Business Retention and Development Committee Agenda and Packet 2016 02 01

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SUBJECT: DATE: BAP PROGRAM REVIEW FEBRUARY 1, 2016 PAGE3OF4 and tenant improvements could span more than a year, and flexibility is desired to accommodate phased expansions. Implementation of Consumer Use Tax rebates Finance staff has had several years of experience implementing consumer use tax rebates on purchases made having a durable lifespan greater than 3 years. This rebate takes significant staff time to determine the qualifying consumer use tax (and in some cases sales tax) purchases due to the durable goods limitation. Companies are required to provide consumer use tax returns to the City for purchases of goods made outside the City for use within the operation of the business. This includes major equipment, furniture, and fixtures, but also expendable goods such as paper, pens, and even food. The challenge lies in the determination of what is durable versus non - durable within each use tax return provided to the City within the term of the BAP agreement. Basically, the Finance Department and the business must develop a new use tax return list for only durable goods, even though all the information has already been provided, just that durable and non - durable purchases are together. A proposed fix to eliminate significant duplication and review time for staff and the business would be to modify the allowed use tax purchases to all purchases, rather than only durable good purchases. This would create a greater basis for rebate payments. To adjust for this increase, the consumer use tax incentive rebate percentage could be reduced reflect that some purchases are now eligible. We propose reducing the consumer use tax rebate percentage to 40% of all eligible purchases, down from the typical 50% rebate amount. Analyzing proposed BAP assistance agreements When an assistance agreement is brought to City Council for consideration, staff summarizes the new revenues expected to come to the City due to the company's investment in the community. Estimates are also provided for new revenues for open space and historic preservation purposes that are not rebated in accordance with the Municipal Code. For new businesses to town, all revenues are new and would not come to the City if the business didn't come to town. For existing businesses looking to expand in town or relocate to a different location outside of Louisville, staff does not provide a summary of the company's existing revenues to the City which would be lost should the company relocate. We do not do this summary as some revenues are publicly available (property taxes, personal property taxes), and some are personal to the business and the City is obligated to keep those figures private to the business (sales tax, consumer use tax). If staff provided a total estimate of revenues generated by an existing business, one could determine the private amounts by subtracting the publicly available amounts from the total. Other communities when evaluating assistance agreements, perform an economic impact study to determine the direct, indirect, and induced benefits of the project to the CITY COUNCIL COMMUNICATION 10