Economic Vitality Committee Agenda and Packet 2021 07 16

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SUBJECT: STRATEGIC PLAN ITEM #1-3 DATE: JULY 16, 2021 PAGE 2 OF 5 All of the incentives available through the BAP are rebate -based, including rebates of Building Permit Fees, Construction Use Tax, Sales Tax, and Consumer Use Tax. Rebates are generally in the range of 40% - 50% and the total value of the incentive rebate varies highly —depending on the type of project, business model, and amount of improvements being undertaken for a new building or existing property. City staff has now developed a spreadsheet for tracking incentive agreements and outcomes of the packages awarded to businesses. It is important to track agreements that are completed, void, and active to determine what liabilities the City may have for repayment. But the data also serves to inform the City about the impact these dollars make for businesses coming to or growing in Louisville. Since the first assistance package was approved in 2007, the City has engaged in 88 incentive agreements. As of today, 55 agreements are complete, 22 are void, and 11 are active. As shown in the table, significantly more has been offered in incentives than the City has paid out over time, which is likely the result of several contributing factors. In many cases, the company did not ultimately locate in Louisville and therefore substantive incentive agreements are void and not paid. Frequently, staff also finds that estimates provided by applications at the stage of the business assistance are generous. For example, the estimate of project costs on the application does not often closely relate to the valuation that an applicant then lists of the building permit application. Rebates are only paid on actual amounts. Incentives Offered 2007 - 2018 $ 5,141, 089 2019-2021 $ 3,727,557 Total $ 8,868,646 Incentives Paid (2007 - 2021 Retail $ 1,475,036 Office $ 1,648,170 Industrial $ 899,050 Total $ 4,022,256 Approximately 45.3% of incentives offered have been paid. Since there are still 11 active agreements, if some of those projects come to fruition, the percentage paid of incentives offered could rise to about 50%. There is not a consistent pace to the number of agreements received or approved, but over time the property owners, brokers, and local business owner awareness of the program has increased. The amount of incentives offered between 2019 and 2021 has a significant outlier, as the package for Medtronic Inc was valued at $1,457,700; and since that project will be built in Lafayette, no rebate payments will be made. Eight of the 19 assistance agreements since 2019 are also valued at a cap over $100,000. Agenda Packet P. 8