Economic Vitality Committee Agenda and Packet 2024 09 04

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Economic Vitality Committee Meeting Minutes August 16, 2024 Page 2 of 5 that there is often a gap in the business's capital and anticipated costs. Incentives are needed to help close this gap. Councilmember Bierman asked for clarification around the vacancy bonus. Manager Zarate responded that the vacancy bonus can award retail businesses a maximum of $1 per square foot (up to $100,000) for occupying a property that was vacant for at least one year immediately prior to the applicant taking occupancy. Councilmember Bierman asked from which pool of money the vacancy bonus is paid. Manager Zarate responded that the vacancy bonus is paid out of the building permit fees and construction use taxes that the City receives for all projects. Councilmember Bierman noted that there is often confusion from the public around incentives. The public will often focus on the amount of revenue that the City is giving up without seeing that amount of new revenue that the City is receiving. He emphasized the importance of framing these incentives as rebates of new revenue that the City would not otherwise be receiving. Manager Zarate agreed and confirmed that all rebates are based on true costs and that all incentives are capped at a maximum rebate amount. Only the new money brought into the City as a result of the project is eligible to be rebated. Councilmember Fahey emphasized the importance of offering carrots rather than sticks and rewarding businesses rather than punishing them. Chair Dickinson commented that it's helpful to see how much revenue the City is receiving in addition to the rebates that will be given back to businesses. He noted that the City often used to view the fiscal impact of the BAP program as negative because the City due to the City giving up revenue. He emphasized the importance of understanding that the City will actually be making money as a result of many of these projects that are incentivized. Chair Dickinson continued, stating that the free market does not encourage small businesses to come to Louisville. He wondered whether the EVC would like to explore a program that encourages and incentivizes small retail businesses to come to Louisville. He mentioned a 100% rebate on sales tax for the first 5 years for a new retail business under 2,000 SF. He noted that if a non -retail user ends up in the space, the City would not be receiving any sales tax revenue anyway. Councilmember Bierman responded that he feels it's also important to retain existing businesses that were not previously able to take advantage of incentives. He wondered if the City could develop a program with incentives designed to help these existing small businesses remain in Louisville.