virginia enterprise zone program june 1, 2007. outline of presentation purpose - the purpose of...
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Virginia Enterprise Zone Virginia Enterprise Zone ProgramProgram
June 1, 2007June 1, 2007
Outline of PresentationOutline of Presentation Purpose - Purpose - The purpose of this presentation is to provide an overview The purpose of this presentation is to provide an overview
of the Virginia Enterprise Zone program for localities that may not be of the Virginia Enterprise Zone program for localities that may not be familiar with it. A PowerPoint presentation with the details of the actual familiar with it. A PowerPoint presentation with the details of the actual designation application will be available at the How-to-Apply workshops.designation application will be available at the How-to-Apply workshops.
Program OverviewProgram Overview
IncentivesIncentives
State and Local Roles & ResponsibilitiesState and Local Roles & Responsibilities
Designation Amendment ProceduresDesignation Amendment Procedures
Program OverviewProgram Overview
Overview: Enterprise ZonesOverview: Enterprise Zones Enterprise ZoneEnterprise Zone
Geographical area of county, city, or town designated by the Geographical area of county, city, or town designated by the Governor for 10-20 years.Governor for 10-20 years.
First established by General Assembly in 1982 First established by General Assembly in 1982 (Virginia Enterprise Zone Act)(Virginia Enterprise Zone Act)
State & local government partnershipState & local government partnership
Means to stimulate job creation, private investment, and Means to stimulate job creation, private investment, and revitalization.revitalization.
Enterprise Zones Enterprise Zones
EZ Statute 2005EZ Statute 2005
July 1, 2005: General Assembly passed July 1, 2005: General Assembly passed Enterprise Zone Grant ActEnterprise Zone Grant Act
Transitioned program from tax credits Transitioned program from tax credits incentives to grants:incentives to grants: Job Creation GrantJob Creation Grant Real Property Investment Grant Real Property Investment Grant
IncentivesIncentives
State IncentivesState Incentives
New performance based grants:New performance based grants: Job Creation GrantJob Creation Grant Real Property Investment GrantReal Property Investment Grant
Click below for summary chart on State Click below for summary chart on State incentivesincentives
http://www.dhcd.virginia.gov/CommunityDevelopmentRevitalization/PDFs/vez_state_incentives.pdf
Job Creation GrantJob Creation Grant
Encourages the creation of higher quality jobs
Eligible positions: Net new to Virginia
Over 4 job threshold
Permanent full-time
Pay at least 175% of Federal minimum wage
Provide health benefits
Job Creation Grant: AmountJob Creation Grant: Amount
Based on wages paid for the position
For businesses providing health benefits & Pay at least 175% of Federal minimum wage
($9.01/hour) Up to $500/position per yearUp to $500/position per year
Pay at least 200% of Federal minimum wage ($10.30/hour) Up to $800/position per yearUp to $800/position per year
Job Creation Grant: TermJob Creation Grant: Term Capped at 350 positions annuallyCapped at 350 positions annually
Available for 5-consecutive year termAvailable for 5-consecutive year term
Restrictions:Restrictions: Retail, personal service, or food and beverage Retail, personal service, or food and beverage
positionspositions Units of local, state, or federal governmentUnits of local, state, or federal government
Zone verificationZone verificationPayroll documentationPayroll documentation
W-4W-4 First and last payroll records for base and/or grant First and last payroll records for base and/or grant
yearyear Health benefits informationHealth benefits information
Part of position’s premium paid by employerPart of position’s premium paid by employer Health insurance waivers for those declining firm’s Health insurance waivers for those declining firm’s insuranceinsurance
W-9W-9 CPA’s Attestation ReportCPA’s Attestation Report
Job Creation Grants: Application Materials
Real Property Investment GrantReal Property Investment Grant Based on qualified real property investments made
by individual/entity to commercial, industrial, or mixed-use* buildings in Enterprise Zones
Applicant: Zone Investor Owner Owner of space* Tenant* Developer
* Supplemental application material
Real Property Investment Grant: Real Property Investment Grant: AmountAmount
Eligibility thresholds based on type of investment: $50,000 for rehab or expansion $250,000 for new construction
Up to 20% of total cost of qualified real property investment
Real Property Investment Grant: Real Property Investment Grant: TermTerm
Capped per building/facilityCapped per building/facility Investments less than $5 Million: $125,000 per Investments less than $5 Million: $125,000 per
building or facilitybuilding or facility Investments of $5 Million or more: $250,000 per Investments of $5 Million or more: $250,000 per
building or facilitybuilding or facility
5-consecutive year term5-consecutive year term
Restrictions:Restrictions: Units of local, state, or federal governmentUnits of local, state, or federal government
Qualified Real Property InvestmentWhat Constitutes Qualified Real Property Investment?What Constitutes Qualified Real Property Investment?
Qualified Real Property Investments:Qualified Real Property Investments:
Excavation, grading Excavation, grading Paving Paving Driveways, roads, sidewalks Driveways, roads, sidewalks Landscaping or other land improvementsLandscaping or other land improvementsDemolition Demolition CarpentryCarpentrySheetrock, plaster Sheetrock, plaster PaintingPaintingCeilings Ceilings Fixtures Fixtures Doors, windows Doors, windows Fire suppression systems Fire suppression systems Roofing and flashing Roofing and flashing Exterior repair Exterior repair Cleaning and clean-upCleaning and clean-upElectrical/wiringElectrical/wiringPlumbingPlumbingHVACHVACFlooringFlooringWindowsWindows
NOT Qualified Real Property Investments: NOT Qualified Real Property Investments: Furnishings Furnishings Appraisal, architectural, engineering and interior design feesAppraisal, architectural, engineering and interior design feesLoan fees; points or capitalized interestLoan fees; points or capitalized interestLegal, accounting, realtor, sales and marketing or other Legal, accounting, realtor, sales and marketing or other professional feesprofessional feesClosing costs Closing costs Permits, user fees, zoning fees, impact fees, inspection feesPermits, user fees, zoning fees, impact fees, inspection feesBids Bids Insurance Insurance Signage or signsSignage or signsUtilities Utilities Bonding Bonding Copying Copying Rent lossRent lossRoadsRoadsTemporary facilities Temporary facilities Utility hook-up or access feesUtility hook-up or access feesOutbuildings Outbuildings Well, septic, or sewer systemsWell, septic, or sewer systemsLand or building acquisition Land or building acquisition Basis of any property: (i) for which a grant was previously Basis of any property: (i) for which a grant was previously awarded; (ii) which was previously placed in service in Virginia awarded; (ii) which was previously placed in service in Virginia by the taxpayer, a related party, or a trade or business under by the taxpayer, a related party, or a trade or business under common control; or (iii) which was previously in service in common control; or (iii) which was previously in service in Virginia and has a basis in the hands of the person acquiring it, Virginia and has a basis in the hands of the person acquiring it, determined in whole or in part by reference to the basis of such determined in whole or in part by reference to the basis of such property in the hands of the person from whom acquired, or property in the hands of the person from whom acquired, or Internal Revenue Code §1014 (a).Internal Revenue Code §1014 (a).
Code requires that an independent CPA licensed in VA Code requires that an independent CPA licensed in VA perform the agreed upon procedures established by DHCD perform the agreed upon procedures established by DHCD and report on findings in EZ grant applications to DHCDand report on findings in EZ grant applications to DHCD
CPA’s Attestation Report
Enterprise Zone Grant Deadlines
Application Deadlines for New EZ Grants: Application Deadlines for New EZ Grants: Wage-based Job Creation Grants and Real Property Wage-based Job Creation Grants and Real Property Investment GrantsInvestment Grants
April 1stApril 1st – Applicant submits application to DHCD – Applicant submits application to DHCD
May 15th May 15th – DHCD notifies applicant of deficiencies.– DHCD notifies applicant of deficiencies.
June 1stJune 1st – Applicant resubmits, if necessary and deficiencies have – Applicant resubmits, if necessary and deficiencies have been resolved. been resolved.
June 30thJune 30th – DHCD notifies applicant of qualification. – DHCD notifies applicant of qualification.
AugustAugust – Virginia Department of Treasury sends enterprise zone – Virginia Department of Treasury sends enterprise zone grant check to applicant.grant check to applicant.
Funds allocated annually by General Assembly
$16.5 million in grants available grant year 2006
Should requests exceed grants allocated, all qualified requests will be pro-rated
Pro-ration was 61 percent for the 2005 grant year
Grant Awards and General Limitations
Local Incentives
Local IncentivesLocal Incentives
CrucialCrucial part of program’s success part of program’s success
Means to create an improved climate for Means to create an improved climate for private business development & private business development & expansionexpansion
Consistent with local revitalization and Consistent with local revitalization and development goals (overcoming barriers to development goals (overcoming barriers to business operations)business operations)
Local government may propose any type Local government may propose any type of incentive permissible under Federal and of incentive permissible under Federal and State Law (as long as zone specific)State Law (as long as zone specific)
Local IncentivesLocal Incentives
Local Tax IncentivesLocal Tax Incentives
Dos and Don’tsDos and Don’ts Constitutionality is a must!Constitutionality is a must! Article 10, Section 1, Article 10, Section 1, Uniformity Uniformity Clause:Clause:
• Taxation has to be uniform in territory, subject, classTaxation has to be uniform in territory, subject, class• ““Territory” refers to entire locality Territory” refers to entire locality
Local Tax IncentivesLocal Tax Incentives
Dos and Don’ts (cont.)Dos and Don’ts (cont.) Applies to “property” type taxes – real estate, Applies to “property” type taxes – real estate,
machinery & toolsmachinery & tools Unless expressly allowed by the GA, like 58.1-Unless expressly allowed by the GA, like 58.1-
3220 & 3221; 3220 & 3221; oror As a grant, typically thru an IDA, for machinery & As a grant, typically thru an IDA, for machinery &
tools taxtools tax Do Do notnot use words abatement, refund, rebate use words abatement, refund, rebate
Local Tax IncentivesLocal Tax Incentives
Dos and Don’ts (cont.)Dos and Don’ts (cont.) Uniformity does Uniformity does not not apply to BPOL, utility tax, apply to BPOL, utility tax,
permit fees permit fees Rebates, refunds, abatement are allowedRebates, refunds, abatement are allowed
Local IncentivesLocal Incentives
Partial exemption for substantially rehabilitated real Partial exemption for substantially rehabilitated real estate (58.1-3221, VA Code)estate (58.1-3221, VA Code)
Grants based on the value of machinery & tool taxGrants based on the value of machinery & tool tax Architectural assistance – grants, designArchitectural assistance – grants, design Reduced permit and user fees Reduced permit and user fees Special rates for BPOL taxSpecial rates for BPOL tax
Local IncentivesLocal Incentives
Special zoning districts (e.g., parking)Special zoning districts (e.g., parking) Fast-track permitting Fast-track permitting Exemptions from local ordinancesExemptions from local ordinances Infrastructure improvementsInfrastructure improvements Crime reduction measures (security audits; Crime reduction measures (security audits;
assistance w/purchase cost)assistance w/purchase cost)
Local IncentivesLocal Incentives
Quality vs. quantity
Measurable and effective
Should represent sound fiscal policy
Roles & ResponsibilitiesRoles & Responsibilities
State Role & ResponsibilityState Role & Responsibility Annual site visit Annual site visit
Confer with you and your clients on state qualification, on-Confer with you and your clients on state qualification, on-site and via phonesite and via phone
Review & advise on amendments to boundaries or Review & advise on amendments to boundaries or incentivesincentives
Provide periodic administrator meetingsProvide periodic administrator meetings
Participation in local workshops and zone promotionParticipation in local workshops and zone promotion
Zone AssessmentZone Assessment Means to evaluate level of participation, Means to evaluate level of participation,
success, and value of zonesuccess, and value of zone
Offer more targeted technical assistanceOffer more targeted technical assistance
ConsiderationsConsiderations INCENTIVES! INCENTIVES!
• Local utilizationLocal utilization• State utilizationState utilization
Physical appearance of zonePhysical appearance of zone Marketing effortsMarketing efforts Number of stakeholders involvedNumber of stakeholders involved
Local ResponsibilitiesLocal Responsibilities
Program performance evaluation:Program performance evaluation: Data CollectionData Collection
• Incentive utilizationIncentive utilization• Private Sector InvestmentPrivate Sector Investment• Public Sector InvestmentPublic Sector Investment
Submit an Annual Report to DHCD (July)Submit an Annual Report to DHCD (July)• Discusses zone activity and is the basis for an annual report to the Discusses zone activity and is the basis for an annual report to the
General Assembly. Click below to view a copy of the report.General Assembly. Click below to view a copy of the report.www.dhcd.virginia.gov/CommunityDevelopmentRevitalization/Word/VEZ_%20Annual_Progrwww.dhcd.virginia.gov/CommunityDevelopmentRevitalization/Word/VEZ_%20Annual_Program_Report.docam_Report.doc
Annual site assessment visits with DHCD staffAnnual site assessment visits with DHCD staff
Local ResponsibilitiesLocal Responsibilities
Process/Management Structure for: Zone administration and local incentive promotion
• What departments are involved and what are their roles
Compilation of comprehensive list of addresses & businesses within zone
State Incentives promotion• Meet state requirements• Attend how-to-qualify workshops• Respond to questions about state incentives• State grant forms and applications
Zone Marketing
Zone Characteristics: Size Zone Characteristics: Size GuidelinesGuidelines
Cities:Cities: Minimum of 1/4 square mile (160 acres)Minimum of 1/4 square mile (160 acres)
Maximum of 1 square mile (640 acres); Maximum of 1 square mile (640 acres);
Or, 7 percent of the jurisdiction’s land area Or, 7 percent of the jurisdiction’s land area or population, whichever is largestor population, whichever is largest
Zone Characteristics: Size Zone Characteristics: Size GuidelinesGuidelines
Consolidated Cities: Consolidated Cities: Minimum of 1/2 square miles (320 acres)Minimum of 1/2 square miles (320 acres)
Maximum of 6 square miles (3,840 acres)Maximum of 6 square miles (3,840 acres)
Hampton, Newport News, Richmond, Suffolk, Hampton, Newport News, Richmond, Suffolk, Virginia BeachVirginia Beach
Zone Characteristics: Size Zone Characteristics: Size GuidelinesGuidelines
Counties: Counties: Minimum of 1/2 square mile (320 acres)Minimum of 1/2 square mile (320 acres)
Maximum of 6 square miles (3,840 acres)Maximum of 6 square miles (3,840 acres)
Zone Characteristics: Size GuidelinesZone Characteristics: Size Guidelines
Unincorporated Areas of County:Unincorporated Areas of County:
Minimum of 1/2 square mile (320 acres)Minimum of 1/2 square mile (320 acres)
Maximum of 6 square miles (3,840 acres)Maximum of 6 square miles (3,840 acres)
Joint zones – an enterprise zone located in two or Joint zones – an enterprise zone located in two or more jurisdictions (cities or counties). more jurisdictions (cities or counties).
Each locality’s portion of the joint zone can consist Each locality’s portion of the joint zone can consist of up to three non-contiguous geographic areas of up to three non-contiguous geographic areas relative to that locality. relative to that locality.
One of the locality’s three possible zone areas One of the locality’s three possible zone areas must be contiguous to at least one other must be contiguous to at least one other participant’s zone area as part of the joint participant’s zone area as part of the joint application. application.
Zone Characteristics: Zone Zone Characteristics: Zone ConfigurationsConfigurations
Single zone – an enterprise zone located entirely within a single Single zone – an enterprise zone located entirely within a single jurisdiction (city or county). A county zone including areas within jurisdiction (city or county). A county zone including areas within incorporated town limits is considered part of the county’s zone acreage incorporated town limits is considered part of the county’s zone acreage and constitutes a single zone.and constitutes a single zone.
EXAMPLE: Smyth County applies for a single zone designation. A EXAMPLE: Smyth County applies for a single zone designation. A portion of the proposed zone includes part of Marion’s town limits. The portion of the proposed zone includes part of Marion’s town limits. The acreage within the town limits counts towards Smyth County’s zone acreage within the town limits counts towards Smyth County’s zone acreage. The town is not required to offer incentives (but can) and is acreage. The town is not required to offer incentives (but can) and is considered part of the county’s zone.considered part of the county’s zone.
County limits
Town limits
Portion of town limits in County’s single zone
Zone Characteristics: Size Zone Characteristics: Size ConfigurationsConfigurations
County EZ boundaries
Example of a Joint Zone ConfigurationExample of a Joint Zone Configuration
Locality One
Locality Two
Locality Three
Contiguous joint zone areasNon-contiguous zone areas (3 per locality)
Zone Characteristics: Size Zone Characteristics: Size ConfigurationsConfigurations