House File 132HOUSE FILE BY STRUYK, FORRISTALL, UPMEYER, HOFFMAN, LUKAN, VAN FOSSEN, SODERBERG, CLUTE, GREINER, and ROBERTS Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act providing for the establishment by certain cities of sales 2 tax increment financing districts. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1504YH 82 5 mg/sh/8 PAG LIN 1 1 Section 1. Section 423B.1, subsection 6, Code 2007, is 1 2 amended by adding the following new paragraph: 1 3 NEW PARAGRAPH. c. Notwithstanding any other provision in 1 4 this section, a change in use of the increased local sales and 1 5 services tax revenues for purposes of a sales tax increment 1 6 financing district pursuant to section 423B.10 does not 1 7 require an election. 1 8 Sec. 2. Section 423B.9, subsection 2, Code 2007, is 1 9 amended to read as follows: 1 10 2. An issuer of public bonds which is a recipient of 1 11 revenues from a local option sales and services tax imposed 1 12 pursuant to this chapter may issue bonds in anticipation of 1 13 the collection of one or more designated portions of the local 1 14 option sales and services tax and may pledge irrevocably an 1 15 amount of the revenue derived from the designated portions for 1 16 each of the years the bonds remain outstanding to the payment 1 17 of the bonds. Bonds may be issued onlyfor one or more of the 1 18 purposes set forth on the ballot proposition concerning the 1 19 imposition of the local option sales and services tax or for 1 20 purposes of a sales tax increment financing district pursuant 1 21 to section 423B.10, except bonds shall not be issued which are 1 22 payable from that portion of tax revenues designated for 1 23 property tax relief. The bonds may be issued in accordance 1 24 with the procedures set forth in either subsection 3 or 4. 1 25 Sec. 3. NEW SECTION. 423B.10 SALES TAX INCREMENT 1 26 FINANCING DISTRICTS. 1 27 1. For purposes of this section, unless the context 1 28 otherwise requires: 1 29 a. "Base year" means the fiscal year during which the 1 30 designation by ordinance of a sales tax increment financing 1 31 district is made. 1 32 b. "District" means a sales tax increment financing 1 33 district established pursuant to subsection 2. 1 34 c. "Eligible city" means a city in which a local sales and 1 35 services tax imposed by the county applies or a city described 2 1 in section 423B.1, subsection 2, paragraph "a". 2 2 d. "Project" means an athletic, cultural, or entertainment 2 3 facility or complex in which the owners or operators make an 2 4 actual investment of at least five million dollars. "Project" 2 5 does not include any gaming establishment or facility and does 2 6 not include a retail mall or complex. However, this does not 2 7 preclude a retail specialty shop or business from being 2 8 included as part of a project. 2 9 e. "Retail establishment" means a business operated by a 2 10 retailer as defined in section 423.1. 2 11 2. An eligible city may by ordinance of the city council 2 12 establish a sales tax increment financing district for the 2 13 purpose of using the increased local sales and services tax 2 14 revenues received by it under this chapter which are 2 15 attributable to retail establishments in the district to repay 2 16 any loans, advances, indebtedness, or bonds used to assist in 2 17 the development, redevelopment, improvement, or rehabilitation 2 18 of a project located within such district. The increased 2 19 revenues to be used for the project shall be deposited into a 2 20 special fund to be established for the purpose of repaying the 2 21 loans, advances, indebtedness, or bonds. 2 22 3. a. To determine the revenue increase for purposes of 2 23 subsection 2, a base year revenue amount shall be calculated 2 24 by the department of revenue as follows: 2 25 (1) Determine the amount of local sales and services tax 2 26 revenue collected from retail establishments located in the 2 27 area comprising the district during the base year. 2 28 (2) Determine the dollar amount of the tax revenues 2 29 collected, as described in subparagraph (1), which is 2 30 distributed to the city during the base year. This is the 2 31 base year revenue amount. 2 32 b. A current year revenue amount is determined for each 2 33 fiscal year following the base year in the manner specified in 2 34 paragraph "a". 2 35 c. The excess of the amount determined in paragraph "b" 3 1 over the base year revenue amount determined in paragraph "a" 3 2 is the increase in the eligible city's revenues that are to be 3 3 deposited in the special fund established pursuant to 3 4 subsection 2. However, if any portion of these increased 3 5 revenues has been previously irrevocably pledged to pay bonds 3 6 issued pursuant to section 423B.9 for any purpose other than 3 7 the purpose of the district, such portion shall not be 3 8 deposited into the special fund. 3 9 4. An eligible city that has designated a sales tax 3 10 increment financing district as provided in subsection 2 may 3 11 apply to the department of economic development to receive a 3 12 portion of the amount of the state sales tax revenues 3 13 collected pursuant to chapter 423, subchapter II, during a 3 14 fiscal year from retail establishments located in such 3 15 district which is in excess of the amount of such revenues 3 16 collected by the state during the base year. The department 3 17 of economic development shall establish by rule criteria for 3 18 determining if it will enter into an agreement with an 3 19 eligible city. These criteria shall include but not be 3 20 limited to all of the following: 3 21 a. The project is not replacing an athletic, cultural, or 3 22 entertainment facility or complex located in another part of 3 23 the city. 3 24 b. The extent to which the project will bring out=of=state 3 25 residents to the city and the county. 3 26 c. The extent to which the project will have an adverse 3 27 effect on surrounding cities and counties. 3 28 d. The district is a well=defined compact area where the 3 29 majority of the commercial property contained in the district 3 30 is benefited by the project. 3 31 e. The total amount of investment to be made in the 3 32 project and the amounts to be provided by private investors, 3 33 the city, and the state. 3 34 f. The agreement shall be for a period not to exceed ten 3 35 fiscal years or for attainment of a specific dollar amount, 4 1 whichever occurs first. 4 2 5. The payment of any portion of the amount of state sales 4 3 tax revenues collected during a fiscal year under subsection 4 4 4 is contingent upon an appropriation by the general assembly 4 5 specifically for payment of such revenue increase, and any 4 6 agreement entered into between the department of economic 4 7 development and an eligible city shall contain a statement as 4 8 to this contingency. 4 9 6. All moneys received by an eligible city from state 4 10 sales tax revenue collections shall be deposited into the 4 11 special fund established pursuant to subsection 2. 4 12 7. For purposes of this section, the eligible city shall 4 13 assist the department of revenue in identifying retail 4 14 establishments in the district that are collecting the local 4 15 sales and services tax and state sales tax. This process 4 16 shall be ongoing until the district is dissolved. 4 17 Sec. 4. Section 423E.5, unnumbered paragraph 2, Code 2007, 4 18 is amended to read as follows: 4 19 A school district in which a local option sales tax for 4 20 school infrastructure purposes has been imposed shall be 4 21 authorized to enter into a chapter 28E agreement with one or 4 22 more cities or a county whose boundaries encompass all or a 4 23 part of the area of the school district. A city or cities 4 24 entering into a chapter 28E agreement shall be authorized to 4 25 expend its designated portion of the local option sales and 4 26 services tax revenues for any valid purpose permitted in this 4 27 chapter or authorized by the governing body of the city, 4 28 including the use of the revenues for purposes of a sales tax 4 29 increment financing district under section 423B.10. A county 4 30 entering into a chapter 28E agreement with a school district 4 31 in which a local option sales tax for school infrastructure 4 32 purposes has been imposed shall be authorized to expend its 4 33 designated portion of the local option sales and services tax 4 34 revenues to provide property tax relief within the boundaries 4 35 of the school district located in the county. A school 5 1 district where a local option sales and services tax is 5 2 imposed is also authorized to enter into a chapter 28E 5 3 agreement with another school district, a community college, 5 4 or an area education agency which is located partially or 5 5 entirely in or is contiguous to the county where the tax is 5 6 imposed. The school district or community college shall only 5 7 expend its designated portion of the local option sales and 5 8 services tax for infrastructure purposes. The area education 5 9 agency shall only expend its designated portion of the local 5 10 option school infrastructure sales tax for infrastructure and 5 11 maintenance purposes. 5 12 EXPLANATION 5 13 This bill authorizes a city with a local option sales and 5 14 services tax to establish by ordinance a sales tax increment 5 15 financing district for the purpose of dedicating and using the 5 16 increase in the local sales and services tax revenues it 5 17 receives from retail establishments in the district to pay the 5 18 loans, advances, indebtedness, and bonds used to assist in the 5 19 development, redevelopment, improvement, or rehabilitation of 5 20 an athletic, cultural, or entertainment facility or complex 5 21 project located within such district. Dedicating such 5 22 increased revenues does not require an election. The owners 5 23 or operators of the project must make an actual investment of 5 24 at least $5 million and the project cannot include a gaming 5 25 establishment or facility or a retail mall or complex. 5 26 The bill also allows the city to enter into an agreement 5 27 with the department of economic development to receive 5 28 assistance for all or a portion of the increase in state sales 5 29 tax revenues collected by retail establishments in the 5 30 district. This state assistance is subject to appropriation 5 31 by the general assembly. The department would establish 5 32 criteria for entering into such an agreement, which criteria 5 33 would include the extent to which the project would bring in 5 34 nonresidents of the state and would affect surrounding 5 35 communities, the amount of private and public investment being 6 1 made, the compactness of the district, and the requirement 6 2 that the project is not replacing a similar facility or 6 3 complex in the city. The agreement would be for a period of 6 4 10 years or for a specified amount of state assistance, 6 5 whichever occurs first. 6 6 The bill provides that a city may use revenues that it may 6 7 receive from a local sales and services tax for school 6 8 infrastructure purposes for purposes of the city's sales tax 6 9 increment financing district. 6 10 The base year revenue amount for determining the increase 6 11 in tax revenues is the amount of tax revenues collected and 6 12 distributed to the city from retail establishments in the 6 13 district area during the fiscal year ending after the city has 6 14 established the district. However, any portion of that 6 15 increase which has previously been pledged for another purpose 6 16 is not considered part of the increase that may be used for 6 17 the purposes of the district. 6 18 LSB 1504YH 82 6 19 mg:nh/sh/8