House Study Bill 234 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON SANDS) A BILL FOR An Act authorizing the establishment of reinvestment districts 1 following approval of the economic development authority 2 board, providing for the remittance of certain state sales 3 tax revenues and certain state hotel and motel tax revenues 4 to municipalities, establishing a state reinvestment 5 district fund, and making appropriations. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 2518YC (7) 85 md/sc

H.F. _____ Section 1. NEW SECTION . 15J.1 Short title. 1 This chapter shall be known and may be cited as the “Iowa 2 Reinvestment Act” . 3 Sec. 2. NEW SECTION . 15J.2 Definitions. 4 As used in this chapter, unless the context otherwise 5 requires: 6 1. “Board” means the same as defined in section 15.102. 7 2. “Department” means the department of revenue. 8 3. “District” means the area within a municipality that is 9 designated a reinvestment district pursuant to section 15J.3. 10 4. “Fund” means the state reinvestment district fund created 11 in section 15J.5. 12 5. “Governing body” means the county board of supervisors, 13 city council, or other body in which the legislative powers of 14 the municipality are vested. 15 6. “Lessor” means the same as defined in section 423A.2. 16 7. “Municipality” means a county or an incorporated city. 17 8. “Project” means a vertical improvement constructed 18 or substantially improved within a district using sales 19 tax revenues and hotel and motel tax revenues received by a 20 municipality pursuant to this chapter. 21 9. “Retail establishment” means a business operated by a 22 retailer as defined in section 423.1. 23 10. “State hotel and motel tax” means the state-imposed tax 24 under section 423A.3. 25 11. “State sales tax” means the sales and services tax 26 imposed pursuant to section 423.2. 27 12. “Vertical improvement” means a building that is wholly 28 or partially above grade and all appurtenant structures to the 29 building. 30 Sec. 3. NEW SECTION . 15J.3 District establishment —— 31 approval. 32 1. A municipality that has an area suitable for development 33 within the boundaries of the municipality is eligible to 34 seek approval from the board to establish a reinvestment 35 -1- LSB 2518YC (7) 85 md/sc 1/ 13

H.F. _____ district under this section consisting of the area suitable for 1 development. To be designated a reinvestment district, an area 2 shall meet the following requirements: 3 a. The area consists only of parcels of real property that 4 the governing body of the municipality determines will be 5 directly and substantially benefited by development in the 6 proposed district. 7 b. The area is in whole or in part either an economic 8 development enterprise zone designated under chapter 15E, 9 division XVIII, or an urban renewal area established pursuant 10 to chapter 403. 11 c. The area consists of contiguous parcels and does not 12 exceed fifty acres in total. 13 d. For a municipality that is a city, the area does not 14 include the entire incorporated area of the city. 15 2. Prior to submission to the board for approval under 16 subsection 3, a proposed district plan shall be developed 17 and approved by resolution of the governing body of the 18 municipality. The proposed district plan shall state the 19 governing body’s intent to establish a district. The proposed 20 district plan shall also include all of the following: 21 a. A finding by the governing body that the area in the 22 proposed district is an area suitable for development. 23 b. A legal description of the real estate forming the 24 boundaries of the area to be included in the proposed district 25 along with a map depicting the existing parcels of real estate 26 located in the proposed district. 27 c. A list of the names and addresses of the owners of record 28 of the parcels to be included in the proposed district. 29 d. A list of all projects proposed to be undertaken within 30 the district, a detailed description of those projects, and 31 a project plan for each proposed project. Each project plan 32 shall clearly state the estimated cost of the project, the 33 anticipated funding sources for the project, and the amount and 34 type of debt, if any, to be incurred by the municipality to 35 -2- LSB 2518YC (7) 85 md/sc 2/ 13

H.F. _____ fund the project, and shall include a project feasibility study 1 conducted by an independent professional with expertise in 2 economic development and public finance. The feasibility study 3 shall include projections and analysis of all of the following: 4 (1) The amount of gross revenues expected to be collected in 5 the district as a result of the project for each year that the 6 district is in existence. 7 (2) A detailed explanation of the manner and extent to which 8 the project will contribute to the economic development of 9 the state and the municipality, including an analysis of the 10 project’s economic impact. The analysis shall include the same 11 components and be conducted in the same manner as the economic 12 impact study required under paragraph “e” . 13 (3) An estimate of the number of visitors or customers 14 the project will generate during each year that the district 15 exists. 16 (4) A description of the unique characteristics of the 17 project. 18 e. An economic impact study for the proposed district 19 conducted by an independent economist retained by the 20 municipality. The economic impact study shall, at a minimum, 21 do all of the following: 22 (1) Contain a detailed analysis of the financial benefit 23 of the proposed district to the economy of the state and the 24 municipality. 25 (2) Identify one or more projected market areas in which the 26 district can reasonably be expected to have an economic impact. 27 (3) Assess the fiscal and financial impact of the proposed 28 district on businesses or on other economic development 29 projects within the projected market area. 30 3. a. The municipality shall submit a copy of the 31 resolution, the proposed district plan, and all accompanying 32 materials adopted pursuant to this section to the board for 33 evaluation and approval. 34 b. The board shall evaluate each municipality’s proposed 35 -3- LSB 2518YC (7) 85 md/sc 3/ 13

H.F. _____ district plan and accompanying materials and shall approve the 1 district plan and establishment of the district if the board 2 determines that, in addition to other criteria established by 3 the board by rule, all of the following conditions are met: 4 (1) The area of the municipality proposed to be included in 5 the district meets the requirements of subsection 1. 6 (2) The projects proposed to be undertaken in the district 7 will have a substantial beneficial impact on the economy of the 8 state and the economy of the municipality. 9 (3) The proposed funding sources for each project are 10 feasible. 11 c. If the board denies a proposed district plan, the board 12 shall state the reasons for the denial and the municipality may 13 resubmit the application. 14 d. As part of its approval of a proposed district plan, 15 the board may, subject to the authorized amounts under section 16 15J.4, establish maximum amounts of state sales tax revenues 17 or state hotel and motel tax revenues, or both, that may be 18 remitted to a municipality’s reinvestment project fund. Such 19 maximum amounts shall be determined based on the financing 20 needs of the project and the economic impact to the state. 21 4. Upon receiving the approval of the board, the 22 municipality may adopt an ordinance establishing the district 23 and shall notify the director of revenue of the establishment 24 of the district. The ordinance adopted by the municipality 25 shall include a detailed statement of the manner in which 26 the approved projects to be undertaken in the district will 27 be financed, including but not limited to the financial 28 information included in the project plan under subsection 2, 29 paragraph “d” . Following establishment of the district, a 30 municipality may use the moneys deposited in the municipality’s 31 reinvestment project fund created pursuant to section 15J.6 32 to fund the development of those projects included within the 33 district plan. 34 5. A municipality may amend the district plan to add 35 -4- LSB 2518YC (7) 85 md/sc 4/ 13

H.F. _____ or modify projects. However, a proposed modification to a 1 project and each project proposed to be added shall first be 2 approved by the board in the same manner as provided for the 3 original plan. In no case, however, shall an amendment to 4 the plan result in the extension of the district dissolution 5 date provided in section 15J.7. If a district plan is amended 6 to add or modify a project, the municipality shall amend 7 the ordinance, if necessary, to reflect any changes to the 8 financial information required to be included under subsection 9 4. 10 Sec. 4. NEW SECTION . 15J.4 New state tax revenue 11 calculations. 12 1. a. The department of revenue shall calculate quarterly 13 the amount of new state sales tax revenues for each district 14 established in the state to be deposited in the state 15 reinvestment district fund created in section 15J.5, pursuant 16 to section 423.2, subsection 11, paragraph “b” . 17 b. The amount of new state sales tax revenue for purposes 18 of paragraph “a” shall be the product of the amount of sales 19 subject to the state sales tax in the district during the 20 quarter from retailers holding a retail sales tax permit issued 21 on or after the date the ordinance establishing the district 22 was first adopted under section 15J.3, subsection 4, times four 23 percent. 24 2. a. The department of revenue shall calculate quarterly 25 the amount of new state hotel and motel tax revenues for each 26 district established in the state to be deposited in the state 27 reinvestment district fund created in section 15J.5, pursuant 28 to section 423A.6. 29 b. The amount of new state hotel and motel tax revenue for 30 purposes of paragraph “a” shall be the product of the amount of 31 sales subject to the state hotel and motel tax in the district 32 during the quarter from retailers or lessors holding a permit 33 for the collection of the state hotel and motel tax issued 34 on or after the date the ordinance establishing the district 35 -5- LSB 2518YC (7) 85 md/sc 5/ 13

H.F. _____ was first adopted under section 15J.3, subsection 4, times the 1 state hotel and motel tax rate imposed under section 423A.3. 2 3. Each municipality that has established a district 3 under this chapter shall assist the department of revenue in 4 identifying retail establishments in the district that are 5 collecting state sales tax and lessors in the district that are 6 collecting state hotel and motel tax. This process shall be 7 ongoing until the municipality ceases to utilize state sales 8 tax revenue or state hotel and motel tax revenue under this 9 chapter or the district is dissolved. 10 Sec. 5. NEW SECTION . 15J.5 State reinvestment district 11 fund. 12 1. A state reinvestment district fund is established in the 13 state treasury under the control of the department of revenue 14 consisting of the new state sales tax revenues collected within 15 each district and deposited in the fund pursuant to section 16 423.2, subsection 11, paragraph “b” , and the new state hotel and 17 motel tax revenues collected within each district and deposited 18 in the fund pursuant to section 423A.6. Moneys deposited in 19 the fund are appropriated to the department of revenue for the 20 purposes of this section. Moneys in the fund shall only be 21 used for the purposes of this section. 22 2. A district account is created within the fund for each 23 district created by a municipality under this chapter. 24 3. The department of revenue shall deposit the moneys 25 described in subsection 1 into the appropriate district account 26 in the fund beginning the first day of the quarter following 27 adoption of the ordinance by the municipality under section 28 15J.3, subsection 4. 29 4. All moneys in each district account within the fund 30 shall be remitted quarterly by the department of revenue to the 31 municipality that established the district for deposit in the 32 municipality’s reinvestment project fund established pursuant 33 to section 15J.6. 34 5. The department of revenue shall adopt rules for the 35 -6- LSB 2518YC (7) 85 md/sc 6/ 13

H.F. _____ remittance of moneys to municipalities. 1 Sec. 6. NEW SECTION . 15J.6 Reinvestment project fund. 2 1. State sales tax revenue and state hotel and motel tax 3 revenue remitted by the department of revenue to a municipality 4 pursuant to section 15J.5 shall be deposited in a reinvestment 5 project fund of the municipality and shall be used to fund 6 projects within the district from which the revenues were 7 collected. If the municipality determines that the revenue 8 accruing to the reinvestment project fund exceeds the amount 9 necessary for these purposes, the excess moneys that are 10 remittances received under section 15J.5 and all interest in 11 the fund attributable to such excess amounts shall be remitted 12 by the municipality to the department of revenue for deposit in 13 the general fund of the state. 14 2. In addition to the moneys received pursuant to section 15 15J.5, a municipality may deposit in the reinvestment project 16 fund any other moneys lawfully at the municipality’s disposal, 17 including but not limited to local sales and services tax 18 receipts collected under chapter 423B if such use is a purpose 19 authorized for the municipality under chapter 423B. 20 3. a. Moneys from any source deposited into the 21 reinvestment project fund shall not be expended for or 22 otherwise used in connection with a project that includes 23 the relocation of a commercial or industrial enterprise not 24 presently located within the municipality, unless one of the 25 following occurs: 26 (1) The local governing body of the municipality where 27 the commercial or industrial enterprise is currently located 28 and the local governing body of the municipality where the 29 commercial or industrial enterprise is proposing to relocate 30 have either entered into a written agreement concerning the 31 relocation of the commercial or industrial enterprise or have 32 entered into a written agreement concerning the general use 33 of economic incentives to attract commercial or industrial 34 development within those municipalities. 35 -7- LSB 2518YC (7) 85 md/sc 7/ 13

H.F. _____ (2) The local governing body of the municipality where the 1 commercial or industrial enterprise is proposing to relocate 2 finds that the use of moneys in the reinvestment project fund 3 for a project that includes such a relocation is in the public 4 interest. A local governing body’s finding that a project that 5 includes a commercial or industrial enterprise relocation is 6 in the public interest shall include written verification from 7 the commercial or industrial enterprise that the enterprise is 8 actively considering moving all or a part of its operations to 9 a location outside the state and a specific finding that such 10 an out-of-state move would result in a significant reduction 11 in either the enterprise’s total employment in the state or in 12 the total amount of wages earned by employees of the enterprise 13 in the state. 14 b. For the purposes of this subsection, “relocation” 15 means the closure or substantial reduction of an enterprise’s 16 existing operations in one area of the state and the initiation 17 of substantially the same operation in the same county or a 18 contiguous county in the state. “Relocation” does not include 19 an enterprise expanding its operations in another area of the 20 state provided that existing operations of a similar nature are 21 not closed or substantially reduced. 22 4. Upon dissolution of a district pursuant to section 15J.7, 23 if moneys remitted to the municipality pursuant to section 24 15J.5 remain in the municipality’s reinvestment project fund 25 and those moneys are not necessary to support completion of 26 a project in the dissolved district, such amounts and all 27 interest remaining in the fund that was earned on such amounts 28 shall be remitted by the municipality to the department of 29 revenue for deposit in the general fund of the state. 30 5. Upon dissolution of a district pursuant to section 15J.7, 31 moneys remaining in the reinvestment project fund that were 32 deposited pursuant to subsection 2 and all interest remaining 33 in the fund that was earned on such amounts shall be deposited 34 in the general fund of the municipality. 35 -8- LSB 2518YC (7) 85 md/sc 8/ 13

H.F. _____ Sec. 7. NEW SECTION . 15J.7 District dissolution. 1 1. A district established pursuant to this chapter is 2 dissolved twenty-five years from the date the ordinance was 3 first adopted under section 15J.3, subsection 4, unless the 4 municipality dissolves the district by ordinance prior to that 5 date. 6 2. Upon expiration of the twenty-five-year period or 7 upon adoption of an ordinance dissolving the district, the 8 municipality shall notify the director of revenue of the 9 dissolution of the district. 10 3. Upon receipt of the notice pursuant to subsection 2, 11 the department of revenue shall cease to deposit state sales 12 tax revenues and state hotel and motel tax revenues into the 13 district’s account within the fund. 14 Sec. 8. Section 423.2, subsection 11, paragraph b, Code 15 2013, is amended by adding the following new subparagraph: 16 NEW SUBPARAGRAPH . (6) Beginning the first day of the 17 quarter following adoption of an ordinance pursuant to section 18 15J.3, subsection 4, transfer to a district account created 19 in the state reinvestment district fund for each reinvestment 20 district established under chapter 15J, the amount of new state 21 sales tax revenue, determined in section 15J.4, subsection 1, 22 paragraph “b” , in the district, that remains after the prior 23 transfers required under this paragraph “b” . 24 Sec. 9. Section 423A.6, unnumbered paragraph 1, Code 2013, 25 is amended to read as follows: 26 The director of revenue shall administer the state and local 27 hotel and motel tax as nearly as possible in conjunction with 28 the administration of the state sales tax law, except that 29 portion of the law which implements the streamlined sales and 30 use tax agreement. The director shall provide appropriate 31 forms, or provide on the regular state tax forms, for reporting 32 state and local hotel and motel tax liability. All moneys 33 received or refunded one hundred eighty days after the date 34 on which a city or county terminates its local hotel and 35 -9- LSB 2518YC (7) 85 md/sc 9/ 13

H.F. _____ motel tax and all moneys received from the state hotel and 1 motel tax shall be deposited in or withdrawn from the general 2 fund of the state. Beginning the first day of the quarter 3 following adoption of an ordinance pursuant to section 15J.3, 4 subsection 4, the director of revenue shall transfer from the 5 general fund of the state to a district account created in 6 the state reinvestment district fund for each reinvestment 7 district established under chapter 15J, the new state hotel and 8 motel tax revenue, determined in section 15J.4, subsection 2, 9 paragraph “b” , in the district. 10 EXPLANATION 11 This bill enacts new Code chapter 15J, the “Iowa 12 Reinvestment Act”. 13 The bill authorizes municipalities to establish reinvestment 14 districts and receive remittances of specified amounts of state 15 sales tax revenues and state hotel and motel taxes collected 16 in those districts for use in undertaking projects, as defined 17 in the bill, in the district. 18 A municipality that has an area suitable for development 19 within the boundaries of the municipality is eligible to 20 seek approval from the economic development authority board 21 to establish a reinvestment district under new Code chapter 22 15J consisting of the area suitable for development. To be 23 designated a reinvestment district, an area shall meet the 24 following requirements: (1) the area consists only of parcels 25 of real property that the governing body of the municipality 26 determines will be directly and substantially benefited by 27 development in the proposed district, (2) the area is in whole 28 or in part either an economic development enterprise zone 29 designated under Code chapter 15E, division XVIII, or an urban 30 renewal area established pursuant to Code chapter 403, (3) the 31 area consists of contiguous parcels and does not exceed 50 32 acres, and (4) for a municipality that is a city, the area does 33 not include the entire incorporated area of the city. 34 Prior to submission to the economic development authority 35 -10- LSB 2518YC (7) 85 md/sc 10/ 13

H.F. _____ board for approval, the municipality must develop a proposed 1 district plan and approve it by resolution of the governing 2 body of the municipality. The proposed district plan shall 3 state the governing body’s intent to establish a district. The 4 proposed district plan shall include a finding by the governing 5 body of the municipality that the area in the proposed district 6 is an area suitable for development. The proposed district 7 plan must also include information relating to the composition 8 of the proposed district, a list and detailed description of 9 all projects proposed to be undertaken within the district, a 10 project plan for each proposed project, and an economic impact 11 study for the proposed district. 12 The economic development authority board is required 13 to evaluate each municipality’s proposed district plan and 14 accompanying materials and shall approve the district plan and 15 establishment of the district if the board determines that, 16 in addition to other criteria established by the board by 17 rule, the area of the municipality proposed to be included in 18 the district is suitable for development, as defined in the 19 bill, the projects proposed to be undertaken in the district 20 will have a substantial beneficial impact on the economy of 21 the state and the economy of the municipality, and that the 22 proposed funding sources for each project are feasible. 23 If the economic development authority board approves 24 the district plan and establishment of the district, the 25 municipality may adopt an ordinance establishing the district 26 and shall notify the director of revenue of the establishment 27 of the district. The bill provides that an amendment to the 28 district plan to add or modify a project must be approved by 29 the board in the same manner as the original district plan. 30 The bill authorizes the economic development authority board 31 to establish, subject to the amounts authorized in the bill, 32 maximum amounts of state sales tax revenues or state hotel 33 and motel tax revenues, or both, that may be remitted to a 34 municipality’s reinvestment project fund. 35 -11- LSB 2518YC (7) 85 md/sc 11/ 13

H.F. _____ The bill authorizes a municipality to use specified new 1 state sales tax revenues and specified new state hotel and 2 motel tax revenues for those projects being undertaken in the 3 district that were approved by the board. The bill calculates 4 the amount of new state sales tax revenues and new state hotel 5 and motel tax revenues using only those sales subject to those 6 taxes from retailers and lessors holding sales tax permits 7 issued on or after the date the district was established by 8 ordinance. The department of revenue calculates quarterly the 9 amount of new state sales tax revenues and new state hotel 10 and motel tax revenues for each district established in the 11 state to be deposited in the district’s account in the state 12 reinvestment district fund created in the bill. The amount of 13 new state sales tax revenue is calculated using a 4 percent 14 tax rate instead of the 6 percent tax rate imposed under Code 15 section 423.2. All moneys in each district account within the 16 fund shall be remitted quarterly by the department of revenue 17 to the municipality that established the district for deposit 18 in the municipality’s reinvestment project fund established 19 in the bill and used to fund projects within the district 20 from which the revenues were collected. The bill imposes 21 limitations on the use of moneys deposited in a municipality’s 22 reinvestment project fund. 23 The bill provides for the remittance by the municipality 24 to the department of revenue of specified amounts accruing 25 to the municipality’s reinvestment project fund or remaining 26 in the municipality’s reinvestment project fund following 27 dissolution of the district that the municipality determines to 28 be unnecessary to fund the projects in the district. 29 The bill provides that a district established under new 30 Code chapter 15J is dissolved 25 years from the date the 31 ordinance to establish the district was first adopted, unless 32 the municipality dissolves the district by ordinance prior to 33 that date. Upon dissolution of a district, the department of 34 revenue shall cease to deposit state sales tax revenues and 35 -12- LSB 2518YC (7) 85 md/sc 12/ 13