House File 641 - Reprinted HOUSE FILE 641 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 234) (As Amended and Passed by the House April 24, 2013 ) 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 HF 641 (2) 85 md/sc/md

H.F. 641 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- HF 641 (2) 85 md/sc/md 1/ 10

H.F. 641 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- HF 641 (2) 85 md/sc/md 2/ 10

H.F. 641 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- HF 641 (2) 85 md/sc/md 3/ 10

H.F. 641 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- HF 641 (2) 85 md/sc/md 4/ 10

H.F. 641 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 c. For the purpose of calculating the amount of new state 25 sales tax revenues under paragraph “b” , a retail sales tax 26 permit issued before the date the ordinance establishing the 27 district was first adopted under section 15J.3, subsection 28 4, that is held by a retailer whose place of business for 29 that permit is located in a vertical improvement within the 30 district that was substantially improved on or after the date 31 the ordinance establishing the district was first adopted shall 32 be considered a retail sales tax permit issued on or after the 33 date the ordinance establishing the district was first adopted. 34 2. a. The department of revenue shall calculate quarterly 35 -5- HF 641 (2) 85 md/sc/md 5/ 10

H.F. 641 the amount of new state hotel and motel tax revenues for each 1 district established in the state to be deposited in the state 2 reinvestment district fund created in section 15J.5, pursuant 3 to section 423A.6. 4 b. The amount of new state hotel and motel tax revenue for 5 purposes of paragraph “a” shall be the product of the amount of 6 sales subject to the state hotel and motel tax in the district 7 during the quarter from retailers or lessors holding a permit 8 for the collection of the state hotel and motel tax issued 9 on or after the date the ordinance establishing the district 10 was first adopted under section 15J.3, subsection 4, times the 11 state hotel and motel tax rate imposed under section 423A.3. 12 c. For the purpose of calculating the amount of new state 13 hotel and motel tax revenues under paragraph “b” , a permit for 14 the collection of the state hotel and motel tax issued before 15 the date the ordinance establishing the district was first 16 adopted under section 15J.3, subsection 4, that is held by a 17 retailer or lessor whose place of business for that permit is 18 located in a vertical improvement within the district that 19 was substantially improved on or after the date the ordinance 20 establishing the district was first adopted shall be considered 21 a permit issued on or after the date the ordinance establishing 22 the district was first adopted. 23 3. Each municipality that has established a district 24 under this chapter shall assist the department of revenue in 25 identifying retail establishments in the district that are 26 collecting state sales tax and lessors in the district that are 27 collecting state hotel and motel tax. This process shall be 28 ongoing until the municipality ceases to utilize state sales 29 tax revenue or state hotel and motel tax revenue under this 30 chapter or the district is dissolved. 31 Sec. 5. NEW SECTION . 15J.5 State reinvestment district 32 fund. 33 1. A state reinvestment district fund is established in the 34 state treasury under the control of the department of revenue 35 -6- HF 641 (2) 85 md/sc/md 6/ 10

H.F. 641 consisting of the new state sales tax revenues collected within 1 each district and deposited in the fund pursuant to section 2 423.2, subsection 11, paragraph “b” , and the new state hotel and 3 motel tax revenues collected within each district and deposited 4 in the fund pursuant to section 423A.6. Moneys deposited in 5 the fund are appropriated to the department of revenue for the 6 purposes of this section. Moneys in the fund shall only be 7 used for the purposes of this section. 8 2. A district account is created within the fund for each 9 district created by a municipality under this chapter. 10 3. The department of revenue shall deposit the moneys 11 described in subsection 1 into the appropriate district account 12 in the fund beginning the first day of the quarter following 13 adoption of the ordinance by the municipality under section 14 15J.3, subsection 4. 15 4. All moneys in each district account within the fund 16 shall be remitted quarterly by the department of revenue to the 17 municipality that established the district for deposit in the 18 municipality’s reinvestment project fund established pursuant 19 to section 15J.6. 20 5. The department of revenue shall adopt rules for the 21 remittance of moneys to municipalities. 22 Sec. 6. NEW SECTION . 15J.6 Reinvestment project fund. 23 1. State sales tax revenue and state hotel and motel tax 24 revenue remitted by the department of revenue to a municipality 25 pursuant to section 15J.5 shall be deposited in a reinvestment 26 project fund of the municipality and shall be used to fund 27 projects within the district from which the revenues were 28 collected. If the municipality determines that the revenue 29 accruing to the reinvestment project fund exceeds the amount 30 necessary for these purposes, the excess moneys that are 31 remittances received under section 15J.5 and all interest in 32 the fund attributable to such excess amounts shall be remitted 33 by the municipality to the department of revenue for deposit in 34 the general fund of the state. 35 -7- HF 641 (2) 85 md/sc/md 7/ 10

H.F. 641 2. In addition to the moneys received pursuant to section 1 15J.5, a municipality may deposit in the reinvestment project 2 fund any other moneys lawfully at the municipality’s disposal, 3 including but not limited to local sales and services tax 4 receipts collected under chapter 423B if such use is a purpose 5 authorized for the municipality under chapter 423B. 6 3. a. Moneys from any source deposited into the 7 reinvestment project fund shall not be expended for or 8 otherwise used in connection with a project that includes 9 the relocation of a commercial or industrial enterprise not 10 presently located within the municipality, unless one of the 11 following occurs: 12 (1) The local governing body of the municipality where 13 the commercial or industrial enterprise is currently located 14 and the local governing body of the municipality where the 15 commercial or industrial enterprise is proposing to relocate 16 have either entered into a written agreement concerning the 17 relocation of the commercial or industrial enterprise or have 18 entered into a written agreement concerning the general use 19 of economic incentives to attract commercial or industrial 20 development within those municipalities. 21 (2) The local governing body of the municipality where the 22 commercial or industrial enterprise is proposing to relocate 23 finds that the use of moneys in the reinvestment project fund 24 for a project that includes such a relocation is in the public 25 interest. A local governing body’s finding that a project that 26 includes a commercial or industrial enterprise relocation is 27 in the public interest shall include written verification from 28 the commercial or industrial enterprise that the enterprise is 29 actively considering moving all or a part of its operations to 30 a location outside the state and a specific finding that such 31 an out-of-state move would result in a significant reduction 32 in either the enterprise’s total employment in the state or in 33 the total amount of wages earned by employees of the enterprise 34 in the state. 35 -8- HF 641 (2) 85 md/sc/md 8/ 10

H.F. 641 b. For the purposes of this subsection, “relocation” 1 means the closure or substantial reduction of an enterprise’s 2 existing operations in one area of the state and the initiation 3 of substantially the same operation in the same county or a 4 contiguous county in the state. “Relocation” does not include 5 an enterprise expanding its operations in another area of the 6 state provided that existing operations of a similar nature are 7 not closed or substantially reduced. 8 4. Upon dissolution of a district pursuant to section 15J.7, 9 if moneys remitted to the municipality pursuant to section 10 15J.5 remain in the municipality’s reinvestment project fund 11 and those moneys are not necessary to support completion of 12 a project in the dissolved district, such amounts and all 13 interest remaining in the fund that was earned on such amounts 14 shall be remitted by the municipality to the department of 15 revenue for deposit in the general fund of the state. 16 5. Upon dissolution of a district pursuant to section 15J.7, 17 moneys remaining in the reinvestment project fund that were 18 deposited pursuant to subsection 2 and all interest remaining 19 in the fund that was earned on such amounts shall be deposited 20 in the general fund of the municipality. 21 Sec. 7. NEW SECTION . 15J.7 District dissolution. 22 1. A district established pursuant to this chapter is 23 dissolved twenty-five years from the date the ordinance was 24 first adopted under section 15J.3, subsection 4, unless the 25 municipality dissolves the district by ordinance prior to that 26 date. 27 2. Upon expiration of the twenty-five-year period or 28 upon adoption of an ordinance dissolving the district, the 29 municipality shall notify the director of revenue of the 30 dissolution of the district. 31 3. Upon receipt of the notice pursuant to subsection 2, 32 the department of revenue shall cease to deposit state sales 33 tax revenues and state hotel and motel tax revenues into the 34 district’s account within the fund. 35 -9- HF 641 (2) 85 md/sc/md 9/ 10

H.F. 641 Sec. 8. Section 423.2, subsection 11, paragraph b, Code 1 2013, is amended by adding the following new subparagraph: 2 NEW SUBPARAGRAPH . (6) Beginning the first day of the 3 quarter following adoption of an ordinance pursuant to section 4 15J.3, subsection 4, transfer to a district account created 5 in the state reinvestment district fund for each reinvestment 6 district established under chapter 15J, the amount of new state 7 sales tax revenue, determined in section 15J.4, subsection 1, 8 paragraph “b” , in the district, that remains after the prior 9 transfers required under this paragraph “b” . 10 Sec. 9. Section 423A.6, unnumbered paragraph 1, Code 2013, 11 is amended to read as follows: 12 The director of revenue shall administer the state and local 13 hotel and motel tax as nearly as possible in conjunction with 14 the administration of the state sales tax law, except that 15 portion of the law which implements the streamlined sales and 16 use tax agreement. The director shall provide appropriate 17 forms, or provide on the regular state tax forms, for reporting 18 state and local hotel and motel tax liability. All moneys 19 received or refunded one hundred eighty days after the date 20 on which a city or county terminates its local hotel and 21 motel tax and all moneys received from the state hotel and 22 motel tax shall be deposited in or withdrawn from the general 23 fund of the state. Beginning the first day of the quarter 24 following adoption of an ordinance pursuant to section 15J.3, 25 subsection 4, the director of revenue shall transfer from the 26 general fund of the state to a district account created in 27 the state reinvestment district fund for each reinvestment 28 district established under chapter 15J, the new state hotel and 29 motel tax revenue, determined in section 15J.4, subsection 2, 30 paragraph “b” , in the district. 31 -10- HF 641 (2) 85 md/sc/md 10/ 10