HF 641 (LSB 2518HV (2) 85)

HOUSE FILE 641

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO HSB 234)

(As Amended and Passed by the House 2013-04-24)

A BILL FOR

An Act authorizing the establishment of reinvestment districts following approval of the economic development authority board, providing for the remittance of certain state sales tax revenues and certain state hotel and motel tax revenues to municipalities, establishing a state reinvestment district fund, and making appropriations.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  15J.1  Short title.
   This chapter shall be known and may be cited as the “Iowa Reinvestment Act”.
    Sec. 2.  NEW SECTION.  15J.2  Definitions.
   As used in this chapter, unless the context otherwise requires: 
   1.  “Board” means the same as defined in section 15.102.
   2.  “Department” means the department of revenue.
   3.  “District” means the area within a municipality that is designated a reinvestment district pursuant to section 15J.3.
   4.  “Fund” means the state reinvestment district fund created in section 15J.5.
   5.  “Governing body” means the county board of supervisors, city council, or other body in which the legislative powers of the municipality are vested.
   6.  “Lessor” means the same as defined in section 423A.2.
   7.  “Municipality” means a county or an incorporated city.
   8.  “Project” means a vertical improvement constructed or substantially improved within a district using sales tax revenues and hotel and motel tax revenues received by a municipality pursuant to this chapter.
   9.  “Retail establishment” means a business operated by a retailer as defined in section 423.1.
   10.  “State hotel and motel tax” means the state-imposed tax under section 423A.3.
   11.  “State sales tax” means the sales and services tax imposed pursuant to section 423.2.
   12.  “Vertical improvement” means a building that is wholly or partially above grade and all appurtenant structures to the building.
    Sec. 3.  NEW SECTION.  15J.3  District establishment —— approval.
   1.  A municipality that has an area suitable for development within the boundaries of the municipality is eligible to seek approval from the board to establish a reinvestment district under this section consisting of the area suitable for development. To be designated a reinvestment district, an area shall meet the following requirements:
   a.  The area consists only of parcels of real property that the governing body of the municipality determines will be directly and substantially benefited by development in the proposed district.
   b.  The area is in whole or in part either an economic development enterprise zone designated under chapter 15E, division XVIII, or an urban renewal area established pursuant to chapter 403.
   c.  The area consists of contiguous parcels and does not exceed fifty acres in total.
   d.  For a municipality that is a city, the area does not include the entire incorporated area of the city.
   2.  Prior to submission to the board for approval under subsection 3, a proposed district plan shall be developed and approved by resolution of the governing body of the municipality. The proposed district plan shall state the governing body’s intent to establish a district. The proposed district plan shall also include all of the following:
   a.  A finding by the governing body that the area in the proposed district is an area suitable for development.
   b.  A legal description of the real estate forming the boundaries of the area to be included in the proposed district along with a map depicting the existing parcels of real estate located in the proposed district.
   c.  A list of the names and addresses of the owners of record of the parcels to be included in the proposed district.
   d.  A list of all projects proposed to be undertaken within the district, a detailed description of those projects, and a project plan for each proposed project. Each project plan shall clearly state the estimated cost of the project, the anticipated funding sources for the project, and the amount and type of debt, if any, to be incurred by the municipality to fund the project, and shall include a project feasibility study conducted by an independent professional with expertise in economic development and public finance. The feasibility study shall include projections and analysis of all of the following:
   (1)  The amount of gross revenues expected to be collected in the district as a result of the project for each year that the district is in existence.
   (2)  A detailed explanation of the manner and extent to which the project will contribute to the economic development of the state and the municipality, including an analysis of the project’s economic impact. The analysis shall include the same components and be conducted in the same manner as the economic impact study required under paragraph “e”.
   (3)  An estimate of the number of visitors or customers the project will generate during each year that the district exists.
   (4)  A description of the unique characteristics of the project.
   e.  An economic impact study for the proposed district conducted by an independent economist retained by the municipality. The economic impact study shall, at a minimum, do all of the following:
   (1)  Contain a detailed analysis of the financial benefit of the proposed district to the economy of the state and the municipality.
   (2)  Identify one or more projected market areas in which the district can reasonably be expected to have an economic impact.
   (3)  Assess the fiscal and financial impact of the proposed district on businesses or on other economic development projects within the projected market area.
   3.
  a.  The municipality shall submit a copy of the resolution, the proposed district plan, and all accompanying materials adopted pursuant to this section to the board for evaluation and approval.
   b.  The board shall evaluate each municipality’s proposed district plan and accompanying materials and shall approve the district plan and establishment of the district if the board determines that, in addition to other criteria established by the board by rule, all of the following conditions are met:
   (1)  The area of the municipality proposed to be included in the district meets the requirements of subsection 1.
   (2)  The projects proposed to be undertaken in the district will have a substantial beneficial impact on the economy of the state and the economy of the municipality.
   (3)  The proposed funding sources for each project are feasible.
   c.  If the board denies a proposed district plan, the board shall state the reasons for the denial and the municipality may resubmit the application.
   d.  As part of its approval of a proposed district plan, the board may, subject to the authorized amounts under section 15J.4, establish maximum amounts of state sales tax revenues or state hotel and motel tax revenues, or both, that may be remitted to a municipality’s reinvestment project fund. Such maximum amounts shall be determined based on the financing needs of the project and the economic impact to the state.
   4.  Upon receiving the approval of the board, the municipality may adopt an ordinance establishing the district and shall notify the director of revenue of the establishment of the district. The ordinance adopted by the municipality shall include a detailed statement of the manner in which the approved projects to be undertaken in the district will be financed, including but not limited to the financial information included in the project plan under subsection 2, paragraph “d”. Following establishment of the district, a municipality may use the moneys deposited in the municipality’s reinvestment project fund created pursuant to section 15J.6 to fund the development of those projects included within the district plan.
   5.  A municipality may amend the district plan to add or modify projects. However, a proposed modification to a project and each project proposed to be added shall first be approved by the board in the same manner as provided for the original plan. In no case, however, shall an amendment to the plan result in the extension of the district dissolution date provided in section 15J.7. If a district plan is amended to add or modify a project, the municipality shall amend the ordinance, if necessary, to reflect any changes to the financial information required to be included under subsection 4.
    Sec. 4.  NEW SECTION.  15J.4  New state tax revenue calculations.
   1.
  a.  The department of revenue shall calculate quarterly the amount of new state sales tax revenues for each district established in the state to be deposited in the state reinvestment district fund created in section 15J.5, pursuant to section 423.2, subsection 11, paragraph “b”.
   b.  The amount of new state sales tax revenue for purposes of paragraph “a” shall be the product of the amount of sales subject to the state sales tax in the district during the quarter from retailers holding a retail sales tax permit issued on or after the date the ordinance establishing the district was first adopted under section 15J.3, subsection 4, times four percent.
   c.  For the purpose of calculating the amount of new state sales tax revenues under paragraph “b”, a retail sales tax permit issued before the date the ordinance establishing the district was first adopted under section 15J.3, subsection 4, that is held by a retailer whose place of business for that permit is located in a vertical improvement within the district that was substantially improved on or after the date the ordinance establishing the district was first adopted shall be considered a retail sales tax permit issued on or after the date the ordinance establishing the district was first adopted.
   2.
  a.  The department of revenue shall calculate quarterly the amount of new state hotel and motel tax revenues for each district established in the state to be deposited in the state reinvestment district fund created in section 15J.5, pursuant to section 423A.6.
   b.  The amount of new state hotel and motel tax revenue for purposes of paragraph “a” shall be the product of the amount of sales subject to the state hotel and motel tax in the district during the quarter from retailers or lessors holding a permit for the collection of the state hotel and motel tax issued on or after the date the ordinance establishing the district was first adopted under section 15J.3, subsection 4, times the state hotel and motel tax rate imposed under section 423A.3.
   c.  For the purpose of calculating the amount of new state hotel and motel tax revenues under paragraph “b”, a permit for the collection of the state hotel and motel tax issued before the date the ordinance establishing the district was first adopted under section 15J.3, subsection 4, that is held by a retailer or lessor whose place of business for that permit is located in a vertical improvement within the district that was substantially improved on or after the date the ordinance establishing the district was first adopted shall be considered a permit issued on or after the date the ordinance establishing the district was first adopted.
   3.  Each municipality that has established a district under this chapter shall assist the department of revenue in identifying retail establishments in the district that are collecting state sales tax and lessors in the district that are collecting state hotel and motel tax. This process shall be ongoing until the municipality ceases to utilize state sales tax revenue or state hotel and motel tax revenue under this chapter or the district is dissolved.
    Sec. 5.  NEW SECTION.  15J.5  State reinvestment district fund.
   1.  A state reinvestment district fund is established in the state treasury under the control of the department of revenue consisting of the new state sales tax revenues collected within each district and deposited in the fund pursuant to section 423.2, subsection 11, paragraph “b”, and the new state hotel and motel tax revenues collected within each district and deposited in the fund pursuant to section 423A.6. Moneys deposited in the fund are appropriated to the department of revenue for the purposes of this section. Moneys in the fund shall only be used for the purposes of this section.
   2.  A district account is created within the fund for each district created by a municipality under this chapter.
   3.  The department of revenue shall deposit the moneys described in subsection 1 into the appropriate district account in the fund beginning the first day of the quarter following adoption of the ordinance by the municipality under section 15J.3, subsection 4.
   4.  All moneys in each district account within the fund shall be remitted quarterly by the department of revenue to the municipality that established the district for deposit in the municipality’s reinvestment project fund established pursuant to section 15J.6.
   5.  The department of revenue shall adopt rules for the remittance of moneys to municipalities.
    Sec. 6.  NEW SECTION.  15J.6  Reinvestment project fund.
   1.  State sales tax revenue and state hotel and motel tax revenue remitted by the department of revenue to a municipality pursuant to section 15J.5 shall be deposited in a reinvestment project fund of the municipality and shall be used to fund projects within the district from which the revenues were collected. If the municipality determines that the revenue accruing to the reinvestment project fund exceeds the amount necessary for these purposes, the excess moneys that are remittances received under section 15J.5 and all interest in the fund attributable to such excess amounts shall be remitted by the municipality to the department of revenue for deposit in the general fund of the state.

   2.  In addition to the moneys received pursuant to section 15J.5, a municipality may deposit in the reinvestment project fund any other moneys lawfully at the municipality’s disposal, including but not limited to local sales and services tax receipts collected under chapter 423B if such use is a purpose authorized for the municipality under chapter 423B.
   3.
  a.  Moneys from any source deposited into the reinvestment project fund shall not be expended for or otherwise used in connection with a project that includes the relocation of a commercial or industrial enterprise not presently located within the municipality, unless one of the following occurs:
   (1)  The local governing body of the municipality where the commercial or industrial enterprise is currently located and the local governing body of the municipality where the commercial or industrial enterprise is proposing to relocate have either entered into a written agreement concerning the relocation of the commercial or industrial enterprise or have entered into a written agreement concerning the general use of economic incentives to attract commercial or industrial development within those municipalities.
   (2)  The local governing body of the municipality where the commercial or industrial enterprise is proposing to relocate finds that the use of moneys in the reinvestment project fund for a project that includes such a relocation is in the public interest. A local governing body’s finding that a project that includes a commercial or industrial enterprise relocation is in the public interest shall include written verification from the commercial or industrial enterprise that the enterprise is actively considering moving all or a part of its operations to a location outside the state and a specific finding that such an out-of-state move would result in a significant reduction in either the enterprise’s total employment in the state or in the total amount of wages earned by employees of the enterprise in the state.

   b.  For the purposes of this subsection, “relocation” means the closure or substantial reduction of an enterprise’s existing operations in one area of the state and the initiation of substantially the same operation in the same county or a contiguous county in the state. “Relocation” does not include an enterprise expanding its operations in another area of the state provided that existing operations of a similar nature are not closed or substantially reduced.
   4.  Upon dissolution of a district pursuant to section 15J.7, if moneys remitted to the municipality pursuant to section 15J.5 remain in the municipality’s reinvestment project fund and those moneys are not necessary to support completion of a project in the dissolved district, such amounts and all interest remaining in the fund that was earned on such amounts shall be remitted by the municipality to the department of revenue for deposit in the general fund of the state.
   5.  Upon dissolution of a district pursuant to section 15J.7, moneys remaining in the reinvestment project fund that were deposited pursuant to subsection 2 and all interest remaining in the fund that was earned on such amounts shall be deposited in the general fund of the municipality.
    Sec. 7.  NEW SECTION.  15J.7  District dissolution.
   1.  A district established pursuant to this chapter is dissolved twenty-five years from the date the ordinance was first adopted under section 15J.3, subsection 4, unless the municipality dissolves the district by ordinance prior to that date.
   2.  Upon expiration of the twenty-five-year period or upon adoption of an ordinance dissolving the district, the municipality shall notify the director of revenue of the dissolution of the district.
   3.  Upon receipt of the notice pursuant to subsection 2, the department of revenue shall cease to deposit state sales tax revenues and state hotel and motel tax revenues into the district’s account within the fund.
    Sec. 8.  Section 423.2, subsection 11, paragraph b, Code 2013, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (6)  Beginning the first day of the quarter following adoption of an ordinance pursuant to section 15J.3, subsection 4, transfer to a district account created in the state reinvestment district fund for each reinvestment district established under chapter 15J, the amount of new state sales tax revenue, determined in section 15J.4, subsection 1, paragraph “b”, in the district, that remains after the prior transfers required under this paragraph “b”.
    Sec. 9.  Section 423A.6, unnumbered paragraph 1, Code 2013, is amended to read as follows:
   The director of revenue shall administer the state and local hotel and motel tax as nearly as possible in conjunction with the administration of the state sales tax law, except that portion of the law which implements the streamlined sales and use tax agreement. The director shall provide appropriate forms, or provide on the regular state tax forms, for reporting state and local hotel and motel tax liability. All moneys received or refunded one hundred eighty days after the date on which a city or county terminates its local hotel and motel tax and all moneys received from the state hotel and motel tax shall be deposited in or withdrawn from the general fund of the state. 
 
Beginning the first day of the quarter following adoption of an ordinance pursuant to section 15J.3, subsection 4, the director of revenue shall transfer from the general fund of the state to a district account created in the state reinvestment district fund for each reinvestment district established under chapter 15J, the new state hotel and motel tax revenue, determined in section 15J.4, subsection 2, paragraph “b”, in the district.