City of Fairfax, Virginia City Council Work Session

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City of Fairfax, Virginia City Council Work Session Agenda Item # WS 2 City Council Meeting 5/5/2015 TO: FROM: SUBJECT: ISSUE(S): Honorable Mayor and Members of City Council Robert Sisson, City

1 City of Fairfax, Virginia City Council Work Session Agenda Item # WS 2 City Council Meeting 5/5/2015 TO: FROM: SUBJECT: ISSUE(S): Honorable Mayor and Members of City Council Robert Sisson, City Manager Discussion on Financial Incentives Whether or not the City should have a financial incentives package. SUMMARY: Surrounding jurisdictions provide various financial incentives to attract business encourage redevelopment and create new jobs, as outlined in the attachment. The City is currently limited and may find itself in a competitive disadvantage. Council directed staff to research and make recommendations on potential City incentives. FISCAL IMPACT: Unknown RECOMMENDATION: Direct staff, and/or Economic Development Authority, to move forward with the Council approved recommendations. ALTERNATIVE COURSE OF ACTION: RESPONSIBLE STAFF/ POC: COORDINATION: ATTACHMENTS: Take no action. Economic Development Director City Manager, City Attorney, Commissioner of Revenue Memo, Comparison of Local Incentive Programs

2 CREATING AN ECONOMIC INCENTIVE PROGRAM FOR THE CITY OF FAIRFA The economic vitality of the City of Fairfax could be greatly enhanced through the targeted offering of incentives and non-financial resources that facilitate small business growth, attract target industries, and encourage the redevelopment of underperforming properties. Most, if not all, localities in Northern Virginia provide some sort of incentive package, from grants to tax abatements to regulatory assistance. The City of Fairfax has no formal package in place and finds itself in a competitive disadvantage as a result. The information below highlights, generally, the options available to the City and potential funding mechanisms. The City should establish the framework upon which an incentive program can be built. Similarly sized localities have experienced greater success and lower administrative burdens by focusing incentive programs on target industries, in accordance with state enabling legislation. Technology Zones: The City of Fairfax could establish a technology zone by ordinance which would allow for qualified businesses to benefit from incentives such as a reduction in user or permit fees, special zoning treatment, exemption from specific ordinances, etc. Currently Arlington County and the Cities of Falls Church, Manassas, and Manassas Park utilize these zones. Other University towns with Tech Zones include Charlottesville and Harrisonburg. Winchester has one as well. Once created the City can offer a variety of incentives based upon established criteria. Most jurisdictions offer a 3-5 year elimination or phased reduction of BPOL, while Harrisonburg and Winchester offer additional incentives consisting of utility and connection fee rebates, permit fee rebates, and property tax exemptions for rehabbed or historic properties. (A summary chart of local incentive programs is attached.) Arts and Culture District: Under this ordinance the City would establish a program for the downtown, or City-wide, whereby qualified arts and tourism businesses or organizations may be eligible for economic incentives. Qualified arts businesses or organizations are those businesses or not-for-profit organizations physically located within the City of Fairfax Arts and Tourism District and which positively contribute to the spectrum of arts and cultural activities and venues available to the public. Examples may include, but are not limited to theaters, art galleries, music clubs and dance studios. Qualified tourism businesses or organizations include, but are not limited to hotels, restaurants music clubs and retail. Economic Development Authority Incentive Program 4/29/15 1

3 Resources will need to be identified to support any incentive program. An attractive option for many has been the creation of a fund, separate from the general fund, to be used specifically to support economic development initiatives. Below is a successful model used by the City of Manassas. Economic Opportunity Fund: Establishing an Economic Opportunity Fund provides instant credibility for the City of Fairfax with developers, investors and state economic development officials as they determine potential site locations. Moneys to support the fund can come from a variety of sources including one-time infusions from the sale of property, bond revenue and annual appropriation of tax revenue (1/2 1 cent). Policies outlining the criteria by which the fund will be used and tracking of performance measures will be necessary to ensure success of the initiative and ensure appropriate level of Council oversight. Creating a supportive ecosystem for small businesses, which are the foundation of the City s economy, is as critical to the City s economic growth as the above recommendations. Regulatory Assistance: Providing an efficient and transparent regulatory environment is considered to be the most influential economic development tool for any local government. Streamlining permitting processes helps businesses of all sizes, for relatively low cost. The City should identify an ombudsman, who would walk a prospective business through the permitting process; thus improving the experience in City Hall and perception of doing business in the City. The City should formalize and promote existing roles performed by the Economic Development Office. Fast track permitting is another tool used in several localities whereby new or existing business may qualify for an expedited review of a city required permit or plan to locate in new or existing space, based upon established criteria. Connect small businesses to information and resources: The City should develop a more dynamic and integrated website, capitalizing on existing information and infrastructure, that is more user friendly and clearly outlines the steps for doing business in the City. The City s greatest asset, the MEC-Fairfax must become a focal point in showcasing the existing business support systems available to start-ups, entrepreneurs and others looking to come to the City of Fairfax. Additional Considerations: In order for any of the above incentives to positively impact the City s business climate and contribute to economic growth, the City should adopt a strategic plan for economic development that provides the vision and guidance necessary for sustained economic vitality. It should also review, update, and re-adopt, the comprehensive plan. Economic Development Authority Incentive Program 4/29/15 2

4 COMPARISON OF LOCAL INCENTIVE PROGRAMS This is a brief overview of the incentives offered across Northern Virginia for commercial (re)development. Greater detail on specific programs is attached. Alexandria Arlington Fairfax Fairfax Co. Falls Church Fredericksburg Manassas Prince William Loudoun Tax Increment Financing Industrial Revenue Bonds (EDA) Technology Zones Commercial Rehab Tax Credit/Abatement Opportunity Fund BPOL tax abatement Fast Track Permitting (when critical) Incentives Comparison Page 1

5 FAIRFA CO. BPOL Tax Exemption The Business, Professional and Occupational license (BPOL) tax is an annual tax based on gross receipts for the preceding year. Companies with gross receipts more than $10,000 must pay a fee or the tax. However, Fairfax County does allow certain specific exclusions and adjustments, including: -Software Development Companies: Software sales, leases or licensing may be excluded from gross receipts by companies that design, develop or create computer software in Fairfax County. -Government computer hardware/software sellers: The original cost (not resale price) of computer hardware or software sold under contract to a state or federal government entity in the United States within two years of purchase may be deducted from gross receipts. -Nonprofits: Except for unrelated business income, the income of charitable nonprofit organizations may be excluded from gross receipts. CITY OF FALLS CHURCH EDA Grant Program The EDA Board of Directors has renewed its grant program for The EDA will limit individual grant awards to $2,500, with discretion for special awards. Total grant awards will not exceed $20,000. Commercial Property Rehabilitation Tax Abatement Program If you are the owner of a commercial building that is at least 20 years old, located in the City of Falls Church, and you are planning to make improvements to the building that will increase its value by at least 50%, you may qualify for an abatement of property taxes on the value of your investment. Tax Increment Financing Limits may be placed on the slice of tax increment revenue diverted for a TIF fund each year and shall be determined on a case-by-case basis. Technology Zone The City provides up to three years abatement on BPOL taxes for qualified tech companies. CITY OF FREDERICKSBURG Rehabilitation Tax Credit Programs Downtown Property Rehab, Vacant Commercial Structures, Commercial properties Job Creation Property Programs (new construction) New Jobs tax credit, enhanced new jobs tax credit Incentives Comparison Page 2

6 LOUDOUN The types of incentives available to Virginia companies relocating to or expanding in Loudoun County will be limited to: -Waiving commercial development processing fees. - Public infrastructure improvements, such as roads, sidewalks, parking facilities, etc. - A match of the Virginia Jobs Investment Program grant. County may provide a match to the Governor s Opportunity Fund. CITY OF MANASSAS Partial Exemption of Taxes on Substantially Rehabilitated Real Estate To encourage redevelopment and revitalization, a property owner maybe have a portion of their real estate taxes exempted based on the added value of any physical improvements to the property; phased in over 10 years. Partial Exemption of Taxes on BPOL New and expanding businesses in the city-wide Technology Zone may qualify for a full or partial exemption of their BPOL based on the type of business, the capital investment, number of new jobs, etc. for a period of up to 5 years. Sales Tax Rebate New and expanding retail businesses in the Arts and Tourism District may be eligible for a 0.5% of the 1.0% local sales tax returned to the city from the state provided back to the business for a period of up to 5 years. Economic Opportunity Fund New and expanding businesses in the city-wide Technology Zone or Downtown Arts and Tourism District may qualify for a cash grant for such up-front costs as site acquisition, building, site plan, and permitting fees, utility tap fees, etc. Industrial Development Revenue Bonds Qualified businesses may be able to use industrial development revenue bond financing to acquire land, construct or expand buildings, and/or purchase equipment. Fast Track Permitting Any new or existing business may qualify for an expedited review of a city required permit or plan to locate in new or existing space. Incentives Comparison Page 3

7 PRINCE WILLIAM PWC Economic Development Opportunity Fund The Prince William County Board of Supervisors maintains an opportunity fund to help attract and retain targeted industries. The Board of County Supervisors may authorize the use of these funds upon the recommendation of the Department of Economic Development. Funds may be used for infrastructure improvements, site preparation, work force services, and/or capital equipment purchases. Low Business Tangible Personal Property Tax Rates In addition to highly competitive tax rates for business property, Prince William County offers aggressive depreciation schedules for business property. Generally, business property (with the exception of programmable computer equipment and peripherals) is assessed at 85% of its original cost in the year acquired. The percentage decreases in 10% increments each year thereafter. County may provide a match to the Governor s Opportunity Fund. Incentives Comparison Page 4

ARLINGTON programs and incentives

ARLINGTON programs and incentives Arlington Economic Development is committed to attracting and retaining high-quality businesses of all shapes and sizes. When it comes to assisting businesses, we don