Virginia Enterprise Zone Program

Virginia Enterprise Zone Program June 1, 2007

Outline of Presentation
Purpose - The purpose of this presentation is to provide an overview of the Virginia Enterprise Zone program for localities that may not be familiar with it. A PowerPoint presentation with the details of the actual designation application will be available at the How-to-Apply workshops.
Program Overview
Incentives
State and Local Roles & Responsibilities
Designation Amendment Procedures

Program Overview

Overview: Enterprise Zones
Enterprise Zone
Geographical area of county, city, or town designated by the Governor for 10-20 years.
First established by General Assembly in 1982
(Virginia Enterprise Zone Act)
State & local government partnership
Means to stimulate job creation, private investment, and revitalization.

Enterprise Zones

EZ Statute 2005
July 1, 2005: General Assembly passed Enterprise Zone Grant Act
Transitioned program from tax credits incentives to grants:
Job Creation Grant
Real Property Investment Grant

Enterprise Zone Grant Act
Act authorizes up to 30 zones
Current zones run out their 20-year designation period
30 zones will be reached as current zones expire
Initial ten-year designation period, with two five-year renewals

Policy Intent
Target zone designations -- greatest need and most impact
Focus on economic situations that can best benefit from financial incentives -- influence location decisions
Increase fiscal accountability associated with state incentives

Zone Designation Process

Designation Application Content
Demonstration of Need
Zone Characteristics
Impact of Zone
Program Implementation

Distress Factors
Locality-wide distress factors not zone specific distress criteria
Freedom to put zone where it best fits local economic development needs
3 zones per locality
Each zone can have 3 non-contiguous areas

Distress Factors
50 percent of an applicant’s score is based on the most recent three year averages:
Average unemployment rate
Average median adjusted gross income (all returns)
Average percentage of public school students receiving free or reduced price lunches

Applicants
City or county only
Towns can be part of county acreage
Joint applicants can be two or more adjacent jurisdictions – must be strategic, not just convenient; must have mechanism to ensure shared benefits

Zone Requirements
Meet but do not exceed size limitations
Provide a local incentive package
Joint zones – have established a mechanism to ensure that economic benefits of the zone are shared among participating jurisdictions and have completed a joint application agreement
No eligibility criteria must be met in order to apply for zone designation

Designation Process
Zones must show impact, effectiveness to be renewed after 10 years and then after 15 years
Performance of EZ responsibilities
Effectiveness in creating jobs and capital investment
Need
DHCD will review performance, effectiveness with each zone annually and offer suggestions for improvement

Designation Process: Impact
Impact of Designation on Locality’s Economic Development Efforts
The importance of zone designation
What role will the zone play in overall economic development efforts
Joint zones should discuss the mechanisms to be used to ensure benefits are shared

Zone Termination
Statute requires DHCD to terminate zone designations under the following conditions:
Failure to provide local incentives
Failure to qualify for state incentives
Businesses/Zone Investors that are within an eligibility period may continue to qualify for state incentives.
Once de-designated, no new businesses can qualify

Incentives

State Incentives
New performance based grants:
Job Creation Grant
Click below for summary chart on State incentives
http://www.dhcd.virginia.gov/CommunityDevelopmentRevitalization/PDFs/vez_state_incentives.pdf

Job Creation Grant
Encourages the creation of higher quality jobs
Eligible positions:
Net new to Virginia
Over 4 job threshold
Permanent full-time
Pay at least 175% of Federal minimum wage
Provide health benefits

Job Creation Grant: Amount
Based on wages paid for the position
For businesses providing health benefits &
Pay at least 175% of Federal minimum wage ($9.01/hour)
Up to $500/position per year
Pay at least 200% of Federal minimum wage ($10.30/hour)
Up to $800/position per year

Job Creation Grant: Term
Capped at 350 positions annually
Available for 5-consecutive year term
Restrictions:
Retail, personal service, or food and beverage positions
Units of local, state, or federal government

Zone verification
Payroll documentation
W-4
First and last payroll records for base and/or grant
year
Health benefits information
Part of position’s premium paid by employer
Health insurance waivers for those declining firm’s insurance
W-9
CPA’s Attestation Report
Job Creation Grants: Application Materials

Based on qualified real property investments made by individual/entity to commercial, industrial, or mixed-use* buildings in Enterprise Zones
Applicant: Zone Investor
Owner
Owner of space*
Tenant*
Developer
* Supplemental application material

Real Property Investment Grant: Amount
Eligibility thresholds based on type of investment:
$50,000 for rehab or expansion
$250,000 for new construction
Up to 20% of total cost of qualified real property investment

Real Property Investment Grant: Term
Capped per building/facility
Investments less than $5 Million: $125,000 per building or facility
Investments of $5 Million or more: $250,000 per building or facility
5-consecutive year term
Restrictions:
Units of local, state, or federal government

Qualified Real Property Investment
NOT Qualified Real Property Investments:
Furnishings
Appraisal, architectural, engineering and interior design fees
Loan fees; points or capitalized interest
Legal, accounting, realtor, sales and marketing or other professional fees
Closing costs
Permits, user fees, zoning fees, impact fees, inspection fees
Bids
Insurance
Signage or signs
Utilities
Bonding
Copying
Rent loss
Roads
Temporary facilities
Utility hook-up or access fees
Outbuildings
Well, septic, or sewer systems
Land or building acquisition
Basis of any property: (i) for which a grant was previously awarded; (ii) which was previously placed in service in Virginia by the taxpayer, a related party, or a trade or business under common control; or (iii) which was previously in service in Virginia and has a basis in the hands of the person acquiring it, determined in whole or in part by reference to the basis of such property in the hands of the person from whom acquired, or Internal Revenue Code §1014 (a).
Qualified Real Property Investments:
Excavation, grading
Paving
Driveways, roads, sidewalks
Landscaping or other land improvements
Demolition
Carpentry
Sheetrock, plaster
Painting
Ceilings
Fixtures
Doors, windows
Fire suppression systems
Roofing and flashing
Exterior repair
Cleaning and clean-up
Electrical/wiring
Plumbing
HVAC
Flooring
Windows
What Constitutes Qualified Real Property Investment?

Code requires that an independent CPA licensed in VA perform the agreed upon procedures established by DHCD and report on findings in EZ grant applications to DHCD
CPA’s Attestation Report

Enterprise Zone Grant Deadlines April 1st – Applicant submits application to DHCD May 15th – DHCD notifies applicant of deficiencies. June 1st – Applicant resubmits, if necessary and deficiencies have been resolved. June 30th – DHCD notifies applicant of qualification. August – Virginia Department of Treasury sends enterprise zone grant check to applicant. Application Deadlines for New EZ Grants: Wage-based Job Creation Grants and Real Property Investment Grants

Funds allocated annually by General Assembly
$16.5 million in grants available grant year 2006
Should requests exceed grants allocated, all qualified requests will be pro-rated
Pro-ration was 61 percent for the 2005 grant year
Grant Awards and General Limitations

Local Incentives

Local Incentives
Crucial part of program’s success
Means to create an improved climate for private business development & expansion

Consistent with local revitalization and development goals (overcoming barriers to business operations)
Local government may propose any type of incentive permissible under Federal and State Law (as long as zone specific)
Local Incentives

Local Tax Incentives
Dos and Don’ts
Constitutionality is a must!
Article 10, Section 1, Uniformity Clause:
Taxation has to be uniform in territory, subject, class
“Territory” refers to entire locality

Dos and Don’ts (cont.)
Applies to “property” type taxes – real estate, machinery & tools
Unless expressly allowed by the GA, like 58.1-3220 & 3221; or
As a grant, typically thru an IDA, for machinery & tools tax
Do not use words abatement, refund, rebate

Dos and Don’ts (cont.)
Uniformity does not apply to BPOL, utility tax, permit fees
Rebates, refunds, abatement are allowed

Local Incentives
Partial exemption for substantially rehabilitated real estate (58.1-3221, VA Code)
Grants based on the value of machinery & tool tax
Architectural assistance – grants, design
Reduced permit and user fees
Special rates for BPOL tax

Local Incentives
Special zoning districts (e.g., parking)
Fast-track permitting
Exemptions from local ordinances
Infrastructure improvements
Crime reduction measures (security audits; assistance w/purchase cost)

Local Incentives
Quality vs. quantity
Measurable and effective
Should represent sound fiscal policy

Roles & Responsibilities

State Role & Responsibility
Annual site visit
Confer with you and your clients on state qualification, on-site and via phone
Review & advise on amendments to boundaries or incentives
Provide periodic administrator meetings
Participation in local workshops and zone promotion

Zone Assessment
Means to evaluate level of participation, success, and value of zone
Offer more targeted technical assistance
Considerations
INCENTIVES!
Local utilization
State utilization
Physical appearance of zone
Marketing efforts
Number of stakeholders involved

Local Responsibilities
Program performance evaluation:
Data Collection
Incentive utilization
Private Sector Investment
Public Sector Investment
Submit an Annual Report to DHCD (July)
Discusses zone activity and is the basis for an annual report to the General Assembly. Click below to view a copy of the report.
www.dhcd.virginia.gov/CommunityDevelopmentRevitalization/Word/VEZ_%20Annual_Program_Report.doc
Annual site assessment visits with DHCD staff

Local Responsibilities
Process/Management Structure for:
Zone administration and local incentive promotion
What departments are involved and what are their roles
Compilation of comprehensive list of addresses & businesses within zone
State Incentives promotion
Meet state requirements
Attend how-to-qualify workshops
Respond to questions about state incentives
State grant forms and applications
Zone Marketing

Marketing
Shouldn’t be an after thought
Develop a plan
Point person
Awareness vs. Target
Everyone can help market
Regional Partnership
IDA
Downtown Organizations
Realtors/developers
SBDC

Zone Characteristics: Size Guidelines
Cities:
Minimum of 1/4 square mile (160 acres)
Maximum of 1 square mile (640 acres);
Or, 7 percent of the jurisdiction’s land area or population, whichever is largest

Consolidated Cities:
Minimum of 1/2 square miles (320 acres)
Maximum of 6 square miles (3,840 acres)
Hampton, Newport News, Richmond, Suffolk, Virginia Beach

Counties:

Unincorporated Areas of County:

Joint zones – an enterprise zone located in two or more jurisdictions (cities or counties).
Each locality’s portion of the joint zone can consist of up to three non-contiguous geographic areas relative to that locality.
One of the locality’s three possible zone areas must be contiguous to at least one other participant’s zone area as part of the joint application.
Zone Characteristics: Zone Configurations

Single zone – an enterprise zone located entirely within a single jurisdiction (city or county). A county zone including areas within incorporated town limits is considered part of the county’s zone acreage and constitutes a single zone.
EXAMPLE: Smyth County applies for a single zone designation. A portion of the proposed zone includes part of Marion’s town limits. The acreage within the town limits counts towards Smyth County’s zone acreage. The town is not required to offer incentives (but can) and is considered part of the county’s zone.
Zone Characteristics: Size Configurations County limits Town limits Portion of town limits in County’s single zone County EZ boundaries

Example of a Joint Zone Configuration
Zone Characteristics: Size Configurations Locality One Locality Two Locality Three Contiguous joint zone areas Non-contiguous zone areas (3 per locality)

http://www.leavingmymarc.com	129
http://www.slideshare.net	10

Virginia Enterprise Zone Program

by leavingmymarc on Dec 07, 2009

Accessibility

Categories

Tags

Upload Details

Usage Rights

2 Embeds 139

Statistics

Virginia Enterprise Zone Program — Presentation Transcript