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Harpel gasb 77 tax abatement disclosure workshop
The document outlines the importance of financial disclosure related to tax abatement agreements as mandated by GASB Statement No. 77, aimed at enhancing transparency and accountability in economic development incentives. It emphasizes the need for economic developers to understand and communicate the criteria for disclosure and the expectations for data-driven outcomes. The document also provides guidance on how to connect disclosures to community economic development objectives and improve stakeholder engagement.
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Harpel gasb 77 tax abatement disclosure workshop
- 1. GASB Incentive Workshop IEDC FEDFORUM APRIL 2017 ELLEN HARPEL SMART INCENTIVES
- 2. About us Business DevelopmentAdvisors is an economic development consulting firm Smart Incentives helps communities make sound decisions throughout the incentives process 2 © 2017 SMART INCENTIVES
- 3. Understanding Statement No. 77in relation to your job as an economic developer © 2017 SMART INCENTIVES 3
- 4. Why do weuse incentives? To achieve our community’s economic development goals ◦ Jobs ◦ Business Development ◦ Investment ◦ Downtown revitalization ◦ Brownfield redevelopment ◦ Quality of life and quality of place ◦ Strengthen tax base Incentives are not just about winning a deal. Smart incentive use is always connected to a larger economic development strategy. 4 © 2017 SMART INCENTIVES
- 5. What is drivinginterest in incentives disclosure? Disconnect between what economic developers believe they do and what others think they do Growth in incentive use ◦ more programs ◦ more money ◦ more projects Expectation for data-driven, performance-based accountability in government programs © 2017 SMART INCENTIVES 5
- 6. Fundamentals of reporting &disclosure Transparency ◦ How much are we spending? ◦ Who is receiving incentives? Accountability ◦ What are we getting out of our incentives spending? ◦ Do our programs help us achieve our goals in an effective and efficient manner? 6 © 2017 SMART INCENTIVES
- 7. Reporting is partof the incentives process © 2017 SMART INCENTIVES 7
- 8. Nuts and bolts ofreporting and compliance © 2017 SMART INCENTIVES 8
- 9. Introduction to GASB77 Requires disclosure of financial information about tax abatement agreements between individual taxpayers and governments ◦ Guidance is limited to tax abatements – does not include all tax expenditures or other forms of assistance to businesses ◦ Not limited to tax abatements for business attraction/expansion Why? To make transparent the financial impact of transactions that can limit a government’s revenue-raising ability GASB is not directly concerned with the effect of tax abatements on economic development outcomes In effect for financial statements for periods beginning after Dec. 15, 2015 © 2017 SMART INCENTIVES 9
- 10. Definition of aTax Abatement A reduction in tax revenues that results from an agreement between one or more governments and an individual or entity in which (a) one or more governments promise to forgo tax revenues to which they are otherwise entitled and (b) the individual or entity promises to take specific action after the agreement has been entered into that contributes to economic development or otherwise benefits the governments or citizens of those governments. Source: Statement 77; Presentation by Pam Dolan, Project Manager, GASB © 2017 SMART INCENTIVES 10
- 11. GASB Statement 77State & Local Tax Abatement Disclosure Disclose agreements between individual taxpayers and the government that might diminish the tax base Includes: ◦ General descriptive information (tax being abated, authority, eligibility, mechanism by which taxes are abated, provisions for recapture) ◦ Commitments made by the recipient ◦ Other commitments made by a government (such as infrastructure) ◦ Number of tax abatement agreements entered into and in effect during the reporting period ◦ Dollar amount of taxes abated during the reporting period Substance of the transaction rather than the name or description determines whether the abatement must be disclosed. 11 © 2016 SMART INCENTIVES
- 12. Disclosure principles A governmentshould disclose information separately for: ◦ Its own tax abatements ◦ Tax abatements that are entered into by other governments that reduce the reporting government’s tax revenues Disclosure information may be presented for individual agreements or may be aggregated Disclosure should commence in the period in which a tax abatement agreement is entered into and continue until the tax abatement agreement expires. © 2017 SMART INCENTIVES 12 Source: Statement 77; PresentaEon by Pam Dolan, Project Manager, GASB
- 13. Summary of requireddisclosures Brief Descrip+ve Informa+on Own Abatements Other Government’s Abatements Name of program x Purpose of program x Name of government x Tax being abated x x Authority to abate taxes x Eligibility criteria x Abatement mechanism x Recapture provisions x Types of recipient commitments x Dollar amount of taxes abated x Amounts rec’d from other governments for abated taxes x Threshold for individual disclosure x InformaEon omiWed due to legal prohibiEons x © 2017 SMART INCENTIVES 13 Source: PresentaEon by Pam Dolan, Project Manager, GASB
- 14. Three steps foreconomic developers Understand which tax incentives meet the GASB criteria for disclosure Communicate with your government finance staff Determine how to supplement the financial disclosure ◦ Disclosures will describe costs but not expected benefits of tax abatements ◦ Consider supplemental reports ◦ Be prepared for questions ◦ Engage and be a good resource © 2017 SMART INCENTIVES 14
- 15. How best totalk to colleagues and elected officials about Statement No. 77 © 2017 SMART INCENTIVES 15
- 16. To do now Communicatewith government finance staff and/or budgetary officials Think about stakeholders* ◦ Enacting authorities: states, cities, counties ◦ Reporting entities: finance department; other affected jurisdictions such as school districts ◦ Direct stakeholders: tax departments, state auditor, municipal league, association of counties, assessors ◦ Third party stakeholders: financial institutions, investors, rating agencies *Source: John Tysseling, Moss-Adams LLP © 2017 SMART INCENTIVES 16
- 17. To do attime of disclosure Supplement the financial disclosure ◦ Disclosures will describe costs but not expected benefits of tax abatements ◦ Consider supplemental reports Options: ◦ Letter of transmittal with the Comprehensive Annual Financial Report (CAFR) ◦ Other supplemental material within CAFR ◦ Annual report aligned with disclosures ◦ Online – dashboards, opengov sites, etc. Be prepared for questions Engage and be a good resource © 2017 SMART INCENTIVES 17
- 18. Engage and bea good resource Connect tax abatement use to your community’s economic development objectives. Provide context that demonstrates relative impact and fit with the community. Consider your audience(s). Strive to improve the quality of the policy conversation around incentives. © 2017 SMART INCENTIVES 18
- 19. To do overtime Consider how to use the disclosures in conjunction with your own reporting on economic development activities Develop a template or consistent method of providing both the required disclosures and any supplemental data Streamline and standardize data collection procedures How can this information improve economic development decision-making? © 2017 SMART INCENTIVES 19
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- 21. Questions Have you beenworking with your government finance staff on these disclosures? ◦ What has your role been? ◦ What have been the challenges? ◦ Have there been surprises? ◦ What has been your experience in pulling together requested data elements? What questions are you fielding about tax abatement disclosures? What story would you like to tell? What are you interested in learning from disclosures from other places? What can we do to facilitate proper use of GASB 77 reporting? © 2017 SMART INCENTIVES 21