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Home My WebLink AboutA005 - memo from Ames Economic Development Commission Ames Economic Development Commission 205 Clark, Suite 2 • Ames, Iowa 50010 • 515-232-0337 TU: Mayor Paul Goodland and the Ames City Council FROM: Ames Economic Development Commission SUBJECT: Property Tax Exemption Ordinance The Board of Directors of the Ames Economic Development Commission is requesting that the Ames City Council enact an ordinance to exempt from property taxation, the actual value added to industrial real estate by new construction, reconstruction of an existing building, and the acquisition of or improvement to machinery and equipment assessed as real estate. This property tax exemption is allowed under Iowa State Code, Chapter 427B. The amount of actual value added which is eligible to be exempted from taxation is as follows: Year 1 75% Year 2 60% Year 3 45% Year 4 30% Year 5 15% This schedule shall be followed unless an alternative schedule is adopted. The alternative schedule shall not provide for a larger exemption in a particular year than is provided by state law. A property tax exemption under Chapter 427B shall not be granted if the property for which exemption is claimed has recieved any other property tax exemption authorized by law. New construction means new buildings and structures and includes new buildings and structures which are constructed as additions to existings buildings and structures. New construction does not include reconstruction of an existing building or structure, unless the reconstruction is required due to economic obsolescence and the reconstruction is necessary to implement recognized industry standards for the manufacuring and processing of specific products and the reconstruction is required for the owner of the building or structure to continue to competitively manufacture or process those products. This determination shall recieve prior approval from the city council upon the recommendation of the Iowa Development Commission. An application shall be filed for each project resulting in actual value added for which an exemption is claimed. The application shall be filed by the property owner with the local assessor by February 1 of the assessment year in which the value added is first assessed for taxation. Applications for exemption shall be made on forms prescribed by the director of revenue and shall contain information pertaining to the nature of the improvement, its cost, and other information deemed necessary by the director of revenue. ' A person may submit a proposal to the city council of the city to receive prior approval for eligibility for a tax exemption on new construc- tion. The city council, by ordinance, may give its prior approval of a tax exemption for new construction if the new construction is in conformance with the zoning plans of the city. The prior approval shall be subject to the hear- ing requirements of section 427B. 1. Prior approval does not entitle the owner to exemption from taxation until the new construction has been completed and found to be qualified real estate. However, if the tax exemption for new construction is not approved, the person may submit an amended proposal to the city council for approval or rejection. A person must submit a proposal to the city council for prior approval if the project calls fro the reconstruction of an existing building or structure. A statement verifying the granting of such approval must be submitted with the application that is provided to the local assessor. The following are two examples of what this incentive means financially to two different prospects if they were to expand in Ames or were to locate a plant in Ames. Example one is an existing industry that needs to expand. Example two is a prospect that is currently looking at several Iowa communities as a site location for a manufacuring plant that will employ one hundred plus people. EXAMPLE ONE Building Value: $175,000 Tax Rate $25.88125/$1,000 assessed valuation Taxes Paid Taxes Saved Year 1 $ 1, 132.00 $ 3,397.00 Year 2 S 1,812.00 $ 2,717.00 Year 3 $ 2,491.00 $ 2,038.00 Year 4 $ 3,170.00 $ 1,359.00 Year 5 $ 3,850.00 $ 697.00 $12,455.00 $10,190.00 EXAMPLE TWO Building Value: $2,250,000 Tax Rate $25.88125/$1,000 assessed valuation save� Year 1 $ 14,558.00 $ 43,675.00 Year 2 $ 23,293.00 $ 34,940.00 Year 3 $ 32,028.00 $ 26,205.00 Year 4 $ 40,763.00 $ 17,470.00 Year 5 $ 49,498.00 $ 8,735.00 $160,140.00 $131,025.00 According to information provided by the prospect noted in example one, unless the tax exemption ordinance is adopted in Ames, the company will build their new facility in another Story County community that currently has the tax exemption ordinance. The two examples shown above illustrate why this incentive is important to the Ames community. By not having this incentive we not only lose the t r;.I\'od b\' t lit• hid(I ,t i y ' but p'iW b\' 4I Key points to remember: . . . . .The exemption must be applied to all real estate used for industrial purposes (industrially zoned) . The City Council cannot pick and choose which development will receive the exemption. . . . . .An applicant must come before the City Council and request prior approval before a reconstruction project is started. . . . . .An applicant may request prior approval from the City Council for a new construction type project. We would recommend and encourage that all new construction projects request prior approval from the City Council. . . . . .Exemption can be for new machinery and equipment that would be taxed as personal property. If the new machinery and equipment is purchased through the normal replacement process, it is not eligible for the exemption. Also, if the machinery and equip- ment have received exemptions under other laws, it would not be eligible for exemption under this ordiance. . . . . .The city will not lose taxes that they are presently receiving. In the first year the City will receive 25% of the assessed tax which is more than if the improvements were not made. . . . . .There are presently 133 communities and 21 counties that have a tax abatement program. This incentive gives them a competitive edge over Ames when it comes to attracting new industries. (See attached lis7of communities and counties) . . . . .Attached is a copy of Chapter 427B of the Iowa State Code for your reference. The Ames Economic Development Commission recommends that the Ames City Council enact an ordinance to exempt from property taxation, the actual value added to industrial real estate by new construction, reconstruction of exist- ings buildings, and the acquisition of or improvement to machinery and equip- ment assessed as real estate. We feel that this incentive is very important if we are to be competitive in attracting businesses to Ames and at the same time work with existing industries on their expansion projects. 427B LIST 11/20/84 1. Ackley 54 . Grinnell 2. Adair 107: Sanborn 55. Guthrie Center 108. Schleswig 3 . Albia 56. Hampton 109. Sheldon 4. Ankeny 587. , Haarlan 110. Sibley 5' y H warden Ill. Sigourney 6. Atlantic 59 . Hull7. Audubon 112. Sioux Center 8. Bedford 60• Humboldt 113. Sioux City 61. Humeston (pending) 114. Spencer 9. Belle Plaine 62. Ida Grove 10. Belmond 115. Spirit Lake + 63 . Independence 116. • Storm Lake 11. Bettendorf 64. Indianola 117. Tama �•: 12. Birmingham 65. Iowa Falls .�• 13. Bloomfield 118. Toledo 66. Jefferson 119. Traer 14. Bondurant 67. Keokuk 15. . Boone 120. Urbandale 68. Keosauqua 121. Victor 16. Britt 69 . Knoxville 122. Vinton 17. Burlington 70. Lamoni 123. Wapello 18. Camanche 71. Laurens ; , 19 . Carroll 124. Waterloo -�>' 72. • LeMars 125. Waverly 20 . Carter Lake 73. Leon 126. • Webster City 21. Cedar Falls 74. Lisbon 127. West Des Moines , �. 220 Cedar Rapids 75. Marengo 12 . West Union 23.' Centerville 76. Marion 129. Wilton .24 . Chariton 77. Marshalltown 130. Winterset -_; 25. Charles City 78. Mason City 26 . Cherokee 79 . Milton 27. Clarion ADDITIONAL CITIES: (2/7/85) 80. Montezuma 28 . Clearfield 81. Mount Ayr 29 . Clinton 82. Mount Pleasant 131. Clarinda 30 . Conrad 83. Muscatine 132. Iowa City 31: Corning 84. Nevada 133. Lake Mills 32. Council Bluffs 85. New Hampton 33. Cresco 86. Newton COUNTIES WITH 427B: ,i., 34 . Creston :�. � �• 35. Davenport 87• North English 1. Adams p 88. - Northwood 36 • Dellitt (City) 89 . Oelwein 2. Carroll 3 f . Decorah 90. city orange 3. Cass 38 . Des Moines 91. Osage y 4. Clay • ,t 39 . Dubuque 92. Osceola 5. Crawford 40. Dyersville 93. Oskaloosa 6. Floyd 1; 41. Eagle Grove 94. Ottumwa 7. Franklin 42. Eldridge 95. Parkersburg', ` 8. Fremont .r :r.• -,- 43. Emmetsburg 96. Perry 9. Grundy 44. Estherville 97. Pleasant Hill 10. Hamilton 4 5 Fairfield 98. Pocahontas 11. Henry e.��. 46:' Farmington 99 . Primghar 12. Iowa • 13. Marion �,_47. Fayette 100 . Red Oak (pending) 48. Fort Dodge 101. Reinbeck 14. Monroe 99. Fort Madison 102, Riceville 15. Palo Alto 50.' Garner 103. Rock Rapids (City) 16. Plymouth 51. Glenwood 104. Rock Valley 17. Ringgold 52. Greenfield 105. Rockwell 18. Sioux 53 . Grimes 106 . Sac City 19. Union 20. Warren 21. Winneshiek , §427A.13,PERSONAL PROPERTY TAX CREDIT 2206 !!! tion shall continue for each succeeding fiscal year.For 427A.14 Computing debt limitations. For the pur- the fiscal year for which the ninth increase in the poses of computing all debt limitations for municipal- additional personal property tax credit becomes effec- ities,political subdivisions,school districts and taxing tive as provided in this division,and for each succeed- districts with respect to any debt incurred or proposed ing fiscal year,the total appropriation shall be sixty- to be incurred after July 1, 1973, the actual value of .,. eight million dollars per year.[C71,73,§427A.8;C75, all personal property as defined in section 427A.1 77, 79,81, §427A.131 shall not exceed its actual value as of January 1, 1973. Referred to in 1442.2 [C75, 77, 79,81, §427A.141 Referred to in 1442.2 li CHAPTER 427B i, t,f INDUSTRIAL PROPERTY—SPECIAL TAX PROVISIONS J Referred to in t:331,402 a' DIVISION 1 INDUSTRIAL REAL ESTATE,MACHINERY,AND UIPMENT— 427B.6 Dual exemptions prohibited. 42713.7 to 4:7B.J Reserved. i. NEW CONSTRUCTION EXEMPTION 42713.1 Actual value added exemption from tax— %S'� 1 IIVISION 11 public hearing. SPECIAL VALUATION POK MACHINERY AND COMPUTERS 42713.2 Zoning under chapter 358A. I,. 427B.3 Period of partial exemption. 427B.10 Property subject to special valuation. t;t 427B.11 Assessor duties. 427B.4 Application for exemption by property 42713.12 Reimbursement. owner. 42713.13 Appropriation. 42713.5 Exemption may be repealed. 427B.14 Property not eligible. f1 DIVISION I manufacture or process those products which deter- INDUSTRIAI.REAL ESTATE,MACHINERY,AND mination shall receive prior approval from the city EQUIPMENT—NEW council of the city or the board of supervisors of the CONSTRUCTION county upon the recommendation of the Iowa devel- R EXEMPTION opment commission. The exemption shall also apply " to new machinery and equipment assessed as real es- 427B.1 Actual value added exemption from taz— tate pursuant to section 427A.1, subsection 1, para- "_ public hearing. A city council, or a county board of graph `e',unless the machinery or equipment is part supervisors as authorized by section 42713.2,may pro- of the normal replacement or operating process to vide by ordinance for a partial exemption from prop- maintain or expand the existing operational status. F erty taxation of the actual value added to industrial The ordinance may be enacted not less than thirty real estate by the new construction of industrial real days after a public hearing is held in accordance with I section 358A.6 in the case of a county,or section 362.3 estate and the acquisition of or improvement to ma- chinery and equipment assessed as real estate pursu- in the case of a city.The ordinance shall designate the ant to section 427A.1, subsection 1, paragraph 'e'. length of time the partial exemption shall be available ' New construction means new buildings and structures and may provide for an exemption schedule in lieu of and includes new buildings and structures which are that provided in section 42713.3.However,an alterna- constructed as additions to existing buildings and tive exemption schedule adopted shall not provide for c>? _ structures.New construction does not include recon- a larger tax exemption in a particular year than is { ' struction of an existing building or structure which provided for that year in the schedule contained in 1 does not constitute complete replacement of an exist- section 42713.3. [C81, §427B.1;82 Acts,ch 1104, §201 4 ing building or structure or refitting of an existing Referred to in 14278.2.4278.3,427B.4,427R.5,4278.14 r building or structure,unless the reconstruction of an 427B,2 Zoning under chapter 358A. y . existing building or structure is required due to eco- 1. The board of supervisors of a county which has nomic obsolescence and the reconstruction is neces- appointed a county zoning commission and provided l; guy to implement recognized industry standards for for county zoning under chapter l 358A may provide for the manufacturing and processing of specific products a partial exemption from property taxation of the ac- .[ and the reconstruction is required for the owner of the tual value added to industrial real estate as provided " building or structure to continue to competitively under section 427B.1. .t aWl INDUSTRIAL PROPERTY—SPECIAL TAX PROVISIONS,§427B.10 1 2, The board of supervisors of a count which has resulting in actual value added for which an exemp- not appointed a zoning commission may provide for tion is claimed.The application for exemption shall be a partial exemption from property taxation of the ac- filed by the owner of the property with the local asses- a al value added to industrial real estate as provided sor by February 1 of the assessment year in which the under section 427B.1 in the following areas: value added is first assessed for taxation.Applications o, Outside the incorporated limits of a city to for exemption shall be made on forms prescribed by which a city has extended its zoning ordinance pursu the director of revenue and shall contain information ` I ant to section 414.23 which complies with the city's pertaining to the nature of the improvement,its cost, S zoning ordinance. and other information deemed necessary by the direc- b- Outside the incorporated limits of a city which for of revenue. has adopted a zoning ordinance but which has not A person may submit a proposal to the city council extended the ordinance to the area permitted under of the city or the board of supervisors of a county to ! section 414.23 if the property would be within the area receive prior approval for eligibility for a tax exemp- to which a city may extend a zoning ordinance pursu- tion on new construction. The city council or the ant to section 414.23. board of supervisors,by ordinance,may give its prior i C. Outside the incorporated limits of a city which approval of a tax exemption for new construction if �. has not adopted a zoning ordinance but which would the new construction is in conformance with the zon- 1 be within the area to which a city may extend a zoning ing plans for the city or county. The prior approval ordinance pursuant to section 414.23. shall also be subject to the hearing requirements of 3. The board of supervisors of a county which has section 427B.1. Prior approval does not entitle the ° not appointed a zoning commission may provide for owner to exemption from taxation until the new con- a partial exemption from property taxation of the ac- struction has been completed and found to he quali- �' tua]value added to industrial real estate as provided fled real estate.However,if the tax exemption for new x under section 42713.1 in an area where the partial ex- construction is not approved,the person may submit emption could not.otherwise be granted under this an amended proposal to the city council or board of chapter where the actual value added is to industrial supervisors to approve or reject. [C81, §42713.4; 82 .� real estate existing on July 1, 1979. Acts,ch 1104, §241 To grant an exemption under the provisions of this Referred to in§427B.14 £ section,the county board of supervisors shall comply with all of the requirements imposed by this chapter 42713.5 Exemption may be repealed.When in the ? upon the city council of a city.[C81,§42713.2;82 Acts, opinion of the city council or the county board of supervisors continuation of the exemption granted by j fi• i:` 1 ch 1104, §21-231 Referred to in 142",B.1.427,B.14 this chapter ceases to be of benefit to the city or coun- ty,the city council or the county board of supervisors d 427B.3 Period of partial exemption. The actual may repeal the ordinance authorized by section value added to industrial real estate for the reasons 42713.1, but all existing exemptions shall continue ' Ft specified in section 427B.1 is eligible to receive a par- until their expiration. [C81, §42713.51 k +t pal exemption from taxation for a period of five years. Referred to in 1427,13.14 }+ "Actual value added" as used in this chapter means 427E 6 Dual exemptions prohibited. A property the actual value added as of the first year for which } 1 the exemption is received, except that actual value tax exemption under this chapter shall not be granted I added by improvements to machinery and equipment if the property for which the exemption is claimed has ,, 4 i means the actual value as determined by the assessor received any other property tax exemption authorized as of January 1 of each year for which the exemption by law. [C81, §427B.6] j slily` Referred to in 1427B.14 is received. The amount of actual value added which is eligible to be exempt from taxation shall be as fol- r' 427B.7 to 427B.9 Reserved. lows: a. For the first year,seventy-five percent. b, For the second year,sixty percent. DIVISION II f k' C. For the third year, forty-five percent. ' � •° d. For the fourth year,thirty percent. SPECIAL VALUATION FOR MACHINERY AND e. For the fifth year, fifteen percent. COMPUTERS ' This schedule shall be followed unless an alterna- Sections 427B.10 to 427B.14 relrosclive to December 31,1981;82 Acts.ch Ave schedule is adopted by the city council of a city or the board of supervisors of a county in accordance 1023,t33 with section 427B.1. 427B.10 Property subject to special valuation.For However,the granting of the exemption under this �T property defined in section 427A.1,subsection 1,par- t section for new construction constituting complete re- 11 and agraphs placement of an existing building or structure shall 'e' j' acquired or initially leased after not result in the assessed value of the industrial real December 31, 1981,the taxpayer's valuation shall be limited to thirty percent of the net acquisition cost of estate being reduced below the assessed value of the industrial real estate before the start of the new con- the property.For purposes of this section, net acqui- ;•. . struction added. [C81,§427B.3] sition cost" means the acquired cost of the property }} 1 + Referred to in 1427B.1,427B.14 including all foundations and installation cost less any excess cost adjustment. 427B.4 Application for exemption by property For purposes of this section and sections 42713.11 to kl. owner.An application shall be filed for each project 427B.14: _ .is - 1•,t i a 4427B.10,INDUSTRIAL PROPERTY—SPECIAL TAX PROVISIONS 2208 f i 1. Property assessed by the department of reve- 1. The difference between the assessed value of nue pursuant to sections 428.24 to 428.29,or chapters property defined in section 427A.1,subsection 1,par- ; �I 433,434 and 436 to 438 shall not receive the benefits agraphs "e'and !"and assessed pursuant to section I of this section and sections� 42713 14 .11 to 427B. . 42713.10 as of Januaryn 1 of the preceding g year,and the 2. Property acquired on or before December 31, value at which the property would be assessed in the 1981 which was owned or used on or before December absence of sections 42713.10 to 427B.14. 31,1981 by a related person shall not receive the bene- 2. The tax levy rate for each taxing jurisdiction fits of this section and sections 42713.11 to 42713.14. 3. Property acquired after December 31, 1981 levied against assessments made as of January 1 of the 3!; which was owned and used by a related person shall previous year. not receive any additional benefits under this section 3. The machinery and computer tax replacement j and sections 427B.11 to 42713.14. claim for each taxing district, which is equal to the "f 4. Property which was owned or used on or before amount determined pursuant to subsection 1 of this ji December 31, 1981 and subsequently acquired by an section,multiplied by the tax rate specified in subsec- i! exchange of like property shall not receive the benefits tion 2 of this section. of this section and sections 42713.11 to 427B.14. The county auditor shall certify and forward one 5. Property which was acquired after December copy of the statement to the state comptroller not 31,1981 and subsequently exchanged for like property later than July 1 of each year. [82 Acts,ch 1023,§21, shall not receive any additional benefits under this 331 �• section and sections 42713.11 to 42713.14. Referred to in§427B.to.427B.12.427B.13.427B.14 6. Property acquired on or before December 31, This section retroactive to December 31.1981,for property acquired or t'= ' 1981 which is subsequently leased to a taxpayer or leased after that date:82.Acts,ch 1023.§21,33 k t. related person who previously owned the property shall not receive the benefits of this section and sec- 4276.12 Reimbursement. Each county treasurer tions 427B.11 to 421 B.14. shall be reimbursed an amount equal to the machin- 7. Property acquired after December 31, 1981 ery and computer tax replacement claim for that which is subsequently leased to a taxpayer or related county determined pursuant to section 427B.11,sub- `' erson who previously owned the property shall not t P P P P Y• section 3. The reimbursement shall he made in two t!i receive any additional benefits under this section and equal installments on or before September 30 and tl sections 42711.11 to 427B.14. q P 1 r,;: For purposes of this section,"related person"means March 30 of each year. The county treasurer shall apportion the disbursement in the manner provided ' ? a person who owns or controls the taxpayer's business in section 445.57. [82 Acts,ch 1023, §22, 33] l� and another business entity from which property is Referred to in 1427B.10,4_7B.11.427B.13,427E-14 .4 acquired or leased or to which property is sold or This section retroactive to December 31.1981.for property acquired or j� leased. Business entities are owned or controlled by leased after that date;82 Acts,ch 1023,122,33 11� the same person if the same person directly or indi- rectly owns or controls fifty percent or more of the 427B.13 Appropriation.There is appropriated an- assets or any class of stock or who directly or indirect- Dually from the general fund of the state to the state j ly has an interest of fifty percent or more in the owner- comptroller an amount sufficient to carry out the pro ship or profits. [82 Acts, ch 1023, §20, 33) visions of sections 427B.10 to 427B.14. [82 Acts,ch Referred to in§427B.11,427B.13,427B.14 This aection retroactive to December 31.1981,for property acquired or 1023, §23, 33J !j leased after that date,82 Acts,ch 1023.120,33 Referred to in§427B.10,427B.I1,427B.14 i1 This section retroactive to December 3l,1981,for property acquired or 427B.11 Assessor duties. On or before July 1 of leered after that date:82 Acts.ch I023,§23,33 each year,the assessor shall determine the taxpayer's in Y. value of the property specified in section 427B.10 and section 427A.1, subsection 1, paragraphs 'e' and 427B.14 Property not eligible.Property defined in the value at which the property would be assessed in and assessed under sections 427B.10 to 427B.14 shall the absence of sections 427B.10 to 427B.14,and report the values to the county auditor. not be eligible to receive a partial exemption under {� On or before July 1 of the following year the county sections 42713.1 to 427B.6. [82 Acts,ch 1023, §24,331 r1 auditor shall prepare a statement listing for each tax- Referred to in§427B.10,427B.11,427B.13 This section retroactive to December 31,1981,for property acquired or 1, ing jurtShcCtlOn ID the county: leased after that date;82 Acts,ch 1023,124,33 R"+ 1 N! it tfiy it t� i 1i t t �