COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 4058-01
Bill No.: SB 1098
Subject: Taxation and Revenue; Economic Development; Enterprise Zones.
Type: Original
Date: February 3, 2004
FISCAL SUMMARY
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| General Revenue | $0 | ($237,490) | ($237,490) |
| Total Estimated
Net Effect on General Revenue Fund* |
$0 | ($237,490) | ($237,490) |
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| Total Estimated
Net Effect on Other State Funds* |
$0 | $0 | $0 |
* The fiscal impact could be divided between the General Revenue Fund and the County Foreign Insurance Fund (which ultimately goes to local school districts) if some of the tax credits are utilized against insurance premium taxes.
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 5 pages.
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| Local Government* | $0 | $0 | $0 |
* The fiscal impact could be divided between the General Revenue Fund and the County Foreign Insurance Fund (which ultimately goes to local school districts) if some of the tax credits are utilized against insurance premium taxes.
ASSUMPTION
Officials from the Office of Administration - Budget and Planning (BAP) state the proposal should not result in additional costs or savings to their agency. However, this proposal may have a negative impact on Total State Revenue and General Revenue. BAP defers to the Department of Economic Development for the fiscal impact to the state.
Officials from the Department of Revenue (DOR) state their Division of Taxation does not anticipate a large number of taxpayers that would/could use this credit. Therefore, DOR will not request additional FTE at this time. However, if the number of additional credits is larger than expected, DOR would need one Tax Processing Tech I for every 4,000 personal taxpayers claiming the credit and one for every 3,680 business taxpayers claiming the credit. These employees would maintain the certification of the credits and verify the amounts on the returns as claimed by the taxpayers. DOR defers to the Department of Economic Development or BAP for the estimated impact to the General Revenue Fund.
ASSUMPTION (continued)
Officials from the Department of Insurance (INS) state the designation of an additional enterprise zone will increase the areas that receive enterprise zone tax credits. If insurance companies invest or expand into the new enterprise zone, they will be eligible for additional tax credits, reducing premium tax revenue. Premium tax revenue is split evenly between General Revenue and the County Foreign Insurance Fund or deposited solely into the County Stock Fund depending on the type of company. The County Foreign Insurance Fund and County Stock Fund are later distributed to school districts. INS is unable to project how much in additional tax credits may be generated and what effect it will have on premium tax collections. Fiscal impact will be an unknown loss of revenue to the three funds.
Officials from the Department of Economic Development (DED) did not respond to our request for fiscal impact. However, in response to a different proposal from this year that established an enterprise zone, DED did not feel the bill has enough immediate impact on DED to warrant additional personnel or expenditures. At some point in the future, enough additional enterprise zone credits could be issued that would require an additional person. At that time, DED would request additional funding.
DED stated the average cost for each enterprise zone in a rural area (not located in a Standard Metropolitan Area such as Kansas City, St. Louis, St. Joseph, Springfield, or Joplin) is estimated to be $118,745 per year. The cost of an enterprise zone includes the costs of EZ tax credits, refunds, and income modifications (modification times tax rate to convert to dollar benefit) for a year. These figures are an average so some zones will cost more and some will cost less. It was not possible to predict anything more than the averages used as the cost until the zone has been created and mapped.
DED assumed the Total State Revenue will be reduced by the tax credits and income modifications. This will be offset by some positive but indeterminable amount of economic benefit realized by the designation of enterprise zones.
In response to a similar proposal from this year, officials from the City of Nixa stated they may experience some costs because of the enterprise zone designation from upgrades to infrastructure (water, sewer, streets and electric) for the accommodations of industrial manufacture development. However, they will also realize additional revenues in the future from anticipated economic development and the location of industrial manufacturing jobs within the zone.
Officials from the City of Ozark and Christian County did not respond to our request for fiscal impact.
ASSUMPTION (continued)
Oversight assumes the local taxing and governing authorities may grant an exemption (in whole or in part) of property taxes to new or expanding businesses after holding the required public hearings on the matter, therefore, has estimated the local impact as zero. The fiscal note does not reflect any indirect positive result that may occur because of the tax credits issued.
This proposal may result in a loss of Total State Revenue.
| FISCAL IMPACT - State Government | FY 2005
(10 Mo.) |
FY 2006 | FY 2007 |
| GENERAL REVENUE | |||
| Loss - Enterprise Zone in Nixa | $0 | ($118,745) | ($118,745) |
| Loss - Enterprise Zone in Ozark | $0 | ($118,745) | ($118,745) |
| ESTIMATED NET EFFECT TO GENERAL REVENUE |
$0 |
($237,490) |
($237,490) |
Note: This does not reflect the possibility that some of the tax credits could be utilized by insurance companies against insurance premium taxes. If this occurs, the loss in tax revenue would be split between the General Revenue Fund and the County Foreign Insurance Fund, which ultimately goes to local school districts.
| FISCAL IMPACT - Local Government | FY 2005
(10 Mo.) |
FY 2006 | FY 2007 |
| $0 | $0 | $0 |
FISCAL IMPACT - Small Business
This proposal could have a direct fiscal impact to small businesses that are in the newly created enterprise zones.
DESCRIPTION
This proposal authorizes the creation of enterprise zones in the cities of Nixa and Ozark.
This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.
SOURCES OF INFORMATION
Department of Revenue
Department of Insurance
Office of Administration - Budget and Planning
City of Nixa
NOT RESPONDING: Department of Economic Development, City of Ozark, Christian County
Mickey Wilson, CPA
Director
February 3, 2004