L.R. NO. 0434-01
BILL NO. SB 171
SUBJECT: Economic Development; Kansas City
TYPE: Original
DATE: January 10, 2001
Net Effect on All State Funds * * Losses could exceed $100,000 in a given fiscal year. Net Effect on All Federal Funds
FUND AFFECTED
FY 2002
FY 2003
FY 2004 General Revenue
($6,887 to Unknown)
($31,052 to
Unknown)
($31,984 to
Unknown)
Total Estimated
($6,887 to
UNKNOWN)
($31,052 to
UNKNOWN)
($31,984 to
UNKNOWN)
FUND AFFECTED
FY 2002
FY 2003
FY 2004 None
$0
$0
$0
Total Estimated
$0
$0
$0
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| Local Governments | (Unknown) | (Unknown) | (Unknown) |
Numbers within parentheses: ( ) indicate costs or losses
This fiscal note contains 4 pages.
ASSUMPTION
Officials from the City of Kansas City (CKC) stated the proposed legislation will accomplish three distinct items:
Officials from CKC assume this proposal may reduce revenue collection for the City's portion of the sales tax.
In response to similar legislation from last year, Officials from the Department of Revenue (DOR) stated that this proposal would establish a sales tax free zone in economically depressed areas for a specified period of time.
ADMINISTRATIVE IMPACT:
DOR stated this proposal would require the department to create a program within its computer system to classify certain identified businesses as owing no sales or use tax on transactions for a certain period of time. After the period of time has expired DOR would need to change this program to again expect sales/use tax from such businesses. Program changes would cost $4,524 for 363 hours of overtime. State Data Center charges would be $2,363 for implementation and testing time.
Officials from the Department of Economic Development (DED) stated that their agency would be responsible for providing the boundaries of the area(s) to be designated as a tax free zone(s) in Kansas City. The DED is also to assess the economic impact and report to the Governor and the general assembly in years 2003 and 2004.
The DED assumes that the local political subdivisions receiving tax revenue from the area designated as a tax-free zone would lose sales tax revenue from existing businesses as well as business who would subsequently relocate to the area. The DED assumed they are only able to project their department's administrative fiscal impact from the proposal. The DED anticipates costs for a consultant to assess the economic impact of the tax-free zone and prepare the report
ASSUMPTION (continued)
for the governor and the general assembly. The DED assumed costs of $31,052 in FY 2003 and $31,984 in FY 2004 for this contract consultant's services.
Officials from the Office of Administration - Budget and Planning did not respond to our request for fiscal impact.
Oversight assumes there would be an unknown loss of sales tax revenue to the General Revenue Fund
This proposal would result in a decrease in Total State Revenues.
FISCAL IMPACT - State Government FY 2002 FY 2003 FY 2004
(10 Mo.)
GENERAL REVENUE FUND
Loss - General Revenue Fund
Creation of tax-free pilot project (Unknown) (Unknown) (Unknown)
Cost - Department of Revenue
Reprogramming costs ($6,887) $0 $0
Cost - Department of Economic Development
Consultant costs $0 ($31,052) ($31,984)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND ($6,887 to ($31,052 to ($31,984 to
UNKNOWN) UNKNOWN) UNKNOWN)
FISCAL IMPACT - Local Government FY 2002 FY 2003 FY 2004
(10 Mo.)
LOCAL GOVERNMENTS
Loss - Local Governments
Creation of tax-free pilot project (Unknown) (Unknown) (Unknown)
ESTIMATED NET EFFECT ON
LOCAL GOVERNMENTS (UNKNOWN) (UNKNOWN) (UNKNOWN)
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent there would be less administrative reporting of sales and sales/use tax and increased business from consumers wishing to benefit from the tax free zone. Small businesses just outside of the tax-free zone could be negatively impacted if consumers chose to shop at other stores that are within the zone.
DESCRIPTION
This proposal creates a pilot project which will require the Director of the Department of Economic Development to designate a tax free zone within a portion of Kansas City. The area to be designated shall be within a distressed community as defined by law. The city shall identify qualified areas and shall recommend one such area for designation as the economically depressed tax free zone. All retail purchases made during the years 2002 through 2004 within the economically depressed tax-free zone will be exempt from all state and local sales tax.
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 Economic Development
City of Kansas City
NOT RESPONDING: Office of Administration - Budget and Planning
Jeanne Jarrett, CPA
Director
January 10, 2001