COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 4657-05
Bill No.: SB 1279
Subject: Cities, Towns and Villages; Economic Development; Urban Development; Revenue Department.
Type: Original
Date: March 6, 2002
FISCAL SUMMARY
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| General Revenue* | ($546,773) to (Unknown) | ($402,599) to (Unknown) | ($413,321) to (Unknown) |
| Total Estimated
Net Effect on All State Funds* |
($546,773) to (Unknown) | ($402,599) to (Unknown) | ($413,321) to (Unknown) |
* Partially subject to appropriation.
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| None | |||
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| Local Government | $0 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 14 pages.
ASSUMPTION
KANSAS AND MISSOURI METROPOLITAN CULTURAL DISTRICT; Section 67.642.
Officials from the City of Kansas City (CKC) state the fiscal impact for this bill will begin in July 2005 (FY 2006), according to Section 67.642 of this bill. CKC assumes that state funding could be as much as $7 million per year. In addition, increased economic activity at Arrowhead and Kauffman stadiums will generate revenue in the form of increased earnings taxes, utility taxes and sales taxes for the City and additional income and sales taxes for the state which can be used to leverage additional economic development in and around the Sports Center Redevelopment Area.
Oversight assumes the fiscal impact of this part of this proposal is beyond the scope of this fiscal note, since the state is allowed to make annual appropriations to the Kansas and Missouri Metropolitan Cultural Districts of up to $7 million starting in FY 2006. Therefore, for purposes of this fiscal note, Oversight assumes this part of the proposal would have no fiscal impact in fiscal years 2003, 2004 and 2005.
SPORTS CENTER REDEVELOPMENT AUTHORITY ACT; Sections 67.2000 to 67.2060.
In response to similar legislation from this year, officials of the Governor's Office assumed no fiscal impact to their office.
In response to similar legislation from this year, officials of the Department of Elementary and Secondary Education assumed no fiscal impact to their department.
In response to similar legislation from this year, officials of the Missouri Department of Transportation assumed this proposal could require MoDOT to incur the expense of providing modern interstate-style highways serving the new sports centers and the surrounding redevelopment areas. Officials assume this legislation would have a significant indirect, "voluntary" cost impact. If the new facilities are built away from the current St. Louis and Kansas City stadiums, then MoDOT may need to add highway entrance and exit ramps, additional highway bridges, etc., to serve the public stadiums. Officials assume no fiscal impact.
ASSUMPTION (continued)
Officials of the Department of Revenue assumed that MITS would need to create a taxing district (shape file) enclosing the redevelopment areas, which could be up to 6, in order to gather the sales revenues and / or sales taxes generated to be able to identify, report and track the "new state revenues". It is estimated the above program changes will require 2,768 hours of programming at a total cost of $92,340. The State Data Center cost to implement the proposed legislation will be $18,013.
In response to similar legislation from this year, officials of the Department of Economic Development assume no fiscal impact to their department.
Officials from the Office of Administration- Division of Budget and Planning (BAP) did not respond to our request for fiscal impact. However, in response to similar legislation from this year, BAP stated after consultation with the State Demographer, assume this proposal as written, allows for sports center development in both the St. Louis and Kansas City areas.
Officials stated that for purposes of this fiscal note, the only segment that is estimatable is Section 67.2033 subsection 3. This Section allows the state to appropriate up to $7 million annually, per project, beginning in Fiscal Year 2006, (assuming the proposal would pass this session), to pay the State's share of debt service on the stadium (s). Therefore, officials assume there would be no State fiscal impact until Fiscal Year 2006. Officials assume beginning in Fiscal Year 2006 the State could incur a General Revenue cost of up to $14,000,000 per year for 30 years. That cost would depend upon the number of stadiums that would be built. If one stadium were built the cost would be $7,000,000.
Officials stated that there is a provision that mandates that the stadium authority receives all the income derived from the sale of the "naming rights" to the stadium. After 10 years some of this revenue could be used to reimburse the state if the "new state revenues" as defined in Section 67.2009 do not meet or exceed the amount of the State's annual appropriation. As there is no empirical basis for estimating the value of the "naming rights", no estimate of the impact of this provision can be made. Officials assume that there would be no loss to existing revenue streams for the additional exemption contained in Section 67.2051, because it would only be applicable if a stadium were constructed.
Officials of the City of St. Louis- Division of Budget assume that the City would realize a positive fiscal impact, from local taxes during the construction of the $326 million dollar stadium through 2005. Beginning in 2005, officials assume the City would be required to appropriate $4.2 million dollars per year for 30 years through the year 2034. Officials assume these annual payments are to be offset by the incremental taxes generated by activities at the new ballpark. Based on St. Louis Cardinals
ASSUMPTION (continued)
projections of incremental taxes over current levels the net present value at 6% of the incremental taxes
over the required appropriations through the agreement period is a positive $26.2 million dollars.
Oversight assumes based on research conducted by the Office of Administration- Division of Budget and Planning, that the first year for state fiscal impact would be Fiscal Year 2006. Therefore, fiscal impact would be beyond the scope of this fiscal note. Oversight assumes, based on statements supplied by the Office of Administration, that this proposal would affect the Kansas City area stadiums.
Oversight assumes this proposal is enabling legislation and as written does not require any affected city or county to establish a Sports Center Redevelopment Authority.
Oversight assumes that if the affected cities would establish a Sports Center Redevelopment Authority and if the Missouri General Assembly were to elect to annually appropriate funds to provide debt service for the established sports authority, the annual costs to the State's General Revenue Fund could be as much as $14,000,000 for 30 years that would provide a net sum not to exceed $100,000,000 in support of the sports authority plan. This estimate is based on the assumption that both Kansas City and St. Louis City areas would be eligible to establish a Sports Center Redevelopment Authority pursuant to this proposal.
The State would also realize income from it's portion of revenues received from naming rights for the stadium. These funds would be deposited in the State's Naming Rights Fund. This fund could be drawn upon by the state in the event new state revenue from the area would be less than the cumulative annual appropriation for the applicable period made by the state for the debt services on the financing.
If an eligible city were to establish a stadium pursuant to this proposal the city would realize positive fiscal impact from local taxes during the construction of the stadium through fiscal year 2005. The amount of tax revenues is unknown. For purposes of this fiscal note Oversight assumes in Fiscal Year 2006 the city would be required to appropriate approximately $4,200,000 per year for 30 years, through calendar year 2034. St. Louis officials assumed this annual payment would be offset by new revenues that would be generated by activities associated with the new stadium.
This proposal would allow St. Louis County to contribute tax revenues annually to the benefit of the Sports Center Redevelopment Authority. The proposal does not indicate what that amount would be.
Officials from St. Louis County state this proposed bill has no direct fiscal impact on them because its language only permits, but does not require, participation by St. Louis County in funding a Sports Center Redevelopment Authority. However, if the negotiated Project Agreement pertaining to the
ASSUMPTION (continued)
State, St. Louis City, St. Louis County, and the St. Louis Cardinals is approved by the County Council,
it calls for a series of payments starting at $2 million dollars in 2003 and increasing by 3 percent compounded each year for a total of 30 years. Depending on interest rates, the present value of this stream is likely to be $40 million to $45 million dollars. The source of these funds is a local Hotel/Motel tax currently dedicated to convention and tourism purposes.
Officials from the Secretary of State's Office (SOS) state this bill creates a Sports Center Redevelopment Authority and a Downtown Economic Stimulus Authority for municipalities. This authority will develop plans for economic development and improvements in roads, utilities and other facilities for development projects. This authority may borrow money and apply for and accept advances, grants, contributions and other forms of assistance. The authority may levy taxes. This bill also approves appropriations for a convention center in Branson and an exposition center in Springfield. There is created a Local Economic Opportunities Fund. The Department of Economic Development is charged with promulgating rules and regulations to administer the application and prioritization of funds for political subdivisions within the economic development regions created. This could create new rules or amendments by the Department of Economic Development which could result in SOS publishing rules in the Missouri Register and the Code of State Regulations.
SOS assumes this action could require as many as approximately 32 pages in the Code of State Regulations. For any given rule, roughly half again as many pages are published in the Missouri Register as in the Code because cost statements, fiscal notes and the like are not repeated in Code. These costs are estimated. The estimated cost of a page in the Missouri Register is $23. The estimated cost of a page in the Code of State Regulations is $27. The actual costs could be more or less than the numbers given. The impact of this legislation in future years is unknown and depends upon the frequency and length of rules filed, amended, rescinded and withdrawn.
Oversight assumes the SOS could absorb the costs of printing and distributing regulations related to this proposal. If multiple bills pass which require the printing and distribution of regulations at substantial costs, the SOS could request funding through the appropriation process. Any decisions to raise fees to defray costs would likely be made in subsequent fiscal years.
LOCAL ECONOMIC OPPORTUNITIES ACT; Section 67.2150.
Officials from the Department of Economic Development did not respond to our request for fiscal impact regarding this proposal.
ASSUMPTION (continued)
Officials from the Office of Administration - Budget and Planning did not respond to our request for fiscal impact from this proposal.
Oversight assumes this part of the proposal would result in a possible unknown loss of sales tax and income tax revenue to the General Revenue fund depending on the amount of amount of economic development project revenues collected from the Sports Complex, Exposition Center in Springfield and the Convention Center in Branson. Oversight has ranged this fiscal impact from $0 to (Unknown) starting in FY 2005 since Oversight assumes appropriations for some of these projects will begin in FY 2005.
EXPOSITION CENTER IN SPRINGFIELD; Section 99.845.14.
Officials from the City of Springfield state this bill will not fiscally impact their city.
Oversight assumes the total appropriation for this project shall not exceed $9,000,000 over 23 years, starting in FY 2005. Therefore, Oversight has reflected the cost of this part of the proposal as a range of $0 (construction not completed on time) to $400,000, which is the total $9,000,000 divided by 23 years. Annual totals could vary substantially.
CONVENTION CENTER AND ARENA FACILITY IN BRANSON; Section 99.845.15.
Officials from the City of Branson assume the proposed Convention Center and Arena Facility will be constructed in 2003 and 2004 and will generate roughly $4.1 million in additional tax revenue in 2005, $7.7 million in 2006 and $8.6 million in 2006. The sources of additional tax revenue is state sales tax, county and city sales taxes, property taxes and tourism taxes. The City estimates the amount of state sales tax collected that will be utilized for debt service during this period is $525,750 in 2005, $1.1 million in 2006 and $1.2 million in 2007.
Oversight assumes the annual appropriation for this project shall not exceed $1,400,000 in any fiscal year, starting in FY 2005. Therefore, Oversight has reflected the cost of this part of the proposal as a range of $0 (construction not completed on time) to the maximum of $1,400,000.
ASSUMPTION (continued)
MISSOURI DOWNTOWN ECONOMIC STIMULUS ACT; Sections 99.915 - 99.984.
Officials from the Department of Economic Development (DED) did not respond to our request for fiscal impact. However, in response to similar legislation from this year, DED stated the bill enacts the Missouri Downtown Economic Stimulus Act. Certain taxes deemed new increment would be diverted to pay for the development of the area (or noncontiguous areas). PILOTS, EATS, and "other net new revenues," which purport to be incremental state sales tax revenues and incremental state income taxes attributable to new hires. To be eligible for the state revenue portion, an application is made to the Missouri Development Finance Board. If approved, state revenue that is "other net new revenues" would be paid to a special fund in the city rather than to the state.
DED stated this bill would include more state revenues than State TIF currently does. State TIF allows up to half of one or the other type of state increment to go to a project. This act dedicates 100% of both types of state increment. Of importance to determining fiscal impact is that the incremental state income tax for "new jobs" is based upon new hires in the area after approval of the development plan. This does not ensure that the new jobs are new to the state and therefore there is a potential for a loss of revenue that the state currently receives.
In a manner similar to Local TIF, DED receives annual reports and must prepare an annual report on MODESA areas and to provide assistance in some cases.
DED assumed the need for the assistance of contract labor to review information received and produce the two reports required. DED also assumes contract labor help to develop the manual required by 99.984 RSMo and assumes that annual updates would be required. DED assumes there will be some unknown costs to comply with 99.969 that requires General Revenue to pay for DED costs to provide assistance with this section. Cost would be unknown. The Missouri Development Finance Board (MDFB) anticipates the need of one professional FTE (at $50,000) to accomplish tasks imposed plus associated expenses. MDFB would recover these costs as development finance costs from the proceeds received by the authority from the municipality or the state. Therefore, these costs are stated as local costs. All costs for DED and MDFB are estimates and are subject to adjustment.
DED assumed there would be an unknown impact on state tax revenue collections. This proposal may actually result in a net loss of revenue to the state due to the fact that it does not require that the state income tax diverted be for new jobs to the state but only for new hires to a business in the development area after the approval of the development plan.
ASSUMPTION (continued)
Oversight assumes the costs incurred by DED would be paid from the General Revenue fund.
In response to similar legislation from this year, officials from the Office of Administration - Budget and Planning stated this legislation could have a significant impact on general revenue. It reduces revenues that otherwise would come into the state general revenue fund.
Part A: Gives a sales tax offset to municipalities for local development in amounts ranging from $10 million to $40 million, per municipality. It is unknown how many municipalities would participate in the program.
Part B: In addition, participants involved in the above municipality projects can receive a 100% credit against their state income tax liability. This potentially doubles the cost to the state.
Officials from the Department of Revenue (DOR) state this proposal will create numerous questions from business and taxpayers within the approved development projects. DOR states the additional calls and additional work can be handled with existing resources.
DOR also assumed Information Technology; Programming changes to MINITS to recognize the new credit will need to be done. It is estimated that the changes will require 1,384 hours of programming at a total cost of $46,170. The State Data Center cost to implement the proposed legislation will be $9,007.
DOR also assumed the need for two Tax Processing Tech I's (at $21,192) to handle the additional volume of tax credits that will occur as a result of this bill.
Oversight assumes the Department of Revenue will be able to handle some additional tax credit filings with existing staff. Oversight does not know the potential tax credits to be utilized as a result of this portion of the proposal. If the bill generates excessive tax credit filings, Oversight assumes DOR would request the additional needed FTE though the normal budget process.
Officials from the City of Springfield assume this proposal would not fiscally impact them since it is optional.
Officials from the City of Kansas City assume this proposal would not fiscally impact their city.
ASSUMPTION (continued)
Oversight assumes the loss of revenue for the state is $0 to unknown, since the proposal is permissive to any Missouri municipality and the Downtown Economic Stimulus Authority may designate various portions of the city as development areas, as long as they meet the specified requirements.
Oversight assumes that based on past experience of performing program evaluations, Oversight anticipates performing performance evaluations year round with 5 additional FTE. They would be one Program Evaluator III postion ($48,000) two Program Evaluator II positions ($44,000), one Program Evaluator I postion ($36,000), and one clerk steno ($28,000). Equipment (computer, calculator, etc.) for each FTE of $8,000. Expenses would include office supplies, janitorial, telephone, professional development ($1,700), and additional rental space (200 sq. ft. per FTE at $10.50 per sq. ft.). If no municipalities organize such authorities, then Oversight assumes the additional resources would not be needed, however, additional resources could be required if participation by municipalities is great.
JACKSON COUNTY RESEARCH PARK; Section 172.273.
Officials from the University of Missouri assume this proposal would not fiscally impact them.
Oversight assumes an unknown amount of appropriation from the General Revenue Fund would be needed to establish a research, development and office park in Jackson County to foster life sciences related to business development and provide business incubator facilities for new life sciences related companies. Funding would be needed for all three fiscal years in the scope of this fiscal note for continued funding of the facilities.
Oversight has reflected the fiscal impact to local governments as $0, since all of these proposals are permissive and does not require municipalities or counties to participate in the economic stimulus projects. Oversight has also not reflected the potential positive economic impact that may occur from these projects.
This proposal could impact Total State Revenues.
| FISCAL IMPACT - State Government | FY 2003
(10 Mo.) |
FY 2004 | FY 2005 |
| GENERAL REVENUE | |||
| Cost to Department of Revenue | |||
| for Programming costs (various) | ($110,353) | $0 | $0 |
| Loss - loss in sales tax and income tax revenue (Local Economic Opportunities Act) * |
$0 |
$0 |
$0 to (Unknown) |
| Loss - of sales tax revenue to the City of Springfield for their exposition center * |
$0 |
$0 |
$0 to ($400,000) |
| Loss - of sales tax revenue to the City of Branson for their convention center * |
$0 |
$0 |
$0 to ($1,400,000) |
| Loss - loss in sales tax and income tax revenue (Downtown Economic Stimulus) | $0 to (Unknown) | $0 to (Unknown) | $0 to (Unknown) |
| Costs - DED
Contract labor charges (Downtown Economic Stimulus) |
($25,000) |
($13,800) |
($14,609) |
| Costs - MDFB | |||
| Personal Service (1 FTE) | ($41,667) | ($51,250) | ($52,531) |
| Fringe Benefits | ($15,004) | ($18,455) | ($18,916) |
| Expense and Equipment | ($17,500) | ($21,630) | ($22,280) |
| Total Costs - MDFB
(Downtown Economic Stimulus) |
($74,171) | ($91,335) | ($93,727) |
| Costs - Department of Revenue
Programming changes (Downtown Economic Stimulus) |
($55,177) |
$0 |
$0 |
|
|
|||
| Costs -Oversight Division | |||
| Personal Service (5 FTE) | ($170,833) | ($210,125) | ($215,378) |
| Fringe Benefits | ($56,939) | ($70,035) | ($71,785) |
| Expense and Equipment | ($54,300) | ($17,304) | ($17,822) |
| Total Costs - Oversight Division
(Downtown Economic Stimulus) |
($282,072) | ($297,464) | ($304,985) |
| Costs - University of Missouri research, development and office park in Jackson County * |
(Unknown) |
(Unknown) |
(Unknown) |
| ESTIMATED NET EFFECT TO THE GENERAL REVENUE FUND | ($546,773) to (UNKNOWN) | ($402,599) to (UNKNOWN) | ($413,321) to (UNKNOWN) |
| * Subject to Appropriation | |||
| FISCAL IMPACT - Local Government | FY 2003
(10 Mo.) |
FY 2004 | FY 2005 |
| $0 | $0 | $0 | |
FISCAL IMPACT - Small Business
This proposal would fiscally impact small businesses in the newly created Local Economic Opportunities Act and the Missouri Downtown Economic Stimulus Act.
DESCRIPTION
This proposal creates several community development projects.
KANSAS AND MISSOURI METROPOLITAN CULTURAL DISTRICT - This proposal authorizes annual appropriations of up to $7 million to fund projects undertaken and partially funded by a retail sales tax relating to the Kansas and Missouri Metropolitan Cultural District. Appropriated moneys shall only be used if the cumulative annual sales tax revenue generated exceeds the cumulative
DESCRIPTION (continued)
annual appropriation. No moneys shall be appropriated until the cultural district retail sales tax is renewed or extended.
ST. LOUIS CARDINALS BALLPARK AND BALLPARK VILLAGE - This proposal creates the "The Sports Center Redevelopment Authority Act".
St. Louis may establish a "Sports Center Redevelopment Authority". The Authority will consist of a nine-member board of commissioners. The Authority is granted the power of eminent domain.
When a sports center redevelopment plan is adopted by the city and the authority, for a period not to exceed thirty-five years, economic activity taxes generated within the sports center redevelopment area shall be deposited into the special allocation fund of the city for the purposes enumerated, including paying project costs and obligations.
The maximum state appropriation shall not exceed $7 million per year for a maximum of 30 years, for debt service financing that will provide a net sum not to exceed $100 million.
SPRINGFIELD - Allows for the annual appropriation for funding of an exposition center in Springfield. Beginning in FY 2005, the state shall annually appropriate one half of the new state revenues from the
redevelopment area. However, in no event shall the capitalized value of the state's contribution exceed $9 million.
BRANSON - Allows for the annual appropriation for funding of a convention center and arena in Branson. Beginning in FY 2005, the state shall annually appropriate one half of the new state revenues from the redevelopment area. However, in no event shall the capitalized value of the state's contribution exceed $32 million.
LOCAL ECONOMIC OPPORTUNITIES FUND - One half of the increased state revenues from sales taxes and income taxes withheld in certain development areas less the debt service obligations will be deposited in the Local Economic Opportunities Fund. The fund is then further subdivided into four regional funds and the regions are established. Funds from the regional subaccounts may be appropriated for infrastructure improvements and economic stimulus projects. Certain political subdivisions receiving funding are excluded from appropriations from the regional subaccounts. The Department of Economic Development shall establish an application and prioritization process. Political subdivisions shall not receive more than 25% of a subaccount and may not receive appropriations for more than five consecutive years.
MISSOURI DOWNTOWN ECONOMIC STIMULUS ACT;
(1) Creates in each municipality a "Downtown Economic Stimulus Authority," with certain provisions,
which will constitute a public body corporate and politic;
(2) Requires each authority to be governed by a board of commissioners with three to 13 members. The commissioners will be appointed by the mayor for a term of three years;
(3) States the powers of the authority;
(4) Outlines methods by which real property can be disposed;
(5) Outlines the required process for reviewing and accepting developer proposals;
(6) Explains what the authority may do to carry out a development project, including how to transfer real property;
(7) Outlines the requirements of a development plan and the process by which it must be reviewed;
(8) Allows the authority, municipality, or state to issue bonds to finance the development project without a referendum;
(9) Explains the manner in which ad valorem taxes and payments in lieu of taxes will be divided among the affected taxing districts;
(10) Explains the manner in which other new net revenues will be paid to the municipality;
(11) Requires the municipality to deposit other new net revenues in a separate account within the special allocation fund and explains when the municipality is required to remit excess funds to the Department of Revenue;
(12) Explains when particular affected taxpayers are entitled to receive tax credits;
(13) Requires each municipality to submit an annual report regarding development to the department;
(14) Allows payments in lieu of taxes, economic activity taxes, and other net new revenue to be apportioned or diverted pursuant to the Real Property Tax Increment Allocation Redevelopment Act if all or a part of the development project area becomes subject to tax increment financing;
(15) Requires the authority as well as the municipality to submit annual reports concerning development to the Director of the Department of Economic Development.
JACKSON COUNTY RESEARCH PARK - The Curators of the University of Missouri are authorized to establish a research, development and office park in Jackson County to foster life sciences related business development.
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 Economic Development
Department of Revenue
Office of the Secretary of State
Office of Administration - Budget and Planning
University of Missouri
City of Kansas City
City of St. Louis
City of Branson
City of Springfield
St. Louis County
Department of Elementary and Secondary Education
Department of Transportation
Mickey Wilson, CPA
Acting Director
March 6, 2002