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Brightbill's Economic Development
Measure
Passes After Two-Year Push
Senate Bill 10 Will Help Communities
Compete
for Economic Development Projects
After pushing for Pennsylvania to be empowered with
a stronger, more effective Tax Increment Financing (TIF) program for two years,
Senate Majority Leader David J. Brightbill (R-Lebanon) achieved success last
night when the state House and state Senate voted overwhelmingly to send his
legislation to the governor.
"Tax increment financing is a way for Pennsylvania
to attract new businesses and expand hospitals and existing manufacturers
without directly spending state funds," Senator Brightbill said. "TIFs are a
proven economic development tool, and Pennsylvania should be using them more
often."
When Cabela's, a world-class outdoors outfitter,
wanted to build a 225,000-square-foot store in Berks County -- only their
seventh store in the country, Senator Brightbill pushed for the creation of a
state-level TIF program to help reduce the burden on local taxpayers, Tilden
Township, and the Tulpehocken School District.
However, the administration of Governor Mark
Schweiker was not interested in creating such a program, so the TIF portion of
the project was shouldered locally.
Since the Cabela's project had to potential to
provide significant new sales tax revenue to the state -- revenue which could be
used to fund the TIF, Senator Brightbill believed this was inappropriate and
began his push for a state-level TIF program.
Last month, the Associated Press reported that
Cabela's, which has hired 600 employees to date, is on track to generate $3
million to $4 million in state sales taxes in its first full year of operation. The store draws 50,000 visitors on a typical Saturday or Sunday, according to
the AP report.
"Officials from Cabela's told us they've used a
sales tax TIF effectively in other states," Senator Brightbill said. "We looked
at it, and a sales tax TIF seemed to make perfect sense here, too. Unfortunately, the previous administration would not move the issue forward, so
we had to resume the push for it when a new governor was elected."
Early in his Administration, Governor Rendell
embraced Senator Brightbill's TIF proposal, and he is expected to sign Senate
Bill 10 into law as early as today.
"At the grand opening of Cabela's," Brightbill said,
I mentioned in my remarks that this tool was the one suggested by the outfitter. Governor Rendell told me later that he picked up on it immediately as a valuable
tool, and he has since embraced it as part of his program."
"This tool," said Senator Brightbill, "is
particularly good since it does not require the state to accept any risk of
failure and it's use tests the applicant's ability to secure private funds."
SB 10 will establish the Infrastructure and
Facilities Improvement Program (IFIP), designed to provide financial assistance
to existing companies looking to expand in Pennsylvania, or new companies
looking to locate in Pennsylvania, in the form of tax increment financing.
While the idea has been used in other states,
recognition is going to Senator Brightbill for his persistence in moving the
concept to fruition here in Pennsylvania. "Now it is up to the Rendell
administration to use it wisely," Brightbill said.
With a TIF, a business expansion or new business
location is financed with a bond issue which is then paid off using the new tax
revenues generated by the expansion or new business.
The goal of IFIP is to increase Pennsylvania's
ability to compete for strong job-producing economic development projects.
"Until now, other states have been able to use
similar TIFs in wider variety of projects than Pennsylvania," Senator Brightbill
said. " With this legislation, the state has a much better ability to compete for
economic development projects."
Specifically targeted under IFIP are manufacturers,
industrial enterprises, larger retail enterprises and hospitals. It can also
apply to hotels associated with a convention center. To qualify for a state TIF,
a project must create new full-time jobs, preserve existing full-time jobs, or
both.
Currently, the only tax which can legally be used in
a TIF project in Pennsylvania is the real estate tax -- the reason local
taxpayers, municipalities and school districts can be unfairly burdened. Under IFIP, the use of the state sales tax, corporate net income tax, and capital
stock and franchise taxes are authorized as TIF mechanisms. In the case of
hospitals, the personal income tax can be used.
Senator Brightbill's TIF program passed the state
Senate unanimously and the state House 188-7.
Under IFIP, financial assistance for projects may
not exceed 10 years for industrial enterprises, retail enterprises or
manufacturers, or 20 years for hospitals, convention centers or hotel
establishments.
IFIP requires that tax revenue generated from the
project must be greater than or equal to the aggregate amount of the grants
during the initial two years. For the third year, it is required that revenues
are anticipated to be greater than or equal to the aggregate amount of the
grants for that year, and for the succeeding two-year period, revenues are
anticipated to be greater than or equal to the aggregate amount of the grants
during that two-year time period.
The project user must submit financial information
prepared or reported on by an independent certified public accountant. If the
project is solely for infrastructure, some portion of the project must be funded
with a local TIF.
The act takes effect July 1, 2004. |
