Vermont Sales TaxReallocationProgram

Guidelines andApplication

Vermont Department of Housing and Community Development

Community Planning + Revitalization

April 2017

2017 Application Guidelines for Sales Tax Reallocation

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Overview Municipalities and the developer of a qualified project may jointly apply to the Downtown Board for a reallocation of sales taxes on construction materials. Qualified projects must be located within a designated downtown district. Reallocated taxes must be used by the municipality to support the qualified project. In 2017, funding is available for both the Downtown and Village Center tax credits and the Sales Tax Reallocation program, and projects in both categories will compete for the available $2,200,000.

Qualification Requirements: • Applications must be for qualified projects within a designated downtown. The Board will not consider

projects that are substantially completed before designation is granted to the municipality.

• Applications must be submitted jointly by the municipality and the owner of the qualified project.

• Applications may be submitted either just prior to the start of construction or during construction of the qualifying project, but not after construction has been substantially completed.

• Applications will not be considered at the same Board meeting at which the applicant municipality requests initial downtown designation.

• The application must demonstrate that the qualified project will be under construction within 12 months of the award date, and the municipal project must be completed within 30 months of the award.

• Applications and projects must be consistent with the following definitions:

1. "Construction materials" means all construction materials purchased by the owner or owner's representative, project manager, construction manager, general contractor, or subcontractor to be incorporated into a qualified project. Construction materials include building components; sand, gravel, etc. incorporated into the site; and landscaping materials incorporated into the project. Construction materials do not include furniture, furnishings, and equipment which does not become real property, tools used in construction, or fuel or other supplies used in construction but not incorporated into the project.

2. "Qualified project" means expansion or rehabilitation of contiguous real property that is or will be used at the completion of the expansion or rehabilitation as a structure in a downtown development district designated under chapter 76A of Title 24, but only to the extent that the expansion or rehabilitation becomes an integral component of the real property and the project does not seek qualification for either the historic or older building tax credits authorized under subchapter 11F or subchapter 11G of chapter 151 of Title 32. "Qualified project" also means new construction of contiguous real property that will be used at the completion of the construction as a structure in a downtown development district designated under chapter 76A of Title 24 but only to the extent that the new construction is compatible with the buildings that contribute to the integrity of the district in terms of materials, features, size, scale and proportion, and massing of buildings.

3. “Municipal project” means a project undertaken by the municipality in support of a qualified project and which uses the reallocated sales tax revenues in support of that qualified project.

Amounts Available for Reallocation 1. In a municipality with a population of 7,500 or less, all taxes paid on sales of construction materials in

excess of $100,000 for each separate qualified project may be reallocated to the municipality; 2. In a municipality with a population greater than 7,500 but less than 30,000, all taxes paid on

construction materials in excess of $200,000 for each separate qualified project may be reallocated to the municipality;

3. In a municipality with a population greater than 30,000, all taxes paid on sales of construction materials in excess of $1,000,000 for each separate qualified project may be reallocated to the municipality.

The benefits of this program, combined with the downtown and village center tax credits, are capped at $2,200,000 annually. Funding for the combined projects (tax credits and sales tax reallocation) in any given municipality may not exceed 30% of this total cap in one year.

2017 Application Guidelines for Sales Tax Reallocation

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Reallocated funds may only be used by the municipality for expenditures on this municipal project, as approved by the Downtown Development Board.

Application Requirements Applications must include the following information and respond to “Competitive Criteria” on pages 4 and 5.

A cover page, including the primary contact person for the application, their address, phone number and email.

A copy of a municipal resolution, meeting minutes, or other evidence of the local legislative body’s

decision to apply.

A signed letter of intent to apply for the sales tax reallocation from the owner of the project.

A description of the qualified project including:

• Project location marked on a map of the Designated Downtown District;

• A detailed written description of the scope of work;

• Design elevations and renderings of the project;

• If the “qualified project” involves new construction, evidence of the municipal determination of compatibility with the charter of the downtown district;

• A budget (excel spread sheet preferred) showing major categories of expenditures for the qualified project. The budget must break out and summarize the taxable cost of construction materials used in the qualified project, and must be based on the successful construction bid(s) for the qualified project. For each major subcontractor, the budget should itemize:

- The subcontractor’s total bid price; and

- The taxable cost of materials NOTE: You do not to include the bid documents with the application, but they should be referenced, and must be made available to the Board upon request.

• An explanation of how this project meets the definition of a “qualified project” above; and

• A project schedule demonstrating that the qualified project will be under construction within 12 months of award and that the municipal project will be completed within 30 months of the Downtown Board’s approval.

A description of the municipal project that will be financed with the reallocated sales taxes, including:

• An explanation of how it will support the qualified project;

• Design drawings and a written scope of work;

• A budget, including the project cost, all necessary funding sources, and the status of each funding source; and

• A schedule for completion. The municipal project must be completed within 30 months of the Board’s approval of the application.

Application Submission Please email an electronic copy of the application to Caitlin Corkins at caitlin.corkins@vermont.gov by 4:30 p.m. on June 30, 2017. Late applications will not be considered. Decisions will be made at the July meeting of the Downtown Board on July 24, 2017.

We encourage applicants in Designated Downtowns to work with their Downtown organizations to complete the Community Need and Community Impact sections. Keep it simple and limit your response to the space provided. Additional pages may be added if this is not possible.

2017 Application Guidelines for Sales Tax Reallocation

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Requests for Funds and Closeout Funds will be allocated in two installments. Email reimbursement requests to Caitlin Corkins at caitlin.corkins@vermont.gov. The first 50% payment shall be requested by letter, signed by both the developer and the municipality, certifying that the qualified project is 50% complete, and requesting 50% of the amount awarded. The letter shall include:

1. A statement that the municipal project has begun construction 2. A summary of the costs to date

The final 50% payment shall be made when both the qualified and municipal projects have been completed and a final report submitted to and accepted by the Agency. The final report shall include:

1. Photos of both the completed qualified project and the completed municipal project 2. A description of the municipal project as completed 3. A summary of the expenses of the municipal project 4. A certification from the Developer indicating the total amount of Sales Tax paid for the project

Scoring Criteria Funding priority goes to projects that demonstrate the cost effectiveness of a project and show how the project addresses an important community need or issue. The Board uses the following information to score projects in each area: Cost Effectiveness (scored 0-5), Community Need (scored 0-5) and Community Impact (scored 0-7). An additional bonus point (scored 0 or 1) is added to projects with Vermont taxpayer investment and/or for those creating or expanding a maker or co-working space. Scores are tallied and ranked high to low. Projects must score a minimum of 12 points (average derived from individual Board scores divided by number of Board members scoring). Projects are typically funded in rank order until the credits are exhausted; however, the Board may fund projects at its discretion. Tie scores are broken with a Board vote.

2017 Application Guidelines for Sales Tax Reallocation

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Competitive Criteria Please provide the information below in the space provided.

COST EFFECTIVENESS: This information assists determining the relative cost effectiveness of a project. Funding priority goes to projects that have a low cost per square foot, high percentage of new investment to pre-construction property value, and high percentage of private funds to public funds.

(Scored: 0−incomplete information; 1−poor return; 2-3−fair return; 4−good return; 5−excellent return).

Total Private Funds: _____________________

Total Public Funds (local, state and federal): ___________________

Grand List Value (pre-construction): ____________________

Total Project Cost (actual or estimated): ____________________

Total Sales Tax Reallocation Requested: _____________________

Sales Tax Previously Awarded/Year: ___________/_____________ N/A

Reason for Additional Request: _________________________________________________

Property Span: _________________

Square Feet: Before: __________ After: ___________

Housing Units: Before: ___________ After: ____________

Commercial Units: ___________ After: ____________

Existing Use(s) – check all that apply: housing retail office industrial other

Proposed New Use(s) – check all that apply: housing retail office industrial other

VERMONT TAX PAYERS: Projects with investment from individual Vermont income taxpayers (includes Vermont investors or members of a development partnership) receive an additional point. If applicable, provide the name and home town of one Vermont-based (income tax payer) investor below. (Scored 0 or 1: 0 – project has no Vermont taxpayers; 1 – project has Vermont taxpayers)

_______________________________________________________________________________________ Name of Vermont Taxpayer Town

MAKER AND CO-WORKING PROJECTS: To encourage investments in “co-working” and “maker” spaces that support entrepreneurs and foster new businesses, projects that propose to create or expand co-working and/or maker spaces will receive an additional point. Definitions below. (Scored 0 or 1: 0 – project does not involve a maker or co-working space; 1 – project will create/expand a maker or co-working space.)

Makerspace: A facility in which people with shared interests, especially in computing or technology, can gather to work on projects while sharing ideas, equipment, and knowledge.

Co-working: A style of work that involves a shared working environment and independent activity. Unlike a typical office environment, those co-workers are usually not employed by the same organization. These spaces are attractive to work-at-home professionals, independent contractors, or people who travel frequently.

Does this project include creation or expansion of a maker or co-working space?

Yes No

2017 Application Guidelines for Sales Tax Reallocation

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COMMUNITY NEED: Describe and document the important community and/or economic development needs or issues the project addresses. For example, recovery from a flood, fire or other local disaster; high unemployment or low per capita income; declining grand list values (vacant, underused or condemned buildings); low rental rate for commercial or rental properties that cannot support accessibility or code improvements; need for new housing or commercial development in the district; supporting a new or relocating technology-related business; competing development outside the designated district; closing or downsizing of a major employer; or other issue or need not listed here. Title this section “Community Need.”

(Scored 0-5 using the following definitions: 0 − no information; 1 – poor/incomplete information, does not clearly describe the needs/issues; 2-3 – fair, describes the needs/issues, but they are not significant or urgent; 4 – good, clearly and convincingly describes compelling needs/issues; 5 – excellent, clearly and convincinglydescribes compelling needs/issues that are significant and urgent).

COMMUNITY IMPACT: Explain how the project offers a significant and long-lasting solution to the community and/or economic development needs or issues identified above. For example, creating or retaining business, jobs, housing or commercial; increasing the tax base; restoring or enhancing the vitality of the community; making the community more accessible; reducing threat of fire or improving public safety; contributing to the long-term economic development of the district, etc. Title this response “Community Impact.”

(Scored 0-7 using the following definitions: 0 − no information; 1 − poor/incomplete information, does not clearly describe how the project addresses the identified needs/issues; 2-3 – fair, describes the how the project addresses the needs/issues, but the long-term community impacts are limited; 4-5 – good, clearly describes how the project addresses the identified needs/issues and the project will have a reasonable impact on the community; 6 – excellent, clearly describes how the project addresses the identified needs/issues and the project will have a broad impact to the community; 7 – exceptional, clearly describes how the project addresses the identified needs/issues and the project will have far-reaching and long-lasting impact to the community).