Virginia Enterprise Zone Virginia Enterprise Zone ProgramProgram

June 1, 2007June 1, 2007

Outline of PresentationOutline of Presentation Purpose - Purpose - The purpose of this presentation is to provide an overview The purpose of this presentation is to provide an overview

of the Virginia Enterprise Zone program for localities that may not be of the Virginia Enterprise Zone program for localities that may not be familiar with it. A PowerPoint presentation with the details of the actual familiar with it. A PowerPoint presentation with the details of the actual designation application will be available at the How-to-Apply workshops.designation application will be available at the How-to-Apply workshops.

Program OverviewProgram Overview

IncentivesIncentives

State and Local Roles & ResponsibilitiesState and Local Roles & Responsibilities

Designation Amendment ProceduresDesignation Amendment Procedures

Program OverviewProgram Overview

Overview: Enterprise ZonesOverview: Enterprise Zones Enterprise ZoneEnterprise Zone

Geographical area of county, city, or town designated by the Geographical area of county, city, or town designated by the Governor for 10-20 years.Governor for 10-20 years.

First established by General Assembly in 1982 First established by General Assembly in 1982 (Virginia Enterprise Zone Act)(Virginia Enterprise Zone Act)

State & local government partnershipState & local government partnership

Means to stimulate job creation, private investment, and Means to stimulate job creation, private investment, and revitalization.revitalization.

Enterprise Zones Enterprise Zones

EZ Statute 2005EZ Statute 2005

July 1, 2005: General Assembly passed July 1, 2005: General Assembly passed Enterprise Zone Grant ActEnterprise Zone Grant Act

Transitioned program from tax credits Transitioned program from tax credits incentives to grants:incentives to grants: Job Creation GrantJob Creation Grant Real Property Investment Grant Real Property Investment Grant

IncentivesIncentives

State IncentivesState Incentives

New performance based grants:New performance based grants: Job Creation GrantJob Creation Grant Real Property Investment GrantReal Property Investment Grant

Click below for summary chart on State Click below for summary chart on State incentivesincentives

http://www.dhcd.virginia.gov/CommunityDevelopmentRevitalization/PDFs/vez_state_incentives.pdf

Job Creation GrantJob Creation Grant

Encourages the creation of higher quality jobs

Eligible positions: Net new to Virginia

Over 4 job threshold

Permanent full-time

Pay at least 175% of Federal minimum wage

Provide health benefits

Job Creation Grant: AmountJob Creation Grant: Amount

Based on wages paid for the position

For businesses providing health benefits & Pay at least 175% of Federal minimum wage

($9.01/hour) Up to $500/position per yearUp to $500/position per year

Pay at least 200% of Federal minimum wage ($10.30/hour) Up to $800/position per yearUp to $800/position per year

Job Creation Grant: TermJob Creation Grant: Term Capped at 350 positions annuallyCapped at 350 positions annually

Available for 5-consecutive year termAvailable for 5-consecutive year term

Restrictions:Restrictions: Retail, personal service, or food and beverage Retail, personal service, or food and beverage

positionspositions Units of local, state, or federal governmentUnits of local, state, or federal government

Zone verificationZone verificationPayroll documentationPayroll documentation

W-4W-4 First and last payroll records for base and/or grant First and last payroll records for base and/or grant

yearyear Health benefits informationHealth benefits information

Part of position’s premium paid by employerPart of position’s premium paid by employer Health insurance waivers for those declining firm’s Health insurance waivers for those declining firm’s insuranceinsurance

W-9W-9 CPA’s Attestation ReportCPA’s Attestation Report

Job Creation Grants: Application Materials

Real Property Investment GrantReal Property Investment Grant Based on qualified real property investments made

by individual/entity to commercial, industrial, or mixed-use* buildings in Enterprise Zones

Applicant: Zone Investor Owner Owner of space* Tenant* Developer

* Supplemental application material

Real Property Investment Grant: Real Property Investment Grant: AmountAmount

Eligibility thresholds based on type of investment: $50,000 for rehab or expansion $250,000 for new construction

Up to 20% of total cost of qualified real property investment

Real Property Investment Grant: Real Property Investment Grant: TermTerm

Capped per building/facilityCapped per building/facility Investments less than $5 Million: $125,000 per Investments less than $5 Million: $125,000 per

building or facilitybuilding or facility Investments of $5 Million or more: $250,000 per Investments of $5 Million or more: $250,000 per

building or facilitybuilding or facility

5-consecutive year term5-consecutive year term

Restrictions:Restrictions: Units of local, state, or federal governmentUnits of local, state, or federal government

Qualified Real Property InvestmentWhat Constitutes Qualified Real Property Investment?What Constitutes Qualified Real Property Investment?

Qualified Real Property Investments:Qualified Real Property Investments:

Excavation, grading Excavation, grading Paving Paving Driveways, roads, sidewalks Driveways, roads, sidewalks Landscaping or other land improvementsLandscaping or other land improvementsDemolition Demolition CarpentryCarpentrySheetrock, plaster Sheetrock, plaster PaintingPaintingCeilings Ceilings Fixtures Fixtures Doors, windows Doors, windows Fire suppression systems Fire suppression systems Roofing and flashing Roofing and flashing Exterior repair Exterior repair Cleaning and clean-upCleaning and clean-upElectrical/wiringElectrical/wiringPlumbingPlumbingHVACHVACFlooringFlooringWindowsWindows

NOT Qualified Real Property Investments: NOT Qualified Real Property Investments: Furnishings Furnishings Appraisal, architectural, engineering and interior design feesAppraisal, architectural, engineering and interior design feesLoan fees; points or capitalized interestLoan fees; points or capitalized interestLegal, accounting, realtor, sales and marketing or other Legal, accounting, realtor, sales and marketing or other professional feesprofessional feesClosing costs Closing costs Permits, user fees, zoning fees, impact fees, inspection feesPermits, user fees, zoning fees, impact fees, inspection feesBids Bids Insurance Insurance Signage or signsSignage or signsUtilities Utilities Bonding Bonding Copying Copying Rent lossRent lossRoadsRoadsTemporary facilities Temporary facilities Utility hook-up or access feesUtility hook-up or access feesOutbuildings Outbuildings Well, septic, or sewer systemsWell, septic, or sewer systemsLand or building acquisition Land or building acquisition Basis of any property: (i) for which a grant was previously Basis of any property: (i) for which a grant was previously awarded; (ii) which was previously placed in service in Virginia awarded; (ii) which was previously placed in service in Virginia by the taxpayer, a related party, or a trade or business under by the taxpayer, a related party, or a trade or business under common control; or (iii) which was previously in service in common control; or (iii) which was previously in service in Virginia and has a basis in the hands of the person acquiring it, Virginia and has a basis in the hands of the person acquiring it, determined in whole or in part by reference to the basis of such determined in whole or in part by reference to the basis of such property in the hands of the person from whom acquired, or property in the hands of the person from whom acquired, or Internal Revenue Code §1014 (a).Internal Revenue Code §1014 (a).

Code requires that an independent CPA licensed in VA Code requires that an independent CPA licensed in VA perform the agreed upon procedures established by DHCD perform the agreed upon procedures established by DHCD and report on findings in EZ grant applications to DHCDand report on findings in EZ grant applications to DHCD

CPA’s Attestation Report

Enterprise Zone Grant Deadlines

Application Deadlines for New EZ Grants: Application Deadlines for New EZ Grants: Wage-based Job Creation Grants and Real Property Wage-based Job Creation Grants and Real Property Investment GrantsInvestment Grants

April 1stApril 1st – Applicant submits application to DHCD – Applicant submits application to DHCD

May 15th May 15th – DHCD notifies applicant of deficiencies.– DHCD notifies applicant of deficiencies.

June 1stJune 1st – Applicant resubmits, if necessary and deficiencies have – Applicant resubmits, if necessary and deficiencies have been resolved. been resolved.

June 30thJune 30th – DHCD notifies applicant of qualification. – DHCD notifies applicant of qualification.

AugustAugust – Virginia Department of Treasury sends enterprise zone – Virginia Department of Treasury sends enterprise zone grant check to applicant.grant check to applicant.

Funds allocated annually by General Assembly

$16.5 million in grants available grant year 2006

Should requests exceed grants allocated, all qualified requests will be pro-rated

Pro-ration was 61 percent for the 2005 grant year

Grant Awards and General Limitations

Local Incentives

Local IncentivesLocal Incentives

CrucialCrucial part of program’s success part of program’s success

Means to create an improved climate for Means to create an improved climate for private business development & private business development & expansionexpansion

Consistent with local revitalization and Consistent with local revitalization and development goals (overcoming barriers to development goals (overcoming barriers to business operations)business operations)

Local government may propose any type Local government may propose any type of incentive permissible under Federal and of incentive permissible under Federal and State Law (as long as zone specific)State Law (as long as zone specific)

Local IncentivesLocal Incentives

Local Tax IncentivesLocal Tax Incentives

Dos and Don’tsDos and Don’ts Constitutionality is a must!Constitutionality is a must! Article 10, Section 1, Article 10, Section 1, Uniformity Uniformity Clause:Clause:

• Taxation has to be uniform in territory, subject, classTaxation has to be uniform in territory, subject, class• ““Territory” refers to entire locality Territory” refers to entire locality

Local Tax IncentivesLocal Tax Incentives

Dos and Don’ts (cont.)Dos and Don’ts (cont.) Applies to “property” type taxes – real estate, Applies to “property” type taxes – real estate,

machinery & toolsmachinery & tools Unless expressly allowed by the GA, like 58.1-Unless expressly allowed by the GA, like 58.1-

3220 & 3221; 3220 & 3221; oror As a grant, typically thru an IDA, for machinery & As a grant, typically thru an IDA, for machinery &

tools taxtools tax Do Do notnot use words abatement, refund, rebate use words abatement, refund, rebate

Local Tax IncentivesLocal Tax Incentives

Dos and Don’ts (cont.)Dos and Don’ts (cont.) Uniformity does Uniformity does not not apply to BPOL, utility tax, apply to BPOL, utility tax,

permit fees permit fees Rebates, refunds, abatement are allowedRebates, refunds, abatement are allowed

Local IncentivesLocal Incentives

Partial exemption for substantially rehabilitated real Partial exemption for substantially rehabilitated real estate (58.1-3221, VA Code)estate (58.1-3221, VA Code)

Grants based on the value of machinery & tool taxGrants based on the value of machinery & tool tax Architectural assistance – grants, designArchitectural assistance – grants, design Reduced permit and user fees Reduced permit and user fees Special rates for BPOL taxSpecial rates for BPOL tax

Local IncentivesLocal Incentives

Special zoning districts (e.g., parking)Special zoning districts (e.g., parking) Fast-track permitting Fast-track permitting Exemptions from local ordinancesExemptions from local ordinances Infrastructure improvementsInfrastructure improvements Crime reduction measures (security audits; Crime reduction measures (security audits;

assistance w/purchase cost)assistance w/purchase cost)

Local IncentivesLocal Incentives

Quality vs. quantity

Measurable and effective

Should represent sound fiscal policy

Roles & ResponsibilitiesRoles & Responsibilities

State Role & ResponsibilityState Role & Responsibility Annual site visit Annual site visit

Confer with you and your clients on state qualification, on-Confer with you and your clients on state qualification, on-site and via phonesite and via phone

Review & advise on amendments to boundaries or Review & advise on amendments to boundaries or incentivesincentives

Provide periodic administrator meetingsProvide periodic administrator meetings

Participation in local workshops and zone promotionParticipation in local workshops and zone promotion

Zone AssessmentZone Assessment Means to evaluate level of participation, Means to evaluate level of participation,

success, and value of zonesuccess, and value of zone

Offer more targeted technical assistanceOffer more targeted technical assistance

ConsiderationsConsiderations INCENTIVES! INCENTIVES!

• Local utilizationLocal utilization• State utilizationState utilization

Physical appearance of zonePhysical appearance of zone Marketing effortsMarketing efforts Number of stakeholders involvedNumber of stakeholders involved

Local ResponsibilitiesLocal Responsibilities

Program performance evaluation:Program performance evaluation: Data CollectionData Collection

• Incentive utilizationIncentive utilization• Private Sector InvestmentPrivate Sector Investment• Public Sector InvestmentPublic Sector Investment

Submit an Annual Report to DHCD (July)Submit an Annual Report to DHCD (July)• Discusses zone activity and is the basis for an annual report to the Discusses zone activity and is the basis for an annual report to the

General Assembly. Click below to view a copy of the report.General Assembly. Click below to view a copy of the report.www.dhcd.virginia.gov/CommunityDevelopmentRevitalization/Word/VEZ_%20Annual_Progrwww.dhcd.virginia.gov/CommunityDevelopmentRevitalization/Word/VEZ_%20Annual_Program_Report.docam_Report.doc

Annual site assessment visits with DHCD staffAnnual site assessment visits with DHCD staff

Local ResponsibilitiesLocal Responsibilities

Process/Management Structure for: Zone administration and local incentive promotion

• What departments are involved and what are their roles

Compilation of comprehensive list of addresses & businesses within zone

State Incentives promotion• Meet state requirements• Attend how-to-qualify workshops• Respond to questions about state incentives• State grant forms and applications

Zone Marketing

Zone Characteristics: Size Zone Characteristics: Size GuidelinesGuidelines

Cities:Cities: Minimum of 1/4 square mile (160 acres)Minimum of 1/4 square mile (160 acres)

Maximum of 1 square mile (640 acres); Maximum of 1 square mile (640 acres);

Or, 7 percent of the jurisdiction’s land area Or, 7 percent of the jurisdiction’s land area or population, whichever is largestor population, whichever is largest

Zone Characteristics: Size Zone Characteristics: Size GuidelinesGuidelines

Consolidated Cities: Consolidated Cities: Minimum of 1/2 square miles (320 acres)Minimum of 1/2 square miles (320 acres)

Maximum of 6 square miles (3,840 acres)Maximum of 6 square miles (3,840 acres)

Hampton, Newport News, Richmond, Suffolk, Hampton, Newport News, Richmond, Suffolk, Virginia BeachVirginia Beach

Zone Characteristics: Size Zone Characteristics: Size GuidelinesGuidelines

Counties: Counties: Minimum of 1/2 square mile (320 acres)Minimum of 1/2 square mile (320 acres)

Maximum of 6 square miles (3,840 acres)Maximum of 6 square miles (3,840 acres)

Zone Characteristics: Size GuidelinesZone Characteristics: Size Guidelines

Unincorporated Areas of County:Unincorporated Areas of County:

Minimum of 1/2 square mile (320 acres)Minimum of 1/2 square mile (320 acres)

Maximum of 6 square miles (3,840 acres)Maximum of 6 square miles (3,840 acres)

Joint zones – an enterprise zone located in two or Joint zones – an enterprise zone located in two or more jurisdictions (cities or counties). more jurisdictions (cities or counties).

Each locality’s portion of the joint zone can consist Each locality’s portion of the joint zone can consist of up to three non-contiguous geographic areas of up to three non-contiguous geographic areas relative to that locality. relative to that locality.

One of the locality’s three possible zone areas One of the locality’s three possible zone areas must be contiguous to at least one other must be contiguous to at least one other participant’s zone area as part of the joint participant’s zone area as part of the joint application. application.

Zone Characteristics: Zone Zone Characteristics: Zone ConfigurationsConfigurations

Single zone – an enterprise zone located entirely within a single Single zone – an enterprise zone located entirely within a single jurisdiction (city or county). A county zone including areas within jurisdiction (city or county). A county zone including areas within incorporated town limits is considered part of the county’s zone acreage incorporated town limits is considered part of the county’s zone acreage and constitutes a single zone.and constitutes a single zone.

EXAMPLE: Smyth County applies for a single zone designation. A EXAMPLE: Smyth County applies for a single zone designation. A portion of the proposed zone includes part of Marion’s town limits. The portion of the proposed zone includes part of Marion’s town limits. The acreage within the town limits counts towards Smyth County’s zone acreage within the town limits counts towards Smyth County’s zone acreage. The town is not required to offer incentives (but can) and is acreage. The town is not required to offer incentives (but can) and is considered part of the county’s zone.considered part of the county’s zone.

County limits

Town limits

Portion of town limits in County’s single zone

Zone Characteristics: Size Zone Characteristics: Size ConfigurationsConfigurations

County EZ boundaries

Example of a Joint Zone ConfigurationExample of a Joint Zone Configuration

Locality One

Locality Two

Locality Three

Contiguous joint zone areasNon-contiguous zone areas (3 per locality)

Zone Characteristics: Size Zone Characteristics: Size ConfigurationsConfigurations