This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0712 - Incentives for Large Scale Economic Development
L.R. NO. 2713-01
BILL NO. SB 712
SUBJECT: Economic Development-Employees and Employers
TYPE: Original
DATE: February 2, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
General Revenue $89,687 $107,625 $107,625
School District
Trust $98,619 $118,343 $118,343
Conservation $12,327 $14,793 $14,793
Parks & Soil $9,862 $11,834 $11,834
Missouri Large-
Scale Development $0 $0 $0
Total Estimated
Net Effect on All
State Funds $210,495 $252,595 $252,595
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
*ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government $162,450 $194,940 $194,940
* Fiscal impact of required local incentives is unknown.
FISCAL ANALYSIS
ASSUMPTION
Officials of the Office of Administration stated this proposal would be
estimated by the Department of Economic Development.
Officials of the Department of Revenue assume this proposal would establish a
withholding tax credit for employers providing new jobs. The Department of
Revenue would process this credit with existing staff and resources.
Officials of the Department of Natural Resources (DNR) state it is impossible
to predict the impact the proposed legislation would have on their agency.
They assume that all new industries would need some type of environmental
permit and inspection. The increase in the number of permits and inspections
would increase the revenues to the department. The permit revenues are used
to offset the DNR costs of reviewing and enforcing the permits. However,
depending on the number of new permits, the DNR may have to utilize
contractors to review the permits, which would result in an additional cost
to the department.
DNR issues a variety of different types of permits. So without knowing the
kind of industry and identification and quantification of the pollutants, it
is difficult to determine a fiscal impact.
In addition, the department would provide technical assistance and options
related to the design of their facilities. Specifically, the department would
review and provide technical suggestions for improved energy efficiency and
the use of renewable resources.
Officials of the Department of Economic Development (DED) estimate the
incremental income tax withholdings to be $535,680 per year. This assumes
five large economic development projects employing the minimum 100 employees
each. The revenues associated with the 5 projects total $805,700 annually.
This is comprised of income tax receipts from 500 additional jobs which they
assume would be added to Missouri's economy ($286,500); sales tax receipts
from purchases of the 1,000 new workers ($500,000); and property tax receipts
from the new investments ($19,200).
This legislation would result in an increased workload for DED; however, the
increased workload could be performed by existing staff and within current
appropriations. The assumption is that there would be five projects of
magnitude meeting the requirements of this legislation annually resulting in
additional work for a Research Economist and a Research Analyst. The Expense
and Equipment budget needed to support the extra work would be minimal, less
than $500. There would also be additional work for the DED fiscal and
accounting staff in receiving and disbursing funds from the "Missouri Large-
Scale Development Fund".
This legislation would also result in an increased workload for the Missouri
Development Finance Board. However, MDFB is a body corporate and politic of
the state and has no FTE's and receives no appropriations for ongoing
operating expenses. Therefore, they have not included any costs to MDFB in
the summary of state fiscal impact.
FISCAL IMPACT - State Government FY 1997 FY 1998 FY 1999
(10 Mo.)
GENERAL REVENUE FUND
Income to General Revenue
Income tax revenues from additional jobs $238,750 $286,500 $286,500
Sales tax receipts from additional
economic activities $295,858 $355,030 $355,030
1% Collection fee $1,479 $1,775 $1,775
Loss- reduced tax revenues due to tax credits($446,400) ($535,680) ($535,680)
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND $89,687 $107,625 $107,625
Income to School District Trust Fund
Sales tax receipts from additional
economic activities $98,619 $118,343 $118,343
Income to Conservation Fund
Sales tax receipts from additional
economic activities $12,327 $14,793 $14,793
Income to Parks & Soil Fund
Sales tax receipts from additional
economic activities $9,862 $11,834 $11,834
MISSOURI LARGE-SCALE
DEVELOPMENT FUND
Income to Missouri Large-Scale
Development Fund
Incremental income tax withholdings $446,400 $535,680 $535,680
Loss to Missouri Large-Scale
Development Fund
Disbursements to Special Projects ($446,400) ($535,680) ($535,680)
ESTIMATED NET EFFECT TO MISSOURI
LARGE-SCALE DEVELOPMENT FUND $0 $0 $0
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
Income to Cities and Counties
Sales tax receipts from additional
economic activities $146,450 $175,740 $175,740
Property tax receipts from additional
economic activities $16,000 $19,200 $19,200
This proposal requires political subdivisions affected by the project to
commit significant local incentives with respect to the project. The benefits
and costs associated with this commitment are unknown.
ESTIMATED PARTIAL NET EFFECT TO
LOCAL GOVERNMENT $162,450 $194,940 $194,940
DESCRIPTION
This proposal would establish the "Missouri Business Use Incentives for
Large-Scale Development Act". Sixteen new sections are created. This act
provides parameters and authorizes the Department of Economic Development
("Department") and the Missouri Development Finance Board ("Board") to
attract eligible industries that must invest at least $200 million in an
economic development project and create at least 100 new jobs. Section 2
defines 12 relevant terms including economic development project, eligible
industry, incremental income tax withholding and program costs. Section 3
gives the Board the power and authority to effectuate this legislation,
including the ability to negotiate and sign financing agreements and
otherwise support economic development within the state. The Board may issue
bonds to finance the economic development projects, but said bonds shall not
constitute an indebtedness or liability of the state and are not guaranteed
by the state. Section 4 requires the Department and the Board to establish
application procedures and standards. Section 5 allows the board to enter
into a financing agreement with any eligible industry. Section 6 delineates
the substance of such financing agreement. Section 7 enacts guidelines for
the Board to follow when entering into an agreement for a credit. Section 8
lists factors the Board must consider when determining if a credit should be
awarded. Section 9 specifies that the amount of the credit, set by the Board,
may not exceed the incremental income tax withholding. Section 10 provides
for items which must be included in an agreement between the Board and an
eligible industry. Section 14 - the Board must establish a separate fund for
each project. Section 15 - the Board may borrow money and issue certificates
marketed through financial institutions authorized to do business in Missouri
to provide funds for the present payment of the costs of economic development
projects. The "Missouri Large-Scale Development Fund" is established in the
State Treasury and shall be administered by the Department. All incremental
tax withholdings remitted by employers shall be transferred to the fund by
the Department of Revenue. General revenue funds shall not be transferred to
the fund.
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
Office of Administration
Department of Revenue
Department of Natural Resources
Department of Economic Development