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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 12/16/2003 - SECOND READING OF ORDINANCE NO. 174, 2003, CONTINU ITEM NUMBER 14 AGENDA ITEM SUMMARY DATE December 16, 2003 FORT COLLINS CITY COUNCIL STAFF Alan Krcmarik SUBJECT Second Reading of Ordinance No 174, 2003 Continuing a Temporary Manufacturing Equipment Use Tax Rebate Program for Fort Collins Manufacturers RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading EXECUTIVE SUMMARY In March 1996 City Council approved a temporary rebate program for use tax paid on manufacturing equipment The goal of the program was to maintain the local economic base by providing modest tax relief to manufacturing concerns located in Fort Collins The program has provided rebates to manufacturers for taxes paid during the calendar years 1996 through 2001 The rebate program was discontinued for calendar year 2002 due to economic conditions Staff is proposing that the program be reinstated for 2003 and 2004 so that rebates may be made of taxes received by the City during those two years Payments are made in arrears This is a "rebate of tax paid in the previous year It is not a tax exemption If approved for calendar years 2003 and 2004 staff will ask manufacturing companies to submit applications by late March of each year— as prescribed in the program Rebates will be paid upon review of the applications Historically many of the companies have requested extensions to file at an even later date Modifications were last made to the program in 1999 to reflect several requests made by the manufacturing community Staff is now requesting that Council approve the program without any changes or modifications for 2003 and 2004 Ordmance No 174 2003, was unanimously adopted on First Reading on December 2 2003 ORDINANCE NO 174 2003 OF THE COUNCIL OF THE CITY OF FORT COLLINS CONTINUING A TEMPORARY MANUFACTURING EQUIPMENT USE TAX REBATE PROGRAM FOR FORT COLLINS MANUFACTURERS WHEREAS the City Council authorized a Temporary Manufacturing Equipment Use Tax Rebate Program (the "Rebate Program' ) with Ordinance No 29 1996 and WHEREAS such Rebate Program was authorized for calendar years 1996 1997 1998 1999 2000 and 2001 and WHEREAS the Rebate Program was not in effect for the year 2002 so that there was no 2003 rebate of taxes received by the City in 2002 and WHEREAS, it is the intent of the City Council to now continue the Temporary Manufacturing Equipment Use Tax Rebate Program (the Rebate Program ) so as to apply to taxes paid during the period from January 1 2003 through December 31 2003 and to taxes paid during the period from January 1 2004 through December 31 2004, unless otherwise modified and extended NOW THEREFORE BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows Section 1 That the City of Fort Collins Manufacturing Equipment Use Tax Rebate Program as described and previously approved by the Council by Ordinance No 30 1999 is in the best interests of the City Section 2 That the Council hereby approves the Rebate Program for taxes paid in calendar year 2003 (for rebates in 2004) and for taxes in calendar year 2004 (for rebates in 2005) except to the extent if at all that the Rebate Program is theretofore modified extended or terminated by the Council Section 2 That the Council may at any time modify extend or terminate the Rebate Program Section 3 That the City Manager shall continue to monitor the Rebate Program and its projected costs and impacts throughout 2003 and 2004, and if the City Manager determines from that review, or from any other information that the Rebate Program poses a financial environmental or other threat to the well being of the City the City Manager shall report such determination to the Council Section 4 That the Rebate Program may be discontinued at the discretion of the Council upon finding that the costs of the Program are contrary to the financial well-being of the City or upon finding the Program is not compatible with the City s Economic Policy Section 5 That the provisions of this Ordinance shall not be construed as establishing any right or entitlement to a rebate of any taxes on the part of any applicant and that the actual rebate of use taxes under such Rebate Program shall be entirely discretionary with the City Council and shall be subject to the appropriation of funds for such purpose Introduced and considered favorably on first reading and ordered published this 2nd day of December A D 2003 and to be presented for final passage on the 16th day of December AD 2003 Mayor ATTEST Chief Deputy City Clerk Passed and adopted on final reading this 16th day of December A D 2003 Mayor ATTEST City Clerk ITEM NUMBER 30 AGENDA ITEM SUMMARY DATE December2, 2003 FORT COLLINS CITY COUNCIL STAFF Alan Krcmank SUBJECT First Reading of Ordinance No 174 2003 Continuing a Temporary Manufacturing Equipment Use Tax Rebate Program for Fort Collins Manufacturers RECOMMENDATION Staff recommends adoption of the rdmance on Firs Reading FINANCIAL IMPACT Based on prior year s actual rebates staff anticipates that the Manufacturers Rebate program could cost the City approximately $500 000 in 2003 and $500,000 in 2004 Costs can vary greatly depending on the purchasing activit of local manufacturers Payment will be made from the Use Tax Carryover Reserve The r erve qcurrently has-fiba c f$ 4 million k � EXECUTIVE SUMMARY In March 1996 City Council approved a temporary rebate program for use tax paid on manufacturing equipment The goal of the program was to maintain the local economic base by providing modest tax relief to manufacturing concerns located in Fort Collins The program has provided rebates to manufacturers for taxes paid during the calendar years 1996 through 2001 The rebate program was discontinued for calendar year 2002 due to economic conditions Staff is proposing that the program be reinstated for 2003 and 2004 so that rebates may be made of taxes received by the City during th e two:yegirs Payments are made in arrears%,Thiskrs1rt003 bao oitax paid the previous year It is not a tax exemption If approved for calendar ye and 2004, staff will ask manufacturing companies to submit applications by late March of each year— as prescribed in the program Rebates will be paid upon review of the applications Historically many of the companies have requested extensions to file at an even later date Modifications were last made to the program in 1999 to reflect several requests made by the manufacturing community Staff is now requesting that Council approve the program without any changes or modifications for 2003 and 2004 December 2, 2003 -2- Item No 30 BACKGROUND The Manufacturers Use Tax Rebate Program was initiated in 1996, and was intended to focus on encouraging the reinvestment made by local manufacturing fines in new manufacturing equipment This type of investment used to be made every three or four years The standard today is that the reinvestment in equipment occurs every fifteen to eighteen months This type of continual reinvestment could result in a relative windfall for the community since there is little added cost or impact associated with existing �,ms The program has provided thejollowin esultsl„ a #of Companies Applied Amount Rebated 1996 10 $ 373,600 1997 17 $ 439 917 1998 10 $ 385 845 1999 13 $ 329,135 2000 14 $ 332 780 2001 11 rj, 010,9Q5 Total 75 282 SUMMARY # With the suspension of the Street Oversizing Fee Exemption Program and the Development Impact Fee Rebate Program in the late 1990s, the Manufacturers Use Tax Rebate Program remains as an economic incentive for retaining local manufacturers The City of Fort Collins has experienced strong growth in sales tax revenues over the past several years with the past two being an exception Our manufacturing concerns have remained a very important element of our tax base Staff recommends that the City continue the program for taxes received by the City m 2003 and`200s proved by Counc`i whiff arefuily monitoring return tax collections The City Manage can reco mend t me thaGhe program be suspended should the City encounter economic c ditions at w d ake the pr gram cost prohibitive In the event that a revenue shortfall should occur, the pra ram be ree ated for continuance