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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 12/07/1999 - FIRST READING OF ORDINANCE NO. 191, 1999, ADDING A ITEM NUMBER: 16 AGENDA ITEM SUMMARY DATE: December 7, 1999 FORT COLLINS CITY COUNCIL STAFF: Ken Waido SUBJECT: First Reading of Ordinance No. 191, 1999,Adding aNew Division 4 to Chapter 25,Article Ii of the Code of the City of Fort Collins Establishing a Program for a Rebate of the City's Sales and Use Taxes for Materials Used in the Construction of Affordable Housing Units,and the Deferral of The Payment of Sales and Use Taxes Thereon. RECOMMENDATION: Staff recommends adoption of the Ordinance on First Reading. The Affordable Housing Board voted unanimously to recommend adoption of the program. FINANCIAL IMPACT: Based on a review of activity over the past three years(average of 190 units/year),the amount of tax rebate on an affordable housing unit would range between$600 and$1,000 per unit. The production goals contained in the Priority Affordable Housing Needs and Strategies report(2/99)establish + an average of 337 units for the years 2000 and 2001. If the production goals were to be achieved, ` the cost of the program would range between approximately $202,000 and $337,000 per year in rebates. Increases in yearly development totals would,obviously,result in higher amounts of sales and use tax rebates. EXECUTIVE SUMMARY: Since 1993,the City of Fort Collins has established several programs to promote the development of affordable housing units in the community. Some programs deal with the soft costs of development involving the processing of development applications, e.g., the "Priority Processing Program,"while others more directly constitute financial incentives,e.g.,the"Development Impact Fee Collection Delay Program." The current proposal is to establish a program to provide for a rebate of the City's Sales and Use Taxes for affordable housing units. The impetus for the program comes from the City Council's 1999-2001 Policy Agenda,Theme IV. Helping Make Housing Affordable to Our Citizens -E. Rebates. The Sales and Use Tax Rebate Program would be another direct financial incentive program which would logistically operate similar to the previous"Development Impact Fee Rebate Program." Basically, builders of affordable housing units would need to pay the City's Sales and Use Taxes for materials used in the units. The City would then, after completion of the units and verification that they were occupied by income eligible families,rebate the amount of City Sales and Use Taxes paid by the builder for the affordable units (only). The Program would operate for two DATE: December 7, 1999 2 ITEM NUMBER: 16 (2) years, after which time it would be reviewed for possible continuation. A second part of the proposal is to include sales and use taxes in the "Development Impact Fee Collection Delay Program"whereby the payment of sales and use taxes would not occur at the time of the issuance of a Building Permit but,rather,would be delayed until the issuance of a Certificate of Occupancy. BACKGROUND: Earlier this year, staff began to investigate financial incentives for the development of affordable housing units involving the City's Sales and Use Taxes. The impetus for the investigation came from the City Council's 1999-2001 Policy Agenda, Theme IV. Helping Make Housing Affordable to Our Citizens-E.Rebates. Several options were investigated including:establishing a separate Sales Tax for affordable housing,establishing a Sales and Use Tax payment exemption; earmarking taxes paid for the City's Affordable Housing Fund; and delaying the payment of Sales and Use Taxes, as in the existing "Development Impact Fee Collection Delay Program." Each option was analyzed as to its advantages (pros) and disadvantages (cons)which included reviews of such issues as voter approval,financial impacts,and the effect of Article X, Section 20 (TABOR amendment) of the State Constitution. At the Council Finance Committee meeting on June 16, 1999, staff presented three options for the committee's consideration. The Finance Committee asked for some additional information regarding the impacts of a Sales and Use Tax on fiscal year spending as defined by the TABOR amendment. On July 21, 1999,the Finance Committee met to review the TABOR related information collected by staff. After discussion on the legal and financial issues,the Committee directed staff to prepare a proposal for a"Sales and Use Tax Rebate Program." Basically, as proposed, a "Sales and Use Tax Rebate Program" would provide for the return to the builder of an affordable housing unit a rebate equal to the amount of Sales and Use Taxes paid to the City for materials used in the unit. On August 18, 1999, the Finance Committee directed staff to prepare an ordinance for the full Council's consideration establishing a Sales and Use Tax Rebate Program for the affordable housing units in an affordable housing project and to defer collection of sales and use taxes, on a trial basis, for two(2)years. The Program would be established with the Council's adoption of this Ordinance. After two years the Program will be reviewed for possible continuation. Qualifying for a Rebate The City would still collect the total amount of Sales and Use Taxes owed by an "Affordable Housing Project" for all affordable housing units in the project. In order to receive a rebate, the builder would be required to submit documentation to the City's Advance Planning Department that the unit was occupied by an income qualified family and the unit meets the City's definitions, and any other pertinent regulations, as either an "Affordable Housing Unit for Rent" and/or an "Affordable Housing Unit for Sale." The Advance Planning Department would then notify the Finance Department that the builder was qualified for a rebate, and the amount of a rebate. The Finance Department would then issue a rebate check to the builder. Rebates would range between $660 to$1,000 per unit. The production goals contained in the Priority Affordable Housing Needs DATE: December 7, 1999 3 ITEM NUMBER: 16 and Strategies report (2/99) establish an average of 337 units for the years 2000 and 2001. If the production goals were to be achieved,the cost of the program would range between approximately $202,000 and $137,000 per year in reduced revenue to the City. Increases in yearly development I totals would, obviously, result in higher amounts of sales and use tax refunds and lost revenue. A second part of the proposal is to defer payment of sales and use taxes in a manner similar to the "Development Impact Fee Collection Delay Program" whereby the payment of sales and use taxes would not occur at the time of the issuance of a building permit but,rather,would be delayed until the earlier of the issuance of a Certificate of Occupancy or the last month of the year in which the building permit was issued. AFFORDABLE HOUSING BOARD RECOMMENDATION: The Affordable Housing Board,at its regular monthly meeting on November 4, 1999,reviewed the proposed Sales and Use Tax Rebate Program for affordable housing units and voted unanimously to recommend adoption of the program. s • • ORDINANCE NO. 191, 1999 OF THE COUNCIL OF THE CITY OF FORT COLLINS ADDING A NEW DIVISION 4 TO CHAPTER 25, ARTICLE II OF THE CODE OF THE CITY OF FORT COLLINS ESTABLISHING A PROGRAM FOR A REBATE OF THE CITY'S SALES AND USE TAXES FOR MATERIALS USED IN THE CONSTRUCTION OF AFFORDABLE HOUSING UNITS, AND THE DEFERRAL OF THE PAYMENT OF SALES AND USE TAXES THEREON WHEREAS, the City has established several programs to promote the development of affordable housing units, including the City's "Priority Processing Program" and "Development Impact Fee Collection Delay Program"; and WHEREAS, the City Council has determined that it is in the best interests of the City to establish a program for the rebate of the City's sales and use taxes collected for materials used in the construction of affordable housing units, which program shall be established as a "pilot" program to continue in existence for a period of two years and automatically terminate unless extended by the Council by ordinance; and WHEREAS, the Council has further determined that another program should also be established for deferring the payment of sales and use taxes for materials used in the construction of affordable housing units,with said payment to be made at the time of issuance of certificates of occupancy. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS that the Code of the City be, and hereby is, amended as follows: Section 1. That Chapter 25,Article II of the Code of the City of Fort Collins be amended by the addition of a new Division 4 to be entitled Affordable Housing Rebate,which division shall read as follows: Sec 5-5& Esta'Iilis 4w , 'There is herebye a3eacandaue bat� agtam'tcr""Iitovide z�e�ief from�ysalesand<a _ g J ases n�� tena�s'�ed!aatthe,�:onstt 'd�ion of�orte,:hqusr '�s��8rmssti�nednn §2�-6��`. Sec.25-56. Applica ion or tebate • Application for thesi lesand�Yaxrebateforaffordable]iousmg :units shall!be made-on forms to beaprav�dedby ttiert Sec 25 57 ,Qualifieahons s, mp�gr In,order t}ztaYye 3ebate ;the following requireuehts m , , __ ? Y ' (l� cheap licantnustdemonstrateYo°'thesahS£a tinnxi# e e �fenals upon i ch'We,axles ai a OVER', h biisiti t��de�fin'ed �d e� r a'°�a' "thereb�aiers � 'sazrieas+ a 'a e es;' r' f ------- If 5�e (? tiepfll dhei3e"an3 shall rmbettmefauit"ofthehft y, , �rbligat�on,�'�cantractuor�fhera�r�ment e� ;, i")—talon or,a rebatens npz i d nd pz ks Ditnsrbn lid the appli Y c}%re a becomes dehnquentinth�payment�fany, -,� �,"e; »' tihlity wb l owed to the city,,the-Tebate qvl,& i3 said npplic�'bt applied,by,the city m'ryvhtileornp toward°thepayinent;of the delinquent taxe ,chargg ptr1 Sec;,�;�5-�8 x �tnounfof rebate: eamount ftherebate payable hereunder shall be the t'W amotuif odes and usees '��'or maf�nals�i5ed u thedci�istniaLian of the, ffzardab�eriit�irig . The; eba i?ved'fic �inder�lus Diyssion bjec3 ;`kttie air 'a`Yionf nss"ary, x]s;and,�fhepro�sibns• of`#his Di,�t�sibn s11ia111ibt be+�on, `tuedz estab3isiun �right of entitlement to a rebate bathe part omany applicad S v�,u.,„m'�9 �`ilmmtsttatibn fficerba"Il admtnistei�" �i' a yyesta`bJ„i.�liedrpivisibiY andPplicat<bn @sttitl� bSisYent v�nttleproY �Dzvissonanclauditandrifyhe$pP7icatigns'submittect pura}tantto tht vi�i ,ny rebate appTcahon, calm sh 4s q etc"`laima t' ve aiid r 8 ip icahon m3er oath The-b&den of ovingrekigib iLy fora cleirt7ait. a`Financ7a lOffiBery„�6requ>�e rea4dax61 _ y an faatrPor#the rebate app3iufion: Se ion. Tlie sales and wise x ate provisions established in this 1 i,yision shall tenninate and, earfhvfi ther`fb=iah&tffect on eceniber 1 2001ii2thd nozebate•shall be paidafler sattLateexceptforaffordable hbtisingptojects farw�luchbwldingpermits have theretoforebeenrssued,unless thissunset provisions repealed%,,modified by the City Council. " Section y` , erv2 t theCode of�theCityHof dhls,-amd lws 3Ua4afoladdtion day; e SeG 5 „Os a edales an nse fag pa_omen' s ._ram.. .. 1_ m. .. .. � r or ,abbe ousu►g prole. € < Wr s or materials p"rchased and a-co chn f rda a unit a.Ckrm is defined §��= p e to e #h �p ban e date i rhfic ofn�pancy ent .fot suc o nm o brhon obtatne occurs fthee�un a de 4y �� Fr¢h -'' 43`•'`'.�'� to . "t 4.,ryt� a �"lic ec i1~y ee in thez�o �` �to- aTh'' ode 4co �' �` on�<No erson g1x �se section.• Introduced and considered favorably on first reading and ordered published this 7th day of December, A.D. 1999, and to be presented for final passage on the 4th day of January, A.D. 2000. Mayor ATTEST: City Clerk Passed and adopted on final reading this 4th day of January, A.D. 2000. Mayor ATTEST: City Clerk •