At the August 21st Town Council meeting, the Winter Park Town Council resumed discussion on the town’s Enhanced Sales Tax Incentive Program (ESTIP) and advised Sitzmark South Development representative, Chip Besse, that the requested use to attract new businesses to town was not appropriate to use as proposed.
While not to say individual businesses cannot request ESTIP, the town would not concede to Besse’s request. The result of a discussion at a recent workshop led to the decision. The Town Council told Besse that, based on the town’s current concept, the request does not work well with the Town’s program. “If you want more, you’d need a different policy”, said interim Town Manager, Stan Zemler.
At the June 19th Town Council meeting, Besse had requested the town allow 4% of sales tax collected at Sitzmark South commercial spaces, up to $1.8 million, be refunded to the developer. He told the council the development is challenged in attracting retail tenants to Winter Park, and the 4% would allow Sitzmark South to fill the spaces with businesses that collect sales tax, as opposed to filling them with office clients such as a law firm or title company which do not (collect sales tax).
Besse described this as a win:win for both the town and the developer, estimating the lifetime value to the town at about $10.5 million. Town Council agreed to discuss the proposal at their upcoming retreat in July.
Mayor Pro-tem, Nick Kutrumbos suggested they look at a program to incentivize a diversity of businesses attracted to town. He also stated that this topic “needed to be discussed at the start of the project”, not as this has been proposed.
Besse maintained that he had been in discussions with the previous Town Manager, prior to breaking ground on the development in Fall 2017, but nothing had been solidified at that time. Besse told the Council that he would like for the council to vote, because he wants potential tenants to know what he had requested.
Besse told the council that the per head retail spend in Winter Park was $60, where the Town of Steamboat Springs had a $288 spend. He said his request achieves all objectives, that the town isn’t on the hook for anything and puts an incentive in place to find new business and “keeps the office space off Main St”. He told them he was trying to find a balance and with a much much larger win for the town, he was surprised by the Town’s stance. He said he would would like to see the town embrace it. The space will be done in November/December and he is actively campaigning to find tenants and the 4% refund is what it is going to take to attract new business to the town.
Mayor Lahrman told Besse that it’s “not detrimental or bad, we are struggling to make it fit into the ESTIP box”. He said that staff was directed to find a program designed to attract new businesses to town. “We’re not trying to take away, we are just seeking alternatives”, said Lahrman. He said that Council identified the benefit, “we see it hands down”.
Zemler told the council “In 30 days, we can have a concept to present to Town Council, directed at the developer” He said it needs to be thought of in terms of a community policy, since directing funds at the developer is different than the current ESTIP design.
Mayor Lahrman said “if the town subsidizes in the manner requested and that plays out, it’s a lot worse for the shop that has been struggling for years”. He told Besse that “we don’t put the risk on the town, we put it on the developer”. Lahrman told him he is in favor of finding alternatives, but opposed to do it in this fashion.
Councilman Seemann stated “We have got to get a program in place that works fairly with both existing businesses and new businesses”. He said he supports Besse’s proposal, but needs staff and the town attorney to find a way to make this work – not necessarily as proposed, but in some form.
Zemler stated there are ‘pros & cons’ in developing a tool for business attraction. He said Besse has laid out an approach, but the financial implications (lost revenue for a period of 5-10+ years) are significant. “If you give away your revenue stream for a period of time, the impact must be considered.” He told the council “we can get past the legal piece, but we have to find something that works fairly”.
Council agreed that development of an alternative incentive plan needs to be a priority. The goal is to develop a plan that does not incent existing businesses to move from one spot to another, except in cases where they have outgrown existing space. It should be designed to bring new businesses to town. “There is a cleaner way to do this – we have to be careful when mixing public dollars with private development”, said Zemler. “We’ll work toward finding a solution that works for everybody.”
Winter Park’s Enhanced Sales Tax Incentive Program (ESTIP)
The Town’s ESTIP was established in 2017. The purpose of the ESTIP is “to encourage the establishment or substantial expansion of retail sales tax generating businesses within the town, stimulating the economy of and within the town, providing employment and opportunities for residents and guests of the town and others, further expanding the goods available for purchase and consumption by residents and guests of the town, and further increasing the sales tax collected by the town, which increased sales tax collections will enable the town to provide expanded and improved municipal services to and for the benefit of the residents and businesses of the town, while at the same time providing public or public related improvements at no cost, or at deferred cost, to the town and its taxpayers and residents”.
Participation in the ESTIP is by approval of the town, exercising its legislative discretion in good faith. An owner or proprietor of a newly established or proposed retail sales tax generating business or location, or the owner or proprietor of an existing retail sales tax generating business or location which wished to expand substantially, may apply to the town for inclusion within the ESTIP, provided that the new or expanded business is reasonably likely to generate enhanced sales tax of at least twenty thousand dollars ($20,000.00) in the first year of operation.
Approval of an application for inclusion in the ESTIP is given by the town, at a public hearing, based upon the following criteria:
- The amount of enhanced sales tax which is reasonably to be anticipated to be derived by the town through the expanded or new retail sales tax generating business;
- The public benefits which are provided by the applicant through public works, public improvements, additional employment for town residents and the like;
- The amount of expenditures which may be deferred by the town based upon public improvements to be completed by the applicant;
- The conformance of the applicant’s property or project with the comprehensive plan and zoning ordinances of the town; and
- The execution of the agreement required by this section.
Each applicant executes an agreement with the town containing the following provisions, at a minimum:
- A list of those public or public related improvements which justify approval, and the amount which shall be spent on said improvements;
- The maximum amount of enhanced sales taxes to be shared, and the maximum time during which said agreement shall continue, it being expressly understood that any such agreement shall expire and be of no further force and affect upon the occurrence of the earlier to be reached of the maximum time of the agreement (whether or not the maximum amount to be shared has been reached) or the maximum amount to be shared (whether or not the maximum time set forth has expired);
- A statement that the agreement is personal, not transferable and does not run with the land;
- A statement that the agreement shall never constitute a debt or obligation of the town within any constitutional or statutory provision;
- The base amount per month, and a statement that if, in any month sales taxes received from the property do not at least equal said amount, that there shall be no sharing of funds for said month;
- A provision stating that any enhanced sales taxes subject to sharing shall be escrowed in the event there is a legal challenge to the ESTIP or the approval of any application therefor;
- A provision stating that the obligations and benefits agreement may not be assigned in whole or in any part without the express consent of the town, and that no third party shall be entitled to rely upon or enforce the agreement; and
- A provision that applicant shall have no right, claim, lien or priority in or to the town’s sales tax revenue superior to or on parity with the rights, claims or liens of the holders as any sales tax revenue bonds, notes, certificates, or debentures payable from or secured by any sales taxes, existing or hereafter issued by the town; and that all rights of the successful applicant are, and at all times shall be, subordinate and inferior to the rights, claims, and liens of the holders of any and all such sales tax revenue bonds, notes, certificates, or debentures, payable from or secured by any sales taxes issued by the town.
Approval by the town of an agreement implementing the ESTIP shall entitle the successful applicant to share in enhanced sales tax derived from the applicant’s property or business in an amount which shall not in any event exceed one hundred percent (100%) of the enhanced sales taxes. The time period in which said enhanced sales taxes may be shared does not begin until all public or public related improvements are completed, and is limited by the town, in its discretion, to a specified time, or until a specified amount is reached.
The uses of shared enhanced sales tax funds are strictly limited to public or public related improvements which are expressly approved by the town at the time of consideration of the application.
While the Town’s ESTIP is designed to assist individual business, it does not fit with the Sitzmark South Development’s request. The Town will look into alternative options designed to potentially benefit a developer seeking to fill vacant retail space and report back to council at a future meeting.
To read about the full program, visit: wpgov.com.