In 2016, the town of Winter Park adopted an Enhanced Sales Tax Incentive Program (ESTIP) with the goal of supporting existing businesses and attracting new businesses to the town and increasing sales tax revenues. To date, no businesses nor developers have utilized the program.
At the December 18th Workshop, members of Town Council discussed the program to determine whether it could be utilized by several developments currently underway.
An ESTIP is utilized in many communities, similar to a Tax-Increment Financing (TIF) program, where new revenues, above and beyond existing revenues generated by a business, can be refunded or returned to a business to pay for new public infrastructure that expands sales tax collection through business creation or expansion. An ESTIP uses only municipal sales tax revenues, where a TIF utilizes all incremental revenues from all levels of government – most commonly property taxes typically reserved for counties, special districts and schools.
The town’s ESTIP currently allows new revenues to the town to be used to offset the cost of public improvements. As defined, the funds can be utilized for projects such as streets, sidewalks, trails, curbs, gutters, pedestrian mallas, street lights, drainage facilities, landscaping, public signage, traffic safety devices, bike paths, off-street parking and off-site water and sewer lines. It is similar to the town’s Commercial Enhancement Grant Program which encourages reinvestment to facade, landscaping and other improvements, only the improvements are paid for with new sales tax revenues instead of existing town funds.
For quite some time, Chip Besse, of Winter Park Development Company, has been requesting use of the town’s ESTIP to help attract new tax-generating businesses to town. Besse had requested use of the ESTIP to offset tenant lease costs and space buildout to help attract new businesses to town. In May, Besse presented an overview of shopping and sales tax collections in similar mountain towns, showing Winter Park at the lower end of the sales and tax collection scale, primarily due to the town not having adequate retail shopping options. Besse offered it is “more beneficial for the town to attract new retail and restaurant business to fill vacant retail space”, as opposed to non-tax generating businesses such as law offices, accounting firms and other professional businesses which do not add to the town’s sales tax collections.
In May, council had approved waiving the $3/square foot affordable housing fee and replacing it with a .5% Real Estate Transfer Assessment (RETA) on the Sitzmark South Phase II development, but did not approve the requested use of the ESTIP. Council felt that, since the ESTIP had not been approved during the planning phase, the development was not eligible for the program.
During the workshop on December 18th, council talked through the program in an effort to better understand under what terms a business or developer would be able to utilize it. They agreed the existing document contained a broad definition for when it can be applied and determined that it needed more clarification. Also missing was a timeline or term of agreement for the business’ expense reimbursement.
When approved, the ESTIP would reimburse a business or developer through a portion of collected sales tax revenues until the approved expenses are paid back. 4% of the town’s discretionary sales tax could be utilized for an approved program, and council agreed a 50/50 split between the town and the business or developer would allow them to to recoup their costs using 2% in sales tax collected by the sales tax-generating business(es) within the development.
Council was very clear that the funds should never be used to “cannibalize” an existing business by luring them away from their current location. However, if a business located in a 500 square foot space needed to expand to 2,000 square feet thus requiring a move, this could be allowable, but only under the proper circumstances. The “ESTIP should be more utilized for public-related improvements, not putting in ovens for a pizza joint”, said councilman Periolat.
Council also wanted to be sure to be fair to existing businesses and not give favor to developers looking to secure agreements with potential competitors. Each application would be considered based on merit and would not be transferable.
The question of whether the new business succeeds or fails was another consideration. A failed business would prevent the developer from recouping their costs, but council agreed the risk would fall on the developer’s shoulders, not the town’s, since the reimbursement would be tied to sales tax revenues.
The ESTIP does not currently allow for what Besse has been requesting and council was not willing to consider making a change until more investigation into what other towns were doing had been completed. Recognizing that all additive businesses were good for the town, the developer and the business, council agreed they needed to work on better document language that helps them more easily arrive at decisions on eligibility.
Town Manager Keith Riesberg told council that staff would look into what other towns were doing. Riesberg also agreed to work with the developers to see if there are ways for the town to help them in offsetting their costs. “We have this in our toolbox and have willing participants in the developers”, said Riesberg. “We can start to give more guidance with another of these workshops in the future.”