The Flagler County Commission is looking to step up its incentive programs for economic development, focusing on certain approaches more than others, as it looks to diversify the local tax base and expand on the availability of local jobs in a county where nearly half the working population of 51,000 people commutes out of county.
“Every budget session it weighs on our conscience the fact that we rely on our residential property tax base so heavily,” Commission Chairman Andy Dance said. “This commission is dedicated to working to create options to bring in that option for increasing our commercial industrial tax base and taking the reliance off of the homeowners.”
Tourism Director Amy Lukasik outlined eight possibilities at a workshop earlier this week, some of them requiring county tax subsidies, some not, some requiring approval by popular referendum, most not, and some more easy to implement than others. Commissioners were more immediately attracted to measures that could be immediately implemented, such as fast-tracking permitting. Other approaches may take longer, since they require voter approval and a more formal county structure.
Some commissioners are interested in providing wage incentives to companies that pledge to create jobs that offer wages higher than the local average, others are not: “I’m not a real fan of incentive wage grants,” Commissioner Donald O’Brien said. “I think they can get dicey with the accounting and the accountability of them from the recipients. I don’t think we had great experience with those in the past.” Nor is he a fan of partnering with a private company to build an industrial park.
He and the rest of the commission were more interested in exploring the possibility of an industrial development authority that would be positioned to offer tax-free bonds to private companies looking to expand operations locally. There was also strong interest in using interest revenue from impact fees to provide rebates on impact fee costs, and allowing expanding companies to benefit from property tax rebates over a set period of years.
Lukasik outlined the incentive possibilities as follows:
Fast-track permitting: It accelerates the planning, zoning and building permitting process with no effect on the general fund. It is taking place for affordable housing. The county wants to expand fast-tracking to other types of permits, making it available to companies expanding operations or moving to the county and proposing to add to the county’s employment base.
Property tax rebates or abatements: that incentive would reduce a company’s property taxes in the first years of expansion or operation in Flagler County. But for the county to approve that incentive, it would have to place it on the ballot for voter approval. If approved, the allowance would be in effect for 10 years. The County Commission would then have to approve each individual abatement proposal by ordinance, and limit it to five years. “It could be viewed as as a pretty heavy lift” for the 2024 ballot, Lukasik said, “because it requires a lot of education and public awareness to the community. So if the board wanted to take some time to do that sort of initiative, then we could possibly wait.”
Tangible personal property tax abatement: It’s a slight variation on the property tax incentive. An eligible company could have some of its tangible personal property tax reduced, to offset the cost of new machinery. The tax abatement would be a reimbursement by the county, after proof of purchase. That program would also have to be approved by voters in a referendum. It would apply for five years per eligible company. Each such incentive would have to be approved by the County Commission by ordinance. As with property tax rebates, tangible tax rebates would obviously reduce general fund revenue.
Wage incentive grants: The county would provide a grant of $5,000 per job, for up to 25 jobs ($125,000), for one year, to a company that would either relocate to Flagler County or expand full-time employment in Flagler County with wages set at least at 125 percent of the county’s average wage, currently $19.60 an hour, or $40,760 a year (compared to $28.93 an hour in the state, and $60,176 a year). The Flagler County incentive would require wages to be at least $25.50 an hour. There’s often been an unverified loophole with such incentives: the grant is awarded based on average wages, not median wages. Average wages are skewed by executive salaries, which artificially and deceptively push up the average wage. That issue weas not addressed at the workshop.
Recaptured enhanced value grant program, also known as the “Rev” program for short: That approach would be used instead of a tax abatement program, though it would similarly reduce general fund revenue. It would work this way: say the Acme Widget Company wanted to build a plant in Flagler. It pays $50,000 a year in property taxes in its first year. That year would be considered a “base” year. In subsequent years, as the property is built up and property taxes on the property increase, say, by $10,000 a year or more, a portion of those incremental increases would be returned to the company in the form of a grant, or what amounts to a rebate. The program would be set up in such a way that for the first five years, 75 percent of the incremental tax increase is rebated. In the next five years, 50 percent of the incremental tax increase would be paid back. The company would then pay the full amount starting at year 11.
Impact fee grant program: Impact fees are the one-time fees builders or developers pay on new construction to offset the “impact” of new residents on roads, parks, police, schools and so on. The fee is passed on to home buyers. It applies only to new construction. Local governments collect impact fees and don’t immediately use the revenue. Those fees can accumulate to the tune of several million dollars. With an impact fee grant program, a government may use the interest generated from that revenue to offset the cost of a given impact fee. In other words, interest earned from road impact fees may only be used to offset the cost of a road project. The program would not affect the general fund, since impact fees are collected and spent from accounts separate from the general fund.
Public-private partnership to develop a light industrial park: The county would buy a large tract of land, of up to 200 acres, for a light industrial park. The county would partner with a private company, a private builder, to build the infrastructure and the buildings on the land. As the buildings lease or sell, the government would recover the cost it invested in the land. That would of course affect the general revenue, since the government’s initial investment would be drawn from it. The county and local cities have considered such possibilities in the past, but with little appetite for it due to the risks and the uncertainty of leasing or selling those properties.
Industrial development revenue bonds: The bonds may be issued to a company with solid credit, with the approval of the County Commission. The tax-exempt bonds would be provided at low interest. The principal and interest would be paid entirely by the company purchasing the bonds. The commission would approve the measure by resolution. It would not affect the general fund. An industrial development authority may or may not have to be established, according to Irvin Weinstein, a bond attorney who addressed the County Commission. “There are benefits to having a separate industrial development authority, that authority develops some level of expertise in dealing with this, but if you have your own economic development people, you could handle it through the county commission,” he said. “So it’s not absolutely clear that you have to have an industrial development authority.”
Typically, non-profit hospitals or nursing homes benefit from those types of bonds, which are often bought by banks and underwritten by underwriting firms. The bonds are limited by law to $10 million, with other restrictions and timeline limits.
Mike McCabe, a former town attorney in Hastings who represents St. Johns County in various capacities, said AdventHealth, being the county’s leading employer, would be the county’s most likely “target” for an issuance of industrial revenue bonds. Unlike Weinstein, he favored setting up an authority first. “The key component is the tax exempt status that that these borrowers are looking for,” McCabe said, noting that as far as the commission would be concerned, “they are relieved from any liability or obligations associated with the debt.”
Lukasik said Palm Coast and Bunnell have shown interest in using the industrial revenue bond approach. The commission did not take any decision. “The next steps are going back on on these items and coming back with some additional clarifications or next steps to push these forward,” Dance said of the four favored approaches–fast-tracking, the “rev” program, using impact fee interest revenue as incentives, and industrial revenue bonds.economic-incentives