Wednesday, May 20, 2009
Tuesday, September 9, 2008
Main Street Commons - Proposed Building
The City and the Devonshire Group are requesting School District 150 to rejoin the Enterprise Zone. The Enterprise Zone is a valuable Economic Development tool that provides incentives for developers to invest in certain types of development in selected areas of the City.
Devonshire hopes to build a 5 story new urban building on Main Street on the site of the abandoned Walgreens building. There would be retail facing the street on the first floor, and residential above the retail.
Taxing bodies join the Enterprise Zone and provide a five year abatement for the additional property tax paid by new development. The reason they participate is that they believe this incentive will get more developers to invest in the older parts of the city, and that they would not invest here but for the incentive.
All the taxing bodies in the Heart of Peoria participate except District 150. The State of Illinois picks up the cost of the Enterprise Zone incentives for school districts with high poverty. District 150 qualifies.
So, it does not cost the District to join the Enterprise Zone, although there is a time delay in getting the money. The taxes are very low on the closed Walgreens. If this development goes through, taxes will be much higher. District 150 gets the increase soon.
It takes five years for the rest of the taxing bodies to get the increase. The question is, should we do nothing? That is the safest thing to do. But it is also the wrong thing to do. By helping this development go through we get an increase in numbers of people living in the Heart of Peoria, increases in property, sales, and utility taxes, and another step in revitalizing the Heart of Peoria.
WMBD/WYZZ TV did a good job explaining this issue.
Taxes Received by District 150 over the next four years
Development proceeds $850,809
Doesn't proceed $78,840
* Projections have increased. The original plan just replaced the old Walgreen's. The newer plan brings in a number of additional properties. The cost of the project increased from $10,000,000 to an estimated $24,000,000, with a resulting increase in projected taxes.
Taxing bodies join the Enterprise Zone and provide a five year abatement for the additional property tax paid by new development (Only 4 years is left in our Enterprise Zone unless the State reauthorizes Enterprise Zones Statewide).
The reason they participate is that they believe this incentive will get more developers to invest in the older parts of the city, and that they would not invest here but for the incentive.
All the taxing bodies in the Heart of Peoria participate except District 150. The State of Illinois picks up the cost of the Enterprise Zone incentives for school districts with high poverty. District 150 qualifies.
It does not cost the District to join the Enterprise Zone, although there is a time delay in getting the money. The taxes are very low on the closed the empty Building and adjacent property. If this development goes through, taxes will be much higher. District 150 gets the increase soon.
It takes five years for the rest of the taxing bodies to get the increase. The question is, should we do nothing? That is the safest thing to do. But I believe that it is the wrong thing to do. By helping this development go through we get an increase in numbers of people living in the Heart of Peoria, increases in property, sales, and utility taxes, and another step in revitalizing the Heart of Peoria.
__________________
Question and Answers:
Question - Why do the developers need the EZ incentive (with D150 involvement, to boot) to develop the property on Main Street?
Answer - Any development is risky. The safest developments are on undeveloped land (green grass sites). It is easier to buy a large tract of land. Less likely to have costly environmental problems hidden underground. Urban redevelopment is always more difficult. It is harder to assemble the land - usually multiple owners. Older areas have more poverty and crime.
I think you can see that this is true by comparing the level of development in the suburban areas of Peoria versus the older areas. More development takes place in new areas. It is always a struggle to get investment in older areas. We try to equalize the difference between new and old with incentives.
Question - The reason I ask is:
(1) Their spokesman is reported to have said that there’s such a big market for college housing that they will be full virtually overnight; why would such a surefire business plan need additional incentive?
There is a good market. We hired the premier market research firm, Tracy Cross, to assess the market for new close into downtown housing. They said the market was strong, for creative class young professionals, but that renters lead the urban renaissance, and that the rents had to be about $1.00 a square foot. It is hard to build a quality brick building that will rent for that rate without incentives.
Peoria Housing Market Research Study
http://marketresearchpeoria.blogspot.com
(2) Since their market is Bradley students, they pretty much have to develop near Bradley—it’s not like other projects where the developer can threaten to move to a greenfield site or across the river.
True. But they are not limiting their clientel to students. They rely on par on the Market Research, which says keep the rents at $1.00 per foot.
Part of the effort of getting developers to come to the Heart of Peoria is to show them that they can get developments approved with incentives without getting beat up by the media and angry citizens. Lots of developers won't put up with the aggravation, and simply take a pass on redeveloping older areas.
(3) They didn’t need EZ or TIF status in Champaign when they developed the Jacobs’ Landing subdivision; it sounds like this Peoria project would have a quicker ROI than that.
I don't know their project in Champaign, but it appears to me that there is a great deal of successful redevelopment downtown near the University. The U of I is an incredible large economic engine, with lots of well paid professors, staff, and some affluent students. I don't know if they are using a lot of incentives there.
But I do know that most successful older central cities that have successfully redeveloped used a lot of incentives. Certainly Chicago and St Louis did. And most older cities like Elgin and Aurora use incentives to help their older neighborhoods redevelop. They don't have to help their suburban areas, which are growing very rapidly.
I recognize how complicated all this. The newspaper article did not explain how District 150 gets all the revenue back from the State.
I think that older cities that don't use a lot of incentives to help redevelop their core end up in pretty bad shape.
Question - But what is the limit of these incentives? We can’t just give them to every developer that comes to town, can we? Or is that the plan? Why not just declare the whole city (the older part, at least) an Enterprise Zone or TIF?
To me, it’s just like taking on debt. Existing taxpayers are picking up the tab for these developers for 5 (EZ) or 23 (TIF) or however many years in the hopes that we’ll see a profit when the EZ/TIF incentives expire.
Answer - No, we can't give incentives everywhere. If you take a look at the Enterprise Zone and TIF maps on my blog at http://peoria.blog.com/ you will see that a fairly small part of the entire city is in a TIF or Enterprise Zone. And not all development is incented. The Enterprise Zone spells out what types of development get incentives. Most residential and commercial development do not get property tax abatement, for example.
Question - Wouldn’t a better incentive be to fix up our streets and sidewalks and streetlights; reduce crime through good town planning, code enforcement, and police intervention; and improving our school system? It seems like we’re throwing money at these developers to get them to locate in places that are not profitable instead of working on the root issue—creating places that people want to live and work so that it will be profitable to invest there. Does that make sense?
Answer - We have to take care of basic services. That is common sense, good government, and good economic development. But we also have to bring investment back into the central city.
Some parts of the city have been in decline for 40 years or more. Some cities write off those neighborhoods. But that is not responsible thinking. We can and will redevelop our inner city neighborhoods. And you have to have private sector investment to do that. And to get that investment, you have to equalize the differential between inner city sites and green grass sites. You have to have incentives.
Question – The property tax estimates are higher now then before.
Answer - Initial estimates of the development were for a $10 million dollar building. The development has gotten larger, and is now estimated at $24 million. That is good news. It substantially increases taxes over time.
The taxes that District 150 will get over the next four years if the development does not proceed is much lower then if the development goes forward.In year 6, all the other taxing bodies get an increase. Sounds like a good thing to me.
_________
The Peoria Journal Star wrote an editorial opposing District 150 joining the Enterprise Zone. Rule number 1 in local government is don't get in fights with people who buy ink by the barrel, so I won't, but I will once again point out that tax revenues for District 150 go up substantially if the development goes through. They stay low if if doesn't.
The City of Peoria Enterprise Zone provides a number of incentives to encourage industrial and commercial development. The most important incentive is that sales tax is not paid on building material purchased for an industrial development in the zone. This saves the developer 8% on material, and helps to encourage redevelopment in Peoria - development that might otherwise go to "green grass" sites with lower development costs.
The one time cost to the City and State helps create a long term investment that pays property, sales, and utility taxes while creating jobs and helping revitalize the older portions of the City.
The spread sheet below shows the quick payback for a typical Enterprise Zone incentive.
http://spreadsheets.google.com/pub?key=pSt1ivzaCLuN_Qgx9RdE2HQ
The one time cost to the City and State helps create a long term investment that pays property, sales, and utility taxes while creating jobs and helping revitalize the older portions of the City.
The spread sheet below shows the quick payback for a typical Enterprise Zone incentive.
http://spreadsheets.google.com/pub?key=pSt1ivzaCLuN_Qgx9RdE2HQ
Monday, January 28, 2008
Enterprise Zone
The Enterprise Zone is a valuable tool for economic development in the City of Peoria. This zone covers redevelopment and selected industrial and commercial areas of the City. Provided the owner fills out the correct paperwork, there is no sales tax on building material, and can receive a 5 year property tax abatement for certain types of development. Please review the Questions and Answer section of the Enterprise Zone. Give Rachael Parker at 309 494 8640 a call for more information.
Click on maps on the city web site, or www.peoriadevelopment.com.
Click here for PDF easy Printing
Enterprise Zone Web page http://www.ieza.org/
Click on maps on the city web site, or www.peoriadevelopment.com.
Click here for PDF easy Printing
Enterprise Zone Web page http://www.ieza.org/
Firefly Uses Peoria Enterprise Zone
Firefly is a great new Peoria company that recently purchased their corporate headquarters in the City. The City used the incentives provided by the Enterprise Zone to help locate the company in the City. Firefly has some great new battery technology that help them grow, and provide quality jobs for our residents.
PEORIA ENTERPRISE ZONE
The Illinois Enterprise Zone Act took effect December 7, 1982. An Enterprise Zone is a specific area designated by the State of Illinois, in cooperation with a local government, to receive various tax incentives and other benefits to stimulate economic activity and neighborhood revitalization.
Both State and local incentives are available in an Enterprise Zone. Enterprise Zones are administered at the State level by the Illinois Department of Commerce and Economic Opportunity. In Peoria, it is administered by the City of Peoria Department of Economic Development (Enterprise Zone Administrator).
The Peoria Enterprise Zone will expire on December 31, 2013. Peoria’s Enterprise Zone encompasses 7.21 square miles out of a total of 12 square miles and was certified on July 1, 1983. The Zone, which originally included industrial properties adjacent to the Illinois River, was expanded to include Pioneer Park, Mt. Hawley Park, the West Main Street Corridor, Knoxville corridor and several parcels in the Targeted Growth Area.
Tax incentives and direct financial assistance can be provided to firms locating or expanding in the Zone. The Zone’s primary objective is to encourage economic development and to increase employment opportunities.
On page two of this document you will find the application for both an Enterprise Zone Project and the building materials sales tax exemption. If your project is located within Peoria’s Enterprise Zone please complete the application and return to the Department of Economic Development at City Hall (complete address is located at the bottom of the application).
The following summarizes the most often asked questions on incentives offered for both the Illinois Enterprise Zone Program in general and the Peoria Enterprise Zone Program in particular.
Topic Page
Enterprise Zone Application ......................................................2
Enterprise Zone Financing Program .........................................3
Property Tax Abatement ............................................................4
NAICS Codes ................................................................................5
Building Materials Sales Tax Exemption ................................. 7
Investment Tax Credits ............................................................. 8
Job Tax Credits ........................................................................... 9
Illinois Income Tax Deductions ............................................... 10
Industrial Revenue Bonds ......................................................... 11
Equipment, Pollution Control, Utility Tax Exemptions ......... 12
Designated Zone Organization ................................................. 12
Sample Enterprise Zone Benefits ............................................. 13
Certification of Eligibility for Sales Tax Exemption
Enterprise Zone Project No. PEZ __________
(Peoria Enterprise Zone No. to be assigned by City Staff)
To The Building Materials Retailer: This certifies that the project below is located within Peoria’s Enterprise Zone and is eligible for exemption of the State of Illinois and the local sales taxes on building materials associated with rehabilitation, renovation, and/or new construction for this project. The Enterprise Zone designation extends until December 2013. Once the rehabilitation, renovation, and/or new construction is complete and all building materials required for a project have been acquired, the owner and/or the general contractor is no longer eligible for the reduction for that project. Any new project on the same site/premises will require a separate certification by the Zone Administrator.
Please retain a copy of this certification for your records.
Name of Project:___________________________ Tax Identification No:
Street Address:
Owner’s Name:___________________________________ Phone No.:
Owner’s Address:
Contractor’s Name:___________________________________ Phone
No.: Estimated Date of Completion: Cost to Purchase Site: Estimated Cost of
Capital Equipment: # of Jobs Retained Due to Project: Current # of Employees:
FTE Jobs Created:
(Take total hours worked by full & part-time employees & divide by 40.)
(Take total hours worked by full & part-time employees & divide by 40.)
PROJECT TYPE (check one):
Retail Commercial _____
Service Commercial _____
Industrial ESTIMATED VALUE OF CONSTRUCTION (per Contractor’s bid):
Please attach a list of building materials and estimated quantities to be acquired:$_____________________ Purchase
Date:____________________
The undersigned purchaser hereby declares that the building materials herein purchased will be physically incorporated as real property exclusively into real estate located within the City of Peoria Enterprise Zone.
Owner’s Signature or Authorized Representative Relationship of Authorized Representative to Owner
Employer’s Federal Identification Number Unemployment Insurance Number
Owner’s Name (Print or Type) Date
Building Permit No. Plumbing Permit No. Electrical Permit No.
Building Permit Value & Date Plumbing Permit Value & Date Electrical Permit
Value & Date
$__________ $__________ $__________
Heating Permit No.
Heating Permit Value & Date
Heating Permit No.
Heating Permit Value & Date
$__________
The building project identified in this Certification meets all the requirements for the building material exemption contained in the Peoria Enterprise Zone ordinance.
The building project identified in this Certification meets all the requirements for the building material exemption contained in the Peoria Enterprise Zone ordinance.
Zone Administrator: _______________________________________Date:
The Zone Administrator shall provide the general contractor or project manager with one signed copy.
The Zone Administrator shall provide the general contractor or project manager with one signed copy.
2
ENTERPRISE ZONE INCENTIVES QUESTIONS AND ANSWERS
Enterprise Zone Financing Program
To promote economic development within the Illinois Enterprise Zones, the Illinois Department of Commerce and Economic Opportunity (DCEO) developed the Enterprise Zone Financing Program. This financing mechanism is designed to encourage businesses to locate within an Illinois Enterprise Zone.
Q. Can any financial institution participate in the Enterprise Zone Financing Program?
A. Yes. However, participating financial institutions must enter into a Master Participation Agreement which outlines all terms and conditions of any loan participation between the financial institution and DCEO.
A. Yes. However, participating financial institutions must enter into a Master Participation Agreement which outlines all terms and conditions of any loan participation between the financial institution and DCEO.
Q. What is the maximum and minimum amount of a loan?
A. DCEO may participate in an eligible loan for no less than $10,000, nor more than $750,000 based on the number of new full-time jobs created at $10,000 per job. DCEO's participation cannot exceed 25% of the total project, and may/may not be subordinate depending on the other financing entities involved in the project.
A. DCEO may participate in an eligible loan for no less than $10,000, nor more than $750,000 based on the number of new full-time jobs created at $10,000 per job. DCEO's participation cannot exceed 25% of the total project, and may/may not be subordinate depending on the other financing entities involved in the project.
Q. Who is eligible for the program?
A. Eligible businesses include any for profit entity with less than 500 employees (or not dominant in its field) locating in an Illinois Enterprise Zone. Funds may not be used for: (1) debt refinancing; (2) passive real estate investment; and (3) wholesale or manufacture of liquor, tobacco products, sexually explicit materials and firearms (includes retail sales).
A. Eligible businesses include any for profit entity with less than 500 employees (or not dominant in its field) locating in an Illinois Enterprise Zone. Funds may not be used for: (1) debt refinancing; (2) passive real estate investment; and (3) wholesale or manufacture of liquor, tobacco products, sexually explicit materials and firearms (includes retail sales).
Q. What is the rate for the Financing Program?
A. DCEO’s rate (either fixed or variable depending on the participating financial institution) will be determined at the time of approval at a comparable T-Bill Rate plus 0 to 2%, but in no event shall DECO’s rate be less than three (3) percent.
Q. What are the terms of the Financing Program?
A. DCEO’s term shall match that of the participating bank, but in no event shall DCEO funds be amortized longer than ten years unless there is a balloon payment provision, at which time DCEO will cease to be a participant.
Q. Who verifies that the business project is eligible?
A. The local Enterprise Zone Administrators must verify that the business project is located in the Enterprise Zone for the business to be eligible for the incentive rate financing under this program.
Property Tax Abatement
Q. Where exactly is the Enterprise Zone and how do I know if a site is in it?
A. A map is available on the Economic Development portion of the City’s website at www.ci.peoria.il.us. For specific parcel information, contact the City of Peoria, Department of Economic Development, at 309/494-8640.
Q. What is the Enterprise Zone Property Tax Abatement?
A. The Illinois Enterprise Zone Act allows taxing districts to direct the County Clerk to abate a portion of its taxes on real estate property improvements occurring within the Zone. Property Tax Abatement applies only to property improvements; in Peoria this is tied to North American Industry Classification System (NAICS) codes and additional investment in the Enterprise Zone.
Q. Can taxes be abated on existing improvements?
A. No. Property taxes are abated only on the assessed value attributed to new improvements or substantial rehabilitation of existing property. Property taxes are not abated on the value of real estate prior to new construction, renovation or rehabilitation.
Q. How much of my property taxes will be abated?
A. Not all taxing authorities abate property taxes in the Enterprise Zone. The following chart outlines the taxing authorities that participate in the tax abatement:
District % Abated Thru (year) City of Peoria 100 2013 Town of Peoria 100 2013
G.P Airport 100 2013
G.P. Mass Transit 100 2013
I.C.C. 100 2013 Peoria County 100 2013 Peoria Library 100 2013 Peoria Park District 100 2013
The following do not participate in the tax abatement program: School District #150; and School District #323.
Property tax rate for the three previous years: For School District # 150
2004
2005
2006
Full Rate$8.1415
Rate with Abatement $6.8359
Full Rate$8.3365
Rate with Abatement $7.04715
Full Rate$8.3589
Rate with Abatement $4.4846
Note: Property tax rates per $100 assessed valuation. Valuation is 33.3% of the real property.
4
Property tax rate for the three previous years: For school District # 323
2004
2005
2006
Full Rate$7.8225
Rate with Abatement $6.5169
Full Rate$7.9053
Rate with Abatement $6.61595
Full Rate$7.9387
Rate with Abatement 4.0644
Note: Property tax rates per $100 assessed valuation. Valuation is 33.3% of the real property.
Q. Are all properties in the Enterprise Zone eligible for property tax abatement?
A. No. Only non-residential properties falling within the following North American Industry Classification System (NAICS) Codes are eligible for property tax abatement:
NAICS Codes
Manufacturing 311 Food and Kindred Products 313 Textile Mill Products 315 Apparel and Other Textile Products 321 Lumber and Wood Products 337 Furniture and Fixtures 322 Paper and Allied Products 323 Printing and Publishing 325 Chemicals and Allied Products 324 Petroleum and Coal Products 326 Rubber and Miscellaneous Plastics
Products 316 Leather and Leather Products 327 Stone, Clay and Glass Products 331 Primary Metal Industries 332 Fabricated Metal products 333 Machinery, Except Electrical 335 Electric and Electronic Equipment 336 Transportation Equipment 334 Instruments and Related Products 339 Miscellaneous Manufacturing Industries
Transportation and Public Utilities 484 Trucking and Warehousing 483 Water Transportation 481 Transportation by Air 492 Communication
Wholesale Trade 421 Wholesale Trade--Durable Goods 422 Wholesale Trade--Nondurable Goods
Information
Finance, Insurance, and Real Estate 521 Banking 522 Credit Agencies Other Than Banks 523 Security, Commodity Brokers and
Services 524 Insurance Carriers 524 Insurance Agents, Brokers & Services
Real Estate 525 Combined Real Estate, Insurance, Etc. 551 Holding and Other Investment Offices
Professional, Scientific and Technical Services 54
Healthcare and Social Assistance 62 (see note below for exception)
Services 721 Hotels and Other Lodging Places 541 Business Services
Social Services 62431 Job Training and Vocational Rehabilitation Services 62441 Child Day Care Services
Engineering, Accounting, Research, Management and Related Services 541 Engineering, Architectural and Surveying Services 54172 Research, Development and Testing Services
Mixed use development (no NAICS Code) **
Note: #62 only eligible within the boundaries of Renaissance Park. For more information on the boundaries of Renaissance Park call the Department of Economic Development at (309) 494-8640
** Property tax abatement for mixed use is available only within the Heart of Peoria. Mixed use is defined as buildings of at least two stories that incorporate residential uses and where at least 20% of the useable floor space will be devoted to commercial, office, or industrial use. Call the Department of Economic Development at (309) 494-8640 for information on boundaries of the Heart of Peoria.
Q. What happens if the property has both qualifying and non-qualifying NAICS Code usage due to, for example, multiple occupants?
A. In the case of multiple use property, property tax abatement will be available on a proportional basis for leasable square footage.
Q. What if a portion of the property is unoccupied on January 1st?
A. Unoccupied property is treated as a non-qualifying NAICS use for purposes of the tax abatement program.
Q. Is the property always reassessed following the construction of new improvements or rehabilitation and/or renovation of existing improvements?
A. Yes. Any time property is improved it must be reassessed.
Q. Can property tax abatement be used in a Tax Increment Financing District?
A. No. Property tax abatements are not offered in a Tax Increment Financing (TIF) District. Properties in the TIF Districts are, however, included in the legal description of the Zone and are eligible to receive other Enterprise Zone benefits. Property tax abatement must be excluded from the TIF Districts because the tax on improvements in the TIF Districts is the mechanism by which public improvements for the Districts are provided. For example, the Southtown and Downtown TIF Districts receive the other Enterprise Zone benefits, but not tax abatement.
Q. How do I apply for tax abatement?
A. An application must be filed with the Zone Administrator (City Of Peoria, Department of Economic Development) by December 1st in order for the project to be eligible for tax abatement the following year. Example: If the abatement form is turned in December 1, 2006, the abatement may begin for 2006 taxes payable 2007.
Q. When will the company first experience the benefits of tax abatement?
A. Tax abatement for a given year will impact the taxes for that year which, under Illinois law, are actually payable the following year. For example, an application received by December 1, 2006 will first affect the 2006 tax bill which is payable in 2007.
Q. What will happen if a company fails to meet the December 1st deadline?
A. The company may lose one year of tax abatement.
(Contact the Department of Economic Development at (309) 494-8640 for more information on receiving property tax abatement.)
Building Materials Sales Tax Exemption
Q. What is the sales tax exemption?
A. Sales tax will be waived on building materials purchased within the State of Illinois for use in properties located in the Enterprise Zone, provided a building permit has been issued and a Certificate of Eligibility has been obtained from the City of Peoria Department of Economic Development. Building materials can be used for remodeling, rehabilitation or new construction.
Q. Who is eligible to offer sales tax exemption?
A. Any retailer whose place of business is located within the State of Illinois is eligible to offer the sales tax exemption for building materials.
Q. How much of the sales tax is waived?
A. 100% of the 8.0% sales tax is waived.
Q. For the purpose of determining the exemption, what qualifies as "Building Material?"
A. Building materials are considered to be any items permanently affixed to real property.
For example, wall-to-wall carpet that is glued and permanently incorporated is allowable since it is permanently installed, but an area rug is not since it is not a permanent addition to the property. Other examples of building materials are lumber, windows, HVAC equipment, roofing materials, concrete, and elevators.
Q. What is the procedure for exempting sales tax on building materials?
A. Sales tax exemptions by qualified retailers to qualified buyers are made at the point of sale. The procedure is similar to any other non-taxable transaction. The retailer deducts the amount of sales tax on the monthly sales tax return (Form RR-1-A). Retailers must maintain records to substantiate the Enterprise Zone transaction, including a copy of the invoice and a signed purchaser's statement.
Q. How does the retailer know that the purchaser is eligible to claim a sales tax exemption?
A. The purchaser must present a Certificate of Exemption signed by the Enterprise Zone Administrator. These forms are available in the Department of Economic Development located in City Hall, Room 403. Photocopies of the Certificate of Exemption are acceptable to the vendors.
Investment Tax Credit
Q. What is the Enterprise Zone Investment Tax Credit?
A. Illinois law allows a 0.5% credit against regular State income tax for the value of investments (excluding land) in qualified property that is placed in service in the Enterprise Zone. The Enterprise Zone investment tax credit is in addition to two existing investment tax credits:
1. 0.5% credit against personal property replacement income tax;
2. 0.5% credit against replacement tax allowed if employment has increased by at least 1% over the preceding year.
Q. What is qualified property?
A. "Qualified property" is that which meets the following criteria:
- is tangible, whether new or used, including buildings and structural components of buildings;
- is acquired by purchase;
- is depreciable, except in the case of property assigned to a three-year federal accelerated cost recovery class which disqualifies the property; and
- has not been previously used in such a manner and by the person or company that qualifies for the credit.
Q. What does "place in service" mean?
A. Qualified property is "placed in service" upon the earlier of the following dates:
- the date the property is in a condition of readiness and availability for its designated use and a Certificate of Occupancy has been issued by the City of Peoria, or
- the date on which the cost recovery period on the property begins.
Q. When must the qualified property be placed in service in order to take advantage of the credit?
A. Qualified property must be placed in service in the Enterprise Zone after July 1, 1983, and on or before the last day of the business's taxable year. The tax credit is allowed for the year in which the property is placed in service. If, however, the amount of the credit exceeds the tax liability for that year, the excess may be carried forward and applied to the tax liability of the five taxable years following the excess credit year.
Job Tax Credits
Q. What is the Job Tax Credit?
A. An employer who conducts business in the Peoria Enterprise Zone is allowed a credit against Illinois income taxes of $500 per eligible employee hired to work in the Zone during the taxable year. The credit is available for eligible employees hired on or after January 1, 1986. Any portion of the credit unused in the first taxing year may be carried forward five years. The credit must be applied to the earliest year for which there is a tax liability.
Q. How do employers qualify for the credit?
A. To qualify for the credit:
- the employer must hire a minimum of five eligible employees during the taxable year;
- the employer's total employment within the Zone must increase by five or more full-time employees beyond the employer's total employment in the Zone at the end of previous tax years for which a credit was taken or beyond the total employment as of December 31, 1985, whichever is later.
Q. How do individuals qualify as eligible employees?
A. The employee must be:
- either certified as a dislocated worker by a dislocated worker center or a local agency administering federal Workforce Investment Act (WIA) Funds, or economically disadvantaged, or a recipient of Public Aid benefits or food stamps;
- employed in the Enterprise Zone (i.e., the Zone employee's place of employment or the base of operations for services performed);
- employed at least 180 consecutive days for 30 or more hours per week.
Q. How does the employer find individuals eligible for the job tax credit?
A. The employer should list job openings with the local WIA administrative agency, noting that the business is within the Zone and seeks to hire certified dislocated workers. For more information contact Workforce Development at 309/495-8900.
Q. What paperwork is involved with the job tax credit?
A. Eligible individuals will be issued a job tax credit certification voucher by the Department of Employment Security to present to prospective employers. When a person is hired, the employer should keep a copy of the voucher for tax records.
Illinois Income Tax Deductions
Q. What is the Dividend Subtraction incentive?
A. The Illinois Enterprise Zone Act provides that a taxpayer may deduct from taxable income an amount equal to those dividends which were paid by a corporation that conducts substantially all of its operations in an Enterprise Zone or Zones.
Q. Who is eligible to take the Dividend Subtraction Incentive?
A. Individuals, corporations, partnerships, trusts and estates are eligible to take the dividend deduction.
Q. Which dividends may be subtracted?
A. Only dividends paid on or after July 1, 1983 and on or before the last day of business's taxable year may be deducted.
Q. What is the Contribution Subtraction incentive?
A. The Illinois Enterprise Zone Act provides that Designated Zone Organizations may solicit and receive cash or in-kind corporate contributions for approved projects. A corporation may claim a State income tax deduction at double the value of the contribution to the extent that:
1. The contribution qualifies as a charitable contribution under Subsection (c) of Section 170 of the Internal Revenue Code; and
2. The Illinois Department of Commerce and Economic Opportunity approves the amount of the contribution that may be claimed as a deduction.
Q. What is the Peoria Designated Zone Organization (DZO)?
A. The DZO is a Board consisting of business people who encourage development in the Enterprise Zone and who review and develop incentives for the benefit of Enterprise Zone businesses.
Q. Who do I contact for more information?
A. The City of Peoria Department of Economic Development, at 309/494-8640 (FAX 309/494-8650).
Q. Who is eligible to take the Contribution Subtraction incentive?
A. Only corporations may claim the exemption.
Q. What is the Interest Deduction incentive?
A. Any financial institution that meets the requirements of Section 403(c) of the Illinois Income Tax Code may deduct from taxable income an amount equal to the interest received from a loan for development in an Enterprise Zone, to the extent that the loan is secured by property eligible for the Enterprise Zone investment tax credit.
Industrial Revenue Bonds
Q. What is the Industrial Revenue Bond incentive provided through the Enterprise Zone program?
A. The Illinois Development Finance Authority (IDFA) has set aside IRBs for the purposes of acquiring, developing, improving or constructing industrial projects established by businesses located or expanding within an Enterprise Zone.
Q. What requirements must a project within an Enterprise Zone meet to be eligible for Industrial Revenue Bonds through IDFA?
A. Any industrial revenue bond project must:
- involve industrial uses only;
- involve only fixed assets (land, building, capital equipment) and certain fees and charges connected directly with financing the project;
- create or retain jobs; and
- conform to certain application procedures.
Q. Are certain projects given preference for industrial revenue bond financing?
A. According to the Illinois Enterprise Zone Act, preference is given to projects which create employment for persons eligible for services under the Workforce Investment Act.
Equipment, Pollution Control, and Utility Tax Exemption
Q. What are the Machinery and Equipment Exemptions?
A. A 5% State sales tax exemption is available on repair and replacement parts for machinery and equipment used in the manufacturing or assembling of goods for wholesale, retail, or lease; equipment; manufacturing fuels; and materials or supplies for operation, repair or maintenance of the above-mentioned equipment.
Q. What is the Pollution Control Facilities Exemption?
A. A 5% State sales tax exemption is available on tangible personal property (e.g. machinery, equipment, supplies) used or consumed in the operation of pollution control facilities.
Q. Who is eligible for the pollution control facilities exemption?
A. To be eligible for the pollution control facilities exemption, a business must make an investment in the Zone that creates a minimum of 200 full-time jobs. In addition, the business must be certified by the Illinois Department of Commerce and Economic Opportunity.
Q. What is the Utility Tax Exemption?
A. A State utility tax exemption is available on gas, electricity, and the Illinois Commerce Commission .08 percent administrative charge.
Q. Who is eligible for the utility tax exemption?
A. To be eligible for the utility tax exemption, the business must be certified by the Illinois Department of Commerce and Economic Opportunity as having made an investment in the Zone that either creates a minimum of 200 full-time equivalent jobs or retains a minimum of 1,000 full-time jobs.
Q. Is my business exempt from the City's utility tax?
A. No. Businesses in the Enterprise Zone are still required to pay any City utility taxes.
SAMPLE ENTERPRISE ZONE BENEFITS
Following is an example of how the Peoria Enterprise Zone benefits can favorably influence an investment in the Zone.
Assumptions: 1. A $500,000 addition is made to an existing business in the Zone. Of this amount, $200,000 is for building materials.
2. The business is NAICS Code-eligible for property tax abatement.
3. The increase in the assessed valuation of the property is one-third of $500,000, or $165,000.
4. Ten new jobs are created, of which six are eligible for the Job Tax Credit.
Type of Benefit
Savings
8.0% Sales Tax Waiver
$ 16,000
Tax Abatement (per year for 5 years or until 2013)1
$ 2,127
Investment Tax Credit2
$ 2,500
Jobs Tax Credit
$ 3,000
TOTAL FIRST YEAR SAVINGS
$23,654.00
1 Based on 2005 payable 2006 property tax rates (School Districts not included).2 This credit is in addition to two other tax credits available throughout the State, regardless of location: a .5% investment tax credit and a .5% credit if employment is increased by one percent over the preceding year.
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