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Economic Development Ad Valorem Tax Exemption Referendum - FAQ's

 

 

 City of Maitland

Ad Valorem Tax Exemption Program Frequently Asked Questions

 

 

 

 

1.  What is the City of Maitland proposing?

2.  What is an ad valorem tax exemption program?

3.  What is the potential benefit of this program?

4.  How does a municipality establish an ad valorem tax exemption program?

5.  If adopted by the City of Maitland, what businesses will be able to apply for the exemption and

     how would the program work?

6.  Will all businesses that apply get the exemption?

7.  Can the exemption be applied retroactively?

8.  Are qualifying businesses exempt from paying all ad valorem taxes?
9.  Will my property taxes increase if the City of Maitland adopts this program?

10. If adopted in the City of Maitland, will the program affect school funding?

11. What are the potential drawbacks of the program?

 

View the applicable Statute F.S. 196.1995.

View the statutory definitions of "new businesses" and "expansions of existing businesses."

 

Click here for printer friendly version of the FAQ's, Statute and definitions. 

 

Click to view Orange County's Job Creation Initiative/Tax Abatement Referendum Web Page. 

 

 

 

 

1. What is the City of Maitland proposing?

 

On October 24, 2011, Maitland City Council approved placing a referendum on the January 2012 ballot allowing the City of Maitland to create an ad valorem tax exemption program for businesses within the City of Maitland. The ballot language will read as follows:

 

Shall the municipality of the City of Maitland be authorized to grant, pursuant to s. 3, Art. VII of the State Constitution, property tax exemptions to new businesses and expansions of existing businesses?

 

______ Yes – For authority to grant exemptions

______ No – Against authority to grant exemptions

 

2.  What is an ad valorem tax exemption program?

 

An ad valorem tax exemption is an incentive program that can be established under State statute and is intended to encourage new businesses to locate or existing businesses to expand and create new jobs in a county or municipality. Where established, the program authorizes the county or municipality to grant qualifying businesses an ad valorem tax exemption of up to 100% for up to 10 years.  The authority to grant exemptions under this program sunsets 10 years after the date such authority was approved in an election, but such authority may be renewed for subsequent 10-year periods if each 10-year renewal is approved in a referendum called and held pursuant to this section.

The applicable Chapter 196.1995, Florida Statutes, and the pertinent statutory definitions of new businesses and expansions of existing businesses are attached for reference.

 

3.  What is the potential benefit of this program?

 

By offering a cost saving to businesses, this program has the potential to attract private sector investment and job creation in the City that might otherwise not occur. Typically, such programs are used in conjunction with other State incentive programs such as the Qualified Target Industry program.

 

Benefit Illustration. Exemptions are based on the property tax millage rate of the jurisdiction granting the exemption and the amount of capital investment, i.e., real property, infrastructure or tangible personal property, being made by the business. Assuming the City of Maitland was authorized to implement a 50% ad valorem tax exemption to a new or expanding business located within the City, the benefit for a project including $250,000 in capital improvements would be calculated as follows:

 

$250,000 capital investment x City millage of .003880 x 50% = $485 annual City exemption.

  

4.  How does a municipality establish an ad valorem tax exemption program?

 

Florida Statutes, Chapter 196.1995, provides that this program must be established by an approved referendum among the voters within the boundaries of the municipality seeking to establish the tax exemption. After the voters approve the referendum, the actual program is created through a public hearing process, with specifics such as the application process, the types of companies that qualify, the required qualified jobs and capital investment, and the amount and term of the incentive addressed at that time. The program would conform to the substantial requirements of Florida Statutes, Chapter 196.1995.

 

5.  If adopted by the City of Maitland, what businesses will be able to apply for the exemption and how would the program work?

 

Under Florida Statutes, large, small, new and existing local businesses are eligible to participate. State law allows counties and municipalities to create their own eligibility criteria for ad valorem tax exemption. For example, a county or municipality might choose to offer the exemption only to companies establishing a new business creating no less than 20 jobs within a designated Brownfield. The tax exemption can extend for up to ten (10) years.

 

If approved by the voters of the City of Maitland, Maitland City Council and the Administration would craft and adopt comprehensive program guidelines through a public hearing process.

 

6.  Will all businesses that apply get the exemption?


Not all businesses that apply will get the exemption. They must meet the eligibility requirements as an “expanding existing business” or as a “new business.” In addition, the exemption is non-transferable.


7.  Can the exemption be applied retroactively?


No. The exemption applies only to new construction and new equipment constructed or purchased after the application for the exemption has been filed.

 

8.  Are qualifying businesses exempt from paying all ad valorem taxes?

 

No. The exemption applies only to ad valorem taxes levied by the county or municipality granting the exemption. The exemption does not apply, however, to taxes levied for the payment of bonds or to taxes authorized by a vote of the electors pursuant to Section 9(b) or Section 12, Article VII of the State Constitution.

 

9.  Will my property taxes increase if the City of Maitland adopts this program?

 

The existence of this program in-and-of-itself does not increase or lessen any tax liabilities except for property owners who become exempted by ordinance under the rules of the program.

 

10.  If adopted in the City of Maitland, will the program affect public school funding?

 

No. Funding made available to Orange County Public Schools through property taxes will not be impacted if a tax exemption program is adopted.

 

11.  What are the potential drawbacks of this program?

 

Some observers contend that this type of incentive program does little to attract or encourage the expansion of small businesses. This argument is based on the fact that the value of the exemption is based on the value of new investment in buildings and equipment, which is often relatively low in a small business environment. The apparently low value of exemptions, coupled with the publicly funded costs associated with administering the program, raises questions about the overall value of the program.

 

Secondly, some observers also believe that the granting of tax exemptions to new businesses creates unfair competition with existing businesses that do not receive an exemption.

 

Finally, because the program requires public disclosure of the tax exemption request, potential applicants may be discouraged from applying.

 

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FLORIDA STATUTES (2011)

Definitions

196.012(15) “New business” means:

(a)1. A business or organization establishing 10 or more new jobs to employ 10 or more full-time employees in this state, paying an average wage for such new jobs that is above the average wage in the area, which principally engages in any one or more of the following operations:

a. Manufactures, processes, compounds, fabricates, or produces for sale items of tangible personal property at a fixed location and which comprises an industrial or manufacturing plant; or

b. Is a target industry business as defined in 2s. 288.106(2)(t);

2. A business or organization establishing 25 or more new jobs to employ 25 or more full-time employees in this state, the sales factor of which, as defined by s. 220.15(5), for the facility with respect to which it requests an economic development ad valorem tax exemption is less than 0.50 for each year the exemption is claimed; or

3. An office space in this state owned and used by a business or organization newly domiciled in this state; provided such office space houses 50 or more full-time employees of such business or organization; provided that such business or organization office first begins operation on a site clearly separate from any other commercial or industrial operation owned by the same business or organization.

(b)Any business or organization located in an enterprise zone or brownfield area that first begins operation on a site clearly separate from any other commercial or industrial operation owned by the same business or organization.

(c)A business or organization that is situated on property annexed into a municipality and that, at the time of the annexation, is receiving an economic development ad valorem tax exemption from the county under s. 196.1995.

196.012(16) “Expansion of an existing business” means:

(a)1.A business or organization establishing 10 or more new jobs to employ 10 or more full-time employees in this state, paying an average wage for such new jobs that is above the average wage in the area, which principally engages in any of the operations referred to in subparagraph (15)(a)1.; or

2.A business or organization establishing 25 or more new jobs to employ 25 or more full-time employees in this state, the sales factor of which, as defined by s. 220.15(5), for the facility with respect to which it requests an economic development ad valorem tax exemption is less than 0.50 for each year the exemption is claimed; provided that such business increases operations on a site located within the same county, municipality, or both colocated with a commercial or industrial operation owned by the same business or organization under common control with the same business or organization, resulting in a net increase in employment of not less than 10 percent or an increase in productive output or sales of not less than 10 percent.

(b)Any business or organization located in an enterprise zone or brownfield area that increases operations on a site located within the same zone or area colocated with a commercial or industrial operation owned by the same business or organization under common control with the same business or organization.

 

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