| AGENDA ITEM #: 16. DATE: 04/26/2021 |
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CITY COUNCIL ACTION REPORT
| SUBJECT: | FOREIGN TRADE ZONE POLICY |
| STAFF PRESENTER(S): | Harry Paxton, Economic Development Project Manager |
SUMMARY:
Request adoption of Proposed Foreign Trade Zone Policy
Recommendation:
ADOPT RESOLUTION NO. 2021-2154 APPROVING FOREIGN TRADE ZONE POLICY OF THE CITY OF GOODYEAR DATED APRIL 26, 2021; PROVIDING AUTHORIZATION AND DIRECTION TO TAKE ACTIONS AND EXECUTE DOCUMENTS NECESSARY TO CARRY OUT INTENT OF THE RESOLUTION; LIMITING APPLICATION OF TAX POLICY TO FUTURE FTZ SITES; AND PROVIDING FOR AN EFFECTIVE DATE. (Harry Paxton, Economic Development Project Manager)
FISCAL IMPACT:
An activated Foreign Trade Zone (FTZ) site provides a property tax benefit to qualified companies reducing the real and personal property tax assessment ratio from 18% to 5%. Property tax savings to companies are only realized after they are activated FTZ sites. This almost exclusively occurs only after the company has made significant investments increasing the property tax base on property.
BACKGROUND AND PREVIOUS ACTIONS:
7/13/09 - City Council Adopts Resolution 09-1324 supporting the formation of the Greater Maricopa Foreign Trade Zone (GMFTZ); Approves a Foreign Trade Zone application to include the Goodyear Gateway South and Palm Valley 303 sites; Adopts a Foreign Trade Zone Tax Policy; Authorizes City’s membership in the GMFTZ Advisory Board.
10/4/10 – City Council Adopts Resolution 10-1404 and 10-1405 amending the FTZ Tax Policy clarifying the circumstances under which a PILOT (i.e. Payment in Lieu of Taxes) Agreement is required and approving the Goodyear Crossings FTZ site.
12/15/2014 – City Council Adopts Resolution 14-1687 amending the FTZ Policy providing administrative approval of FTZ applications for User Driven sites for speculative buildings that met certain requirements by January 1, 2018.
4/12/2021 – Work Session to provide an overview of the proposed FTZ Policy elements and seek Council input and direction. There were no changes proposed to the policy framework that was presented during the work session. Council did request a periodic review of the policy to assess results of the program.
10/4/10 – City Council Adopts Resolution 10-1404 and 10-1405 amending the FTZ Tax Policy clarifying the circumstances under which a PILOT (i.e. Payment in Lieu of Taxes) Agreement is required and approving the Goodyear Crossings FTZ site.
12/15/2014 – City Council Adopts Resolution 14-1687 amending the FTZ Policy providing administrative approval of FTZ applications for User Driven sites for speculative buildings that met certain requirements by January 1, 2018.
4/12/2021 – Work Session to provide an overview of the proposed FTZ Policy elements and seek Council input and direction. There were no changes proposed to the policy framework that was presented during the work session. Council did request a periodic review of the policy to assess results of the program.
STAFF ANALYSIS
The Goodyear FTZ program was established to spur economic development by attracting speculative infrastructure and building development creating shovel ready sites to help attract quality employment. Since the beginning of the FTZ program it has resulted in thirteen companies that are currently operating or have announced operations within an FTZ. Total job creation within the zones is over 5,000 jobs and has attracted over $1.3 billion in capital investments. The growth of the Goodyear FTZ program has helped establish the city’s industrial sector as a thriving market for new investments with millions of square feet of industrial development under construction now or planned in the near future.
Staff proposes modifications to the City of Goodyear FTZ Policy, which includes modifications to the city’s tax policies that will result in full state and federal tax benefits available to certain activated users that meet the requirements of qualified employer. Qualified employers would be a high-wage manufacturer or an internet fulfillment center with substantial end user sales within Arizona while other activated users will receive only full federal tax benefits.
A Qualified High Wage Manufacturing Employer will be required to meets all of the following criteria:
A Qualified Internet Fulfillment Center will be required to meets all of the following criteria:
Employers/Operators of an activated FTZ site would be required to pay a Payment in Lieu of Taxes (PILOT) Fee unless the operator is a Qualified High Wage Manufacturer Employer or a Qualified Internet Fulfillment Center. The policy would require the execution of a Foreign Trade Zone Agreement prior to the Activation of any Zone Site. There would be no PILOT Fee owed during any year that the activated user meets the qualifications for a Qualified High Wage Manufacturing Employer or Qualified Internet Fulfilment Center, otherwise all users will pay a PILOT Fee.
The amount of the PILOT fee shall be the difference between the property taxes that would have been paid had a Zone Site not been activated less the amount of the property taxes owed under the reclassification resulting from the activation unless any of the taxing jurisdictions who receive property taxes have entered into a separate agreement. If a taxing jurisdiction has entered into a separate agreement regarding the payment of property taxes, the amount of the PILOT Fee shall be the difference between the property taxes that would have been paid had the property not been an activated Zone Site, excluding the amount of taxes attributable to the taxing jurisdiction with the separate agreement, less the amount of the property taxes owed under the reclassification resulting from the activation of the Zone Site, excluding the amount of taxes attributable to the taxing jurisdiction with the separate agreement.
The City will distribute to taxing jurisdictions the portion of the PILOT Fee applicable to each of the taxing jurisdictions. The applicant who is seeking to include property as a Zone Site would be responsible for obtaining all letters of support from other taxing jurisdictions whose support is required.
By approving and adopting Resolution 2021-2154, the Council is approving and adopting the Foreign Trade Zone Policy of the City of Goodyear Dated April 26, 2021 (the “FTZ Policy”). The 2021 FTZ Policy shall not apply to zone sites that are included within boundaries of the FTZ No. 277 Western Maricopa County as of April 26, 2021, the date this Resolution is approved. Zone sites that have been included within the boundaries of the FTZ No. 277 Western Maricopa County before April 26, 2021 are subject to the Foreign Trade Zone Policy of the City of Goodyear Dated December 15, 2014.
At the request of Council, staff will provide Council with periodic reviews of the policy to assess results of the program. The first review will be provided by June 1, 2024 and will be provided no less than every three years.
ATTACHMENTS:
Staff proposes modifications to the City of Goodyear FTZ Policy, which includes modifications to the city’s tax policies that will result in full state and federal tax benefits available to certain activated users that meet the requirements of qualified employer. Qualified employers would be a high-wage manufacturer or an internet fulfillment center with substantial end user sales within Arizona while other activated users will receive only full federal tax benefits.
A Qualified High Wage Manufacturing Employer will be required to meets all of the following criteria:
- The manufacturing facility is located within an I-1 zoning district or it is located within a zoning district other than I-1, but the actual use is a permitted use under the I-1 zoning district.
- Employer/Operator provides documentation demonstrating a Capital Expenditure of at least $25,000,000.
- Continuously employs at least 100 Full-Time Employees.
- At least 51% of the operator’s Full-Time Employees are paid at least 125% of the median annual wage computed annually by the Arizona Department of Commerce.
- All Full-Time Employees are offered health insurance for which the employer pays at least 65% of the premium or membership costs of such insurance.
A Qualified Internet Fulfillment Center will be required to meets all of the following criteria:
- Employer/Operator provides documentation demonstrating a Capital Expenditure of at least $25,000,000.
- The internet fulfillment center generates a minimum of $25,000,000 of end user sales in Arizona on an annual basis that is sourced from a facility in Goodyear resulting in the transaction privilege tax of 2.5% to be paid to the City of Goodyear for each occurrence.
Employers/Operators of an activated FTZ site would be required to pay a Payment in Lieu of Taxes (PILOT) Fee unless the operator is a Qualified High Wage Manufacturer Employer or a Qualified Internet Fulfillment Center. The policy would require the execution of a Foreign Trade Zone Agreement prior to the Activation of any Zone Site. There would be no PILOT Fee owed during any year that the activated user meets the qualifications for a Qualified High Wage Manufacturing Employer or Qualified Internet Fulfilment Center, otherwise all users will pay a PILOT Fee.
The amount of the PILOT fee shall be the difference between the property taxes that would have been paid had a Zone Site not been activated less the amount of the property taxes owed under the reclassification resulting from the activation unless any of the taxing jurisdictions who receive property taxes have entered into a separate agreement. If a taxing jurisdiction has entered into a separate agreement regarding the payment of property taxes, the amount of the PILOT Fee shall be the difference between the property taxes that would have been paid had the property not been an activated Zone Site, excluding the amount of taxes attributable to the taxing jurisdiction with the separate agreement, less the amount of the property taxes owed under the reclassification resulting from the activation of the Zone Site, excluding the amount of taxes attributable to the taxing jurisdiction with the separate agreement.
The City will distribute to taxing jurisdictions the portion of the PILOT Fee applicable to each of the taxing jurisdictions. The applicant who is seeking to include property as a Zone Site would be responsible for obtaining all letters of support from other taxing jurisdictions whose support is required.
By approving and adopting Resolution 2021-2154, the Council is approving and adopting the Foreign Trade Zone Policy of the City of Goodyear Dated April 26, 2021 (the “FTZ Policy”). The 2021 FTZ Policy shall not apply to zone sites that are included within boundaries of the FTZ No. 277 Western Maricopa County as of April 26, 2021, the date this Resolution is approved. Zone sites that have been included within the boundaries of the FTZ No. 277 Western Maricopa County before April 26, 2021 are subject to the Foreign Trade Zone Policy of the City of Goodyear Dated December 15, 2014.
At the request of Council, staff will provide Council with periodic reviews of the policy to assess results of the program. The first review will be provided by June 1, 2024 and will be provided no less than every three years.
ATTACHMENTS:
- Resolution 2021-2154
- Exhibit I to Resolution – Foreign Trade Zone Policy of the City of Goodyear Dated April 26, 2021