December 28, 2011
URBAN JOBS PROGRAM
By: John Rappa, Chief Analyst
You asked us to summarize the Urban Jobs Program.
The Urban Jobs Program provides tax incentives to businesses that acquire or develop facilities in the 17 municipalities with enterprise zones (i.e., targeted investment communities (TICs)). The incentives are state-reimbursed property tax exemptions and corporation business tax credits. The incentive amounts vary depending on whether a business intends to use the facility as a “manufacturing facility” or a “service facility.” The facility can be located anywhere in the TIC except the enterprise zone, where other incentives are available.
PA 11-140 expanded the range of uses that qualify a facility as a service facility. These include uses associated with any economic-based business or a business in a Department of Economic and Community Development (DECD)-designated cluster. Because both groups include manufacturers, it appears that manufacturing facilities qualify for the manufacturing or service facility incentives.
A business can access either incentive by applying to the DECD commissioner for an eligibility certificate. In doing so, it must show, among other things, that the prospect of receiving the incentive induced it to acquire or develop the facility.
GEOGRAPHICALLY TARGETED ECONOMIC DEVELOPMENT
The “Urban Jobs Program” is the popular name for an economic development program that, like the Enterprise Zone Program, targets business tax incentives to specific geographic areas and business sectors. The programs' geographic targeting requirements are interconnected—the urban jobs incentives are available anywhere in the 17 TICs except in the enterprise zones, which are relatively small areas covering no more than two contiguous census tracts. Table 1 lists the TICs.
Table 1: Targeted Investment Communities
Like the enterprise zone tax incentives, the urban jobs incentives are for acquiring or developing facilities for specific uses. As Table 2 shows, the law distinguishes between two types of facilities housing overlapping uses. The first category consists of those housing manufacturing and related uses and warehouse and distribution (i.e., “manufacturing facilities”). The second category consists of facilities housing a diverse range of business uses, including many manufacturing uses (i.e., “service facilities”).
Table 2: Eligible Facility Uses under the Urban Jobs Program
(CGS § 32-9p, as amended by PA 11-140)
● Manufacturing, processing, or assembling raw materials, parts, or manufactured products
● Manufacturing-related research and development facilities
● Significantly servicing, overhauling, or rebuilding machinery and equipment for industrial use
● Warehousing and distribution
Economic-based Business—creates or retain jobs, exports most of its goods and services out of the state, encourages innovation, or benefits the state's economy
Cluster business—a business that belongs to the following DECD-designated industry groups:
● Aerospace components, Manufacturing
● Insurance and financial services
● Metal manufacturing
● Plastics and plastics manufacturing
● Software and information technology
Specified Types of Business:
● Line-haul railroads and short line railroads
● Software publishers
● Motion pictures and video production
● Teleproduction and other post-production services
● Colleges, universities, and professional schools
● Business and secretarial schools
● Computer training
● Professional and management development training
● Apprenticeship training
● Other technical and trade schools
● Educational support services
● Depository institutions
● Non depository credit institutions
● Insurance carriers
● Holding and other investment offices
● Business services
● Health services
● Hunting, fishing, and trapping
● Motor freight transportation and warehousing
● Water transportation
● Transportation services
● Securities and commodities brokers
● Exchanges and services
● Management and related services
● Establishments, auxiliaries and operating units of the above
● Providing goods and services for computer hardware and software, computer networking, telecommunications, or communications
Property Tax Exemptions
As Table 3 shows, the Urban Jobs Program provides a five-year, flat-rate 80% property tax exemption for manufacturing facilities and a five-year, sliding scale exemption for service facilities based on the amount a business invests to acquire or develop the facility. The amounts range from 40% for investing between $20 million to $39 million to 90% for investing over $90 million.
Table 3: Urban Jobs Program Property Tax Incentives
Five-year, state-reimburse property 80% property tax exemption
Five-year, state-reimburse property tax exemption based on total investment:
● $20 million to $39 million, 40%
● $39 million to $59 million, 50%
● $59 million to $75 million, 60%
● $79 million to $90 million, 70%
● Over $90 million, 80%
Corporation Business Tax Credits
As Table 4 shows, the Urban Jobs Program also provides a 10-year, flat-rate 25% corporation business tax credit for manufacturing facilities and a 10-year, sliding scale credit for service facilities based on the number of jobs the business creates. The latter credit ranges from 15% for creating between 300 and 599 jobs and 40% for creating between 1,500 and 1,999 jobs.
Table 4: Urban Jobs Program Corporation Business Tax Credits
10-year, 25% credit against the tax attributed to the facility
10-year corporation business tax credit based on the number of jobs created:
● 300 to 500 jobs, 15%
● 600 to 899 jobs, 20%
● 900 to 1,199 jobs, 25%
● 1,200 to 1,499 jobs, 30%
● 1,500 to 1,999 jobs, 40%
(The 10-year, flat 25% credit for manufacturing facilities is also available to manufacturers and other eligible businesses in the enterprise zones, but those that meet specific job creation goals qualify for a 50% credit.)
ACCESSING THE INCENTIVES
As in the enterprise zone program, a business acquiring or developing a facility must obtain a DECD eligibility certificate to access the incentives. By law, the DECD commissioner may issue a certificate if:
1. she determines that the prospect of receiving the incentives “induced” the business to acquire or develop the facility and
2. the business demonstrates an economic need or there is an economic benefit to the state (CGS § 32-9r (a)).
According to DECD's website, the business meets the second criterion if (1) it can show that the incentives will alleviate an economic need or (2) the project will provide a net economic benefit to the state or the municipality.
DECD also prefers that the municipality endorse the project. According to the website, “The preferred method [for seeking the commissioner's approval] is in the form of a letter, from the municipality to the commissioner, requesting approval of benefits on behalf of the company for a specific project.”