Connecticut Seal

General Assembly

File No. 601

    February Session, 2018

Substitute House Bill No. 5585

House of Representatives, April 19, 2018

The Committee on Finance, Revenue and Bonding reported through REP. ROJAS of the 9th Dist., Chairperson of the Committee on the part of the House, that the substitute bill ought to pass.

AN ACT CONCERNING ENTERPRISE ZONES.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (Effective from passage) The Commissioner of Economic and Community Development shall develop specific benchmarks for job creation and state and municipal revenue generated to be used by the Department of Economic and Community Development to assess whether businesses certified to receive enterprise zone benefits pursuant to section 32-70a of the general statutes shall continue to be eligible for such benefits. The commissioner shall submit a report, in accordance with the provisions of section 11-4a of the general statutes, of such benchmarks to the joint standing committees of the General Assembly having cognizance of matters relating to commerce, municipalities and finance, revenue and bonding, not later than January 1, 2019.

Sec. 2. (NEW) (Effective from passage) (a) On and after July 1, 2019, any business that intends to construct, substantially renovate or expand a manufacturing facility or a service facility, as both terms are defined in section 32-9p of the general statutes, in an enterprise zone designated pursuant to section 32-70 of the general statutes, shall notify the Commissioner of Economic and Community Development, in such form and manner as the commissioner prescribes, upon the filing of any applicable permit with the zoning commission, planning commission, combined planning and zoning commission, inland wetlands commission or building department of the municipality in which the enterprise zone is located, of such business's intent. Upon receipt of such notice of intent, the commissioner shall negotiate with such business and the chief elected official of such municipality the rate and duration of the property tax exemption under subdivision (59) or (60) of section 12-81 of the general statutes, as amended by this act. No such negotiated exemption shall exceed the highest amount allowed for such business under said subdivisions.

(b) Any business that intends to apply for an eligibility certificate for a manufacturing facility or service facility in an enterprise zone that (1) has been constructed, substantially renovated or expanded on or before the effective date of this section, or (2) is in the process of being constructed, substantially renovated or expanded on or after the effective date of this section but prior to July 1, 2019, shall submit a notice, in such form and manner as the commissioner prescribes, that such business intends to apply for an eligibility certificate for such facility. Such notice of intent shall be submitted prior to July 1, 2019. Any notice of intent for such facility that is submitted on or after July 1, 2019, shall be subject to the provisions of subsection (a) of this section.

Sec. 3. Subdivisions (59) and (60) of section 12-81 of the 2018 supplement to the general statutes are repealed and the following is substituted in lieu thereof (Effective July 1, 2019):

(59) (a) [With] Except as otherwise provided under subparagraph (d) of this subdivision, with respect to assessment years commencing on or after October 1, 2012, any manufacturing facility, as defined in section 32-9p, acquired, constructed, substantially renovated or expanded on or after July 1, 1978, in a distressed municipality, as defined in said section, in a targeted investment community, as defined in section 32-222, in an enterprise zone designated pursuant to section 32-70 or in an airport development zone established pursuant to section 32-75d and for which an eligibility certificate has been issued by the Department of Economic and Community Development, and any manufacturing plant designated by the Commissioner of Economic and Community Development under subsection (a) of section 32-75c as follows: To the extent of eighty per cent of its valuation for purposes of assessment in each of the five full assessment years following the assessment year in which the acquisition, construction, renovation or expansion of the manufacturing facility is completed, except that a manufacturing facility having a North American Industrial Classification Code of 325411 or 325412 and having at least one thousand full-time employees, as defined in subsection (f) of section 32-9j, shall be eligible to have the assessment period extended for five additional years upon approval of the commissioner, in accordance with all applicable regulations, provided such full-time employees have not been relocated from another facility in the state operated by the same eligible applicant;

(b) [Any] Except as otherwise provided under subparagraph (d) of this subdivision, any service facility, as defined in section 32-9p, acquired, constructed, substantially renovated or expanded on or after July 1, 1996, and for which an eligibility certificate has been issued by the Department of Economic and Community Development, as follows: (i) In the case of an investment of twenty million dollars or more but not more than thirty-nine million dollars in the service facility, to the extent of forty per cent of its valuation for purposes of assessment in each of the five full assessment years following the assessment year in which the acquisition, construction, renovation or expansion of the service facility is completed; (ii) in the case of an investment of more than thirty-nine million dollars but not more than fifty-nine million dollars in the service facility, to the extent of fifty per cent of its valuation for purposes of assessment in each of the five full assessment years following the assessment year in which the acquisition, construction, renovation or expansion of the service facility is completed; (iii) in the case of an investment of more than fifty-nine million dollars but not more than seventy-nine million dollars in the service facility, to the extent of sixty per cent of its valuation for purposes of assessment in each of the five full assessment years following the assessment year in which the acquisition, construction, renovation or expansion of the service facility is completed; (iv) in the case of an investment of more than seventy-nine million dollars but not more than ninety million dollars in the service facility, to the extent of seventy per cent of its valuation for purposes of assessment in each of the five full assessment years following the assessment year in which the acquisition, construction, renovation or expansion of the service facility is completed; or (v) in the case of an investment of more than ninety million dollars in the service facility, to the extent of eighty per cent of its valuation for purposes of assessment in each of the five full assessment years following the assessment year in which the acquisition, construction, renovation or expansion of the service facility is completed, except that any financial institution, as defined in subsection (b) of section 32-236, having at least four thousand qualified employees, as determined in accordance with an agreement pursuant to subsection (b) of section 32-236, shall be eligible to have the assessment period extended for five additional years upon approval of the commissioner, in accordance with all applicable regulations, provided such full-time employees have not been relocated from another facility in the state operated by the same eligible applicant. In no event shall the definition of qualified employee be more favorable to the employer than the definition provided in subsection (b) of section 32-236;

(c) The completion date of a manufacturing facility, manufacturing plant or a service facility will be determined by the Department of Economic and Community Development taking into account the issuance of occupancy certificates and such other factors as it deems relevant. In the case of a manufacturing facility, manufacturing plant or a service facility which consists of a constructed, renovated or expanded portion of an existing plant, the assessed valuation of the facility or manufacturing plant is the difference between the assessed valuation of the plant prior to its being improved and the assessed valuation of the plant upon completion of the improvements. In the case of a manufacturing facility, manufacturing plant or a service facility which consists of an acquired portion of an existing plant, the assessed valuation of the facility or manufacturing plant is the assessed valuation of the portion acquired. This exemption shall be applicable during each such assessment year regardless of any change in the ownership or occupancy of the facility or manufacturing plant. If during any such assessment year, however, any facility for which an eligibility certificate has been issued ceases to qualify as a manufacturing facility, manufacturing plant or a service facility, the entitlement to the exemption allowed by this subdivision shall terminate for the assessment year following the date on which the qualification ceases, and there shall not be a pro rata application of the exemption. Any person who desires to claim the exemption provided in this subdivision shall file annually with the assessor or board of assessors in the distressed municipality, targeted investment community, enterprise zone designated pursuant to section 32-70 or in a town within an airport development zone established pursuant to section 32-75d in which the manufacturing facility or service facility is located, on or before the first day of November, a written application claiming such exemption on a form prescribed by the Secretary of the Office of Policy and Management. Failure to file such application in this manner and form within the time limit prescribed shall constitute a waiver of the right to such exemption for such assessment year, unless (i) an extension of time is allowed pursuant to section 12-81k, and upon payment of the required fee for late filing, or (ii) the person claiming such exemption received a certificate of eligibility on or after October 1, 2009, and is located in a municipality in New Haven County with a population of not less than eighteen thousand five hundred and not more than nineteen thousand five hundred, as enumerated in the 2010 federal decennial census;

(d) Any manufacturing facility or service facility, as both terms are defined in section 32-9p, in an enterprise zone designated pursuant to section 32-70, for which a notice of intent was submitted on or after July 1, 2019, to the Commissioner of Economic and Community Development, in accordance with the provisions of subsection (a) of section 2 of this act, at the rate and duration negotiated pursuant to said subsection;

(60) (a) Except as otherwise provided under subparagraph (c) of this subdivision, (1) [Machinery] machinery and equipment which represents an addition to the assessment or grand list of the municipality in which this exemption is claimed and is installed in any manufacturing facility, as defined in section 32-9p, which facility is or has been constructed, or substantially renovated or expanded on or after July 1, 1978, in a distressed municipality, targeted investment community, enterprise zone designated pursuant to section 32-70 or in an airport development zone established pursuant to section 32-75d and for which an eligibility certificate has been issued by the Department of Economic and Community Development, concurrently with and directly attributable to such construction, renovation or expansion, (2) machinery and equipment which represents an addition to the assessment or grand list of the municipality in which this exemption is claimed and is installed, or machinery and equipment existing, in any manufacturing facility, as defined in section 32-9p, which facility is or has been acquired on or after July 1, 1978, in a distressed municipality, targeted investment community, enterprise zone designated pursuant to section 32-70 or in an airport development zone established pursuant to section 32-75d and for which an eligibility certificate has been issued by the Department of Economic and Community Development, and (3) machinery and equipment acquired and installed on or after October 1, 1986, in a manufacturing facility that is or has at one time been certified as eligible for the exemption under this subparagraph in accordance with section 32-9r, and which continues to be used for manufacturing purposes, provided such machinery and equipment is installed in conjunction with an expansion program that satisfies the requirements for a manufacturing facility, as defined in section 32-9p, and is contiguous to and represents an increase in square feet of floor space of not less than fifty per cent of the floor space in the certified manufacturing facility, as follows: To the extent of eighty per cent of its valuation for purposes of assessment in each of the five full assessment years for which the manufacturing facility in which it is installed qualifies for an exemption under subdivision (59) of this section, except that a facility having a code classification 2833 or 2834 in the Standard Industrial Code Classification Manual, United States Office of Management and Budget, 1987 edition, wherein at least one thousand new full-time employees, as defined in subsection (f) of section 32-9j, are employed, shall be eligible to have the assessment period under this subdivision extended for five additional years upon approval of the commissioner, provided the commissioner approves an extension of the assessment period under subdivision (59) of this section for said facility;

(b) Except as otherwise provided under subparagraph (c) of this subdivision, (1) [Machinery] machinery and equipment which represents an addition to the assessment or grand list of the municipality in which this exemption is claimed and is installed in any service facility, as defined in section 32-9p, which facility is or has been constructed, or substantially renovated or expanded on or after July 1, 1996, and for which an eligibility certificate has been issued by the Department of Economic and Community Development, concurrently with and directly attributable to such construction, renovation or expansion, (2) machinery and equipment which represents an addition to the assessment or grand list of the municipality in which this exemption is claimed and is installed, or machinery and equipment existing, in any service facility, as defined in section 32-9p, which facility is or has been acquired on or after July 1, 1996, and for which an eligibility certificate has been issued by the department, and (3) machinery and equipment acquired and installed on or after July 1, 1996, in a service facility that is or has at one time been certified as eligible for the exemption under this subparagraph in accordance with section 32-9r and which continues to be used for service purposes, provided such machinery and equipment is installed in conjunction with an expansion program that satisfies the requirements for a service facility, as defined in section 32-9p, and is contiguous to and represents an increase in square feet of floor space of not less than fifty per cent of the floor space in the certified service facility, as follows: (i) In the case of an investment of twenty million dollars or more but not more than thirty-nine million dollars in the service facility, to the extent of forty per cent of its valuation for purposes of assessment in each of the five full assessment years for which the service facility in which it is installed qualifies for an exemption under subdivision (59) of this section; (ii) in the case of an investment of more than thirty-nine million dollars but not more than fifty-nine million dollars in the service facility, to the extent of fifty per cent of its valuation for purposes of assessment in each of the five full assessment years for which the service facility in which it is installed qualifies for an exemption under subdivision (59) of this section; (iii) in the case of an investment of more than fifty-nine million dollars but not more than seventy-nine million dollars in the service facility, to the extent of sixty per cent of its valuation for purposes of assessment in each of the five full assessment years for which the service facility in which it is installed qualifies for an exemption under subdivision (59) of this section; (iv) in the case of an investment of more than seventy-nine million dollars but not more than ninety million dollars in the service facility, to the extent of seventy per cent of its valuation for purposes of assessment in each of the five full assessment years for which the service facility in which it is installed qualifies for an exemption under subdivision (59) of this section; or (v) in the case of an investment of more than ninety million dollars in the service facility, to the extent of eighty per cent of its valuation for purposes of assessment in each of the five full assessment years for which the service facility in which it is installed qualifies for an exemption under subdivision (59) of this section, except that any financial institution, as defined in section 32-236, having at least four thousand qualified employees, as determined in accordance with an agreement pursuant to subsection (c) of section 32-236, shall be eligible to have the assessment period extended for five additional years upon approval of the commissioner, in accordance with all applicable regulations, provided such full-time employees have not been relocated from another facility in the state operated by the same eligible applicant. In no event shall the definition of qualified employee be more favorable to the employer than the definition provided in section 32-236;

(c) Machinery and equipment described under subparagraph (a) of this subdivision, which is installed in any manufacturing facility or service facility, as both terms are defined in section 32-9p, which facility is in an enterprise zone designated pursuant to section 32-70 and for which a notice of intent was submitted on or after July 1, 2019, to the Commissioner of Economic and Community Development, in accordance with the provisions of subsection (a) of section 2 of this act, at the rate negotiated pursuant to said subsection;

[(c) This] (d) The exemption under this subdivision shall terminate for the assessment year next following if the manufacturing facility or service facility in which such machinery and equipment is installed no longer qualifies for an exemption under said subdivision (59), and there shall not be a pro rata application of the exemption of such machinery and equipment in the assessment year of such termination. Any person who desires to claim the exemption provided in this subdivision shall file annually with the assessor or board of assessors in the distressed municipality, targeted investment community, enterprise zone designated pursuant to section 32-70 or a town in an airport development zone established pursuant to section 32-75d in which the manufacturing facility or service facility is located, on or before the first day of November, written application claiming such exemption on a form prescribed by the Secretary of the Office of Policy and Management. Failure to file such application in this manner and form within the time limit prescribed shall constitute a waiver of the right to such exemption for such assessment year, unless an extension of time is allowed pursuant to section 12-81k, and upon payment of the required fee for late filing. This exemption shall not apply to rolling stock;

This act shall take effect as follows and shall amend the following sections:

Section 1

from passage

New section

Sec. 2

from passage

New section

Sec. 3

July 1, 2019

12-81(59) and (60)

Statement of Legislative Commissioners:

In Sections 3(59)(d) and (60)(c), "subdivision" was changed to "subsection" for accuracy.

FIN

Joint Favorable Subst. -LCO

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 19 $

FY 20 $

Policy & Mgmt., Off.

GF - Cost/Savings

None

Potential

Note: GF=General Fund

Municipal Impact:

Municipalities

Effect

FY 19 $

FY 20 $

All Distressed Municipalities

Grand List Increase/Decrease

None

Potential

Explanation

The bill results in the following impacts:

Section 1 of the bill has no fiscal impact by requiring the Department of Economic and Community Development (DECD) to develop specific benchmarks to assess continued eligibility of businesses for benefits under the enterprise zone program. DECD is currently developing such benchmarks.

While there is no cost to develop benchmarks, there may be a cost to DECD to apply benchmarks to the enterprise zone program. Such cost, if any, would depend upon the scope and frequency of business assessment required by the benchmarks yet to be developed.

Between 2013 and 2017, DECD certified 210 businesses as eligible for enterprise zone participants.

Sections 2 and 3 allow the DECD and distressed municipalities to negotiate certain property tax benefits for manufacturers located in enterprise zones.

The impact of the bill will depend on the monetary value of the benefits negotiated, relative to the benefits that eligible manufacturers currently receive. An expansion of these benefits results in a grand list reduction in effected municipalities, while a reduction in benefits results in a grand list expansion.

The bill results in a cost, or savings, to the Distressed Municipalities grant program within the Office of Policy and Management (OPM). OPM is required to reimburse municipalities for 50% of the tax loss related to the benefits provided to manufacturers located in enterprise zones. Any increase or decrease in the cost to fully fund the program will vary based on the value of the negotiated benefits.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

Source:

Dept of Economic and Community Development, Connecticut's Enterprise Zone Program Guide http://www.ct.gov/ecd/cwp/view.asp?a=1099&q=249762

OLR Bill Analysis

sHB 5585

AN ACT CONCERNING ENTERPRISE ZONES.

SUMMARY

This bill changes the current fixed rate and term enterprise zone property tax exemptions to ones that must be negotiated between the (1) Department of Economic and Community Development (DECD) commissioner and (2) taxpayer and municipality.

Under current law, businesses that build or improve a qualifying facility in an enterprise zone qualify for a property tax exemption once they have been issued an eligibility certificate from DECD. The exemption is generally a five-year, 80% exemption for the eligible facility and machinery and equipment installed in it.

Beginning July 1, 2019, for businesses seeking to build or improve such facilities in an enterprise zone, the bill requires the DECD commissioner to negotiate the property tax exemption with the business and the municipality's chief elected official. The bill specifically requires the commissioner to negotiate the rate and duration of the facility's real property tax exemption and the rate of its machinery and equipment exemption. But it establishes conditions under which businesses may receive the exemptions under current law for qualifying facilities started or completed before July 1, 2019.

The bill also requires the DECD commissioner to develop certain benchmarks for assessing whether businesses certified to receive enterprise zone (EZ) benefits should continue to be eligible for them. The commissioner must (1) establish benchmarks for job creation and state and municipal revenue generation and (2) by January 1, 2019, report them to the Commerce; Planning and Development; and Finance, Revenue and Bonding committees.

EFFECTIVE DATE: Upon passage, except the conforming changes to the enterprise zone property tax exemptions are effective July 1, 2019.

ENTERPRISE ZONE PROPERTY TAX EXEMPTIONS

The bill's requirement for negotiated benefits varies depending on when a business starts a project and notifies the commissioner of its plans to apply for an enterprise zone eligibility certificate.

Projects Started On or After July 1, 2019

Beginning July 1, 2019, the bill requires businesses intending to build, substantially renovate, or expand a qualifying manufacturing or service facility in an enterprise zone to notify the DECD commissioner of their intent to do so (see BACKGROUND). They must file the notice of intent, in the form and manner the commissioner prescribes, at the same time they file any applicable land use or building permits with the municipality in which the zone is located. Upon receiving a notice of intent, the DECD commissioner must negotiate, with the business and the municipality's chief elected official, the (1) rate and duration of the enterprise zone property tax exemption for the facility and (2) rate of the exemption for the machinery and equipment installed in it. The negotiated exemptions may not exceed the maximum allowed under existing law (CGS 12-81(59) and (60)).

The bill's requirements do not apply to businesses acquiring or leasing qualifying manufacturing or service facilities in an enterprise zone, which qualify for the property tax exemptions under certain conditions.

The bill is silent on whether a business still qualifies for an enterprise zone exemption if it fails to notify the commissioner.

Projects Started or Completed Before July 1, 2019

For a manufacturing or service facility that was completed or in the process or being built or improved between the bill's effective date and July 1, 2019, the bill requires businesses to notify the DECD commissioner that they intend to apply for an eligibility certificate. They must file the notice of intent, in the form and manner the commissioner prescribes, before July 1, 2019, in order to qualify for the exemptions under current law. Under the bill, businesses that file the notices on or after July 1, 2019, are subject to the requirements described above.

BACKGROUND

Qualifying Manufacturing and Service Facilities

For the purpose of the enterprise zone program, a “manufacturing facility” is any plant, building, or other real property improvement that is located in an enterprise zone and used as follows:

A “service facility” is a manufacturing facility that meets the requirements described above, except that it is located outside of an enterprise zone in a targeted investment community (i.e., a municipality with an enterprise zone).

Municipalities with Enterprise Zones

The state's 18 enterprise zones are located in Bridgeport, Bristol, East Hartford, Groton, Hamden, Hartford, Meriden, Middletown, New Britain, New Haven, New London, Norwalk, Norwich, Southington, Stamford, Thomaston, Waterbury, and Windham.

COMMITTEE ACTION

Finance, Revenue and Bonding Committee

Joint Favorable

Yea

44

Nay

7

(04/05/2018)

TOP