8.1 Agr Collection IRB Taxes City Of Salina
Request for Commission Action Date Time
5/22/00 4:00 PM
AGENDA SECTION: ORIGINATING DEPARTMENT: APPROVED
8 FOR AGENDA
FINANCE
ITEM NO.:
I By' Rodney Franz ~
Item Resolution Number 00-5602 authorizing the City of Salina to enter into an agreement
with Saline County providing for the billing and collection of payment in lieu of taxes
pursuant to the issuance of Industrial Revenue Bonds.
Back(~round:
When a private business applies for city issuance of Industrial Revenue bonds (IRB's) to
expand their facilities, it is not unusual for them to request an exemption from ad-valorem
property taxes on the improvements financed by the bond proceeds. The City of Salina
has a policy addressing when economic development tax exemptions (of which IRB's are
one type) should be granted, and to what degree the property and improvements should
be exempted, based on the amount of investment and the number of jobs created.
However, because of the nature of Industrial Revenue Bonds, the Kansas State Board of
Tax appeals normally issues a 100% exemption for the life of the bonds. This does not
coincide with the City's policy on exemptions, which provides for full taxation on any pre-
improvement properties and, most often a partial exemption on new improvements.
The fiduciary mechanism that has been developed to deal with this is a "payment in lieu of
taxes" (PILOT) agreement, which is executed with the company benefiting from the bonds.
The PILOT agreement establishes a payment, to be made in place of property taxes,
based on the City of Salina policy, and the assessed value of the property and
improvements.
Unfortunately, the statutes are unclear as to precisely how the PILOT is to be billed and
collected. There is a requirement that payments in lieu of taxes on exempted property be
distributed to taxing governments in the same manner as other property taxes.
The attached agreement establishes a procedure for calculating and certifying the amount
of PILOT due. Essentially, the PILOT will be collected and distributed through the property
tax system in the same manner as other taxes. We feel that this is the most efficient way
to handle this issue. From the taxpayer's perspective, the bill will look like and be handled
in precisely the same manner as a regular tax bill, and they will be able to pay the amounts
due in the same manner as other property taxes.
Recommendation:
Approve Resolution No. 00-5602, authorizing an agreement with Saline County providing
for the billing and collection of Payments in Lieu of Taxes.
Agreement
This agreement, made and entered into this __ day of May, 2000 by and
between the City of Salina, Kansas, a municipal corporation, hereinafter referred
to as the "City", and the County of Saline, State of Kansas, hereinafter referred to
as the "County", WITNESSETH:
Whereas, from time to time, the City issues Industrial Revenue Bonds for the
purpose of encouraging industrial development within the City and County; and
Whereas, the beneficiaries of said industrial revenue bonds may be granted
partial exemption from ad valorem property taxes pursuant to an adopted City
policy regulating the conditions and magnitude of the exemption; and
Whereas, as a condition of said Industrial Revenue Bonds a payment in lieu of
taxes agreement is normally executed with the beneficiary of said bonds; and
Whereas, there is no clearly defined statutory procedure addressing the
collection and distribution of payments in lieu of taxes, and
Whereas, it is the intent of both parties that a timely, efficient, and reliable
method of providing for the collection, distribution, and monitoring of payments in
lieu of taxes be implemented.
NOW THEREFORE, it is mutually agreed by and between the City and County
as follows:
(1 .) Upon final approval of the requested tax exemption by the City, the
City Clerk will provide a copy of the Ordinance authorizing said
exemption and a copy of the final Payment in Lieu of tax agreement to
the County Appraiser.
(2.) Upon receipt of the final order from the Kansas Board of Tax Appeals
exempting property from ad valorem property taxes pursuant to the
issuance of Industrial Revenue Bonds, the County Appraiser shall
annually determine, for each property exempted, by property type as
identified in the Agreement For Payment In Lieu of Taxes, the
appraised value, the assessment percentage, the assessed value, the
exemption percentage, and the In Lieu of value. For existing
buildings with additions or improvements, the County Appraiser shall
also identify the ratio between the Pre-Improvement Value and the
Improvement value for the first year of the exemption period. The In
Lieu of value shall be the total of the assessed values of various
classes of property identified in Section 2 of the Agreement For
Payment In Lieu of Taxes multiplied by the payment in lieu of taxes
percentage identified for that property. In each succeeding year, The
County Appraiser shall, on or before July 1, certify to the City Clerk the
appraised value, the assessment percentage, and the assessed value,
itemized by property owner and bond issue, on a form to be provided
by the City of Salina.
(3.) The City shall review information provided by the County appraiser for
completeness, consistency, and accuracy to the extent they are able
to determine. The City Clerk shall, at the time of certification of other
ad valorem property taxes, certify said information to the County Clerk,
in substantially the same format provided in Attachment 1,
accompanied by the electronic version of the same information.
(4.) The County Clerk shall determine the final amount of in lieu of tax due,
based on the in lieu of value and the final total mill levy rate for all
taxing entities having jurisdiction over the subject property. The
County Clerk shall certify to the County Treasurer, as a special in lieu
of tax, at the same time as certifying other taxes, the amount due for
each property. Along with said certification, the County Clerk shall
transmit to the County Treasurer the previously identified spreadsheet,
on which the distribution of in lieu of taxes has been calculated.
(5.) The County Treasurer shall bill the amount due out as in lieu of taxes.
Upon receiving payment of the same, the County Treasurer shall
apportion said payment among all of the taxing jurisdictions having
authority over the subject property.
(6.) The County Treasurer shall, on or before January 31 of each year,
provide a report to the City showing the amount of in lieu of taxes
billed and paid during the previous twelve (12) months, by taxpayer,
and note any delinquencies thereon.
Nothing in this agreement shall preclude mutually acceptable administrative
adjustments to the procedure to provide for increased efficiency of the process,
so long as the intent and purpose of this agreement is maintained.
This agreement shall continue in force until notice of termination is provided by
either party of at least 30 days notice of its intention to do so prior to July 1st of
any year.
IN WITNESS WHEREOF, the parties have hereunto caused this agreement to
be executed on the behalf by its duly authorized officers, all on the day and year
first above written.
City of Salina, Kansas
BY:
Alan E Jilka, Mayor
(SEAL)
Attest:
Barbara R. Weber
Acting City Clerk
Board of County Commissioners
Saline County, Kansas
BY:
Deane Allen, Chairman
(Seal)
Attest::
Donald R. Merriman
Saline County Clerk
Salina - Saline County
In Lieu of Tax Cedification
Tax Year 2000
A I S I c IDI E IFI G IHII I JI K I L I M I
Appraiser (Fixed City (From County
1 Appraiser City City City City Appraiser once established) Calculated Appraiser Calculated Ordinance) Calculated Clerk Calculated
Pra-
IRB Issuer/Property Exemption Improvement/Improv Adjusted Assessment In Lieu of
2 Parcel # Owner year (1 - 10) Tax Year Property Classification Appraised Value ement Value Ratio Appraised Value % Assessed Value Percentage In Lieu of Value Levy Rate In Lieu of Tax
3 4324 IRB 4 .... ~:~ 250,000.00 ,~. ~ .~, ~,
Sample Co., 1999-B {~ ; ~ ~!~ ~';'
4 4324 ~RS 4 500,000.00 25%
Sample Co., 1999-B ~, :.'i~ ~ ii}~ :: ¢{~ ~}~it ~
5 4324 IRB 4 2000 150,000.00 25%
Sample Co., 1OO9-B
6 4324 IRS ~iJi ~;~;~[Si ~[U;~; 1,500,000.00
Sample Co., 1999-B EXl~ ~ ~ ~ ~i~ ; : ; ;
7
4324
4
2000
69%
0~
Sample Co., 1999-B ~!!~}d ~{j~;;
8 4324 IRB 4 2000 ~n~~{J~'~ 31% ~ ~ o ~ ?; ?~ ~ ~ '~
Sample Co., 1999-B
9 4324 IRB 4 2000 ~¢~! 400,000.00 25Y0 ~0~ ~0 00 <
10 4324 IRB 4 2000~ 300,000.00 25%
11 4324 To~I for Properly and Issue
12
13 Distribution: City of Salina 25.27 ~ ~'~6~
14 Saline County 20.488
15 State of Kansas 1.5 ~
16 Libra* 5.419
10 USD 305 36.~
~9 USD3O~ o
20
~ ~ota, 9~
22 Total Ce~ifi~tion:
23
24
25 ~ppmisofs Ce~ifl~tion to City:
26
I, Rodney Broberg, Saline County Appraiser, hereby ce~ify the the above referenced values are true and corre~ as of (date), and are in compliance with the provisions of the
27 respe~ive Payment in Lieu of Tax agreements.
28
29 Signed: Date:
30
31 City Cle~'s Ce~ifi~tion:
32
I, Judy Long, City Cle~ of the City of Safina, hereby ce~ify that I have reviewed the above info~ation, and that the referenced in lieu of ~x payments are due and payable in the same place, time,
33 and manner as ad-valo~m prope~y taxes.
35 Si~ned: Date:
Pilot Certification Test Company