Ordinance 2708 and staff report,I
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CITY OF ALAEDA ORDINANCE NO.2708
AMENDING THE IMPROVEMENT TAX REGULATIONS OF THE
CITY OF ALAEDA TO PROVIDE AN EXEMPTION FOR
IMPROVEMENTS CONSTRUCTED AT THE FORMER NAVAL AIR STATION
WHEREAS, the City of Alameda has a . tax
construction to raise revenue for its General Fund for the
among others of deferring the costs of municipal
generated by the development of property; and
on new
purposeservices
WHEREAS the ordinance imposing the improvement taxprovides for an exemption from taxation for certain kinds ofconstruction acti vi ty that serve important public policy goals,including the avoidance of double payment for public services and
the facilitation of seismid retrofit improvements; and
WHEREAS, the City Council finds and determines that any
construction activity at the former Naval Air Station will fulfillthe important public policy goals of assisting the economicrecovery following closure of the base and bringing structures at
the base to higher standards than were applied to their originalconstruction as federal facilities; and
WHEREAS, the City Council finds and determines that
providing a partial exemption from the improvement tax that wouldotherwise apply to construction acti vi ty at the former Naval Air
Station upon acceptance of retrocession by the State of California
would encourage the redevelopment of that military installation;and
WHEREAS, the City Council wishes to remove a possible
impediment to immediate leasing of property at the Naval Air
Station by indicating its intention to provide a partial exemptionfrom the Improvement Tax after retrocession of federalj ur isdiction.
NOW , THEREFORE , BE IT ORDAINED BY THE COUNCIL OF THE CITY
OF ALAMEDA as follows:
Section Section )-62.6 of the Alameda Municipal Code is
hereby amended to add a new paragraph thereto to read in full asfollows:
c. Persons who undertake construction on real
property within the boundaries of the Naval Air station
pursuant to lease with the Alameda Reuse and
Redevelopment Authority are exempt from fifty percent
(50%) of this tax provided that the application for a
Building or Plumbing Permit for the work is approved andin the judgment of the City'Building Official,
substantial progress on the work authorized thereunder
has occurred on or before December 31, 2000.
section In recognition of the preemptive effect ofexisting federal jurisdiction, Section 1 of this Ordinance shallbecome effective upon acceptance by the State of Californiapursuant to section 113 of the Government Code of the State, ofretrocession of federal jurisdiction at the Naval Air StationAlameda.
Section This ordinance shall be in full force and effect
from and after the expiration of thirty (30) days from the date of
its final passage.
Attest:
tl /6
. C1 ty Clerk
I, the undersigned, hereby certify that the foregoing Ordinance was
duly and regularly adopted and passed by the Council of the City
Alameda in regular meeting assembled on the 9th day
of September , 1995, by the following vote to wit:
AYES:Counci'lrne.bers Arnerich, DeWitt, Lucas,
Mann.u and President Appezzato -
NOES:None.
ABSENT:None.
ABSTENTIONS:None.
IN WITNESS, WHEREOF, I have hereunto set my hand and affixed the
official seal of said City this 20th day of September , 1995.
Diane
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Ci ty of Alameda
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City of Alameda
Inter-deparment Memorandum
TO:Honorable Mayor and
Councilmembers
FROM:Zenda JamesFinance Director
DATE:August 22 , 1995
SUBJECT:FINANCIAL INCENTIVES FOR BUSINESSES LOCATING AT THE NAVAL
AIR STATION (NAS)
Background
Encouraging businesses to locate at the Naval Air Station (NAS) is
a high priority for the City. Businesses that locate at the NAS
may assist in the economic recovery following base closure by
generating sales tax revenues to the City and creating jobs that
can be filled by Alameda residents. There are substantial expenses
that new business face when first established- at NAS. Providing
temporary exemptions from some of the costs that may apply to these
business will facilitate their location at the NAS and hasten
economic recovery.
Two taxes over which the City Council has direct control are theci ty' s Improvement Tax and its Bus iness License Tax. In addition
the City may reimburse businesses for certain expenses if there isa public interest in doing so , such as assisting the economic
recovery following the announcement of military base closure.
Exemptions from some portion of each of the two taxes and acondi tional and limited reimbursement of other tax expenses are
recommended in this report.
Discuss ion/ Analysis
The recommendations made in this report a e being presented to the
Council at this time because of the potential signing of an interim
lease with AEG Corporation. AEG Corporation is nego tiating with
the Alameda Reuse and Redevelopment Authority (AR) to use threebuildings at the NAS. In addition to spending significant dollars
for code compliance and safety upgrades to improve the property,
AEG projects hiring 150-200 employees. The current estimates are, that when fully built and staffed , the AEG Corporation's use of NAS
buildings will generate $2.75 million in local sales tax revenues
over the seven-year life of their current contract ,to refurbish
BART cars.
As long as the property at the NAS is under federal jurisdictionlocal taxes are generally preempted. AEG Corporation will not have
to pay such taxes as long as federal jurisdiction continues to
exist over the NAS site. Unfortunately, it is impossible to
Re: Introduction
of Ordin & Reso #5-19-5-95
Honorable Mayor a
Counci lmembers August 22 , 1995
Page Two
predict when federal jurisdiction will cease. This is because the
process of handing jurisdiction from federal to state andul timately to local control (AR) is a complicated and uncertainone. In order to eliminate the uncertainty involved because of the
inability to predict when these state and local taxes would apply
to businesses locating at NAS , i.e. AEG Corporation , waiver and
reimbursement of these expenses if and when they would apply is
being recommended.
Partial Exemption from Improvement Tax. A partial exemptionfrom the City'Improvement Tax is recommended for allconstruction performed at the 'NAS pursuant to the terms of alease with the AR. The City'Improvement Tax is one
percent of the value of new construction. An exemption ofhalf of that amount is recommended for new construction
performed pursuant to a Lease with the AR.
If approved by the City Council , the 50% exemption from the
Improvement Tax could theoretically apply to the construction
contemplated by the AEG Corporation. For every one milliondollar value of the construction planned by the AEGCorporation, the 50% exemption would save the corporation
$ 5 , 000 in improvement tax.
The Business License Tax Credit. It is recommended that two
al ternati ves be made available for business license taxcredits. These would be as follows:
Alternative 1. A credit of 100% of business license tax
liability shall be applied toward the business license tax forany business which: (1) enters into a lease with the Alameda
Reuse and Redevelopment Authority prior to January 1 , i996;
(2) employs at least 20 employees who each work at least 30
hours per week during the entire year , and (3) generates at
least $47 500 ($5 000 000 in taxable sales) in local sales and
use tax allocated to the city of Alameda in the year for which
the credit is applied. The purpose of this 100% credit is to
encourage businesses to commit to s of base properties by
the end of the year.
Alternative 2. A credit of 50% of business license tax
liability shall be applied toward the business license tax forany business which: (1) enters into a lease with the Alameda
Reuse and Redevelopment Authority after December 31 , 1995 , (2)
employs at least 20 employees who each work at least 30 hours
per week during the entire year; and (3) generates at least
$47 500 ($5,000 000 in taxable sales) in local sales and use
tax allocated to the City of Alameda in the year for which the
credit is applied.
Both alternatives will sunset on June 30 , 2002.
Honorable Mayor a
Councilmembers August 22 , 1995
Page Three
Again , it is important to emphasize that the recommended
actions are primarily intended to respond to an economic
uncertainty. The " loss " of revenue from the recommendations
if any, is thus very difficult to estimate.
However , we estimate that for a business that would generate
000 000 gross receipts and our rate of 40 cents per $1 000gross receipts:
100% exemption = $2 OOOjyear x 7 years =$14 000
50% exemption = $1 OOOjyear x 7 years -$ 7 000
Reimbursement of the Unsecured Property Tax. state law
provides for two statewide taxes that have a special impact onbusinesses: the possessory interest tax and the tax on the
unsecured roll. The possessory interest tax is effectively a
substitute for property tax imposed when a private party-
leases government-owned property and the tax on the unsecuredroll is a tax on property other than land such as heavyequipment. Like local taxes , these taxes are affected by
federal jurisdiction and generally may not be collected until
the preemptive effect of federal jurisdiction is eliminated bythe state's acceptance of retrocession.
In order to respond to the uncertainty provided by not knowing
when retrocession will occur , or when these taxes will apply
to lessees , staff is recommending that the City Manager be
authorized to sign agreements providing for reimbursements of
such expenses if and when they arise during the course of alease. The lease being negotiated with AEG Corporation
contemplates such reimbursement and would in all likelihood be
the first time the City Manager would exercise the authority
granted by this recommended action.
Budget/Fiscal Impact
The economic incentives proposed herein will result in an estimated
"loss" of revenues as follows:
Improvement Tax: For every $1 million dollar
improvement = $5 000 (one time revenue only)value
Business License Tax Credit: For a business that generates
approximately $5 million in annual gross receipts:
100% exemption $2 OOOjyear
50% exemption $1 000 jyear x 7 years - $14 000
x 7 years = $ 7 000
The unsecured property tax returns approximately 27% to the Cityfor every $1 tax paid to the County. This is the amountrecommended to be reimbursed to the business.
onor ble Mayor ? i
Counci lmembers August 22 , 1995
Page Four
Net sales tax revenue that will be generated for the City for every
$1 million in taxable sales is $9 500 jyear.
Recommenda tion
It is recommended that the City Council adopt two economic
incentives for businesses locating at the Naval Air station and
adopt a resolution that will authorize a third incentive for selectbusinesses. The two general incentives. are to exempt from the
Improvement Tax for construction undertaken at the base and a
credi t of either 50% or 100% from " business license taxes for up to
seven years. The third incentive that is recommended is for the
reimbursement in select cases , of the taxes that City would
otherwise receive from property on the unsecured property tax roll
and the exemption to expire June 30 , 2002.
If the Council concurs with these proposed incentives , introduction
andjor adoption of the following legislation is recommended:
An Ordinance Amending the Business License Tax Ordinance ofthe City of Alameda to Provide a Credit for Businesses
Conducted at the former Naval Air station
An Ordinance Amending the Improvement Tax Regulations of the
City of Alameda to Provide an Exemption for Improvements
Constructed at the former Naval Air station
Resolution Authorizing the City Manager to Execute
Agreements Providing Reimbursement for Unsecured Personal
Property to Certain Businesses that locate at the Naval Airstation
Respectfully submitted
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Zenda
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JamesFinance Director
RWARDED
cc:AR Executive DirectorSupervising Accountant (Oakes)