Iowa lawmakers eye local “reinvestment” districts

Designated 25-acre developments would use a share of sales tax and hotel-motel tax revenues

DES MOINES – Iowa communities would be able to designate special 25-acre development zones and use a share of sales tax and hotel-motel tax revenues to assist private projects of at least $10 million under legislation that’s getting bipartisan support.

House File 641 would establish reinvestment districts designed to spur development of “big ideas,” said Sen. Matt McCoy, D-Des Moines, who led a Senate Ways and Means subcommittee that revamped the bill representatives approved 87-9 last month.

Cities or counties that create the new districts would be authorized to use a portion of the state sales taxes and hotel-motel tax revenues diverted from the state to subsidize the cost of a new private development of $10 million or more for up to 20 years to help finance up to 35 percent of the project, he said.

“This is a terrific opportunity for communities across the state that have a big idea that want to collect -- through the establishment of a special district -- a sales tax that is to be used as gap funding or as an inducement for creating a special fund that can be used for economic development projects,” McCoy said.

Under the proposed Senate revisions, the special tax incentives would be capped at $100 million and the program would sunset in 2018 after five years. All of the hotel-motel tax revenues and two-thirds of the 6 percent sales taxes collected in the districts would be diverted to the reinvestment account.

“Anybody with a big idea that invests at least $10 million can qualify for this,” McCoy said. “We hope that it will stimulate a lot of growth and new ideas across the state and communities will line up to get their projects in the hopper for this.”

Sen. Randy Feenstra, R-Hull, supported the measure in subcommittee but said he planned to offer an amendment that would apply the reinvestment concept to smaller communities with populations of 10,000 or less who had projects of at least $5 million to ensure that all parts of Iowa that want to participate would be eligible.

House Speaker Kraig Paulsen, R-Hiawatha, said he viewed the reinvestment approach as an extension of tax incentive “experiements” that legislators crafted to aid the development of the Iowa Speedway in Newton and the Field of Dreams youth sports complex in Dyersville.

“It’s taxpayers giving up something that they currently don’t have. That model worked pretty decent in those earlier situations and so we’re going to give this a try,” he said. “It has statewide applicability.”

The bill now moves to the full Senate Ways and Means Committee for consideration.

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