KRS 65.6972: Development area and related project -- Application -- Approval --

Requirements for project -- Independent consultant -- Approval by authority -

- Ordinance -- Grant contracts -- Portion of increment due from each taxing

district -- Financing account -- Reports -- Operating procedures -- Obligation

of Department of Revenue and agency.

(1) A city, county, or agency shall submit an application to the Cabinet for Economic

Development for approval of a development area, which includes revenues from the

Commonwealth, and the related project, the standards for which the Cabinet for

Economic Development and the Tourism, Arts and Heritage Cabinet shall establish

through their operating procedures or by the promulgation of administrative

regulations in accordance with KRS Chapter 13A. The Cabinet for Economic

Development shall determine whether the development area and related project

described in the application constitutes a project of the type described in KRS

Chapter 154 for which the economic development auth ority shall have the right to

approve the development area and related project or KRS Chapter 148 for which the

tourism development authority shall have the right to approve the development area

and related project. The Cabinet for Economic Development, up on its

determination, shall assign the application to the economic development authority

or the tourism development authority, as appropriate, for further consideration and

approval.

(2) A project otherwise satisfying the requirements of the project as def ined in KRS

65.680, in order to qualify the project and related development area, in addition

shall satisfy all of the following requirements for a project:

(a) Represent new economic activity in the Commonwealth;

(b) Result in a minimum capital investment of ten million dollars ($10,000,000);

(c) Result in the creation of a minimum of twenty-five (25) new full-time jobs for

Kentucky residents to be held by persons subject to the personal income tax of

the Commonwealth within two (2) years of the date of th e final resolution

authorizing the development area and the project;

(d) Result in a net positive economic impact to the economy of the

Commonwealth, taking into consideration any substantial adverse impact on

existing Commonwealth businesses;

(e) Generate a minimum of twenty -five percent (25%) of the total revenues

derived from the project attributable to sources outside of the Commonwealth

during each year a grant contract is in effect;

(f) Result in a unique contribution to or preservation of the economi c vitality and

quality of life of a region of the Commonwealth; and

(g) Not be primarily devoted to the retail sale of goods.

(3) After assignment of the application for the project and related development area by

the Cabinet for Economic Development:

(a) The economic development authority or the tourism development authority, as

appropriate, shall engage the services of a qualified independent consultant to

analyze data related to the project and the development area, who shall

prepare a report for the eco nomic development authority or the tourism

development authority, as appropriate, with the following findings:

1. The percentage of revenues derived from the development area which

are generated from business not located in the Commonwealth;

2. The estimated amount of increment the development area is expected to

generate over a twenty (20) year period from the projected activation

date;

3. The estimated amount of ad valorem taxes, other than the school or fire

district portion of ad valorem taxe s, from real property, Kentucky

individual income tax, Kentucky sales and use taxes, local insurance

premium taxes, occupational license fees, or other such state taxes

which would be displaced within the Commonwealth, to reflect

economic activity which is being shifted over the twenty (20) year

period;

4. The estimated increment the development area is expected to generate

over the twenty (20) year period, equal to the estimated amount set forth

in paragraph (a)2. of this subsection minus the estimated amo unt set

forth in paragraph (a)3. of this subsection; and

5. The project or development area will not occur if not for the designation

of the development area and granting of increments by the

Commonwealth to the development area.

(b) The independent consul tant shall consult with the economic development

authority or the tourism development authority, as appropriate, the Office of

State Budget Director and the Finance and Administration Cabinet in the

development of the report. The Office of State Budget Dir ector and the

Finance and Administration Cabinet shall agree as to methodology to be used

and assumptions to be made by the independent consultant in preparing its

report. On the basis of the independent consultant's report and prior to any

approval of a p roject by the economic development authority or the tourism

development authority, as appropriate, the Office of State Budget Director and

the Finance and Administration Cabinet shall certify whether there is a

projected net positive economic impact to the Commonwealth and the

expected amount of incremental state revenues from the project to the

economic development authority or tourism development authority, as

appropriate. Approval shall not be granted if it is determined that there is no

projected net positive economic impact to the Commonwealth.

(c) The primary project entity shall pay all costs associated with the independent

consultant's report.

(4) With respect to each city, county, or agency that applies for approval of a project

and development area , the economic development authority or the tourism

development authority, as appropriate, shall request materials and make all inquiries

concerning the application the economic development authority or the tourism

development authority, as appropriate, de ems necessary. Upon review of the

application and requested materials, and completion of inquiries, the economic

development authority or the tourism development authority, as appropriate, may by

resolution grant approval for:

(a) The development area and project for which an application has been

submitted;

(b) The percentage of the Commonwealth's portion of the increment that the

Commonwealth agrees to have distributed to the agency each year during the

term of the grant contract;

(c) The maximum amount of costs for the project for which the increment may be

distributed to the agency; and

(d) The grant contract.

(5) Prior to any approval by the economic development authority or the tourism

development authority, as appropriate, the economic development auth ority or the

tourism development authority shall have received an ordinance adopted by the city

or county creating the development area and approving the project and establishing

the percentage of increment that the city and county are distributing each year to the

agency to pay for the development area for which economic development authority

or tourism development authority approval is sought. The economic development

authority or the tourism development authority, as appropriate, shall not approve a

percentage of the Commonwealth's portion of the increment to be distributed to the

agency each year with respect to a development area and project greater than the

percentage approved by the city or county creating the development area.

(6) The amount of incre ment available for a development area shall be no more than

eighty percent (80%) per year, but shall in no case exceed twenty -five percent

(25%) of the project costs during the term of the grant agreement.

(7) The terms and conditions of each grant contrac t are subject to negotiations between

the economic development authority or the tourism development authority, as

appropriate, and the other parties to the grant contract. The grant contract shall

include but not be limited to the following provisions: the activation date, the

agreed taxes to be included in the calculation of the increment, the percentage

increment to be contributed by the Commonwealth and other taxing districts, the

maximum amount of project costs, a description of the development area and the

project, the termination date, and the requirement that the agency annually certify to

the economic development authority or tourism development authority, as

appropriate, as to the use of the increment for payment of project costs in the

development area.

(8) The agency responsible for the development area that enters into the grant contract

shall, after each year the grant contract is in effect, certify to the economic

development authority or the tourism development authority, as appropriate:

(a) The amount of the increment used during the previous calendar year for the

project costs; and

(b) That more than twenty -five percent (25%) of the total revenues derived from

the project during the previous calendar year were attributable to sources

outside the Commonwealth.

(9) (a) Any agency that enters into a grant contract for the release of any increments

that may arise during the period of a grant contract shall, after each calendar

year a grant contract is in effect, notify each taxing district obligated under the

grant contract that an increment is due. In consultation with each taxing

district, the agency shall determine the respective portion of the total

increment due from each taxing district, and the determination of the agency

shall be reviewed by an independent certified public accountant. The agency

shall submit to the Department of Revenue for certification its determination

with respect to the total increment due together with the review of the certified

public accountant and detailed informati on concerning ad valorem taxes,

Kentucky individual income tax, Kentucky sales and use taxes, local

insurance premium taxes, occupational license fees, and other such state taxes

as may be determined by the Department of Revenue, including withholding

taxes of employees of each taxpayer located in the development area.

1. Upon notification to the agency of the total increment by the Department

of Revenue and notice from the agency, each taxing district obligated

under the grant contract, other than the Comm onwealth, shall release to

the agency the respective portion of the total increment due under the

grant contract. The agency shall certify to the Department of Revenue on

a calendar year basis the amount of the increments collected.

2. Upon certification o f the total increment due from the Commonwealth

by the Department of Revenue, the department is authorized and

directed to transfer the increment to a tax increment financing account

established and administered by the Finance and Administration Cabinet

for payment of the Commonwealth's portion of the increment. Prior to

disbursement by the Finance and Administration Cabinet of the funds

from the tax increment financing account, the economic development

authority or the tourism development authority, as app ropriate, shall

notify the Finance and Administration Cabinet that the agency is in

compliance with the terms of the grant contract. Upon notification, the

Finance and Administration Cabinet is authorized and directed to release

to the agency the Commonwea lth's portion of the total increment due

under the grant contract.

(b) The Department of Revenue shall report to the economic development

authority or the tourism development authority, as appropriate, on a calendar

year basis the amount of the total increment released to an agency.

(10) The Department of Revenue shall have the authority to establish operating

procedures for the administration and determination of the Commonwealth's

increment.

(11) The Department of Revenue or agency shall have no obligatio n to refund or

otherwise return any of the increment to the taxpayer from whom the increment

arose or is attributable. Further, no additional increment resulting from audit,

amended returns or other activity for any period shall be transferred to the trust

account established under subsection (9)(a)2. of this section and administered by the

Finance and Administration Cabinet after the initial release to the agency of the

Commonwealth's increment for that period.