HomeMy WebLinkAboutAgenda - 11-19-2014 - 1ORANGE COUNTY
ASSEMBLY OF GOVERNMENTS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: November 19, 2014
Action Agenda
Item No. 1
SUBJECT: Article 46 — One Quarter Cent Sales Tax Collection and Use; Funds Available
and Main Uses for Economic Development in Orange County
DEPARTMENT: County Economic PUBLIC HEARING: (Y /N) No
Development, County Finance
& Administrative Services
ATTACHMENT(S):
A) Economic Development Uses of
"Article 46" Quarter Cent Sales Tax
B) Article 46 Sales Tax Collection —
October 2014 Report
C) Orange County Uses of Article 46
Quarter Cents Proceeds Since
2001
D) Available Economic Development
Article 46 Sales Tax Proceeds
INFORMATION CONTACT:
Clarence Grier, (919) 245 -2453
Steve Brantley, (919) 245 -2326
1
PURPOSE: To discuss the receipt and usage of "Article 46" proceeds that are collected
annually from a one - quarter cent sales tax that Orange County voters approved in 2011 for
use in County -wide economic Development initiatives, including the main funding
programs used, successful economic development examples, current balances and next
goals.
BACKGROUND: Orange County voters successfully passed a referendum in November
2011 to levy a one - quarter (1/4) cent sales tax that generates additional annual funding for
education and economic development purposes. Now called "Article 46 ", the funding
program was forecast to generate $2.5 million annually in new local sales tax proceeds
which would be split equally between education and economic development, each
receiving $1.25 million. The 50/50 share of Article 46 funds for economic development
was initially set for 10 years. The Orange County Board of Commissioners adopted a
Resolution in December 2011 authorizing the new one - quarter cent sales tax, and actual
proceeds began to accrue at the State level and distributed to Orange County in early
2012.
There is no set protocol for Article 46 funding requests for economic development projects,
such as proposed by the municipalities, to be considered by the County. Previous
requests have been tied to specific project needs, and presented directly to the Board of
Commissioners, the County Manager, and on occasion, by the towns' economic
development staff to the Orange County Economic Development office. Proposed
changes regarding how Article 46 is administered, such as defining the primary
expenditure categories or overall objective may require the Board Commissioners to
modify the existing Resolution.
Attachments A and C provide a summary table, pie chart and current balances of the key
sectors where Article 46 funds are used for economic development in Orange County.
Assuming an annual $1.25 million receipt in sales tax proceeds, the Article 46 program
and the Orange County Board of Commissioners' adopted Resolution identify seven (7)
main economic development expenditures, as follows:
Key
Sector
% of Total
$ Annually
•
Debt service on water, sewer & associated
60%
$750,000
Infrastructure made in Orange County's three
(3) Economic Development Districts
(Eno, Hillsborough and Buckhorn)
•
Orange County's Small Business Loan Fund
16%
$200,000
•
Entrepreneurial & Incubator Support
8%
$100,000
•
Business Investment Grants
8%
$100,000
•
Agriculture Investment Grants
5%
$60,000
•
Marketing & Collaborative Outreach
1.5%
$20,000
•
Advertising, Publishing & Collateral Materials
1.5%
$20,000
100% $1,250,000
Debt Service on Utilities - 60% of annual expenditures ($750.000
Funding to cover debt service on utilities, as currently being installed in the Buckhorn
Economic Development District, was immediately put to use, and has already yielded a
significant economic development "win" for Orange County. This $4 million project,
initiated in late 2012, created a `backbone' sewer and water system to service or augment
over 1,000 acres of economic development lands, stretching from the Cheeks and Efland
areas westward toward the City of Mebane. This project included 2 miles of gravity sewer
(18" gravity in western zone and 12" gravity in eastern zone) and 3 miles of 16" water
system. Besides adding to the inventory of additional utility serviceable acres, the 16"
water system created a large loop to increase pressures, water capacity and fire flow to
many existing industrial businesses in Orange County's western economic development
zone. Other Capital Investment Plan (CIP) projects are underway to improve the
availability and reach of present utilities in designated economic development land use
areas.
The ability to have the County's western sewer system under construction enabled the
Morinaga project to consider its present location and select an area in Orange County for
the firm's new North America operation. In September 2013 the company announced the
creation of nearly 100 new manufacturing jobs, and an initial investment of $48 million. A
future plant expansion of similar size is anticipated in future years. With this new, clean
industry, Morinaga America Foods, Inc. became Orange County largest corporate taxpayer
(not counting the electric power utilities), and the County and City of Mebane formed an
even closer relationship.
K
Additional utility - served sites, along with appropriate zoning, road access and related
power infrastructure, have since opened up in the County and are being marketed to other
high quality business investment prospects.
A second illustration of Article 46 funds from this category aiding local collaboration is the
County /Town of Carrboro Interlocal Agreement related to the repair of a failing sewer line
on Roberson Street, which would have negatively impacted over 20 downtown businesses
employing more than 100 people. The sewer line has since been repaired with State
funding from a Community Development Block Grant, and a 50/50 sharing of a required
co -pay cost.
The resolution and obligation for the Article 46 Sales Tax runs for 10 years, while the debt
service on infrastructure projects runs for 20 years. Without renewal of the resolution at the
end of 10 years, the General Fund would be obligated to pay the debt service.
Small Business Loan Fund — 16% of annual expenditures ($200,000)
The Orange County Economic Development office maintains a loan program that assists
small (and start -up) businesses to obtain necessary capital, especially for firms that are
otherwise unable to receive normal bank financing due to marginal credit history or short
operating experience. Article 46 funds are available, when needed, to replenish the loan
program's lending capabilities. Typical loans can be made for as much as $50,000 with a
5 -year repayment term. With the slow recovery of the national, state and local economy,
capital demand by local firms should continue to increase, and the County's loan program
should find even more demand. The Economic Development office is working diligently to
market the program, identify potential borrowers, and make additional loans to local
businesses.
Borrowers:
• Ceremony Salon
• Tin Can Ventures
• Phd
• Skram Furniture
• The Depot
• Mystery Brewing
• Accidental Baker
• Santosha
• Isis I.T.
• Orange County Gymnastics
• Flawless Day Spa
Balances:
• Article 46 - allocated
Sun Trust Account
• Current Balance (available funds)
Company Location:
Carrboro
Cedar Grove
Hillsborough
Hillsborough
Hillsborough
Hillsborough
Hillsborough
Chapel Hill
Chapel Hill
Chapel Hill (relocated to Hillsborough)
Chapel Hill
$598,000.00
$111,695.42
$709,695.42
To date, a total of twelve (12) loans have been made to eleven (11) small businesses, and
there is one (1) pending loan application. All loans are current with no delinquent history
or negative write -offs.
M
Entrepreneurial & Incubator Support - 8% of annual expenditures ($100,000)
There is an ongoing and successful effort to retain entrepreneurial start -up talent that
originates in the County, such as from UNC Chapel Hill, by supporting an affordable and
creative work environment that keeps such talent from leaving the County. Article 46
funds back an Interlocal Agreement between Orange County and the Town of Chapel Hill
to support the monthly lease requirements of the "LaUNCh Chapel Hill" innovation center,
located on Rosemary Street. Over the initial 3 1 /2 year lease period, the County will
provide a total of $140,000 in economic development funding to support "LaUNCh Chapel
Hill ". This new incubator, with over 20 full -time promising firms, also has support and
financial backing from the University and key private donors.
Business Investment Grants — 8% of annual expenditures ($100,000)
This grant program is intended, like the Small Business Loan Program, to make vital
capital injections that help local, small businesses start up and grow. Although the
passage of the one - quarter cent sales tax for economic development has accrued funds
for this category, there was never a set of bylaws, application guidelines or review
committee in place to allow the County to actually administer the grants. However, the
Orange County Economic Development Advisory Board has worked throughout 2014 to
draft a multi- tiered set of recommended grant award levels, an application process and
guidelines, and volunteered to administer the actual review and awarding of grants
beginning in January 2015. The Advisory Board plans to presents its draft
recommendation to the County Manager and the Board of County Commissioners for
comments in December 2014, with a goal to begin the year 2015 making business
investment grants in increments up to $10,000 each to small businesses. Grant recipients
should prove over time to be small businesses located throughout the County and the
municipalities.
Agriculture Investment Grants — 5% of annual expenditures ($60,000)
A grant program funded by Article 46 also exists to help local agriculture thrive in Orange
County. This includes efforts to support sustainable farming practices by both larger
century farms and beginning new farmers, expand the production of locally produced foods
with area restaurants, farmers markets and food co -ops, and related goals. However, like
the Business Investment Grant, there has previously been no set of guidelines or other
protocol in place to help administer the grant program. The County's Economic
Development Advisory Board will present a recommended set of agricultural - Chemed draft
guidelines in early 2015 to the Manager and Board of Commissioners for their review.
Marketing & Collaborative Outreach; Advertising, Publishing & Collateral Materials —
combined 3% of annual expenditures ($40,000 total)
Article 46's two smallest categories exist to enable flexibility with decisions about how to
brand Orange County's economic development advantages, create print and digital
marketing brochures, and tools that appeal to business investors, and otherwise help staff
maximize efforts to pursue investment leads. Recent expenditures have included a joint
ad campaign (with the Chapel Hill /Orange County Visitors Bureau) on WCHL 1360 radio
and for local print media ads, development of the Orange County Economic Development
department's new web page, and use of the "Buxton" proprietary retail marketing software
services. Future marketing goals include the creation of an updated business marketing
guide, and to assist the County with a new initiative, encouraged by the Board of
Commissioners, to more directly interface with retention efforts among existing businesses
in the County.
R
FINANCIAL IMPACT: There is no direct financial impact associated with discussion of
Article 46's One - Quarter Cent Sales Tax program. There are no action items requiring
formal decisions.
RECOMMENDATION(S): The County Manager recommends the Boards discuss the
Article 46 '/4 cent sales tax program and provide appropriate comments and questions to
the respective staff members.
Attachment A
PROPOSED ECONOMIC DEVELOPMENT USES OF "ARTICLE 46"
QUARTER CENT SALES TAX
Key Sectors
Economic Development Proposed Use
Percentage of
Allocation
Debt Service on Water & Sewer Infrastructure in
3 Economic Development Districts of Orange County
$ 750,000
60.0%
Marketing & Collaborative Outreach
$ 20,000
1.5%
Small Business Loan Fund
$ 200,000
16.0%
Collateral Materials, Advertising, Publishing
$ 20,000
1.5%
Innovation Center for Entrepreneurial Development
(LaUNCh incubator)
$ 100,000
8.0%
Agricultural Economic Development Grants
$ 60,000
5.0%
Business Investment Grants
$ 100,000
8.0%
TOTAL
$ 1,250,000
100.0%
APPROVED ECONOMIC DEVELOPMENT USES OF QUARTER
CENT SALES TAX
8%
5%
8%
1.5%
16%
1.5%
■ Debt Service on Infrastructre
■ Collaborative Outreach
Small Business Loan Fund
■ Collaterial Materials
Innovation Center
Agricultural Economic
Development
Business Investment Grants
Attachment B
7
Article 46 Sales Tax Collection - October 2014 Report
Orange County, NC
Revenues
Sales Tax Month /Year Month Distributed Amount
Total FY 2011 -12
$
709,663
Total FY 2012 -13
$
2,732,718
Total FY 2013 -14
$
2,859,675
July 2014 October 2014
Total FY 2012 -13
257,744
Total FY 2014 -15
$
257,744
490,000
Total FY 2013 -14
$
Grand Total - Revenues:
$
6,559,800
Expenses
Fiscal Month /Year
Department of Economic
Development
Chapel Hill -
Carrboro City
Schools
Orange County
Schools
Total FY 2011 -12
$
20,000
-
$
-
Total FY 2012 -13
$
78,730
$ 51,242
$
490,000
Total FY 2013 -14
$
1,126,944
$ 1,023,273
$
513,055
July 2014
1,500
-
-
August 2014
446
181,245
September 2014
426,480
12,767
October 2014
23,876
279,092
-
Total FY 2014 -15
$
452,302
$ 473,104
$
-
Grand Total - Expenses:
$
4,228,650
Please direct inquires to Orange County Finance and Administrative Services at fas @orangecountync.gov or (919) 245 -2151.
Article 46 Sales Tax Collection - October 2014 Report
Orange County, NC
Notes:
The previous tables outline revenue collected and expenses incurred, since the tax's
inception. The tables are updated monthly, with the prior month's information. All
revenue and expense figures have been rounded to the nearest dollar.
The NC Department of Revenue (DOR) coordinates the collection and distribution of sales
tax revenue. County receipt of sales tax revenue can take upwards of three months. For
more information, please refer to the DOR's Sales Tax Distribution and Closeout
Schedule.
Please direct inquires to Orange County Finance and Administrative Services at fas @orangecountync.gov or (919) 245 -2151.
Attachment C
Orange County Uses of Article 46 1/4 Cents Proceeds Since 2011
$1,547,619
$1,677,976
■ Economic Development
■ Orange County Schools
■ Chapel Hill - Carrboro City Schools
Total Article 46 1/4 cents proceeds received since FY2011 total $6.5 million
0
10
Attachment D
Available Economic Development Article 46 Sales Tax Proceeds
Revenues
Total Revenue - Economic Development and Education $ 6,559,800
Less: Education portion of revenues $ 3,279,900
Economic Development Initiatives portion of revenues $ 3,279,900
Expenditures
Economic Development Expenditures thru October 31, 2014 $ 1,677,976
Economic Development Committed Funds thru October 31,
2014 $ 704,584
Total Economic Development expenditures and committed
funds as of October 31, 2014 $ 2,382,560
Article 46 Sales Tax Proceeds Available for Economic Development
Initiatives $ 897,340