Louisville’s incentive package based on percentage of sales tax, permit fees

LOUISVILLE – The city of Louisville made history Jan. 16 by instituting its first business incentive package.

The Business Assistance Program, known as BAP, is an ordinance added to the city’s municipal code with the aim of recruiting, retaining and expanding businesses in Louisville.

BAP, which was developed by Becky Hogan, a Denver-based economic development consultant hired by Louisville, is based on one simple principle: Businesses that generate permit fees and sales taxes revenues for the city get to share the wealth.

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For example, a retailer moving into Louisville will generate a certain amount of sales tax.

When the retailer applies for BAP, it provides an estimate of the sales tax revenue it will generate. If its application is approved, the business will be eligible to receive a certain percentage of the tax collected for up to 10 years.

The same rebate plan applies to businesses that are expanding.

When a business renovates its offices so it can hire more people, for example, it pays permit fees. Part of the renovation may include purchasing furniture and lighting; if bought within the city limits it pays sales tax. When the contractor buys construction materials – drywall, bricks, windows, etc. – it pays a construction use tax. Once hired, the new employees then spend money in Louisville, generating more sales tax.

Prior to the renovation, the business applies for BAP to negotiate its tax and permit fee rebate.

The percentage of rebate and time frame are determined during the application process. Applicants present their case at a city council meeting, and approval requires the assent of four council members.

One difference between this type of plan – which Hogan said is in effect in Front Range communities including Broomfield, Westminster, Thornton, Northglenn and others – and Boulder’s incentive plan is it doesn’t rely on taxpayers’ dollars. “People only get a percentage of the newly created tax dollars, so it’s never taken out of the pot,” Hogan said. “This is hugely significant. The other one has been up for debate of whether it’s fair to give away tax dollars.”

Another is that it’s open to all businesses, not just primary employers, “to give us some versatility,´ said Louisville Mayor Chuck Sisk.

A competitive advantage Louisville has had for some time is its lack of a use tax, Sisk continued. The city put a use tax on the ballot last November, and it was soundly defeated. “Other cities are saying, ‘We will waive the use tax,’ and we say, ‘We waive it from the get-go.’ “

Sisk likes BAP’s simplicity. “I’m hopeful that it will pay dividends for us. I think it will at least allow us to emphasize the way forward to get and retain businesses in Louisville.”