Implications of forthcoming tax abatement disclosures and steps economic developers can take to prepare.

1. GASB Incentive
Workshop
IEDC FED FORUM
APRIL 2017
ELLEN HARPEL
SMART INCENTIVES

2. About us
Business Development Advisors
is an economic development
consulting firm
Smart Incentives helps communities
make sound decisions
throughout the incentives process
2 © 2017 SMART INCENTIVES

3. Understanding Statement
No. 77 in relation to your
job as an economic
developer
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4. Why do we use incentives?
To achieve our community’s economic development goals
◦ Jobs
◦ Business Development
◦ Investment
◦ Downtown revitalization
◦ Brownfield redevelopment
◦ Quality of life and quality of place
◦ Strengthen tax base
Incentives are not just about winning a deal. Smart incentive use is
always connected to a larger economic development strategy.
4 © 2017 SMART INCENTIVES

5. What is driving interest in
incentives disclosure?
Disconnect between what economic developers believe they do
and what others think they do
Growth in incentive use
◦ more programs
◦ more money
◦ more projects
Expectation for data-driven, performance-based accountability in
government programs
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6. Fundamentals of reporting
& disclosure
Transparency
◦ How much are we spending?
◦ Who is receiving incentives?
Accountability
◦ What are we getting out of our incentives spending?
◦ Do our programs help us achieve our goals in an effective and
efficient manner?
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7. Reporting is part of the
incentives process
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8. Nuts and bolts
of reporting and
compliance
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9. Introduction to GASB 77
Requires disclosure of financial information about tax abatement
agreements between individual taxpayers and governments
◦ Guidance is limited to tax abatements – does not include all tax
expenditures or other forms of assistance to businesses
◦ Not limited to tax abatements for business attraction/expansion
Why? To make transparent the financial impact of transactions
that can limit a government’s revenue-raising ability
GASB is not directly concerned with the effect of tax abatements
on economic development outcomes
In effect for financial statements for periods beginning after Dec.
15, 2015
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10. Definition of a Tax
Abatement
A reduction in tax revenues that results from an agreement
between one or more governments and an individual or entity in
which (a) one or more governments promise to forgo tax revenues
to which they are otherwise entitled and (b) the individual or entity
promises to take specific action after the agreement has been
entered into that contributes to economic development or
otherwise benefits the governments or citizens of those
governments.
Source: Statement 77; Presentation by Pam Dolan, Project Manager, GASB
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11. GASB Statement 77 State & Local
Tax Abatement Disclosure
Disclose agreements between individual taxpayers and the
government that might diminish the tax base
Includes:
◦ General descriptive information (tax being abated, authority, eligibility,
mechanism by which taxes are abated, provisions for recapture)
◦ Commitments made by the recipient
◦ Other commitments made by a government (such as infrastructure)
◦ Number of tax abatement agreements entered into and in effect during
the reporting period
◦ Dollar amount of taxes abated during the reporting period
Substance of the transaction rather than the name or description
determines whether the abatement must be disclosed.
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12. Disclosure principles
A government should disclose information separately for:
◦ Its own tax abatements
◦ Tax abatements that are entered into by other governments that
reduce the reporting government’s tax revenues
Disclosure information may be presented for individual
agreements or may be aggregated
Disclosure should commence in the period in which a tax
abatement agreement is entered into and continue until the tax
abatement agreement expires.
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Source: Statement 77; PresentaEon by Pam Dolan, Project Manager, GASB

13. Summary of required disclosures
Brief Descrip+ve Informa+on Own Abatements Other Government’s
Abatements
Name of program x
Purpose of program x
Name of government x
Tax being abated x x
Authority to abate taxes x
Eligibility criteria x
Abatement mechanism x
Recapture provisions x
Types of recipient commitments x
Dollar amount of taxes abated x
Amounts rec’d from other governments for abated
taxes
x
Threshold for individual disclosure x
InformaEon omiWed due to legal prohibiEons x
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Source: PresentaEon by
Pam Dolan, Project
Manager, GASB

14. Three steps for economic
developers
Understand which tax incentives meet the GASB criteria for
disclosure
Communicate with your government finance staff
Determine how to supplement the financial disclosure
◦ Disclosures will describe costs but not expected benefits of tax
abatements
◦ Consider supplemental reports
◦ Be prepared for questions
◦ Engage and be a good resource
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15. How best to talk to
colleagues and elected
officials about Statement
No. 77
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16. To do now
Communicate with government finance staff and/or budgetary
officials
Think about stakeholders*
◦ Enacting authorities: states, cities, counties
◦ Reporting entities: finance department; other affected jurisdictions
such as school districts
◦ Direct stakeholders: tax departments, state auditor, municipal league,
association of counties, assessors
◦ Third party stakeholders: financial institutions, investors, rating
agencies
*Source: John Tysseling, Moss-Adams LLP
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17. To do at time of disclosure
Supplement the financial disclosure
◦ Disclosures will describe costs but not expected benefits of tax
abatements
◦ Consider supplemental reports
Options:
◦ Letter of transmittal with the Comprehensive Annual Financial Report
(CAFR)
◦ Other supplemental material within CAFR
◦ Annual report aligned with disclosures
◦ Online – dashboards, opengov sites, etc.
Be prepared for questions
Engage and be a good resource
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18. Engage and be a good
resource
Connect tax abatement use to your community’s economic
development objectives.
Provide context that demonstrates relative impact and fit with the
community.
Consider your audience(s).
Strive to improve the quality of the policy conversation around
incentives.
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19. To do over time
Consider how to use the disclosures in conjunction with your own
reporting on economic development activities
Develop a template or consistent method of providing both the
required disclosures and any supplemental data
Streamline and standardize data collection procedures
How can this information improve economic development
decision-making?
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20. Contact us
Ellen Harpel
President
571/212.3397
eharpel@businessdevelopmentadvisors.com
www.businessdevelopmentadvisors.com
ellen@smartincentives.org
http://www.smartincentives.org/
@SmartIncentives
20 © 2017 SMART INCENTIVES

21. Questions
Have you been working with your government finance staff on
these disclosures?
◦ What has your role been?
◦ What have been the challenges?
◦ Have there been surprises?
◦ What has been your experience in pulling together requested data
elements?
What questions are you fielding about tax abatement disclosures?
What story would you like to tell?
What are you interested in learning from disclosures from other
places?
What can we do to facilitate proper use of GASB 77 reporting?
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