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View some more detailed reading on this subject here
View some more detailed reading on this subject here
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What is this?
How projects get approved for TDA
Application and approval process
What does this mean for the proposed resort project?
What can be done about this? And what is RRGU doing about this?
If a development meets the criteria for the Tourism Development Act then it will also qualify for the Kentucky Enterprise Initiative Act (KEIA) program. The program, which is administered by the Kentucky Economic Development Cabinet (KEDC), allows businesses to recover the sales taxes paid for approved building materials, fixtures and certain equipment acquired in the construction of the project.
In short, like the TDA, the KEIA program allows a development to recoup construction costs. However instead of recouping costs such as labor the developer would be recouping sales tax paid for certain construction materials.
Any business entity primarily engaged in manufacturing or service or technology activities, or in operating or developing a tourism attraction in Kentucky. Eligible company does not include any company whose primary activity is retail sales.
The maximum sales and use tax refund incentive available for commitment by KEDFA in each fiscal year for all projects is limited to $20 million for build and construction materials and $5 million for equipment used for research and development or electronic processing (not this project). So all projects in Kentucky applying for this incentive would have to split the $20 million.
The developer makes an application to the Kentucky Economic Development Finance Authority (KEDFA) and the total incentives are then negotiated with the Cabinet for Economic Development.
These negotiated incentives are presented with the project to the KEDFA for approval. KEDFA sets maximum approved recovery amount and terms and conditions for the agreement.
Once the project is completed the developer will submit documentation of completion per the terms and conditions of agreement and an application for refund, at which time the Department of Revenue will issue a refund check.
It is estimated that the cost of building materials, etc. used for the resort project will be in the range of $60,000,000, which could generate a potential recovery of $3,600,000 in sales taxes paid for the construction of the resort. However, approval of that amount by Kentucky Economic Development Cabinet is very unlikely since there is an overall per year cap on the total KEIA incentive that must be shared among other eligible projects.
A reasonable estimate for a KEIA incentive would be in the range of $300,000. Like the TDA incentive, the KEIA incentive is generated from the sales taxes paid for by the construction of the project, and not from any other state revenues
The KEIA, like the TDA, is an act which basically just requires eligibility of a project to be awarded. If a project meets the prerequisite requirements of the KEIA then a project is likely to be approved by KEDFA.
Because of this, it is RRGU’s position that we are not actively opposing the awarding of this incentive to a RRED resort development. Simply we don’t believe the is much that can be done to stop it.
To contact Kentucky Economic Development Cabinet:
300 West Broadway
Frankfort, KY 40601
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