COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:3921H.01I Bill No.:HB 1685 Subject:Economic Development; Department of Economic Development; Political
Subdivisions
Type:Original Date:January 26, 2022Bill Summary:This proposal establishes the Targeted Industrial Manufacturing
Enhancement Zones Act.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2023FY 2024FY 2025General Revenue*$0 to ($5,000,000)$0 to ($5,000,000)$0 to ($5,000,000)Total Estimated Net
Effect on General
Revenue$0 to ($5,000,000)$0 to ($5,000,000)$0 to ($5,000,000)
*Twenty-five percent (25%) of state tax withholdings from new jobs created within established
TIME Zones may be deposited into the TIME Zone Fund to be disbursed back to the Time Zone
(less up to 10% for state administrative costs). The program cap (across all TIME Zones) is
$5 million per year.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025TIME Zone Fund*$0$0$0Total Estimated Net
Effect on Other State
Funds $0$0$0
*Distribution of revenues and expenses net to zero.
Numbers within parentheses: () indicate costs or losses. L.R. No. 3921H.01I
Bill No. HB 1685
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2023FY 2024FY 2025TIME Zone Fund0 or 1 FTE0 or 1 FTE0 or 1 FTETotal Estimated Net
Effect on FTE0 or 1 FTE0 or 1 FTE0 or 1 FTE
☒ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☐ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Local Government*$0$0$0
*Distribution of revenues and expenses net to zero. L.R. No. 3921H.01I
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FISCAL ANALYSIS
ASSUMPTION
Officials from the Office of Administration - Budget and Planning (B&P) assume this
proposal allows for 25% of the state tax withholdings on new jobs within a TIME zone to be
deposited into the TIME zone fund, newly created, rather than the general revenue fund.
The total amount of withholding taxes retained by all TIME zones shall not exceed $5M per
fiscal year. B&P will show an impact of up to $5M deposited into the TIME zone fund and (up
to $5M) from general revenue.
This proposal may encourage other economic activity, but B&P does not have data to estimate
induced revenues.
Officials from the Department of Economic Development (DED) assume the proposal creates
the “Target Industrial Manufacturing Enhancement Zones Act” (TIME) which allows
communities to recapture a portion of state withholding tax associated with new taxes and use
those funds for infrastructure improvement. The TIME Zone program is to be administered by
the Department of Economic Development. DED is responsible for reviewing and approving
agreements with local zone boards to ensure compliance with the program requirements. DED
will also receive annual reports from the zone board explaining how moneys will be spent.
620.2250.14. The total amount of withholding taxes retained by all TIME zones shall not exceed
$5M per fiscal year.
This legislation will result in a reduction to state withholding tax. DED has no mechanism to
calculate the impact on Total State Revenue, but estimates a potential GR loss of $0 to
($5,000,000).
DED is responsible for reviewing job creation quotas, approving any agreements, agreement
renewals, along with reviewing annual budgets and annual reports and, therefore, would need 1.0
FTE Economic Development Specialist to implement the program.
In summary, DED assumes a cost of $74,193(10 Mo) in FY 2023, $79,838 in FY 2024 and
$81,138 in FY 2025 to provide for the implementation of the changes in this proposal.
Officials from the Department of Revenue (DOR) note:
This proposal creates the Targeted Industrial Manufacturing Enhancement Zones Act (TIME
Zone). L.R. No. 3921H.01I
Bill No. HB 1685
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§620.2250.7 allows for the diversion of 25% to 50% of the state tax withholding on new jobs to
not be remitted to General Revenue and instead go to a designated TIME Zone as outlined in this
proposal. The percentage of the withholding tax is based on qualifications outlined in this
proposal. DOR notes this 25%- 50% is on new jobs created in a TIME Zone and is not currently
being collected by the DOR from the TIME Zone area. This proposal limits the cumulative
amount of withholding tax to $5 million annually for all TIME Zones created in the State.
DOR is unable to estimate the number of new jobs that may be created and the new withholding
tax those new jobs would generate. DED may be able to provide an estimate of the number of
expected jobs. This could be expected to generate between $0 (no TIME Zones created) and
$5,000,000 annually for the TIME Zones (based on limits of the proposal).
The DOR is unsure if this would result in additional or lost revenue to the State. Should the
created jobs be truly new jobs in the State and not just jobs in the Time Zone area then the State
would gain some withholding tax it is not already collecting. Should the TIME Zone just be
hiring employees that previously worked elsewhere then the State may actually lose withholding
tax it previously collected. The DOR will show an Unknown impact to the general revenue.
Oversight notes §620.2250 of this proposal creates the Targeted Industrial Manufacturing
Enhancement Zones Act. This also creates the TIME Zone Fund. Once an ordinance or
resolution is passed/adopted by at least two political subdivisions, this proposal requires “twenty-
five percent of the state tax withholdings” on new jobs created in the TIME Zone to go directly
to the new fund created. Oversight will assume a loss to General Revenue of the withholding tax
and a gain to the TIME Zone Fund of the withholding tax. The total amount of withholding taxes
retained by all TIME Zones will not exceed $5,000,000 per fiscal year. In addition, no TIME
Zone may be established after August 28, 2025, and already established TIME zones created
prior to that date shall continue to exist. Oversight will reflect the impact as $0 (no new jobs
created) to $5,000,000. Also, depending upon the number of TIME Zones established and new
jobs created, Oversight assumes DED may be able to absorb some additional responsibilities
created by this bill. Therefore, Oversight will range DED’s administrative needs from zero
impact to one additional FTE in the TIME Zone Fund. Oversight notes the state is allowed to
retain 10% of the proceeds for administrative costs.
Rule Promulgation
Officials from the Joint Committee on Administrative Rules assume this proposal is not
anticipated to cause a fiscal impact beyond its current appropriation.
Officials from the Office of the Secretary of State notes many bills considered by the General
Assembly include provisions allowing or requiring agencies to submit rules and regulations to
implement the act. The Secretary of State's office is provided with core funding to handle a
certain amount of normal activity resulting from each year's legislative session. The fiscal impact
for this fiscal note to Secretary of State's office for Administrative Rules is less than $5,000. The
Secretary of State's office recognizes that this is a small amount and does not expect that L.R. No. 3921H.01I
Bill No. HB 1685
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additional funding would be required to meet these costs. However, SOS also recognizes that
many such bills may be passed by the General Assembly in a given year and that collectively the
costs may be in excess of what the office can sustain with the core budget. Therefore, SOS
reserves the right to request funding for the cost of supporting administrative rules requirements
should the need arise based on a review of the finally approved bills signed by the governor.
Oversight assumes the SOS could absorb the costs of printing and distributing regulations
related to this proposal. If multiple bills pass which require the printing and distribution of
regulations at substantial costs, the SOS could request funding through the appropriation process.
Officials from the Office of the State Treasurer assume the proposal will have no fiscal impact
on their organization. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect a zero impact in the fiscal note for this agency.
Officials from the City of Springfield assume the proposal will have no fiscal impact on their
organizations Oversight does not have any information to the contrary. Therefore, Oversight
will reflect a zero impact in the fiscal note for this agency.
In response to similar legislation, SB 174 (2021), officials from the City of Corder and the City
of Hughesville
organizations. Oversight does not have any information to the contrary. Therefore, Oversight
will reflect a zero impact in the fiscal note for these agencies.
Oversight only reflects the responses received from state agencies and political subdivisions;
however, other cities and counties were requested to respond to this proposed legislation but did
not. A general listing of political subdivisions included in Oversight’s database is available upon
request. L.R. No. 3921H.01I
Bill No. HB 1685
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FISCAL IMPACT – State
Government
FY 2023
(10 Mo.)
FY 2024FY 2025GENERAL REVENUERevenue Reduction – loss of
withholding tax – redirected to
the Time Zone Fund
$0 to
($5,000,000)
$0 to
($5,000,000)
$0 to
($5,000,000)
ESTIMATED NET
EFFECT ON GENERAL
REVENUUE
$0 to
($5,000,000)
$0 to
($5,000,000)
$0 to
($5,000,000)
TIME ZONE FUNDRevenue – withholding tax
collected from new jobs
$0 to
$5,000,000
$0 to
$5,000,000
$0 to
$5,000,000
Cost – DED (must not exceed
10%)
$0 or …$0 or…$0 or… Personal Service($36,305)($51,168)($51,679) Fringe Benefits($24,500)($29,692)($29,990) Equipment & Expense($16,065)($5,708)($5,822)Total Cost – DED($74,193)($86,568)($87,491)FTE Change – DED0 or 1 FTE0 or 1 FTE0 or 1 FTETransfer Out – to local
political subdivisions
$0 to
($5,000,000)$0 to ($5,000,000)$0 to ($5,000,000)
ESTIMATED NET
EFFECT ON THE TIME
ZONE FUND
$0$0$0
Estimated Net FTE Change on
Time Zone0 or 1 FTE0 or 1 FTE0 or 1 FTE L.R. No. 3921H.01I
Bill No. HB 1685
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FISCAL IMPACT – Local
Government
FY 2023
(10 Mo.)
FY 2024FY 2025LOCAL POLITICAL
SUBDIVISIONS
Transfer In – from the TIME
Zone Fund
$0 to
$5,000,000
$0 to
$5,000,000
$0 to
$5,000,000
Cost – administration of TIME
Zone developments
$0 to
($5,000,000)
$0 to
($5,000,000)
$0 to
($5,000,000)
ESTIMATED NET EFFECT
ON LOCAL POLITICAL
SUBDIVISIONS$0$0$0
FISCAL IMPACT – Small Business
Small businesses that qualify for the programs in this proposal would be impacted.
FISCAL DESCRIPTION
This bill establishes the "Targeted Industrial Manufacturing Enhancement Zones Act".
The bill allows any two or more contiguous or overlapping political subdivisions, as defined in
the bill, to create Targeted Industrial Manufacturing Enhancement (TIME) zones for the purpose
of completing infrastructure projects to promote economic development. Prior to the creation of
a TIME zone, each political subdivision must propose an ordinance or resolution that sets forth
the names of the political subdivisions which will form the zone, the general nature of the
proposed improvements, the estimated cost of such improvements, the boundaries of the
proposed TIME zone, and the estimated number of new jobs to be created in the TIME zone. The
political subdivisions must hold a public hearing prior to approving the ordinance or resolution
creating the TIME zone.
This bill allows the Zone Board governing the TIME zone to retain 25% of withholding taxes on
new jobs created within the TIME zone to fund improvements made in the TIME zone. Prior to
retaining such withholding taxes, the Zone Board must enter into an agreement with the
Department of Economic Development. The agreement must include the estimated number of
new jobs to be created, the estimated average wage of new jobs to be created, the estimated net
fiscal impact of the new jobs, the estimated costs of improvements, and the estimated amount of
withholding tax to be retained over the period of the agreement. The Department will not
approve an agreement unless the Zone Board commits to the creation of a certain number of new
jobs, as described in the bill. L.R. No. 3921H.01I
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The term of such agreement will not exceed 10 years. A Zone Board may apply to the
Department of Economic Development for approval to renew any agreement. In determining
whether to approve the renewal of an agreement, the Department will consider the number of
new jobs created and the average wage and net fiscal impact of such new jobs, and the
outstanding improvements to be made within the TIME zone, the funding necessary to complete
such improvements, and any other factor the department requires. The Department may approve
the renewal of an agreement for a period not to exceed 10 years. If a Zone Board has not met the
new job creation requirements by the end of the agreement, the Department will recapture the
withholding taxes retained by the Zone Board.
The total amount of withholding taxes retained by TIME zones under this bill must not exceed
$5 million per year. No new TIME zone will be created after August 28, 2025.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Office of Administration - Budget and Planning
Department of Economic Development
Joint Committee on Administrative Rules
Office of the Secretary of State
Department of Revenue
Office of the State Treasurer
City of Springfield
City of Hughesville
Julie MorffRoss StropeDirectorAssistant DirectorJanuary 26, 2022January 26, 2022