2014 2:00:00 PM

Monday, October 13, 2014 2:00 PM
Council Chambers, Legislative Bldg., 745 4th St., Sparks

Consent Items: 8.5

Title: Consideration and possible approval of a request to refund Residential Construction Tax to Sparks Development, LLC in the amount of $146,036.70.

Petitioner/Presenter: John A. Martini, P.E. Assistant Community Services Director/John A. Martini, P.E. Assistant Community Services Director

Recommendation: Staff recommends approval.

Financial Impact: $146,036.70 Refund will be paid from Residential Construction Tax collected in Park District 3 from cash received from Sparks Development First Tee Project

Total Costs: $146,036.70

Fund: Rec & Parks District 3 Account: 603250
Program: Culture & Rec Program Revenue in P&R Dist lll Fund (1408-35)
Amount: $146,036.70 Budget Status: Over Budget (See Budget Correction Plan)

Business Impact (Per NRS 237):
A Business Impact Statement is not required because this is not a rule.

Agenda Item Brief:

On April 22, 2002 the Sparks City Council approved a Residential Construction Tax Credit Agreement ( A-2869) with Sparks Development LLC for the First Tee Project within the Kiley Southern Development Planned Unit Development. The terms of the agreement include the construction and dedication of a neighborhood park within the First Tee Development and provide Sparks Development with Residential Construction Tax Credits equal to the value of the Park. Sparks Development LLC constructed and dedicated the park and was awarded Residential Construction Tax Credits in the amount of $487,672.59. All building permits (560) for the First Tee Development have been issued and all Residential Construction Taxes have been collected. During the course of development, Sparks Development LLC forgot to use a portion of the awarded Residential Construction Tax Credits and paid the tax with cash. Staff has performed an audit of all residential building permits within the First Tee Development and has verified that Sparks Development paid for a portion of the residential construction tax with cash in lieu of using awarded credits. Staff recommends approval.

Background:

On April 22, 2002 the Sparks City Council approved a Residential Construction Tax Credit Agreement ( A-2869) with Sparks Development LLC for the First Tee Project within the Kiley Southern Development Planned Unit Development. The terms of the agreement include the construction and dedication of a neighborhood park within the First Tee Development and provide Sparks Development with Residential Construction Tax Credits equal to the value of the Park. Sparks Development LLC constructed and dedicated the park and was awarded Residential Construction Tax Credits in the amount of $487,672.59. All building permits (560) for the First Tee Development have been issued and all Residential Construction Taxes have been collected. In March of 2014, Sparks Development contacted the City and informed staff that they had failed to use Residential Construction Tax credits for a portion of the building permits and had paid the tax with cash. On April 8, 2014, legal council for Sparks Development, LLC sent the City of Sparks City Attorney a formal request (attached) for a refund of cash paid for Residential Construction Tax up to the remaining balance of tax credits issued to Sparks Development LLC.

Analysis:

Staff has performed an audit of all (560) residential building permits within the First Tee Development (see attached figure). From this audit staff has determined the following:

Sparks Development was issued 560 permits for single family home construction.
A total of $551,234.99 of Residential Construction Tax was levied for the first tee project.
Sparks Development was awarded $487,672.59 of Residential Construction Tax credit for construction and dedication of Coyote Springs Park.
Sparks Development paid $209,599.10 in cash toward Residential Construction Tax.
Sparks Development used $341,635.89 of $487,672.59 Residential Construction Tax Credit leaving a balance of $146,036.70 of credits not used.

Had Sparks Development fully used the Residential Construction Tax awarded for construction of Coyote Springs Park, they would have been required to pay a portion of the residential construction tax for the project in cash: $551,234.99 (total tax levied for the development) - $487,672.59 (credits awarded) = $63,562.40.

Sparks Development only used a portion of the Residential Tax Credits awarded and paid the remaining tax with cash. The amount that is eligible for refund is $209,599.10(cash paid) - $63,562.40(cash owed if all credits used) = $146,036.70.

Alternatives:

1. The City Council could approve the refund as outlined by staff.

2. The City Council could reject the refund and provide direction to the City Manager.

Recommended Motion:

"I move to approve the refund of Residential Construction Tax to Sparks Development, LLC in the amount of $146,036.70."

Attached Files: