EDC Supports USDESA Legislation

EDC Supports USDESA Legislation

In KC News by EDCKC Staff

Summary of the United States Downtown Economic Stimulus Act (USDESA) 

The United States Downtown Economic Stimulus Act (USDESA) is designed to provide economic incentives to stimulate community development in America’s economically distressed central cities and towns. To offset the higher costs associated with distressed urban property development, public resources are needed to address issues such as the higher costs of land acquisition and assembly, the relocation of existing businesses and residents, the replacement or relocation of aging physical infrastructure, and the provision of public amenities such as parks and green space. USDESA is a targeted means of redirecting new federal resources generated by new economic activity into America’s distressed communities.

USDESA will provide new redirected revenue for “major initiative” projects to revitalize urban cores of cities and towns throughout the United States and provide an economic stimulus for the U.S. economy.

The redirected net new federal revenue will be used as an incentive for locating in distressed areas. As projects generate new federal personal and corporate income tax, the first 5% of the effective tax rate will generate funds that will be redirected to local projects in distressed communities for up to a 20 year period. The redirected tax money will be placed by the federal government into a local special allocation fund, which will then be used to improve public infrastructure, provide parking, aid in environmental remediation, assist with property acquisition and provide business loans or grants.

“Major initiatives” are those that will create a minimum of 25 jobs and will promote education, research, arenas, community facilities, multipurpose facilities, libraries, ports, mass transit, museums and convention facilities, tourism, cultural activities, arts, entertainment, or business expansions creating net new, U.S. jobs in distressed communities.

USDESA requires that each municipality create a Downtown Development Authority (DDA) that, in cooperation with a local city council, will approve local major initiatives to be presented to the U.S. Treasury Community Development Financial Institution (CDFI) Fund. The CDFI Fund will have the responsibility for reviewing and approving projects for federal redirected revenue. The Downtown Development Authority at the local level will be an approved local CDFI.

Downtown development areas must be designated by the DDA and be integrated into a redevelopment plan approved by the local municipality, must be contiguous, must be in areas declared blighted by state or local legislation, and cannot exceed 10% of the land area of the municipality as a whole.

Private funds, in combination with local and/or state incentives, are required to access matching federal redirected revenues. The local and/or state incentives will serve as a measure of commitment to access federally redirected revenues. The use of local or state incentives will require that the local or state incentives must demonstrate a positive cost-benefit analysis on the fiscal impact to the state, city, and affected school district.

Under the USDESA legislation, the responsibility of credit enhancements and repayment guarantees will be the responsibility of the local public and private participants, and therefore not a debt obligation of the federal government. No federal appropriation is sought and federal administrative costs can be reimbursed from redirected project revenues.

For more information about the USDESA, please contact the EDC’s Research Officer, Gary Sage, at 816-691-2119 or email gsage@edckc.com

Drafted 10.1.15

Photo credit: Rich Sugg, Kansas City Star Photojournalist