by Mike Sharkey
Staff Writer
One of the best enticements car dealers use is a rebate.
“Buy a car and we’ll give you $3,000 on the spot!” the ads scream.
The City is getting a rebate, too, from both the new arena and baseball park. And, they’ll be getting one from the new Main Library and county courthouse complex, also.
Thanks to a loophole in the tax laws which allows the City to maintain a tax-exempt identification number with the IRS, the City will soon see a refund on taxes paid on materials and equipment for the four major projects within the $2.2 billion Better Jacksonville Plan.
Between the ball park and arena, the City stands to get back well over $1 million in sales tax savings.
“This process is used on major projects,” explained Chief Administrative Officer Sam Mousa. “We limit it to large projects and it can result in significant savings.”
According to Mousa, all bids on large projects — those in excess of $10 million — are required to include sales tax for materials and equipment. Rather than require contractors to purchase those goods themselves, the City buys them. The contractor then submits direct materials purchases for the project. Mousa said the City entered both the sports complex projects with tax savings goals and will, in all likelihood, exceed both goals.
To date, Turner Construction has submitted 83 direct materials purchases for the $130 million arena totaling $851,381 (the budget goal was $1 million) and Barton Malow has submitted 31 direct purchases for the $34 million Baseball Grounds of Jacksonville totaling $292,547 (the budget goal was $238,000).
For example: if the City is doing a $5 million capital improvement project and there’s $2 million worth of equipment and materials purchases, the City ultimately saves $140,000 in sales tax. Mousa said savings is almost immediately pumped back into the project.
“We may use it on the building, outside bricks, things like that,” said Mousa, adding the same fiscal practice will be employed on the new $95 million Main Library and $211 million courthouse. “On the bigger projects, the savings is more because the savings exceeds the administrative costs. We don’t use it on the smaller projects because often the administrative costs exceed the savings.”
This isn’t the first time the City has taken advantage of its tax-exempt status.
“We started this back when we built the jail in 1988,” said Mousa. “We also did it at Alltel Stadium and the Performing Arts Center.”
Mousa said the City won’t be able to employ the savings plan on the $1.5 billion worth of road and infrastructure improvements with the Plan because most of those are smaller, $2 to $3 million projects.