Agenda Packet 12-10-18 Meeting - REVISED

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CITY OF EUGENE, OREGON Notes to Basic Financial Statements continued (5) Other Information, continued (I) Tax Abatements, continued West Eugene Enterprise Zone, continued Four or five years of exemption in total can be granted with special approval from the Zone Sponsor. The requirements include the basic three–year requirements, plus: • Compensation for new jobs created must be at least 150 percent of the average wage for Lane County; • Local approval by written agreement with the local Zone Sponsor; and • Additional requirements that the local zone sponsor may reasonably request. The abatement applies to real and personal property taxes, which are reduced through a reduction of the assessed value. The property taxes normally assessed on a new building/structure, or newly installed machinery and equipment qualify for 100% exemption. Land, existing buildings, existing machinery and equipment, and minor personal property items are not eligible for the exemption. Property is disqualified if it is used for an ineligible activity, such as retail operations, or if the business substantially curtails operations or closes during the exemption period. When property becomes disqualified, prior exempt taxes are billed for payment. For the fiscal year ending June 30, 2018, the property tax impacts from tax abatements are as follows: Property Tax West Eugene Property Tax Impact LIRHPTE MUPTE Differential Enterprise Zone Revenue Loss $ 391,441 857,090 52,192 250,928 Revenue Shift 62,676 137,234 1,451 40,178 The reported property tax impacts were calculated using post division of tax rates. The amounts represent the amount of assessed property taxes. The amount of revenue losses does not take into consideration early payment discounts or property tax collection rates. (J) Accounting Standards Issued but not yet Adopted GASB Statement No. 87, Leases was issued in June 2017. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. This statement is effective for fiscal years beginning after December 15, 2019. Earlier application is encouraged. GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements was issued April 2018. The primary objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. It defines debt for purposes of disclosure in notes to financial statements as a liability that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established. This Statement requires that additional essential information related to debt be disclosed in notes to financial statements, including unused lines of credit; assets pledged as collateral for the debt; and terms specified in debt agreements related to significant events of default with finance-related consequences, significant termination events with finance-related consequences, and significant subjective acceleration clauses. For notes to financial statements related to debt, this Statement also requires that existing and additional information be provided for direct borrowings and direct placements of debt separately from other debt. This statement is effective for fiscal years beginning after June 15, 2018. Earlier application is encouraged. 86 December 10, 2018, Meeting - Item 2D