By Charlie Deans, NMMS Program Associate
This is an overview of funding sources that can finance projects, programming, and specifically administrative operations, of MainStreet/Arts and Cultural Districts. There are only a few funding sources that can be used to fund the administration and operations of MainStreet and A&C Districts and include:
- Quality of Life Tax
- Lodgers Tax
- Business Improvement Districts (BID)
- Local Economic Development Act (LEDA)
- Tax Increment Financing (TIF) Districts
- Quality of Life Gross Receipts Tax (QoL GRT)
The Quality of Life (QoL) GRT enables dedication of a GRT revenue increment “…to cultural programs and activities provided by a local government and to cultural programs, events and activities provided by contract or operating agreement with non-profit cultural organizations and institutions. It is the objective of the quality of life GRT that the revenue from the tax be used to expand and sustain existing programs.” The tax may be imposed in one or more increments of 1/16 percent, for a period of not more than ten years. The QoL GRT goes into effect after an election is approved by the majority of voters in the municipality.
Lodgers Tax
Lodgers Tax is an occupancy tax (usually around 5%) that is collected on all gross receipts for lodging within the municipality’s limits. The purpose of Lodgers Tax is for advertising, publicizing and promoting tourist-related attractions, facilities and events, and acquiring, establishing and operating tourist-related facilities and organizations.
Business Improvement District (BID)
A BID is a special assessment district created by the Town Council and approved by petition of the majority (51%) of property owners within the district. The revenues collected are provided to an entity, such as a non-profit, to support marketing, security, maintenance, and the district administration and services.
Local Economic Development Act (LEDA) Local Option GRT (LoGRT)
LEDA requires a local government to adopt an economic development plan to enable public investments in local economic development projects. In 2007 the legislature approved a LEDA A&CD amendment allowing for “cultural facilities” as a qualifying entity to receive a Local Option GRT (LoGRT) increase, and for purposes of public/private partnerships. As with most GRT increases, this local option requires approval by a majority of the voting public through an election.
Tax Increment Financing (TIF) District and the NM Metropolitan Redevelopment Code
Once the MainStreet/A&C District is designated as a Metropolitan Redevelopment Area (MRA), a MRA Plan is then prepared that proposes several redevelopment projects for revitalization of the area. (Read more about an MRA here.) The MRA Plan is then adopted by the municipality and a Tax Increment Financing (TIF) District can be created. The TIF district is based on the existing property tax increment increase over time; it is not a new tax or tax increase. Tax increment funds generated in the district can be used to fund redevelopment projects and the administrative costs of managing the district.
As always, don’t hesitate to contact the NMMS program for more information or technical assistance on these funding tools!