Agenda Item: 11
CITY OF SANTA CLARITA
AGENDA REPORT
CONSENT CALENDAR
CITY MANAGER APPROVAL:
DATE: August 25, 2026
SUBJECT: USE TAX INCENTIVE PROGRAM WITH AEROSPACE DYNAMICS
INTERNATIONAL
DEPARTMENT: Economic Development
PRESENTER: Tyler Pledger
RECOMMENDED ACTION
City Council approve reimbursement of $80,857 to Aerospace Dynamics International (ADI) per the Use Tax Incentive Program agreement entered into between the City of Santa Clarita and ADI on June 10, 2010.
BACKGROUND
The City of Santa Clarita's (City) Use Tax Incentive Program was established to strengthen partnerships between the City and local businesses by incentivizing business expansion and investment within the community. The program is designed to generate additional use tax revenue for the City by allowing a portion of qualified use tax payments remitted to the City to be reimbursed to participating businesses.
Under the standard Use Tax State allocation, the City would receive 3 percent of the 1 percent of use tax paid by a business. Through the Use Tax Incentive Program, qualifying businesses can apply for a Direct Pay Permit that allows the full 1 percent of use tax paid by a business to be directed to the City, generating additional revenue for the City. To qualify for a Direct Pay Permit, a business must incur at least $500,000 in use tax purchases in the prior year. Once a Direct Pay Permit is secured, the business is able to execute a contract with the City to qualify for the Use Tax Incentive Program.
Aerospace Dynamics International (ADI) is a local aerospace manufacturing company that completed a significant expansion of its operations in Santa Clarita over ten years ago, with estimated construction costs exceeding $14,700,000. As part of the expansion, ADI entered into a Use Tax Incentive Agreement with the City on June 10, 2010.
Under this agreement, there are two options for the incentives generated by ADI to be
reimbursed:
Cash Rebate: A cash rebate equal to 30 percent of the net new use tax generated as a result of participation in the program.
Business Expansion Credit: A rebate equal to 50 percent of the net new use tax generated as a result of the participation in the program. Business Expansion Credits may be used for any permit or development fees for an approved project located within the City.
To date under this agreement, ADI has generated $1,193,801 in use tax payments to the City as a result of their participation in the Use Tax Incentive Program. Through the program, the City has retained $614,807 in use tax revenue, compared to an estimated $35,814 it would have received without the program.
ADI has earned $578,993 in Business Expansion Credits and received $444,232 in Business Expansion Credit payments, approved by the City Council in March 2011 and January 2014.
ADI has a remaining credit balance of $134,762 and has requested a Cash Rebate in the amount of $80,857.
The agreement requires that if the amount of disbursement exceeds $50,000 in a fiscal year, the disbursement of funds must be brought to City Council for approval.
ALTERNATIVE ACTION
Other action as determined by Council.
FISCAL IMPACT
The resources required to implement the recommended action are contained within the City of Santa Clarita's adopted FY 2026-27 budget: $80,857 is available for disbursement to Aerospace Dynamics International (ADI) in Sales and Use Tax Revenue Account (100-401001).