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Home My WebLink About02-01-2005 Council Economic Development CommitteeAGENDA City of Iowa City City Council Economic Development Committee Tuesday, February 1, 2005 2:00 p.m. City Hall Planning & Community Development Conference Room (2nd Floor) 410 East Washington Street Call to Order 2. Approval of Minutes - November 19, 2004 3. Business Visit - Tour of Lear Corporation Plant (2500 Highway 6 East) 4. Adjournment MINUTES CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE NOVEMBER 19, 2004 CITY HALL, CITY MANAGER'S CONFERENCE ROOM Members Present: Ernie Lehman, Bob Elliot, Regenia Bailey Members Absent: None Staff Present: Steve Nasby Others Present: Brian DeCoster CALL MEETING TO ORDER Chairperson Lehman called the meeting to order at 8:OOAM. APPROVAL OF THE MINUTES FROM OCTOBER 12, 2004 Motion: Elliot moved to approve the minutes from October 12, 2004 meeting as written. Bailey seconded. Motion passed 3:0. DISCUSSION -APPLICATION FOR TAX INCREMENT FINANCING ASSISTANCE Nasby said that Big Ten Rentals is re -located within the Highway 6 Urban Renewal Area. Nasby noted that the applicant is proposing to renovate his facility at 1820 Boyrum Street. He mentioned that the tax assessment on the property (as of January 1, 2004) is currently $694,520 and that figure is lower than the "TIF base" that set the value at $737,000 (the January 1, 2003 assessed value). Nasby said that TIF would require the value of the building needs to be increased by at least 15% over the assessed value, which in this case would be about $798,000. Nasby said that he discussed this matter with DeCoster and the City Assessor's Office. He said that DeCoster had determined that even though he purchased the building less than the assessed value, would have to increase the value with more than 15% to qualify for TIF. Nasby also mentioned that the applicant is asking for 10 years of tax rebates for the property. DeCoster said that they used the 2003 values to determine the increase needed to qualify for TIF. Nasby said that we would like to use the $694,520 number as that is the current assessed value, but that he doesn't believe that that would be possible because the Highway 6 TIF district was certified this year due to the Southgate project, and 2003 is the district base year. Nasby confirmed to the committee that the base value is stuck with $737,000. DeCoster said that he wanted to apply for this last year, thinking that it will be a fairly simple deal, but as he got more information, things got complicated. He said that he thought that it would not be that uncommon in a TIF district for a property to be sold below the assessed value. Lehman said that they always used TIF to encourage development in areas that are less developed. He asked that if they use the $737,000 base what happens if the assessed value goes down to $600,000 how is he going to get to $847,000 which is 115% of the 2003 base value. Nasby said in that situation if he does not get to $847,000, there will be no TIF rebate even if he makes the improvements. DeCoster said that he will not appeal the tax assessment down, and will try to keep it high enough so the TIF could work. Lehman said that DeCoster should try to get the tax assessment down anyway since he purchased the building for much less than the assessment. Nasby said that the TIF only gives a rebate on taxes, but if DeCoster manages to lower down the taxes with the assessors' office then he would have to pay less in taxes. DeCoster said that if he wants the TIF he will have to invest more in the building. Lehman said that if the assessed value goes down, than the applicant will pay taxes for the assessed values, but in order to qualify for TIF, the value has to increase 15% from 2003. DeCoster said that he looks for the long-term benefits of the TIF, and that is why he is requesting a 10-year period. DeCoster listed some changes that he will like to do include glass and brick along the front and put sculpted style canopies over the windows. He said that he would like to rent out a portion of the building so interior improvements will be made as well. He said that he would also like to add one garage door in front, and a few garage doors in the back to get in and out of the building. City Council Economic Development Committee Minutes November 19, 2004 Page 2 Lehman said that if the assessed value is decreased, DeCoster will have to have a higher increase in the assessed value to get any TIF money at all. He said that he does not see the numbers working, and he doesn't see any financial advantage by doing so. Nasby said that any TIF advantage will not be at the beginning of the TIF agreement but there could be some near the end date. DeCoster said that he could see getting the assessed value to the required level with all the changes that he wants to do. Lehman said that investing the money in the building does not mean that the value will increase directly proportional with the spending; the value depends on how the assessor values it. Elliot said that it is better to talk with an appraiser or assessor because it seems that it might be easier for DeCoster to just pay lower taxes instead of trying to qualify for TIF. DeCoster said that even if he wants to do the improvements the value will still increase and he would have to pay higher taxes. Lehman asked at what time does the 15% kick in. Nasby said that you have to increase with 15% of the value in the first year of the TIF rebate. Lehman asked if there is a factor relative to market rate increase in value. Nasby said "yes" and that the increase for TIF purposes have to be due to improvements. Elliot said that if it is assessed at $737,000 and can not get TIF unless it reaches $847,000, it might take three or even more years to reach that goal. Lehman added that if it does increase due to market forces rather than improvements the project may not get TIF at all. Elliot asked if the TIF hangs in there even after five years if there had been no increment. Nasby said that it was in effect for whatever timeframe was in the agreement. Bailey asked DeCoster what is his assessed value, when he believes that would reach the goal. DeCoster answered that assuming that he would do noting to the building, and live it the way it is, after the third year he would pay less taxes with the TIF, but if he would improve the building without TIF, the taxes will go higher than the current ones. Elliot said that this is a rather peculiar situation. He added that he is in favor of the project, but that he is concerned about the well being of the applicant because he can not see the numbers working out. Bailey said that there are some requirements regarding the minimum wage. She said that $15,600, which is the estimated salary, is barely over the 30% median income level. Bailey said that the lowest paid job would just meet the median income housing. DeCoster said that he hires a lot of people from the Hope House, and even if it is hard work, a lot of them do not have where else to turn. Bailey asked if the $7.50 per hour is paid for contract or seasonal employees. DeCoster replied that this amount is for both part- time and full-time, especially those without a drivers license. Bailey said that the role of minimum wage requirements is that the City does not support businesses that would also require other services in the community. Lehman said that it might happen that they do invest the money and do not reach the $847,000 assessment, and when the goal will be finally achieved, it will because of the market rate, and not of the value increase, and it will result in not getting any TIF money at all. Bailey said that if there is little to benefit it might be better to weigh and see if it is acceptable to comply with all other constraints from the City. Bailey inquired about what other things may apply to getting a TIF? Nasby said that design review is a requirement and other than that there is some annual reporting for the business. Bailey asked DeCoster if design review would present any problems. DeCoster said that he did not think so. Lehman said that design review is much easier now than it was in the past and it should not be an issue. Bailey added that it may be better to work an accountant on a spreadsheet regarding the tax situations and determine if this TIF process is really worth doing. Lehman asked if there is any cost related to the application for TIF. Nasby answered that there is no cost but the time of the applicant. Lehman said that it is a no lose situation for the applicant in the TIF. He added that if it works out the applicant could save some money. MOTION: Elliot moved to approve a seven years, 100% TIF tax rebate with a maximum of $42,000. Bailey seconded the motion. City Council Economic Development Committee Minutes November 19, 2004 Page 3 ADJOURNMENT The meeting adjourned at 8:45 AM. Minutes submitted by Bogdana Rus. s:/pcd/minutes/hcdc12004/edc11-19-04.doc W 0 0 0 0 o� N O N O 0 0 M O O 00 00 w O O O C) OO H CO W O O O � 4] � o •� a WEn a, zaaaw b � a¢¢zz �4x00