HomeMy WebLinkAbout12-02-2011 Council Economic Development CommitteeAGENDA
City of Iowa City
City Council Economic Development Committee
Friday, December 2, 2011
11:00 a.m.
City Manager's conference Room
City Hall
1. Call to Order
2. Consider approval of the November 8, 2011 Economic Development
Committee meeting minutes
3. Discussion of provision for Urban Renewal Revenue Notes
4. Correspondence from Iowa City Area Development Group
5. Public input
6. Staff time
7. Committee time
8. Adjournment
MINUTES
DRAFT
CITY COUNCIL ECONOMIC
DEVELOPMENT COMMITTEE
NOVEMBER 8, 2011
LOBBY CONFERENCE ROOM, 8:00 A.M.
Members Present:
Regenia Bailey, Matt Hayek, Susan Mims
Staff Present:
Wendy Ford, Jeff Davidson, Tom Markus, Rick Fosse, Tracy
Hightshoe
Others Present:
Gigi Wood, Nancy Quellhorst, Marc Moen
CALL MEETING TO ORDER:
The meeting was called to order by Chairperson Bailey at 8:01 A.M.
CONSIDER APPROVAL OF THE MINUTES OF THE OCTOBER 18, 2011, ECONOMIC
DEVELOPMENT COMMITTEE MEETING:
Hayek moved to accept the October 18, 2011, meeting minutes as presented.
Mims seconded the motion.
Motion carried 3-0.
DISCUSS POSSIBLE DISPOSITION OF THREE CITY -OWNED_ PROPERTIES:
Davidson addressed the Committee Members, noting that there are three City -owned properties
he will be discussing this morning. He noted that staff would like to have the Members'
concurrence on moving forward with these projects. The first property that Davidson presented
is at the intersection of Court and Linn Streets. A proposed project concept includes a mixed -
use residential/office/commercial structure, in conjunction with a 575-space City -owned parking
facility. Davidson noted that staff would like to get a Request for Proposals (RFP) out yet this
calendar year. Davidson then responded to Members' questions, noting that the intention is for
the office and commercial space, the workforce housing, and the townhouse -style units to all be
private, taxable space. Members further discussed the housing options that would be available
with this type of project, and then gave staff their concurrence to move ahead as discussed.
The second potential project discussed is at the intersection of College and Gilbert Streets, and
is actually comprised of four properties. Davidson noted that these parcels have been garnering
interest for redevelopment for years. The question on these parcels is whether or not the City
will ever need this space for its own operations. Davidson noted that staff has discussed these
parcels and looked at options for what the City might do with them. Staff recommends doing an
RFP to see what types of projects are submitted. Bailey stated that getting these properties
back on the tax rolls should be a priority for them and discussion ensued about the potential for
that corner.
Davidson next discussed the Public Works and Transit site, at the corner of U.S. 6/IA 1. He
noted that before they could do an RFP for this project, soil investigations would be needed, due
to a former landfill along the riverbank. Fosse also addressed Members, noting that they need
to get a better understanding of the financial impact of mitigating the environmental issues on
FDC November 8, 2011 2
the site. He further clarified which City services can be moved out of this facility, and which
ones will need further time to complete. Mims asked about the cost of soil testing, and Fosse
noted that he is working on getting some estimates and should have them available in the next
few weeks. EDC Members noted that they agree with staff recommendations here.
Davidson briefly discussed a fourth parcel owned by the City, adjacent to the Court Street
Transportation Center/Hieronymus Square project. He noted that this will be coming to Council
once things for the Hieronymus project begin to move along.
CLARIFICATION OF ADDITION TO ECONOMIC DEVELOPMENT PROCESS AND
POLICIES:
Ford spoke with Members about staff's recommendation to add a policy whereby developers
seeking up -front financing must try to secure an Urban Renewal Revenue Note. She noted that
the City's Bond Counsel strongly recommends this be done. Davidson added that this is not a
popular issue with developers, but that it does help to reduce the City's risk. Members briefly
discussed these risks, and given the state of the economy, noted that they would agree with this
recommendation.
STAFF TIME:
Davidson shared with Members that a draft report on the Downtown Market Study is now being
reviewed by staff. The final report will be delivered to City Council at a special work session on
December 6. Davidson also noted that the City has been in contact with the owner of the Van
Patton House, which recently suffered a fire. Their first priority will be to determine if any part of
this structure can be saved. He added that the same type of evaluation will be done with the
Bruegger's building. Davidson continued, noting that a site plan has been approved for the
Hawkeye Hotel's project on Riverside Drive. The Moss -Green Urban Village project is back on
track, according to Davidson. Also moving forward is planning on the Riverfront Crossings
district. This will include an area from Highway 6 north to Burlington and Gilbert St west to the
River, generally. Finally, Davidson noted that staff will be meeting with the University on the
School of Music project soon, as this starts to move forward as well.
Hightshoe then spoke to Members briefly about CDBG requests for funds that they have
received, and that staff is considering establishing a set of threshold guidelines for applicants.
She noted that recently they have received some applications that due to past credit histories
and judgments, staff could not recommend. Staff will be working on those and present
recommendations at a future meeting.
COMMITTEE TIME:
Hayek spoke briefly about the passenger rail rally that he attended recently in Des Moines,
stating that it went very well. He shared with Members some of the information picked up at this
event.
ADJOURNMENT:
Mims moved to adjourn the meeting at 8:58 A.M.
Hayek seconded the motion.
Motion carried 3-0.
EDC November 8, 2011 4
Council Economic Development Committee
ATTENDANCE RECORD
2011
TERM
.P
o)
cn
NAME
EXP.
N
N
o
a
-A
00
co
Regenia
01/02/11
X
X
X
X
X
X
Bailey
Matt
01/02/11
O
X
X
X
X
X
Hayek
/
E
Susan
01/02/11
X
X
X
X
O/
X
Mims
E
Key:
X = Present
O = Absent
O/E = Absent/Excused
CITY OF IOWA CITY
MEMORANDUM
Date: November 29, 2011
To: Tom Markus, City Manager
From: Jeff Davidson, Director, Department of Planning and Community Development
Re: Resolution approving economic development process and policies
At your 11/22/11 City Council meeting you deferred the resolution approving economic
development process and policies. You stated you wished to have further discussion by the
Economic Development Committee of the proposed use of Urban Renewal Revenue Bond
Notes for TIF funds that are advanced to a developer at the beginning of a project. You stated
the matter should then be reconsidered by the full City Council at the December 6 meeting.
We have scheduled a meeting of the City Council Economic Development Committee for
Friday, December 2 at 11:00 a.m. in the City Manager's Conference Room of City Hall. At this
meeting we will discuss the Urban Renewal Revenue Bond Notes issue. We will also consider
input which has been received from the Iowa City Area Development Group and receive input
from the general public. You are then scheduled to reconsider the matter at your December 6
City Council meeting.
Let me know if there are any questions.
cc: Wendy Ford
ppddir/memlecodevproc-pol.doc
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,I,,,m. CITY OF ICJWA CITY
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MEMORANDUM
Date: November 10, 2011
To: Tom Markus, City Manager
From: Wendy Ford, Economic Development Coordinator
Re: Formalization of economic development process and policies
Introduction:
At their meeting on October 18, 2011, the City Council Economic Development Committee
(EDC) discussed the following memo entitled Formalization of Economic Development Process
and Policies and voted 2-0 to recommend adoption by the full City Council. The memo outlines
a process for standard operating procedures for requests for economic development financial
assistance, and provides a framework for considering requests for financial incentives.
History:
Since the EDC meeting on October 18, 2011, staff has been advised to add one additional
strategy by the City Attorney's Office. The City's Bond Counsel recommends for TIF incentives
provided up front at the beginning of a project, developers be required to secure any upfront TIF
incentives with an Urban Renewal Revenue Note. An Urban Renewal Revenue Note is a form
of debt security issued by a lender on the premise that future revenues (the tax increment, in
this case) will be sufficient to meet repayment obligations. This type of security can be used in
providing public financial assistance where immediate investment capital is required to begin a
large project.
Discussion of Solution:
We've added a fifth point under the heading TIF goals, objects, and strategies on page 3 of the
memo to address the Urban Renewal Revenue Note provision. If after discussions with area
lenders who would buy Urban Renewal Revenue notes the developer is unable to secure a
buyer, the developer may substantiate their reasoning in writing, and the project consideration
will continue, albeit with higher risk to the City.
Recommendation:
After discussion of the proposal, staff recommends the City Council adopt the economic
development process and policies subject to any revisions desired by a majority of the City
Council. We will be available to answer questions at the November 22 City Council meeting.
ppddir/mem/FormalE codevProcess-Cover. doc
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,1.,,=„®, CITY OF IOWA CITY
-T, MEMORANDUM
Date: November 3, 2011
To: City Council
From: Jeff Davidson, Director of Planning and Community Development
Wendy Ford, Economic Development Coordinator
Re: Formalization of economic development process and policies
The economic downturn which began in 2007 has created an atmosphere where the City is now
called upon to assist with the funding of economic development projects on a regular basis.
Developers are not able to go to financial institutions to the degree that they once could and
obtain the financing they need for projects. We are now commonly asked to share in the risk of
an economic development project as one of the funding entities.
Because these requests have become routine, we wish to commence a discussion that will
bring greater structure and objectivity to the standard operating procedures for evaluating
economic development financial incentives. Establishing standard procedures and a framework
for incentives will allow developers to more clearly understand the City's intentions in providing
such incentives, and ensure that the City's financial resources are used as efficiently and
effectively as possible.
We believe that our economic development financial incentives policy should be tied directly to
community objectives. These include such measures as:
• Increasing taxable valuation of property, especially commercial and industrial
• Increasing the number of jobs which have wages and fringe benefits exceeding the
County median
• Redevelopment of blighted property
• Desirable projects which might not otherwise occur without financial incentives, such as
downtown hotels, workforce housing, downtown grocery stores, arts and entertainment
venues, etc.
Following is suggested standard operating procedure for requests for economic development
financial assistance.
Step 1 - Intake. This is the information gathering stage of a project which will provide the
foundation for subsequent decision making. Project information may be proprietary and need to
be kept confidential. Project information will typically be incomplete in early stages, but it is
necessary to collect as much information as possible in order to begin the evaluation of the
project. We have developed the attached information intake form. Additional Planning
Department staff will be trained so that several persons will be able to conduct initial intake
meetings with development prospects.
Step 2 - Evaluation. The purpose of the evaluation stage is to weigh the public costs and
benefits of the project. To date, this step has been largely qualitative and subjective. We attempt
to evaluate the public purpose involved, the strength of the opportunity, and the public costs
November 3, 2011
Page 2
involved. This information is then taken to the City Council Economic Development Committee
for discussion.
We are aware of communities that use highly quantitative fiscal economic impact models. Many
of these are complicated and data -intensive. We are evaluating a software license for a product
called WebLOCI. It is data -intensive, but we believe may be suitable for our purposes. The next
step in our evaluation of this process is to load data into the model and then test it on some
prospective projects.
The evaluation stage involves an in-depth financial analysis of the project. We are currently
utilizing the services of the National Development Council to aid in this aspect of review. This
provides us with a level of expertise not otherwise available from City staff.
The evaluation process does not ignore political factors which will influence the economic
analysis. For example, how does the proposed project fare in a sustainability evaluation? Will
the proposal enhance or harm the image of the City? These factors will be fully vetted by staff
before being presented to the City Council Economic Development Committee.
Step 3 - Due Diligence. Once we have determined that the project may merit public assistance,
we proceed to due diligence. Due diligence is the process of verifying information provided in
the intake phase. It involves verifying corporate names, character of the applicant, financial
ability, financial history, market analysis, and other factors. In the due diligence phase we
typically like to examine three past years of business performance and three future years (pro
forma) based on the business plan for the project. The due diligence phase will require the
assistance of the City's legal and financial staffs. This step may need to be accelerated for a
project which requires a letter of commitment with a quick turn -around.
Step 4 - Performance Measures. Performance measures will vary depending on the type of
project. Examples of performance measures in past projects include minimum assessment
agreements, or Plaza Towers' requirement to include a hotel, grocery store, and office space in
the project. Industrial projects have been required to retain or add a specific number of jobs as
well as create an increase in the property tax base. This step is a regular part of the monitoring
process conducted by the Economic Development Division prior to certification of debt for tax
increment revenues.
Framework for incentive qualification
Tax Increment Financing or property tax exemptions are the two principal methods of
financial assistance we have used in Iowa City. There are other smaller programs such as the
CDBG economic development fund, but we anticipate TIF and property tax exemption to
continue to be our principal sources of financial incentives. Until now, we have generally
considered each project on a case -by -case basis on its own merits. We have had
misunderstandings related to the expectation that a property within a TIF district is eligible for
TIF funds as a matter of right. A more specific framework for qualifying for City -provided
financial incentives should be provided.
Once it has been determined that a project meets the public purpose requirements we have
established, the level of and necessity for financial assistance should be based on a gap
analysis. A gap analysis assures that the City's financial assistance are the last dollars in and
that "but for" the City's assistance the project would not have happened. If this analysis results
in a project which can proceed without public assistance, then it should proceed without
public assistance.
November 3, 2011
Page 3
TIF goals, objectives and strategies
Under state law, TIF assistance can be used for two principal matters: economic development
and remediation of slum and blight. We have developed the following additional criteria for
evaluating TIF assistance:
1. TIF generator.
Creation of a TIF generator of at least $2 million should be a goal, but not a requirement,
for the establishment of a TIF district.
2. Percentage limitation.
It should be a goal, but not a requirement for TIF funding to not exceed more than
50% of the TIF increment created. Further, TIF funds made available to a private
developer shall not exceed the ryoiect value created. For City TIF projects, funds
may be generated from an entire TIF district.
3. Developer equity.
Developer equity should be required to at least equal or exceed the amount of TIF
funds made available for a project. To clarify, bank commitment of debt can be
counted towards developer equity.
4. Eligibility.
The following types of projects, which meet taxable value and high quality jobs goals of
the City, will be considered for TIF assistance:
1. Industrial uses
2. Office space
3. Retail space
4. Specific desired uses, such as hotels, grocery stores, arts and entertainment venues,
etc.
5. Historic revitalization for adaptive reuse
6. Housing which supports stated economic development goals
5. Additional security for upfront financial incentives.
It shall be the City's policy to use a rebate approach for TIF assistance, where all
property taxes are paid and money distributed to protected levies, and the remainder
available for project rebates. Upfront financial assistance will be considered on a case -
by -case basis. Urban Renewal Revenue Notes will be requested for all upfront financing,
and if notes are unobtainable from lender, the developer shall provide substantiating the
reason why.
Process for creating a TIF project
The following process will be followed for crafting a TIF project:
1. Creation of Urban Renewal District
2. Application process for TIF funds
November 3, 2011
Page 4
3. Gap analysis
4. Staff recommendation
5. Legislative process through the EDC, Planning and Zoning Commission, and City
Council
Attachments:
Adopted Economic Development Policies
Intake Form
Tax Increment Financing Districts and Property Tax Exemption Areas
ppdd i t/me m/For m a l EcodevP rotes s. d oc
Approved by the City Council Economic Development Committee
4-19-2011
City Manager Markus
ECONOMIC DEVELOPMENT POLICIES
It shall be the policy of Iowa City to maintain an economic development plan. The purpose of the
plan is to attract new development including residential, commercial, and industrial uses.
Further, the purpose of the plan is to retain the city's existing business operations and to
encourage them to expand and foster spin-off business operations. The city's plan also supports
organizations which help to incubate, grow, foster, and create new business operations by
providing non-traditional collaborative environments.
The expected results of the economic development plan are: increased economic activity, more
jobs, lower unemployment, higher wages, greater property values, more tax revenues, more
ownership and entrepreneurial opportunities, and revitalization of underutilized or blighted
areas.
The city will consider incentive programs including city, state, and federal economic
development funds, tax increment financing, public private partnerships, and other tools in order
to achieve the expected results.
Various evaluative tools including financial pro formas, written evaluation reports, established
benefit metrics, and other performance tools shall be used to monitor the use of economic
incentives from the early stages of project development thru the issuance of an incentive and
post incentive to make sure the objectives are met.
Developers who receive incentives will be expected to enter into development agreements
which delineate the terms, conditions, understandings, and the expected results of receiving an
incentive.
It will be the policy of the City of Iowa City to endeavor to attract, recruit, retain, foster, and
develop new development through the use of incentives which is new to our region
(Metropolitan statistical area [MSAJ). The city will not actively recruit business from other
jurisdictions within our MSA. Should business from jurisdictions within our MSA wish to relocate
to the City of Iowa City, we will notify our neighboring jurisdiction of the interest. It will be the
general practice of the City of Iowa City to not provide economic incentives to business wishing
to relocate from another jurisdiction within our MSA.
When incentive programs are utilized they will be used to maximize the benefits to the City of
Iowa City. The dollar amount of the incentive and time duration of the incentive shall be smallest
amount necessary to achieve the maximum amount of city benefit as determined by the City of
Iowa City City Council.
Despite the need for the program to be flexible and nimble in order to respond to the ever
changing economic conditions of the marketplace, it will be the policy of the city to insure that
the process of using incentives is an open and transparent public process which instills
confidence in the public's understanding of how economic development incentives are utilized.
wippddir/Eco nomicDevelopmentPolicies-2011
1 -1 i
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CITY OF IOWA CITY
Date:
Present at meeting:
Name of firm:
Contact information:
Name:
Phone:
e-mail:
Project description:
Economic Development Intake Form
Meeting location:
Nature of firm: El Local U Regional El National U Global
Location identified?
Size of parcel:
Existing building or new?:
Size of building needed:
TIF District or not?
# of Jobs:
Associated wagesibenefits:
Projected sales/year:
Estimated taxable value:
Parking requirements:
Industrial -Related
Transportation requirements? (Rail, interstate access, special roadway geometry, etc.)
Water capacity needs in gal/day (average and peak):
Waste water capacity needs in gal/day:
• High concentration waste?
EPA industrial category?
• flours of operation'?
Electricity requirements:
Notes:
w/ppdd ir/EconornicDevelopme nt Intake Form. doc
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Jeff Davidson
From: Marc Moen <marcmoen@me.com>
Sent: Tuesday, November 08, 2011 1:26 PM
To: Tom Markus; R Bailey; Matt J. Hayek; Jeff Davidson; Wendy Ford
Subject: guarantee on TIF money
Developer A & B bid on project.
Developer A's proposal is best, Neither A nor B can get guarantee to cover TIF funds.
City chooses the project it likes best.
Developer A & B bid on project.
Developer A's proposal is best. Both A and B can get guarantee to cover 'TGIF funds (highly unlikely)
City chooses the project it likes best.
Developer A & B bid on project,
Developer A's proposal is best. A cannot get guarantee; B can get guarantee.
What does City do? Choose the best project or the one with the guarantee?
Inclusion of language that "guarantee is preferred" will not enhance the City's discretion on which projects are
best for the City (the City already has discretion in selecting the best project).
It could, however, impede the the City's ability to select the best project (the wealthiest developer - not the best
and not the most creative - clearly has an advantage if this language is included).
If you can find a developer who is able to provide a guarantee you may be lowering the City's risk but you may
be excluding the best and most creative projects in the process.
If my goal was to make the most money, I'd develop the sites we control with student housing. I am trying to
do something more meaningful both architecturally and in terms of use and diversity of space.
Marc Moen
marca.moenarour).corn
c 319.430.3010
f 319.358.6779
www.moen-group.com
City of Iowa City
Economic Development Process and Policies
The following are thoughts of ICAD Group staff related to the recent discussions at the
City of Iowa City Economic Development Committee meetings. Unfortunately,
scheduling conflicts have not allowed us to attend the two most recent meetings. We
appreciate Wendy Ford's willingness to send us the topics and staff recommendations
related to processes and policies for economic development resources of the City.
1. Tying financial incentive policies to community objectives
ICAD Staff opinion is to focus incentives primarily on interstate commerce
development, whether that is office, research or industrial use. With that as a focus,
you can create a tiered structure for the amount and timing of assistance based on
number of jobs, wages and taxable capital investment. We provided examples of such a
structure a couple times over the past 4-5 years.
We understand the need to do this for targeted blighted areas, though that is usually
to a limited number of areas and projects
We think it dangerous to leave it so open ended in terms of desirable projects such
as hotels, housing, entertainment, etc. Perhaps applying a minimum investment
amount to a project and also have it be something that is unique in the market -
meaning the first of its kind. For example, a minimum capital investment could be $30
million.
Also, another thought for consideration would be to ensure that all of these unique
projects have space being developed that can support interstate commerce
development of a certain size. One of the challenges we have is that there are usually
not enough office spaces downtown, or in the community, bigger than 15,000 or 20,000
sq./ft. or more that can be marketed to interstate commerce companies. To remedy this
situation, the city could provide TIF assistance to developers building multiple -use
facilities that have this type of space available. A period of time could be established
that the size of space must be maintained for these types of employers, after which
other local development uses could be allowed with reduced incentives. Of course, we
would suggest a meeting with area developers and state and utility economic
development leaders to discuss the merits of this program.
2. Intake process - to better align project with state and other assistance, we would
suggest utilizing the process undertaken by the state of Iowa in working projects. That
way, there is consistency for the client, which is always helpful. We also recommend
that there be a central point of contact that will work with interstate commerce clients
and be an internal liaison for them throughout the process. We realize having a backup
person is needed, but it is critically important to have a point person with the influence
and direct communication with the city manager
3. Evaluation - we recognize the need to conduct cost benefit analysis of publicly funded
projects and would like to work with you to provide a balanced and timely approach to
doing this. Our hope is that this process will be seen as a way to justify why the city
should be engaged in certain projects, rather than as a hurdle for why the city should
not support a project
4. Due diligence - again, we would recommend an alignment of these processes with
the state of Iowa process to ensure continuity and to be more efficient with resources
5. Incentive qualifications - one note on determining assistance when a gap exists- in
some cases there may not be a financial gap but rather a competitive situation with
other markets around the country. In those cases, gap analysis becomes less important
to the equation and the cost -benefit is more of a driver.
6. TIF Generator, percentage limitation - we would recommend this not be included in
this analysis and policy recommendation. If the city can focus its use of incentives
primarily on drivers of the economy and unique game changing projects for the
community, it should leave the council and staff to determine the appropriate amounts in
these areas
We also recommend that the benchmark for Iowa City on this policy not be Madison, or
at least to review several other markets locally and outside the area to draw
conclusions. Our market has had little competition with Madison on projects; in
economic development circles Madison is not viewed as a progressive community in
terms of economic development strategies and programming with this particular topic;
and though we don't advocate for economic development strategies we've witnessed in
other states and parts of Iowa, we believe that a more balanced approach by the city in
these matters will benefit the community with economic growth
Regarding rebates versus up -front cash, we would recommend limiting up front funding
directly to companies unless there is out of market competition for a project and this can
be proven to be important to land a project.
Other thoughts - With the speed of some development projects, and the competition we
face, it is important the city be prepared and comfortable providing comfort letters to
prospective clients. Though they can vary, in most cases, the company is looking for an
idea of the local financial assistance that can be provided to their project based on core
metrics - jobs, wages and benefits, capital investment, taxable capital investment. The
state IEDA already has an intake document to allow for this to happen, and we would
suggest this be used by city staff
In addition, we think it merits a discussion to look at other customer service approaches
and direct assistance to show the value these types of companies mean to the city.
Examples include,
1. Moving all interstate commerce company projects to the front of the queue for
staff reviews
2. Offering the waiving of certain fees on projects where there is a limited ability to
provide TIF because of no or limited new property value