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HomeMy WebLinkAbout01-17-2012 Council Economic Development CommitteeAGENDA City Council Economic Development Committee Tuesday, January 17, 2012 8:00 a.m. Helling Conference Room City Hall 1. Call to Order 2. Welcome and Introductions 3. Consider selection of committee chairperson 4. Consider approval of the Dec. 2, 2011 Economic Development Committee meeting minutes 5. Consider request for capital campaign funding from Iowa City Area Development Group 6. Staff time 7. Committee time 8. Other business EDC December 2, 2011 1 MINUTES DRAFT CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE DECEMBER 2, 2011 CITY MANAGER'S CONFERENCE ROOM, 11:00 A.M. Members Present: Regenia Bailey, Matt Hayek, Susan Mims Staff Present: Wendy Ford, Jeff Davidson, Tom Markus, Tracy Hightshoe, Eleanor Dilkes Others Present: Joe Raso (via phone); Mark Nolte; Marc Moen, Gigi Wood RECOMMENDATIONS TO COUNCIL: CALL MEETING TO ORDER: The meeting was called to order by Chairperson Bailey at 11:05 A.M. CONSIDER APPROVAL OF THE MINUTES OF THE NOVEMBER 8, 2011, ECONOMIC DEVELOPMENT COMMITTEE MEETING: Hayek moved to accept the November 8, 2011, meeting minutes as presented. Mims seconded the motion. Motion carried 3-0. DISCUSSION OF PROVISION FOR URBAN RENEWAL REVENUE NOTES: Dilkes addressed the Members to explain how urban renewal revenue notes work. Instead of selling bonds, the City sells a note to a banker that the developer has recruited for such purpose. The proceeds of the note are then used for the up front financing of a project, and the taxes from the TIF increment are then used to repay the note to the bank. Dilkes added that bond counsel has recommended this. Markus noted these notes would be an arrangement between the City and the bank, and require the future stream of the tax increment to retire the note. To protect itself, the City would require a shortfall guarantee with the Developer. The Developer would then be responsible to make up any difference between tax increment available to make payments on the note and note payments due. Marc Moen, a local developer was in attendance and talked to Members about his previous projects and how they worked financially. Bailey asked for further clarification about why this requirement would not good for local developers. Moen noted that adding another layer of security would make it more difficult for smaller, local developers such as the Moen Group to get financing. He said that he had a difficult time getting the financing for the Plaza Towers and it only came together because the bank allowed him to count the City's financial assistance as equity in the project. He suggested that had there been a requirement to secure an urban renewal revenue note, the financing for Plaza Towers would not have been feasible. He suggested that larger, well -financed developers from outside the area might have an easier time obtaining an urban renewal EDC December 2, 2011 2 revenue note. Dilkes added that while she understands Moen's concerns, she does not believe Members should completely remove requesting this security option from up front financial assistance. Discussion ensued around the risk of providing upfront financing to developers and the reduction in risk that type of security would ensure. Bailey asked for Members' questions or comments. Mims voiced her concerns, noting that she would hate to see something like this derail developers from moving forward with a project. She wants to make sure that this is not an impediment to economic development in the city. Hayek stated that the reason for greater security is the result of more developers requesting up front funding. Bailey asked Members how they would like to proceed: whether they want to leave the paragraph in question as is, or if they would like to make amendments to it. Dilkes noted that Members could change the language of the relevant paragraph by deleting the last sentence and then modifying what is there with "Up front financial assistance and the appropriate financing mechanism and security will be considered on a case -by -case basis." This would address their concerns. Members agreed with this amendment, noting that they would be comfortable recommending this to the full City Council. CORRESPONDENCE FROM IOWA CITY AREA DEVELOPMENT GROUP: Davidson briefed Members on the correspondence in the packet from ICAD regarding economic development policies and procedures. Joe Raso, ICAD President, joined the meeting via phone and noted that he was there to answer questions. Bailey noted it was self-explanatory, and she asked others if they felt the recommendations in the correspondence should be incorporated into the policies. Mims noted the idea of trying to align City processes with State processes makes sense to her. She noted that a lack of consistency is one item that she has heard about. Ford explained that the City's staff intake form asks for the same information as the State forms. Bailey asked if Members desired to make any changes to the policies and procedures based on Raso's input. She added that she was comfortable recommending to the full Council the policies and procedures with the previously discussed change to the Additional Security for Upfront Financing Incentives only. Hayek and Mims concurred. None. STAFF TIME- Hightshoe gave a brief update on a CDBG applicant who has applied for funding twice previously (September 2009 and July 2011). In July 2011, the application was denied funding. The committee advised the applicant if an existing judgment against the business could be addressed, the applicant could reapply with up-to-date sales projections. The applicant submitted revised projections, however, after review, staff recommends denying funding for the same reasons identified in the July application, including the unresolved judgment. The applicant would like to appeal the staff denial and present to the committee. Hightshoe asked if Members would like to consider the request. Hayek recused himself from the discussion. Members said that if the reason(s) for denial that were identified with the July application still existed, that they did not have an interest in reconsidering. EDC December 2, 2011 3 Davidson thanked Bailey for her years of service, as this is her final meeting. COMMITTEE TIME: Hayek stated that he would like to echo Davidson's comments to Bailey. ADJOURNMENT: Mims moved to adjourn the meeting at 12:05 P.M. Hayek seconded the motion. Motion carried 3-0. EDC December 2, 2011 4 Council Economic Development Committee ATTENDANCE RECORD 2011 TERM N) rn co NAME EXP. -A Cn c0 N " N O o - co N N co Regenia 01/02/11 X X X X X X X Bailey Matt 01/02/11 O X X X X X X Hayek / E Susan 01/02/11 X X X X O/ X X Mims E Key: X = Present O = Absent O/E = Absent/Excused Memo To: City of Iowa City Economic Development Committee From: Joe Raso Date: January 6, 2012 Re: Materials and information for discussion at January 17 meeting �? Iowa City Area Development Group Extraordinary opportunities in unexpected places. First, I would like to thank the council members and staff for allowing ICAD Group to discuss several economic development initiatives, programs and proposals with you at this meeting. Included with this memo are a number of additional documents for your review prior to our meeting: 1. Existing Industry Report: On an annual basis, ICAD Group interviews nearly 70 area interstate commerce companies to ascertain information that will aid our communities, region and state to help these companies maintain and grow their operations, tax base and employment. For approximately ten minutes we will share the outcome of our 2011 interviews and highlight potential action steps for aiding the growth of these companies, especially those located in Iowa City 2. Economic Drivers: I will take five minutes to describe the economic development components that drive our economy. This will establish a mental model for why the city has, and respectfully will continue, to support the mission of the Iowa City Area Development Group 3. Vision 2030: Included is a five -page document that describes the 20-year vision the ICAD Group Board of Directors developed for our regional economy; and the programming and goals we will lead, partner and support over the next five years. This document provides the basis for our five- year investment campaign 4. Return on Investment Report: We realize that the City's investment in ICAD Group and our work must provide a return on investment, and an attached two -page document provides some conservative estimates of the value of our work to the city During the past five years, the City of Iowa City has made an annual investment of $100,000 in ICAD Group to support our mission of serving the needs of interstate commerce companies. We believe the attached documents show that the City has received a substantial return on their investment, and that our partnership with the city is as strong as it has ever been. Besides the support of our existing industry base, and the attraction of new companies to our market, ICAD Group has taken the initiative to lead efforts to build a co-working/incubation type facility in downtown Iowa City. 325 E. Washington Street, Suite ioi Iowa City, IA 52240 319-354-3939 Page 2 a ca Iowa City Area Development Group Extraordinary opportunities in unexpected places. During our presentation on January 17 we will share the reasoning for our request to have the City of Iowa City maintain its base annual investment of $100,000, and to provide additional resources over the course of the next 3 years of at least $100,000 to support our programming and unique entrepreneurial development efforts, such as the CoLab space in downtown. Included is a four -page paper that describes why we need to create a culture of innovation in our market for long term economic growth and how downtown Iowa City can help to serve as the hub of these efforts. As always, don't hesitate to call me at (319) 936-5610 should you have any questions prior to the January 17 meeting. Thank you. 325 E. Washington Street, Suite ioi Iowa City, IA 52240 319.354-3939 a cQ Iowa City Area Development Group Conservative Valuation of the Last Five Years: Extraordinary opportunities in unexpected places. City of Iowa City Projects: Iowa City based projects represented more than 25% of our project workload during the recent campaign. In the past 5 % years, ICAD Group worked directly with nine Iowa City based companies on location and expansion projects (Kleffmann Group was removed when they closed operations). The remaining eight companies include: 1. Procter & Gamble (2) 4. Metro Wire 7. Meta Communications 2. Alpla of Iowa (2) 5. Alliance Rock Tenn 8. Nadicom 3. ITC 6. Quality Associates Three of these companies have either constructed new/expanded facilities (ITC, Metro Wire) or are planning to construct new facilities (Nadicom). Combined, they have created/retained more than 370 jobs. ICAD Group also helped obtain road and rail funding from the State of Iowa to support the infrastructure in the new industrial park. Citizens living in Iowa City: Conservatively, we know that in 2007 a minimum of 2,000 people who lived in Iowa City worked for one of our clients. The following estimates use the 2007 data (we are currently collecting data on citizens living in Iowa City as of 2011). Estimated Housing Value to Iowa City of Employment: Considering a very conservative assessed home value of $160,000, Iowa City received excellent return from our clients' employees: a. A minimum of $2,740,000 in residential property taxes annually from employees of existing ICAD Group clients ($160,000 housing cost x 48% rollback x $17.84 tax per $1000 of assessed value x 2000 households). b. Economic impact research on the three dozen ICAD Group projects since FY2007 indicates that these 36 projects netted 2,000 indirect and/or induced jobs (created/retained). Presuming 50% of these workers reside in individual households, we get a total of 1,000 households added/ retained in our market. Iowa City's non -student population is approximately 25% of the county, so using that percentage, 250 new/retained households in Iowa City are from jobs that would not exist without our interstate commerce companies. Thus, $342,528 in residential property taxes is generated annually from employees whose jobs are directly impacted by ICAD Group clients ($160,000 housing cost x 48% rollback x $17.84 tax per $1000 of assessed value x 250 households). Estimated Value Hotel/Motel Tax: Collections the past few years were approximately $750,000 annually. Our research shows that at least 40% of Iowa City's hotel occupancy was from corporate travelers. Conservatively, estimating that only 20% of those travelers were working with interstate commerce businesses in our region, $60,000 in hotel/motel taxes is generated annually from interstate commerce activity ($750,000 in taxes x 40% corporate travelers x 20% interstate commerce driven). 325 E. Washington Street, Suite ioi Iowa City, IA 52240 319.354.3939 Iowa City Area Development Group Conservative Valuation of the Last Five Years: Extraordinary opportunities City of Iowa City continued in unexpected places. Commercial Tax and Payroll: Though significant, these figures do not include the additional commercial tax base that is generated in Iowa City due to the interstate commerce industries and population growth throughout the area. Last year alone, payroll expenditures of our clients exceeded $700 million, which went to support thousands of businesses and jobs in Iowa City. It is also important to note that we did not include the millions of dollars in city property taxes paid by our interstate commerce clients as we know incentives may have been applied to some, not all, of these companies, as well as city investments in new industrial land. Conservative FY2013-FY2017 Estimate: City of Iowa City Based on the Iowa City Area Development Group Five Year Plan We estimate $400 million in capital investment for the campaign. With an estimated 20% of that being in taxable investment, that equates to $80 million in taxable value. Iowa City had approximately 25% of the projects for the current campaign. Estimating 15% moving forward, roughly $12 million in new taxable capital investment will be generated for Iowa City. $214,080 of annual property tax revenue from ICAD Group assisted commercial/industrial projects ($12 million x $17.84 tax per $1000 of assessed value) We estimate 4,216 direct and indirect jobs created/retained with our new programming. Our calculations estimate that this job creation/retention will impact 2,835 households in our market. Iowa City's non -student population is approximately 25% of the county, thus impacting 708 households in Iowa City. $970,000 in residential property taxes annually ($160,000 housing price (current market for Iowa City is greater than $200,000) x 48% rollback x $17.84 tax per $1000 of assessed value x 708 households) 3. Hotel/Motel tax collection for Coralville was around $750,000 this past year. Using the same estimates from past activity: $60,000 in hotel/motel taxes is generated annually from interstate commerce activity ($750,000 in taxes x 40% corporate travelers x 20% interstate commerce driven). 4. Those currently living in Iowa City working for one of ICAD Group's interstate commerce clients represent 2,000 separate households. Calculating a very conservative assessed home value of $160,000 provides an excellent return to the city: $2,740,000 in residential property taxes annually from employees of existing ICAD Group clients ($160,000 housing cost x 48% rollback x $17.84 tax per $1000 of assessed value x 2000 households) 325 E. Washington Street, Suite 1o1 Iowa City, IA 52240 319.354.3939 Iowa City Area Development Group Conservative FY2013-FY2017 Estimate: City of Iowa City Extraordinary opportunities in unexpected places. Based on the Iowa City Area Development Group Five Year Plan continued Though significant, these figures do not include the additional commercial tax base that is generated in Iowa City due to the primary sector industry and population growth throughout the entire area. OUR PARTNERSHIP REQUEST: $100,000 annually for each of the next five fiscal years for our base programming. Additionally, $100,000, over three fiscal years, to support the operations of the new CoLab co -working facility to be located in downtown Iowa City. This request provides at least a 30:1 return on investment for the City of Iowa City. 325 E. Washington Street, Suite 101 Iowa City, IA 52240 319.354.3939 IOWA CITY AREA DEVELOPMENT GROUP: DRIVING THE ECONOMY Vision 2030 is a journey with benchmarks set all along the way to measure and ensure progress and performance. Your time, talent and dollar commitments to the ICAD Group program of work is one of the most important investments you will make. You will shape our region's future and establish the quality of life we leave for our future generations. Iowa City Area Development Group: Driving the economy Iowa City Area Development Group: Driving the economy WHERE WE'VE BEEN Our region has a rich history of a "can -do" attitude and of achieving what we set out to do. We have a well- educated citizenry, a strong mix of local, regional and interstate businesses and we continue to fare well in the lingering national economic downturn. The past five years were quite successful for the Iowa City Area Development Group. The organization's core programming contributed to positive outcomes with 34 individual projects and resulted in over 3,100 new and retained jobs and more than $275 million in new capital investment. Many might say —"good enough for me." But despite the good work accomplished during the past five years, despite the efforts of talented and hardworking people, the abundance of resources, the central location, the presence of strong K-12 schools, Kirkwood Community College, and the University of Iowa, our region remains challenged by complacency, lack of recognition and the absence of a common purpose to compete globally. WHERE WE'RE GOING Starting in the fall of 2009, ICAD Group's leaders created a 20-year vision of the future for our region consistent with the culture of innovation that is required to compete in a global economy. That vision will guide our programming for the next five years: Our purpose is to create a center of commerce and innovation nestled in an area providing an unmatched quality of life. We will create, collaborate and lead regional economic development initiatives that contribute to a highly skilled, educated and inquisitive workforce and enhance a collection of communities powerfully bonded together and strategically aligned under a regional brand. HOW WE WILL GET THERE In order to begin the journey toward the 20-year vision, ICAD Group is executing a bold new game -plan; one that we believe is necessary to build capacity for future competitive success and that focuses the strengths of our prior work in new directions. This strategy will augment our core work with existing industry, workforce development, business recruitment and entrepreneurial development in order to compete on the global stage: ■ We are committed to developing a region that is global in thinking and action. ICAD Group, and the communities we represent, will be connected to the world and it to us. Existing partnerships with our clients, the community, regional partners and the University of Iowa will help foster this global connection. ■ Our region will be known for its world class workforce and education systems. These systems will be developed to meet the needs of our market place with the input and collaboration of the community. The results will not only aid and impact business and industry, but will also strengthen our global reputation as a leader in education and workforce development. Iowa Ci+v Area nevelonment Group: Driving th- mcnnnmv ■ By bucking old trends and traditions, we will further develop a culture of innovation that is entrepreneurial in its thoughts and actions. The families, workers, students and retirees living in this region will embrace our sense of community and belonging. Long gone will be the days of humble, risk - averse Midwesterners. It is our intent to increase total community understanding and involvement in the ICAD Group 2030 Vision through a truly two-way communications outreach. We have now embarked upon the process to establish and quantify the next five -years of actions we will employ as a united community forging local, regional and global partnerships to achieve our goals. WHAT WE WILL LEAD Well -orchestrated economic development, with a clear vision for the future, is pivotal to our region's well- being and community quality of life. ICAD Group consistently adds value by growing existing interstate business and recruiting companies in targeted sectors we desire to add to our economic mix. ICAD Group will play the lead role in regional interstate company development focused on driving and maximizing the potential for planned growth in industry sectors. We will provide significant assistance to the achievement of the following results: uutcoine Measurement — Five tears Beginning in 2U12 ■ We will increase our number of working projects from 34 to 55 ■ 24 of our existing interstate commerce companies will expand — contributing 1,605 high quality jobs ■ We will attract 15 targeted interstate companies creating 860 high quality jobs ■ 16 new interstate companies will be created — adding 170 high quality jobs ■ The impact of interstate commerce business and jobs will create/retain an additional 1,370 jobs in our area economy ■ We will increase total interstate commerce capital investment from $275 million in the past five years to $400 million in this five-year period ■ Total employment in the area will increase 6.6 percent to more than 95,800 people by place of work ■ Interstate commerce workforce will increase 7.5 percent to more than 15,000 employees ■ The private sector wage for all jobs will increase 9 percent to $17.60 and interstate commerce projects we assist will pay an average wage of at least $21 per hour inwa City Ar,�^s Grn-un- r'-wing the economy HOW WE WILL PARTNER The economies around the world are being defined not just by what hands can build, but rather what minds can create when they come together. Our region has developed a culture of innovation and connections, and we must capitalize on the strength of these alliances for the advancement of our region. ICAD Group will play a lead role in nurturing and expanding entrepreneurial thinking. Additionally, we will align our vision with those closely connected to our work. By providing new spaces, forging partnerships and hosting events, we will build on the power of ideas. Through these powerful connections, our area becomes revered as a player on the global stage, offering products and services of value to the global economy. Outcomes Measurement — Five Years Beginning in 2012 ■ Workforce Skill Sets — Workforce strategies prepared with all key participants are highly effective in producing a world -class workforce fully prepared to innovate and execute in a global economy. ` Execute a partnership agreement and comprehensive plan with the University of Iowa, Kirkwood Community College, ACT, Inc., Cedar Rapids Metro Economic Alliance, area community school districts and others with a vested interest in producing a workforce equipped with the skill sets required to meet the global visions, missions, strategies and plans of regional interstate commerce companies. ■ University of Iowa — Direct participation of University departments and centers in ICAD Group activities and programs are highly beneficial to the overall development of the area economy. Execute a partnership agreement and prepare a comprehensive plan that fully aligns University expertise, resources and intellectual capital with interstate commerce companies that have significant programs and projects of lasting economic value: • Research, workforce and production needs of existing companies • Targeted company recruitment • Creation of new companies • Technology transfer ■ Regional Economic Development — Implementation of a region -wide economic development strategic plan, developed in cooperation with members of the Corridor Business Alliance and other partners, will begin in 2012 to act upon the principles outlined in that agreement with specific deliverables each year from that point forward. ■ Increasing the capital funds available for investment in the entire spectrum of business enterprises • Partnering with the key organizations/entities charged with developing land use planning and the transportation infrastructure for our region • Continuing ongoing workforce development initiatives including regional skill assessment, skill development, and recruitment and retention strategies ■ Enacting a full-scale marketing plan to create global awareness and business interest in our region through newly developed branding and marketing materials fc..Jc� Ci#v Area Devel-nmpni Groun: Driving the econom, HOW WE WILL SUPPORT The Iowa City area continues to outpace many regions statewide in population growth. With this expansion comes fresh challenges and opportunities in the public and private sector. As part of our commitment to the development of this region, [CAD Group will support stakeholders working to enhance our communities. ■ Iowa City Area Chamber of Commerce — ICAD Group will continue to support Iowa City Area Chamber activities and programs, such as leadership training, Blue Zones, and public policy, which directly enhance economic development in Iowa City. ■ United Way — ICAD Group is supportive of the United Way 2020 Vision, particularly those components that focus on education, income and health in the development of a workforce fully capable of performing in today's business world, and will continue to provide advice and counsel to support those goals. Iowa City Area Development Group tx[raurainary uppurtumnes in unexpected places.