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HomeMy WebLinkAbout09-03-2013 Council Economic Development CommitteeCity Council Economic Development Committee Tuesday, September 3, 2013 8:00 a.m. Helling Conference Room City Hall 1. Call to Order 2. Consider approval of minutes from July 30, 2013 Economic Development Committee meeting 3. Discuss Competitive process for disposition of Court/Linn property 4. Discuss Employment Based Financial Assistance 5. Staff time 6. Committee time 7. Other business 8. Adjournment FDC Juh302011 1 PRELIMINARY MINUTES CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE JULY 30, 2013 CITY MANAGER'S CONFERENCE ROOM, CITY HALL, 8:00 A.M. Members Present: Susan Mims, Michelle Payne, Matt Hayek Staff Present: Wendy Ford, Tracy Hightshoe, Jeff Davidson, Tom Markus, Geoff Fruin Others Present: Chuck Peters (Gazette Companies); Amanda Styron (Creative Corridors Project); Molly Brown (Hills Bank); Pat Shaver (Corridor Business Journal), Carrie Van Orden RECOMMENDATIONS TO COUNCIL: Hayek moved approval to provide a CDBG Economic Development loan to Carrie Van Orden for Max Effect, a Spinning and Fitness Studio, for $30,000, as discussed. Payne seconded the motion. The motion carried 3-0. Hayek moved to fund the Creative Corridor project $10,000 as discussed and recommended by staff. Payne seconded the motion. Motion carried 3-0. CALL MEETING TO ORDER: The meeting was called to order by Chairperson Mims at 8:04 A.M. WELCOME AND INTRODUCTIONS: Chairperson Mims welcomed everyone and asked that those present to introduce themselves for the minutes. CONSIDER APPROVAL OF MINUTES: The first action was to review the minutes of the June 11, 2013, Economic Development Committee meeting. Hayek noted that on page 3, at end of the second full paragraph, where it says, "Recommend an increase funding yet..." that the sentence should probably have an "in" or "of' before funding. The minutes will be corrected for the approved version. Payne moved to approve minutes from the June 11, 2013, meeting as submitted. Hayek seconded the motion. Motion carried 3-0. Tracy Hightshoe introduced Carrie Van Orden, owner of Max Effect, and briefly explained that Van Orden has applied for a CDBG Economic Development loan for her new business, Max Effect- A Spinning and Fitness Studio. The fitness studio will be located at 1012 Gilbert Court and offer spinning, a fitness studio, limited childcare, EDC July 30, 2013 2 PRELIMINARY personal training, aerobics, and nutritional products. Hightshoe noted that in Van Orden's business plan, she estimates startup costs will be approximately $213,000. Hightshoe noted that Molly Brown is here on behalf of Hills Bank, the commercial lender for the project. Hills Bank has sent a commitment letter of $135,000; however, they require $50,000 of the owner. The $50,000 equity may include CDBG funds, along with owner funds, according to Hightshoe. The Small Business Development Center helped Van Orden in developing her business plan. According to Hightshoe, Hills Bank believes the projections are realistic. Staff is recommending a $30,000 loan with 0% interest over 7 years, with a lien on Van Orden's vehicle and a personal guarantee. Hills Bank will cover $135,000. Payne asked about the $213,000 startup costs and questioned whether the bank's $135,000 plus the owner equity and proposed CDBG loan, totaling $185,000 would come close enough to the $213,000 or leave her undercapitalized. Van Orden noted that the $213,000 was projected when the plan was originally prepared, and included some cushion. Hayek stated that he believes this is a very strong application and he appreciates the vetting already done by staff. Mims agreed, adding that she too is glad to see this business opening in this location as they work towards redevelopment in the Riverfront Crossings area. Van Orden shared her excitement of opening the business, saying she believes good things are going to happen in the Riverfront Crossings neighborhood and she was excited to be in on the ground floor. She responded to Members' questions, noting that she is ready to sign the lease on the building once the finances fall into place. Hightshoe reminded the Members that the full Council no longer has to vote on these types of recommendations to the Council, Members were unanimous in approving the loan to Van Orden, who thanked them for their help. Hayek moved approval to provide a CDBG Economic Development loan to Carrie Van Orden for Max Effect, a Spinning and Fitness Studio, for $30,000, as discussed. Payne seconded the motion. The motion carried 3-0. CONSIDER A RECOMMENDATION FOR FUNDING THE CREATIVE CORRIDOR PROJECT: Wendy Ford spoke to Members about this request. The Creative Corridor is a group that came together with the main goal of marketing the Corridor to attract and connect creative people and business. Ford noted that the idea was to get people to come to the corridor to live, work, play, etc., and to get the new `Iowa's Creative Corridor' brand ingrained in their minds. The new campaign, We Create Here, spreads the word with buttons, window clings, and videos to get the word out. Ford shared a brief video with Members designed around the concept. Ford continued, noting that a big new initiative, `creative week' will be the third week in October this year, the 1 V through the 26 h. This event will highlight all of the innovative things happening in the corridor. All of the intiatives are geared toward attracting young, creative, professional people and companies to the area which directly aligns with our strategic planning goals in economic development. Ford noted staff believes the City should participate in this endeavor and is recommending the request for $10,000 be granted. Next, she introduced Chuck Peters and Amanda Styron with the Creative Corridor group. Peters gave a quick recap of his visit last October with Members about EDC July 30, 2013 3 PRELIMINARY the Creative Corridor Project. He spoke about how the group aims to make positive image changes about the corridor. Styron also spoke about the newest campaign, noting that they have had the opportunity to partner with multiple creative agencies around the corridor while working on this initiative. Getting people connected is a major factor in this effort, and Styron shared how they have a weekly profile story in their newsletter to aid in this connectivity. She then spoke briefly about some of their goals as they attempt to draw more and more people to the corridor, Payne shared that the video was great and would be appealing to a wide range of audiences. Peters spoke to the challenges in getting people to come to the area to begin with. By having multiple tools — buttons, videos, brochures — they hope to reach a wider audience. Discussion ensued about the branding or marketing aspects of this latest campaign and what they hope to accomplish. Hayek then asked if there is a plan in place to address the `trailing spouse' challenge we have in this area. He spoke about how difficult it can be to bring in double -income families as finding employment opportunities for two professionals simultaneously is difficult. It was noted that the University has such a program in-house. Payne asked Peters and Styron how they are able to work with multiple jurisdictions. Mims added that you have to look at what each organization's mission is. She further explained what she meant and shared how a Chicago suburb handles their economic development challenges. Payne spoke about how other areas handle their economic development, and Peters added that a trip to a city such as Minneapolis might be a good idea. Styron shared that their mission is to get everyone to collaborate and work together in order to better themselves as a whole. She also noted that in November they will be looking at their programs, and that perhaps the `trailing spouse' issue could be added to their agenda. Hayek moved to fund the Creative Corridor project $10,000 as discussed and recommended by staff. Payne seconded the motion. Motion carried 3-0. STAFF TIME: Davidson noted that there are several projects happening in the area. Midwest One has taken out permits for the renovation of their historic building. He added that their designers have been in constant contact with the City. He also noted that the Court/Linn Street site is generating some interest. The City Manager's office and Planning have been in contact with several developers regarding this parcel. He then noted the University's belief that the Jefferson Building is an underutilized resource for the community. They have requested that the City coordinate a master planning process, including them, the City, and the private property owners in the area. Davidson then noted that the Bruegger's business is coming back from the ashes. The Van Patten property, which also burned, now has a design team working for them. The Park at 201, according to Davidson, has only two or three residential units left. The building is approximately half completed and almost all of the residential units are sold. There has also been a lot of interest in leasing office space. Davidson continued, noting that the University has some world -class projects in the works with the Art and Music buildings. He noted the hotel projects in the works, and how the need for hotel rooms is still there. As for the industrial sector, Davidson noted that two local employers have been meeting with the City about possible expansions. A EDC July 30, 2013 4 PRELIMINARY third existing business is going to be adding 50 jobs, according to Davidson. ICAD is also ramping up their marketing of the industrial park. Davidson stated that they do have an interested prospect in the industrial park, and due to its `shovel -ready' status, it has put the city in competition with other cities. Payne noted that the second building is up in Towncrest. Hightshoe added that Eye Associates and Towncrest Dental will be moving to the new spaces. She spoke to some of the other areas in Towncrest where there has been interest in redevelopment. Hightshoe then briefly filled Members in on upgrades downtown, such as the Bo James building, the Atlas, and Quinton's. COMMITTEE TIME: Hayek urged the group to continue to look at economic development holistically. He stated that the fact that there is demand for more office space in the downtown area speaks to the ever-growing need. Davidson added that they are starting the park planning process at the north wastewater treatment plant site. They have a grant opportunity that they are pursuing which may fund the demolition of this site and enable the City to get it ready for an actual park. Payne asked about Sycamore Mall and what is happening there. Markus stated that they are working on things there. None. ADJOURNMENT: Payne moved to adjourn the meeting at 8:51 A.M. Hayek seconded the motion. Motion carried 3-0. EDC July 30,'_013 5 PRELIMINARY Council Economic Development Committee ATTENDANCE RECORD 2012 - 2013 TERM o 0 0 0 NAME EXP. C ° w N V O Michelle 01/02/14 X X X X Payne Matt 01/02/14 X O X X Hayek /F Susan 01/02/14 X X X X Mims Key: X = Present O = Absent O/E = Absent/Excused r � I CITY OF IOWA CITY MEMORANDUM Date: August 29, 2013 To: City Council Economic Development Committee From: Jeff Davidson Re: Agenda Item #3: Competitive process for disposition of Court/Linn property In 2011 we conducted a master planning process for the half block property owned by the City which we have come to call the "Court/Linn property." This is the site of the former St. Patrick Catholic School, which was purchased by the City following the 2006 tornado. It has been our intention to locate a City parking facility on this property, working in conjunction with a private developer to be selected through a competitive public process. The main purpose of the 2011 master plan study was to determine through a massing analysis what would fit on the property, and how the various parts would fit together. A combination of residential, commercial, and office uses are envisioned, with residential envisioned as the principal use along with the City's parking facility. A RFP was issued in January 2012. Although there was interest in the site from the development community, we soon found that nearly all of the interested parties were more interested in the College/Gilbert site which the City was also offering for redevelopment. This distraction eventually caused most of the interested parties to drop off of the Court/Linn project and we ultimately received just 2 proposals. After negotiations stalled and we cordially agreed with the interested parties to part ways, the City Council accepted staff's recommendation to table the project for 12 months until July 2013. We would now like to gauge Council's interest in moving forward. In the last 3 months there has been renewed interest in the Court/Linn property. We now have 6 actively interested development groups who have contacted us about the property's availability. The mixed use projects proposed by the interested parties included a variety of residential, office, and commercial uses. Some are predominately student housing projects. All will accommodate the City's proposed parking facility. We have also updated our parking demand figures and determined that it is still in the City's best interest to incorporate a municipal parking facility into the project. We have had several discussions with the interested parties, and believe we are at a point where we need to develop a strategy for moving forward with a competitive process. We would like to discuss that with you at your September 3 meeting. A competitive process is required to allow for requests for City financial assistance through TIF to be considered. We have the benefit of the recent College/Gilbert RFP process fresh in our minds as we determine how to move forward. One thing we may wish to consider is tightening up the provisions for responding to the RFP. You will recall that the 10 College/Gilbert proposals we received had great variety. While this was beneficial in terms of encouraging creativity, it ultimately made the City Council's decision more difficult. Rather than evaluating variations on the same theme, you were forced to weigh the pros and cons of very different proposals. You may wish to not even have specific proposals submitted, but rather a RFO process where a developer is selected based on prior qualifications. However, I would suggest that there are enough qualified developers interested in the Court/Linn site that some type of competitive proposal will be required. We are sensitive to the expense of preparing proposals, and wish to minimize this expense as much as possible. August 29, 2013 Page 2 Please be prepared at the September 3 meeting to give us as much input as possible about your expectations for the disposition of the Court/Linn property. We should try to be as specific as possible with developers as to what you want to see, or conversely, what you don't want to see on the property. A basic question will be student housing or no student housing. The location is not inappropriate for student housing, and already contains a large concentration of student housing. But student housing developers are better able to compete for property in the private market, and can more easily obtain conventional financing. We may wish to concentrate our efforts on the other market segments identified in the Riverfront Crossings Master Plan: Workforce & non -student residential, office, and commercial that is oriented to the residential neighborhood. We look forward to hearing your thoughts. u _ _0 E Harrison St. 0 n n aL ILr m� Mmkiffi mom- i. mm Wo N e W— Arm -1 1 . 4p i� 64 0 r , CITY OF IOWA CITY n_ Date: August 28, 2013 To: Economic Development Committee From: Wendy Ford Re: Agenda Item #4: Discuss a concept for Employment Based Financial Assistance The issue The City's financial assistance options for businesses are limited to two sources: Community Development Block Grant (CDBG) Economic Development Loans and Tax Abatement or Increment Financing (TIF). Typically, CDBG Loans target the smallest of businesses whose employees must meet low to moderate Income requirements or who are classified as Micro - Enterprises with fewer than 5 employees. Tax- or TIF-based incentives are paired with developments that improve the value of real property, creating the property tax revenue stream to pay for the incentives. The two options work well for their targets, but neither cover an important segment of business in Iowa City — the rapidly growing small to midsize interstate commerce business that may not yet own real estate. Background This segment is typically entrepreneurial in nature, has a small, but growing number of employees, pays its employees well to very well with good benefits, is experiencing exponential growth, and is leasing office space. They do not qualify for incentives such as those made through CDBG Economic Development Loan program due to their higher wages or number of employees, and they do not qualify for tax abatement or TIF because they have not improved property or are not the property tax payer. They do, however, make substantial contributions to the local economy and are worthy of our efforts to get them rooted in Iowa City. They employ people who spend their money in the local economy. Some of their employees buy homes and pay property taxes in our community. Sometimes their employees are students at the University who may be more likely to stay in Iowa City after graduation, especially in a job with upward mobility. They are often young companies (3-10 years old) just getting a foothold in their market and are as likely as not to stay in Iowa City permanently. With this program, we would have a way to encourage more of these early stage companies to become rooted in Iowa City, Solution Staff is proposing a deferred payment/forgivable loan program designed for enterprises that meet certain requirements. The goal is to have a method to assist young companies to grow and put down roots in Iowa City, with the ultimate goal that they would do one of the following: • enter into a long term lease or • buy a building or condominiumized office space • buy land and build a building The use of this funding tool would be limited to businesses classified as interstate commerce businesses. The identifying characteristic of interstate commerce business is that their market is not (necessarily) local. These businesses are especially valuable to us to keep rooted in Iowa City simply because they are interstate commerce businesses and because they could locate anywhere. Interstate commerce business in the industries of advanced manufacturing, biotechnology, educational services, information technology, natural products and renewable energy are the August 29, 2013 Page 2 target for these funds. Growing businesses in these sectors complements the existing work force and builds upon the knowledge economy centered in Iowa City. The proposed program would provide up to $100,000 in deferred, low interest loan funds that would be forgiven when and if the company met hiring goals and either made a long-term lease commitment or was to purchase its own building within a prescribed time period (which could range from 3 to 5 years.) Requirements for eligibility would be: • Must locate within Iowa City and plan to commit to a long-term lease, purchase office space within Iowa City or buy land and build a building by the end of the agreement; • Must agree to meet annual increasing employment goals; • Must pay at or above the county median wage and provide good benefits to employees; • Must undergo financial analysis to substantiate need based on growth projections; • Must sign personal guarantee and be willing to put up personal collateral. Development agreements for such assistance would include the details of wage and benefit thresholds to be met, numbers of jobs to be retained or created, and claw -back clauses for failure to meet the objectives of the agreement. The amount of the loan forgiven would depend on year end results and status of attaining agreed upon employment goals along with the final year goal of having executed a long-term lease or made the purchase of an Iowa City office location. Below are three possible scenarios for such an agreement for a forgivable $100,000 Economic Development loan with ABC Company. Up to 100% of the loan could be forgiven if both employment and property acquisition goals are met. At the end of each year, a determination would be made as to the amount of forgiveness the company may expect at the end of the three year term. Illustrated in the tables below you will see that if the company meets 10O% of its hiring goals they remain on track to have 100% of their loan forgiven. If they are only 50% successful at their hiring goals, they are on track for the only 50% forgiveness of their loan. The purchase of property by the end of the third year would ensure the amount of forgiveness earned to that point. Failure to purchase property will further decrease the amount forgiven by 50%. Company meets hiring ,goals and purchases property by end of year three: By the end of: Company Hiring Goals Company Results Status for Amount of Loan to be forgiven at end of year 3: Year 1 Add 20 FTEs Adds 20 FTEs On track for 100% forgiveness Year 2 Add 20 more FTEs Adds 20 FTEs On track for 100% forgiveness Final year Purchase offices ace Purchases offices ace 100% forgiven Buy land an Build office Buys, builds 100°t° forgiven Sign 5-7 year lease Executes lease 90% forgiven August 29, 2013 Page 3 Company meets half of its hiring goats; does not purchase property by the end of year 3: By the Company Hiring Goals Company Status for Amount of Loan to be end Results forgiven at end of year 3: of: Year 1 Add 20 FTEs Adds 10 FTEs On track for 25% to be forgiven because 25% of hidng goals met Year 2 Add 20 more FTEs Adds 10 FTEs On track for 50% to be forgiven (because 50% of hiring goals met Year 3 Purchase office space Does not purchase 25% of loan will be forgiven and payback space terms negotiated. Buy land and Build office Buys, builds 25%forgiven Sign 5.7 year lease Executes lease 20% forgiven Company meets all of its hiring goals but does not purchase property by end of year 3: By the Company Hiring Goals Company Status for Amount of Loan to be end Results forgiven at end of year 3: of: Year 1 Add 20 FTEs Adds 20 FTEs On track for 100% to be forgiven (because hiring goals met Year 2 Add 20 more FTEs Adds 20 FTEs On track for 100% to be forgiven (because hiring goals met Year 3 Purchase office space Does not purchase 50% of loan will be forgiven and payback space terms negotiated. Buy land an Build office Buys, builds 100% forgiven Sign 5-7 year lease Executes lease 90% forgiven Financing this program would require the City provide up front financing to businesses. This funding would be sourced from the general fund or bonded and may be certified as debt that can be repaid through TIF if the leased or the purchased office space is within an Iowa City TIF district. Recommendation Staff recommends Council find ways to help interstate commerce businesses make the transition from early stage to established business located in Iowa City. Providing a financial vehicle that ties employment goals and long term location commitment or property ownership together with the cash needed to grow, is a possible solution. Justification Iowa City is home to several mature interstate commerce companies such as ACT, Pearson, Oral B and many others. The value they bring to the community is immeasurable as they are great employers, great contributors to the community on many levels and some of our biggest property tax payers. While there is risk involved, the value in fostering early to mid -stage businesses pays dividends when roots are established and the plant begins to grow. Property ownership comes after a level of success that first requires employees before it requires property ownership. It makes sense for the City to find ways to assist in the growth and development of companies at this critical stage in growth with the potential to become the next property tax paying employer of 1,000 people.