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HomeMy WebLinkAboutCCEDC Agenda 3-23-17If you need disability-related accommodations in order to participate in this program/event, please contact Wendy Ford, Economic Development Coordinator at 319-356-5248 or wendy-ford@iowa-city.org. We ask that contact us early to allow sufficient time to meet your access needs. Agenda City Council Economic Development Committee Thursday, March 23, 2017 12:00 noon Emma Harvat Hall City Hall 1. Call to Order 2. Consider approval of minutes from the December13, 2016 Economic Development Committee meeting 3. Discuss TIF Policies 4. Staff report 5. Committee time 6. Other business 7. Adjournment EDC December 13, 2016 1 PRELIMINARY MINUTES CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE DECEMBER 13, 2016 EMMA HARVAT HALL, CITY HALL, 12:00 P.M. Members Present: Susan Mims, Rockne Cole, Jim Throgmorton Staff Present: Wendy Ford, Geoff Fruin Others Present: Nate Kaeding (ICDD); Nancy Bird (ICDD); Rebecca Neades (CofC); Nancy Carlson; Chase Castle (Corridor Business Journal) RECOMMENDATIONS TO COUNCIL: Cole moved to approve the funding request for the CoSign project with ICDD as discussed. Throgmorton seconded the motion. The motion carried 3-0. CALL MEETING TO ORDER: The meeting was called to order by Chairperson Mims at 12:00 P.M. She then asked those present to introduce themselves. CONSIDER APPROVAL OF MINUTES: Minutes of the October 12, 2016, meeting were reviewed. Cole moved to approve the minutes as presented. Throgmorton seconded the motion. The motion carried 3-0. CONSIDER REQUEST FOR FUNDING FOR COSIGN PROJECT WITH ICDD: Ford noted that Members have a memo in their meeting packets concerning this funding request. She briefly reviewed what this project entails, noting that the Iowa City Downtown District (ICDD) is participating in a program to ramp up the sign aesthetics downtown, in order to enhance the experience of visiting downtown, and also to increase the visibility of the various shops. There is a $10,000 cost to participate in the program, according to Ford, and this is part one of ICDD’s request for funding for the current FY17. The second part of the request would come in FY18 and is for assistance with the manufacture, design, and installation of the signs that are a part of this program, up to $1,000 each, with a maximum of $10,000. At this point Ford turned it over to Nate Kaeding, with the ICDD, for a presentation on the CoSign project. Kaeding gave Members a brief history of the CoSign project and how they discovered it. He noted that it was founded by the American Sign Museum in Cincinnati. Kaeding stated that it is a cross-pollination of small business owners, local artists and the design community, and sign fabricators, to be able to bring these three entities together in a manner that typically does not occur. He added that Iowa City is one of the first six communities accepted to do such a project outside of the Cincinnati area. Those involved will attend a workshop in February in Cincinnati and will then be able to move forward with the CoSign project. Kaeding continued to explain what the City can expect once this project moves forward, sharing examples of signs used in the EDC December 13, 2016 2 PRELIMINARY Cincinnati sign projects. He also noted that MidWest One has signed on to be a presenting sponsor, according to Kaeding. Throgmorton stated that he is very pleased with the project, noting that it helps to have examples, such as the ones Kaeding shared. Cole stated that he is happy to see a project that addresses unrealized potential, and that he believes this will help unlock additional growth for downtown businesses. He also noted his enthusiasm for the collaboration with Thomas Agran on this project. Mims spoke to Galena, Illinois’ use of signs and how well they are done, and how his type of project will truly enhance the downtown, in terms of both people’s image of it and also in terms of improving business and thus bringing more people downtown. Cole moved to approve the funding request for the CoSign project with ICDD as discussed. Throgmorton seconded the motion. The motion carried 3-0. DISCUSS TIF FOCUS GROUP OUTCOMES AND NEXT STEPS FOR TIF POLICY REVIEW: Ford spoke to Members concerning the TIF Policy review process, noting that their meeting packets contain the findings from the TIF focus group work that was done over the past few months. She noted that there were eight focus groups, made up of several groups within the community. Some of the themes that showed up in the information collected were that more information is needed about TIF, with participants stating that they thought they knew about TIF but found that they actually need more in-depth information to completely understand it. Ford added that there were only 47 respondents to the survey – of folks who participated in the focus groups – noting the small sample size. Ford shared various themes from the focus group meetings, noting that people were generally hungry for information and thought we should get out into the community more to further explain TIF and how it is used in Iowa City. Several of the focus groups, it was felt that achieving LEED silver certification would be appropriate in exchange for receiving TIF assistance. Another area of interest was a way to leverage more benefit in the areas of social services and cultural aspects within the community. Ford asked Members to discuss what they would like to do next with the information. Throgmorton noted his thanks to staff and for those in the community who took part in the surveys and focus groups. Regarding the report that Ford provided Members, Throgmorton stated that there is a lot of great information contained in it, and that with all of the information they have received, he thinks they should get some ideas out on the table now. He stated that they should look at this information through the filter of the Council’s strategic plan, so that the revised TIF policy will be consistent with it. Continuing, Throgmorton noted that the essence of the community’s conflict over TIF has to do mostly with how TIF has been used, and might be used, in the downtown and Riverfront Crossings areas. He added that the concern isn’t so great in the other areas of town. He believes they should amend the TIF policy to contain a section that explicitly focuses on the downtown and Riverfront Crossings areas. Cole stated that he believes the struggle is to between needing detail so developers know exactly what to expect in exchange for TIF, but at the same time, allowing enough flexibility for developer’s creativity and success to be realized. Cole noted that he would like to focus on LEED certification. He added that as Mims stated in a previous meeting, they don’t want standards to be so high that development does not occur. Cole stated that he would like to see the cost implications of a higher standard, such as gold or platinum, as they discuss sustainability EDC December 13, 2016 3 PRELIMINARY requirements in exchange for TIF. Another area of interest for Cole is more information on what is deemed a ‘high quality job.’ He stated that in the past project labor agreements have been done, and he believes these were very effective. Cole also stated that he believes staff has done a great job in gathering information and that he is ready to move forward in discussions on amendments. Mims stated that she thinks they should try to find some ways to get the information out more publicly, such as educating the public on project-based TIF versus district-wide TIFs. She gave examples of some of the project-oriented TIF projects around town. Mims also spoke to the flexibility they need to have in using TIF, noting that Cole also spoke to this issue. She would like to get suggestions from staff on how they can balance the need to give developers more detail from the outset, so that they know exactly what the City is looking for, but at the same time not lock developers into something that won’t fit with their proposed project. Mims stated that in one of the focus groups she attended, a developer spoke to how they spend upwards of $200,000 to $300,000 in just the initial renderings and planning of a project, all before they can even approach the City with a new project. Mims questioned if there wasn’t a way for developers to start discussions with staff that are perhaps more conceptual, without the developers having to spend this type of money on preliminary planning. This would give developers a chance to know what the City seeks in exchange for TIF. Mims also voiced her concern that developers have told her they will not be bringing new projects forward for the next four years, in light of the new Council and what they perceive as difficulties in development. Height is another area of concern. Mims added that she sees building height as a political issue, one that this Council needs to look at. Regarding LEED certification, Mims stated that while she supports what Cole has said, she has also heard from those who often do LEED-certified projects that sometimes simply the location of the project can get them to LEED silver. She stated that she believes they need to look at this issue carefully and perhaps require a higher level of LEED certification for TIF-assisted projects. Mims also thanked staff for their hard work throughout this process, noting that it has not been an easy task. Throgmorton stated that he agrees that the policy should be more definitive about what merits TIF assistance. Regarding building height, he stated his preference for a specific section in the TIF policy that focuses on the downtown and Riverfront Crossing areas. Throgmorton also recalled his previous suggestions for changes to the TIF policy and that he would like to share these with staff as they continue this process. As for the LEED certification issue, he stated that he has suggested they use this as an incentive to exceed the silver standard. Overall, Throgmorton would like to see the City’s TIF policy as one that will advance their carbon emission goals. Continuing, Throgmorton shared other thoughts he has regarding their TIF policy. He questioned having shorter term, such as 5 year, TIFs. Another area he questioned was student housing and use of TIF assistance. Mims gave examples in the past where the City has provided TIF and what has been considered ‘public benefit’ when it comes to these projects. She noted that over time this can change, especially depending on the nature of each project. Cole stated that he believes staff should reach out to developers, labor, and green architects – those who have experience in LEED certification and what it takes to get to each level. Cole also suggested using TIF for municipal type projects. Mims stated that she would disagree with this, because that is what GO bonds are for. Cole mentioned about housing unit mix requirements and owner-occupied versus rental units. He stated that this could play into the flexibility they are looking for. Throgmorton spoke briefly about residential projects and TIF, and EDC December 13, 2016 4 PRELIMINARY how residential should not be a primary focus area of support. Fruin then briefly addressed Members’ questions and concerns, noting areas they may want to be considering being very specific. One he noted, needs to be looked at soon are parking requirements for downtown projects. Mims suggested that with all of the meetings in January for budget, that they look at February for the next EDC meeting, and in the meantime perhaps Staff can begin having those discussions with the development community and other staff to address the Committee’s questions and concerns. STAFF REPORT: Ford stated that they are still working with the Moss Ridge Development. She directed condolences with the family of George Hollins, who died last weekend. She noted that he was one of the people working with Mr. Moss on this project. Staff are also working with the Hodge Companies on their project on South Dubuque Street. She also mentioned the Hieronymus Square project, which is now a two-tower project with a hotel in one tower. Another project in the financial analysis stage is one with the City Hall parking lot and Unitarian Church. COMMITTEE TIME: None. OTHER BUSINESS: None. ADJOURNMENT: Throgmorton moved to adjourn the meeting at 1:10 P.M. Cole seconded the motion. Motion carried 3-0. EDC December 13, 2016 5 PRELIMINARY Council Economic Development Committee ATTENDANCE RECORD 2014 - 2015 NAME TERM EXP. 0 2 / 0 4 / 1 6 0 4 / 1 2 / 1 6 0 5 / 1 0 / 1 6 0 6 / 1 4 / 1 6 0 7 / 1 2 / 1 6 1 0 / 1 2 1 / 6 1 2 / 1 3 / 1 6 Rockne Cole 01/02/18 X X X X X X X Susan Mims 01/02/18 X X X X X X X Jim Throgmorton 01/02/18 X X X X X X X Key: X = Present O = Absent O/E = Absent/Excused Date: March 10, 2017 To: Economic Development Committee From: Wendy Ford, Economic Development Coordinator Re: TIF Policy Review Introduction In January of 2016, the City Council established a set of seven Strategic Planning Priorities, including one to Promote a Strong and Resilient Local Economy. In support of that planning priority, Council listed seven initiatives, including one to review and consider amending the City’s Tax Increment Finance (TIF) policy. The Economic Development Committee asked staff to frame key policy decisions. The goal is to tailor a set of TIF policies that offer a balance of specificity and flexibility. Ideally, policy decisions will align with Strategic Plan objectives, other City planning documents, and standard measures such as the state’s high quality jobs thresholds, blight remediation and expansion of tax base. Staff conducted eight focus groups between June and November, 2016. Focus groups included developers, architects, engineers, members of labor and worker justice organizations, members of social service oriented non-profit groups, members of community promotional non-profit groups, taxing entities and others. A lengthy report was presented to the Economic Development Committee (EDC) at your December 13, 2016 meeting. Feedback from the focus groups indicated that those associated with the development process were critical of the project and design approval process in part because of a lack of clarity for what is required for a project to merit TIF. People with expertise in sustainability seemed to reach consensus that LEED Silver Certification could be required of most traditional TIF projects. It was also noted that place-making is a public benefit, important to making a welcoming community, and includes the provision of Arts, Cultural and Social Services yet it is difficult to fund these public benefits using project-based TIF. Upon reviewing the focus group work in December, 2016, the EDC asked staff to solicit additional stakeholder input on key decisions for the next meeting. The issues EDC members identified for further discussion include building height and form, sustainable features, and the process through which incentives are considered. Local organized labor leaders have also reached out to the City with recommendations for TIF policy revisions. Staff conducted a roundtable to refine the focus group input. This roundtable consisted of three architects and a developer. Staff also communicated with a local labor representative to ensure a solid understanding of their issues. March 14, 2017 Page 2 This memo organizes the economic development issues addressed during the review process, provides supporting information from community focus groups and staff and presents policy decision points for each. 1. Balancing building height and form with building economics Deemed the most important policy by developers and architects, the building height issue downtown is critical because it determines more than the aesthetics of new downtown buildings. It shapes the residential population and thus, downtown diversity because of the economics of the buildings themselves. Developers note that the vast majority of student housing developers do not seek TIF because student housing projects cash flow on their own and need no external support. In Iowa City, student housing developments tend to be 4-7 stories tall, the maximum allowable with wood frame construction. There is one recent exception in the RISE at Court and Linn, a large development with a high rise tower dedicated to housing more than 500 students. Large or small, the market value for student housing developments is so high they are able attract enough investors and debt to avoid a financial gap. The economics are simple: smaller buildings are less expensive to build requiring only wood framing, and are very lucrative because of their premium downtown location and the ability at times to attract large rents from people living together. Developers indicated that there is very little market for permanent residents in smaller buildings downtown. First, the student-aged population can typically outbid other segments of the market. Second, the older demographic wants dwelling units in buildings that are differentiated from the student population, with amenities, other permanent residents and, often with views found in higher rise buildings. Developers say there might be a market for permanent residents in mid-rise buildings, but the economics of mid-rise buildings are challenging. Generally, the requirement for steel construction begins when the building exceeds 5 stories, essentially doubling framing costs per square foot. Limiting a building to 7 or 8 stories does not allow for enough additional income to pay for the added expense of the steel frame building without incentives. When there isn’t enough income, the value is lower and so is the appeal to investors and bankers, which creates an unnecessarily large financial gap per square foot of building. As the building gets taller, the market value begins to be high enough to attract investment and banker interest, thus shrinking the financial gap per square foot. Developers point out that of more than 2,000 housing units in downtown Iowa City, only 75 condos are occupied by permanent residents; fewer than 4% of all downtown residents. The other 96% is predominantly student-aged persons. Each new permanent resident downtown adds to the diversity that we have been working to encourage. By allowing only mid-rise buildings in mid-block parcels downtown, the diversity we seek in our downtown population will be harder to achieve and the financial gaps will be more expensive per square foot. More March 14, 2017 Page 3 importantly, the development community may likely focus on the lucrative student market thus not even attempting to work with the City on TIF projects. Policy Decision points: a) Determine a clear, predictable policy on building height for TIF projects. Is the height permitted by the underlying zoning code sufficient or is there another guideline the Council wishes to use? b) Determine how to consider architectural impact on adjacent properties. Is staff design review sufficient? It is important to note that most projects are not fully designed at the development agreement phase. Changes are often necessary throughout the design process; general compliance with initial concepts rather than exact adherence to early design phase documents can be used. c) Promotion of Historic Preservation and reinvestment into existing building stock. Project-based TIF depends on substantial increases in property value. Often times this cannot be achieved when density is not increased. Thus, Council may want to consider district-wide TIF applications for renovations or less time consuming processes such as tax abatement. 2. Sustainability Features There was consensus that LEED, while imperfect for every project type, is a good standard to achieve for most new construction. In discussions with architects who design to LEED standards regularly, there was consensus that LEED Silver Certification is the appropriate level to require for a downtown building project, with some exceptions based on project scope or location. Focus group participants agreed that LEED is a good standard because it covers a wider group of metrics than just energy efficiency and thus, leverages higher quality projects. Buildings earn LEED points across a range of categories such as site, water, energy, materials, indoor environmental quality, etc. One concern from a roundtable member after our meeting was that a building could achieve LEED Silver without scoring any points in energy efficiency, so her suggestion was to require LEED Silver certification with a minimum of 8 energy efficiency points. For those projects that would not be appropriate for LEED Silver certification (perhaps outside of downtown and RFC or rehabs of historic buildings), one idea was to require documentation of energy efficiency equal to 8 LEED points. The 8 point standard was not reviewed and addressed with other focus group members. Roundtable participants also noted that a metric other than LEED may be needed for manufacturing facilities; their discussion applied generally to residential and mixed use buildings. March 14, 2017 Page 4 They agreed that while downtown projects should be able to achieve LEED Silver, achieving LEED Gold certification would be a greater burden financially, requiring more financial gap filling by the City. Other measures of sustainability were also discussed, such as simply exceeding the current energy code by 20%. This could be a measure or option available to developers when projects are not well-suited for LEED. Policy Decision point: a) Determine sustainability standards to require for TIF projects. Options may include LEED Silver, LEED Silver with a baseline for energy efficiency points, or for those projects not suited for LEED, 20% or greater than energy code requirements, if applicable. 3. Affordable Housing In May of 2016, Council adopted a resolution approving inclusion of affordable housing goals in Economic Development policies. The following policies are for new construction projects that include residential dwelling units and have requested City financing:  A minimum 15% of the residential units must be affordable for a minimum of 20 years, or the term of the developer’s agreement, whichever is longer. It should be noted that only the gap between affordable units required through economic incentives and those otherwise required by code (for example, the required 10% in Riverfront Crossings) will be considered for City financing.  For rental housing, dwelling units shall be targeted to households at a maximum of 60% Area Median Income (AMI). The City may negotiate dwelling units being designated for households at a lower AMI.  For owner-occupied housing, dwelling units should be targeted to households at a maximum of 110% AMI.  The City may negotiate a fee-in-lieu of on-site affordable housing with the fee to be used for affordable housing purposes (for example, grants/loans for construction of affordable housing, down payment assistance for income-qualified households, etc.). Fee-in-lieu of negotiations currently allow the flexibility for providing affordable housing units off-site; off- site provision is something Council may consider addressing more explicitly. Policy Decision point: a) Determine any refinements to above policy such as flexibility in the location of where affordable units required for a project may be alternatively located. March 14, 2017 Page 5 4. Social Justice Wage Theft In November of 2015, Council adopted a resolution aimed at ensuring the City will not contract with any person or entity who has participated in Wage Theft by violation of the Iowa Wage Payment Collection law, the Iowa Minimum Wage Act, the Federal Fair Labor Standards Act or any comparable state statute or local ordinance, which governs the payment of wages. Contractors in TIF building projects Representatives of organized labor have submitted four recommendations for changes to the City’s economic development policies. The recommendations address organized labor’s concerns regarding contractors and subcontractors who use leased employees, sometimes known as independent contractors. The concern is that an independent contractor can operate essentially as an employee without the protection and benefits afforded to employees. The labor representative made four recommendations for any project involving TIF. Staff understands the goals of these recommendations, and believes to some degree the City’s economic development policies can help meet these objectives. However, there are significant enforcement challenges and in some cases existing enforcement mechanisms better suited to meet these goals. The four recommendations with staff commentary are listed below. i. The requirement that all contractors and subcontractors be in compliance with all tax obligations (workmen’s comp, payroll, corporate, etc.); Staff comment: Annual rebate certifications required by the City could also require a statement from developers that to the best of their knowledge, all tax obligations have been met. However, existing state and federal enforcement mechanisms are more appropriate, as there may be cases in which there is a dispute as to whether obligations have been met. ii. That there be no use of leased employees (sometimes known as independent contractors); Staff comment: Monitoring of this requirement would be extremely challenging, and the goal of this recommendation could be partially met with the inclusion of items iii and iv below. iii. That all contractors be in compliance with registration/licensing requirements at the Iowa Workforce Development’s Iowa Contractor Registration; and iv. All subcontractors are disclosed. Staff comment on recommendations iii and iv: Not all contractors and subcontractors will be known by the developer at the time of the development agreement. A policy could March 14, 2017 Page 6 include that the City, at its sole discretion, may request disclosure during the construction process. Violations of State registration and licensing requirements are more appropriately enforced by the State. Policy Decision point: a) Determine whether to adopt any of the recommendations above. 5. Other requirements When certain projects are presented that align with other stated City goals and priorities, related standards apply. Below are four for your consideration. 1) Quality of jobs created and/or maintained. An EDC member asked for clarification on the definition of high quality jobs. The City has required that for a project to be awarded incentives based solely on jobs, the jobs must meet the same quality standards as those used by the State of Iowa High Quality Jobs Program. Each year, the State updates its Average Wage and Laborshed Area data. Traditionally, the City has also required that most jobs to be created meet or exceed 120% of the average, which for FY17 is $24.17 per hour. This threshold could be adjusted down to the average or to any other point the Council feels is appropriate. 2) Class A office space. Historically, the City has required that new office space or office space in an old building on first floor or above be built or renovated to BOMA (Building Owners and Managers Association International) Class A standards (see below for definitions): Class A Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence. Class B Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area. Building finishes are fair to good for the area and systems are adequate, but the building does not compete with Class A at the same price. Class C Buildings competing for tenants requiring functional space at rents below the average for the area. 3) Hotels. The City views hotels positively because of the visitor population they attract and the hotel motel tax they generate. Visitors spend money and their economic impact is March 14, 2017 Page 7 significant. The 7% hotel tax on every room-night sold is also a boon to the community, adding up to more than $1 million per year in Iowa City. 4) Community engagement. Iowa City values the tangible aspects of new buildings, new jobs, new office space, historic rehabilitation, etc., There may be another measure to consider too: the level of community engagement of the entity requesting TIF. Exemptions may include a company offering a job training program or willingness to improve and maintain a public space. You may want to consider stating this value in an introductory paragraph about TIF policy. 5) Public Improvements. You may want to consider a statement in the policy as it relates to the use of TIF for Public Improvements. TIF revenues can be used to forward the goal of ensuring a vibrant and walkable core. Stating this in the TIF policy reinforces the link between public improvements and economic development with projects such as the pedestrian mall renovation and/or streetscape improvements. Likewise, catalyst projects, such as the Riverfront Crossings Park that will drive the private redevelopment opportunities in the neighborhood would be another means to further economic development activity in the Riverfront Crossings Area. The public improvements category could also encompass the Arts, a significant component of place making and arguably, an economic development catalyst. Policy Decision points: a) Determine whether to adopt a wage threshold for incentives based on jobs alone. b) Determine whether to specify that any office space in buildings receiving incentives meet BOMA Class A office standards. c) Determine if we want to consider prioritizing hotels, assuming a positive market study showing need. d) Determine whether to state community engagement is important to prospective TIF recipients. e) Determine whether to make a policy statement about the use of TIF for public improvements serving as economic development catalysts. 6. TIF Mechanics 1) Rebate vs. upfront TIF. The EDC has previously stated a preference to grant TIF rebates. The reason for this simple: it puts the majority of the risk on the developer. The project has to be successfully built, meet taxable valuation requirements and pay property taxes in order to receive the first rebate. Conversely, if the City grants TIF up front, the funds are spent and there is no guarantee that the project will be built and pay taxes, generating the TIF to repay the City’s up front financing. As a safeguard against the possibility that TIF would not be generated from a project granted upfront financing, the City has used Minimum Assessment agreements to ensure that property taxes from developers’ other property holdings will be used to repay the City when upfront TIF is granted. March 14, 2017 Page 8 At the Developer roundtable, a concern was raised that without upfront TIF, more significant projects will not happen because they will not be able to attract the necessary financing. This, in turn, will feed into the diversity problem noted in the building height discussion above. There was discussion that perhaps the size and scope of projects could determine eligibility for upfront TIF, but there was no consensus on what size or scope to merit upfront financing might be. It may be appropriate to consider additional public benefit for any upfront TIF. 2) Developer Equity. The EDC has historically required that Developer Equity be at least equal to the TIF, ensuring that the developer has as much ‘skin in the game’ as they are asking from the City. Developer equity does not include project debt. This has proven to work well and you may wish to consider keeping the policy going forward. 3) Length of TIF term. The length of a TIF term, whether in the form of rebates to the developer or repayments to the City for funding upfront incentives, has been determined by the need demonstrated in the financial analysis. A policy you may wish to consider would be whether to cap the length of time a TIF can be allowed or remain flexible, depending on the project. Policy Decision points: b) State whether rebates or upfront are preferred or not and under what conditions, if any, upfront TIF may be granted. c) State whether Developer Equity should be equal to the gap filled by TIF. d) Determine caps, if any on term length for TIF. We will discuss these policy decision points at your meeting on March 23. If you need any background information, please feel free to email or call me (wendy-ford@iowa-city.org: 319- 356-5248).