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Home My WebLink About10-25-2007 Council Economic Development Committee , AGENDA City of Iowa City City Council Economic Development Committee Thursday, October 25, 2007 9:30 a.m. Lobby Conference Room Iowa City City Hall 1. Call to Order 2. Consider approval of October 1,2007 Economic Development Committee meeting minutes 3. Discussion/ action on Iowa City Ambulatory Surgical Center Tax Increment Financing Request 4. Staff time 5. Committee time 6. Adjournment ,~ 1 _fiI"'"-= -~... !~ai~~ ~~~gg.~ -.. - CITY OF IOWA CITY MEMORANDUM Date: October 18, 2007 To: City Council Economic Development Committee ..-------.u.f// .' ..y-" ../ ( . From: Jeff Davidson, Director of Planning and Community Development Re: Agenda item #3: Iowa City Ambulatory Surgery Center TIF request At the October 15, 2007 Iowa City City Council work session, Council requested that the Economic Development Committee reconsider the Iowa City Ambulatory Surgery Center TIF request. I have contacted Iowa City Ambulatory Surgery Center representatives to see if they have any revised or additional information to present. If anything is received prior to Thursday, I will forward it to you. Otherwise the Thursday meeting is intended to be an opportunity for the applicant to present any revised or additional information. The Economic Development Committee can then discuss the proposal and decide if it wishes to take any further action. Let me know if there are any questions. ppddir/mem/ecodevcomm.doc MINUTES CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE OCTOBER 1, 2007 CITY HALL, LOBBY CONFERENCE ROOM Preliminary Members Present: Regenia Bailey, Connie Champion, Bob Elliott Members Absent: none Staff Present: Wendy Ford, Jeff Davidson. Others Present: Michael Heinrich and Kelly Durian, Iowa City Ambulatory Surgical Center, Gary Sanders. RECOMMENDATIONS TO CITY COUNCIL Elliott moved to support the application for Tax Increment Financing from Iowa City Ambulatory Surgical Center, Bailey seconded. Motion failed, 2-1 (Bailey and Champion against). CALL MEETING TO ORDER Chairperson Regenia Bailey called the meeting to order at 8:30 AM. IOWA CITY AMBULATORY SURGICAL CENTER, TAX INCREMENT FINANCING APPLICATION Ford provided a review of points about the Agreement that had been called in to question just previous to and during the meeting of September 13, 2007. 1) Dates. The applicant had requested date changes that would have resulted in delaying rebates by a full year. Upon explanation about what changing the dates would do to the rebate schedule, they were fine with the original date of certifying completion on May 1, 2009. 2) Defaults and Remedies in Article X, Section 10.1. Applicant desired to delete clause (e), which defined one of the "default events" to include the event that the holder of any mortgage on the development property or any improvements thereon, or any portion thereof, commences foreclosure proceedings as a result of any default under the applicable mortgage documents. City attorney disagreed with their desire and said (e) shall remain. Upon discussion with applicant, they were agreeable. In Section 10.2 Remedies on Default, applicant desired to strike (e) which says the city shall be entitled to recover from the developer, and the developer shall repay to the city an amount equal to the most recent economic development grant made as a remedy to default. City attorney disagreed with their desire saying this a clawback provision that acts a penalty for failure to meet economic development goals throughout the period of the contract. Upon discussion with applicant, they were agreeable. 3) Article III, Section 3.1. Regarding language about the jobs in the application and definition of average vs minimum number and wages. Applicant had stated in their application that they would employ 20 people at a minimum wage of $20 per hour. Upon closer review, applicant restates that they will employ 17 FTEs at a minimum of $21 per hour or and 27 at an average of $21.65, not including the Executive Director or the physician's salaries. 4) Article III, Section 3.2. Discussion with the architects brought to light two problems with Section 3.2; 1) that health care facilities have more difficulty achieving LEED points due to the higher standards of air quality and sterility that require higher energy use. This fact has been recognized by the U.S. Green Building Council who has initiated the development of LEED standards for health care facilities, but have not yet implemented the standards; and 2) that it is virtually impossible to obtain LEED certification upon completion of the building because the certification process can take months after the completion of a building. A workable solution could be to change the Agreement that the developer shall build the building to attain the necessary points and pursue LEED certification upon completion. The applicant has indicated that instead of LEED, they would like to attain another energy efficiency standard, such as one offered by Mid American Energy. Economic Development Committee October 1, 2007 Page 2 Bailey asked about possibility of the applicant delivering low income care. She noted that she wanted to see a higher benefit to the community and that perhaps that could come in the form of the expertise of the developer - surgical services for people with low income. Champion inquired about the occupancy rate of operating rooms. She noted she was supportive at first when she felt this project would keep the hospital from expanding into the Northside neighborhood, but said she now feels differently because they would be a for profit entity, not a non-profit. Her other concern was that the new facility would take jobs away from Mercy. Heinrich said the center would be owned 70% by Mercy and 30% by the physicians. Regarding operating room occupancy, he noted Mercy will have occupancy problems by 2010, and would have to do something by then to expand, either at the hospital or with a new facility. He noted that the center will be an excellent physician recruiting tool for the community and that this type of business does not exist in Iowa City and does in many other communities. Further, he stated that one of their toughest business decisions involved going from non-profit to a for- profit entity and thus, having to pay property tax. The group noted early in its planning that TIF might be a way of mitigating some of that change, especially since they desired to locate in the Northgate Corporate Park, a designated Urban Renewal Area. Elliott asked if they needed to expand their surgery space. Heinrich confirmed they do, saying outpatient surgeries are on the increase. Often times these outpatient procedures get bumped off schedules because the longer, more involved operations take longer than expected. Elliott asked of the new jobs, how may will be coming from Mercy. Heinrich noted there are no plans to reduce the number of FTEs in the surgical unit at Mercy. Bailey referenced the chart distributed by Heinrich and Durian and noted the difference between the Agreement, which stated they would employ 20 FTEs at $20 per hour minimum, and the new information showing only FTEs making $20 or higher. Bailey noted that the average of the jobs is $20/hr, not the minimum, which would be preferred. Durian concurred noting 27 FTEs will average $21.65 per hour, not including the Executive Director or the physician's salaries. He also noted the benefits are competitive and the same as Mercy. Bailey asked where discussion of low income care went. Heinrich explained that the center will extend Mercy's policy that serves people of low income. Financial assistance cases are done in house, as opposed to follow up on insured patients, which is outsourced. Heinrich said they were very comfortable putting in the agreement that the facility would provide the same services for low income folks that the hospital does. Bailey pressed on how to quantify that in order to hold them accountable for it. Heinrich said many surgery centers choose not to put in policies like this, and will even go so far as to "cherry pick" their patients. The Iowa City Area Surgical Center group felt strongly that they would be an extension of Mercy and provide charitable care with the same policy. Champion suggested because Mercy is a non-profit, and owns 70%, she would be willing to go with a 70% rebate. Bailey said she wanted the more in terms of community benefit; she likes the project, says it is a good economic development driver, but is not sure we need to incent it because it is happening anyway. Elliott said he would be in favor of the TIF, but not at the 100% level. He added the upside is that the project adds to the tax base. Public comments. Gary Sanders complimented Mercy's great work, but said that the project would happen regardless of TIF, and thus, doesn't merit it. He said the City should save tax rebating for new companies or companies that wouldn't expand without it. He said it would be the wrong message to the average person. Bailey asked for further discussion. Elliott said he was surprised that it was going to be a for-profit entity. He would like to see an encouragement for the new tax paying entity and doesn't like the level of the proposed TIF. He would rather have a smaller percentage. He noted again that he likes the non-profit going for profit and paying taxes, and would favor it. Champion said she would not support it because it Economic Development Committee October 1, 2007 Page 3 will happen anyway. Bailey said she is glad it is happening, but does not feel it needs incentives, and needs to show additional community benefit. Elliott moved to support the application for Tax Increment Financing from Iowa City Ambulatory Surgical Center, Bailey seconded to move it forward. Motion failed, 2-1 (Bailey and Champion against). Staff time. 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