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COMMUNITY INCENTIVES FOR TIF AND ECONOMIC DEVELOPMENT: FORMAL POLICIES March 1, 2012 WAPA Spring Conference Larry Kirch, AICP Planning and Development.

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Presentation on theme: "COMMUNITY INCENTIVES FOR TIF AND ECONOMIC DEVELOPMENT: FORMAL POLICIES March 1, 2012 WAPA Spring Conference Larry Kirch, AICP Planning and Development."— Presentation transcript:

1 COMMUNITY INCENTIVES FOR TIF AND ECONOMIC DEVELOPMENT: FORMAL POLICIES March 1, 2012 WAPA Spring Conference Larry Kirch, AICP Planning and Development Director City of La Crosse

2 PRESENTATION OVERVIEW  Background - National View of Incentives  Rationale for Proposed Policy  La Crosse - Business Assistance Efforts  Features of Proposed Policy  Feedback  Next Steps March 1, 2012 WAPA Spring Conference

3 National View of Incentives  Businesses seek incentives  Governmental Response  Federal, State, Local, Economic Development Corporations/Authorities  Federal = Tax Credits (e.g. Work Opportunity Tax Credit), low cost financing and targeted grants  State = Tax Credits, Job Creation Tax Credits, Sales and Property Tax Abatement, Development Zones, Authorization for TIF, Job Training Grants, Loan programs, loan guarantees

4 National View of Incentives  Businesses seek incentives – it’s a given – very pervasive  Governmental Response  Boeing to Chicago - $100,000,000 in State and Local incentives for 400 jobs = $250,000 per job  Daimler Chrysler move to Georgia – Proposal included planting tulips for German Executives, having state economic development officials dressed in lederhosen at plant entrances to welcome employees  Wisconsin example - $87,000 per job incentive  Fort Collins Colorado Model – NO INCENTIVES, come for our educated work force, quality of life, but we will not pay you to come here

5 National View of Incentives  Film Industry incentives now in 40 states, up from five states in  Some states up to 30 percent tax credits.  $1.8 billion in incentives given between  State budget shortfalls are causing reexamining the credits, including Wisconsin. Governing.com

6 Rationale For Proposed Policy - Incentives can be good  Why are we discussing this issue?  Incentives locally have escalated similar to national examples – given incentives when not needed  Research indicates not all incentives are worthwhile  La Crosse has evolving but rudimentary system  Little, if any, financial analysis of need for City participation  Decisions should be fact based – level playing field needed for all businesses/developers

7 Rationale For Proposed Policy – What other Wisconsin Cities are doing  La Crosse surveyed Wisconsin Communities  Eau Claire, Wausau, Racine, Kenosha, Fond du Lac, Sheboygan, Janesville, Oshkosh, Appleton, Waukesha, Green Bay, Madison and Milwaukee  Most cities surveyed in Wisconsin have no incentive policy (4 of 13)  Not surprisingly Milwaukee and Madison have most sophisticated policies/programs

8 Rationale For Proposed Policy – What other Wisconsin Cities are doing  15 Survey Questions  Do you have a written TIF policy regarding developer incentives?  Are the following types of projects eligible for TIF consideration?  Which type of projects hold priority during the consideration process?  Do you have a preference to TIF loans vs. grants?  If you prefer loans do you collect interest? If yes, how do you determine interest rate?

9 Rationale For Proposed Policy – What other Wisconsin Cities are doing  15 Survey Questions  Does your TIF policy include job creation incentives? If yes, what incentives do you offer?  What other types of developer incentives does your TIF policy include?  Do you have a written TIF application?  Do you charge an application fee? If yes, how much do you charge?

10 Rationale For Proposed Policy – What other Wisconsin Cities are doing  15 Survey Questions  Do you charge a processing fee? If yes, how much do you charge?  Do you use TIF proceeds to pay city staff and/or reimburse the operating budget? (Finance, Clerk, Assessor, Legal, Mayor, Planning)  Do you have any type of annual review strategy?  Do TIF projects compete with projects in a 5 year/annual capital improvement program?

11 Rationale For Proposed Policy – What other Wisconsin Cities are doing  15 Survey Questions  Have you ever issued TIF revenue bonds?  Do you have a maximum percentage of project cost that you will provide to a developer based on taxable value increase?  Survey Results – See Handout

12 History – Rationale  The City has been involved in economic development for decades  Incentives primarily consisted of Industrial Development (reduced land price)  City infrastructure surrounding site  TIF – Downtown TIF #1, Valley View Mall TIF #3, and Airport Industrial Park-Terminal TIF #4  There is a need to balance redevelopment objectives with incentives  Development Projects can severely impact the City’s Capital Budget, borrowing limits, debt service

13 Rationale for Policy Fix  Businesses seek incentives – it’s now a given  FROM : Incentives have escalated from:  Reduced land price (industrial)  City infrastructure surrounding site  TO:  Grant$ of Land ($1.00)  Grant$ for construction of new buildings  Cash Grant$ (upfront/reverse) for developer costs (fill, demolition, contamination, building construction)  Job creation Cash Grant$  Tax Base Cash Grant$

14 City-Business Assistance  Business loan and tax credit programs:  Small business development loans/Commercial Rehabilitation loans  Upper floor renovation loans  Architectural & Engineering Analysis 80/20 funding program  Assist with State tax credits for job creation, job training  Industrial Park administration (Airport, International Bus Park)  Business communication and outreach  Marketing and business recruitment  Tax Increment Financing (TIF)

15 City-Business Assistance  Business assistance & redevelopment projects:  Riverside Center buildings  Doerflinger Building  Michaels Engineering & Authenticom, Inc.  Kwik Trip expansion  Trane Plant 6  Park Plaza  4 th & Jackson Streets  Future: Exxon-Mobil Oil  Future: Xcel Energy

16 City-Business Assistance  Provided over $4.8 million in loans (for example: People’s Food Coop)  RLF Program has assisted over 30 businesses to create over 450 new jobs  Former Rowley’s Office Supply now home to Kick Shoes and City Wear clothing stores  Lynn Tower  Upstairs Jule’s Coffee Shop Grand River Station

17 City-Business Assistance  Business communication and outreach:  City-Business roundtable meetings  Nearly 35 roundtables have been held  #1 Conduct City organizational assessment  #2 Establish a long-range plan for the riverfront  #3 Exit 3 area development  City-Business e-newsletter  One-on-one meetings

18 City-Business Assistance  Marketing and business recruitment:  Grand River Great City marketing effort  Marketing/recruitment tools  DVD  Folder/inserts  Profile & media packet  Future: Improve and coordinate marketing efforts  Public-private working group to focus on recruitment

19 City-Business Assistance  North La Crosse Business Association:  Highway 53 Corridor Study  First Impressions study & ad hoc committee  Future: Zoning study  Future: Exit 3 visioning  Future: Old Towne North Master Plan

20 Rationale for Policy Fix  Current Policy is ad hoc from project to project  Not all developer’s treated the same  City has gotten away from need-based incentives  2006 “fix” was superficial  Did not address: application fee, need-based approach, ceiling on assistance, loans vs. grants, job quality, types of projects obtaining assistance  2006 fix didn’t address regional aspects of incentive policies  Compact of Job Piracy by City Rejected – New Compact by 7 Rivers Region Alliance now has 100 organizations signed on

21 Features of Proposed Policy  Standard Application Form/fees  Only Gap financing  Ceiling on assistance  Requirements, but no incentives for job creation (State/Federal role)  Specific guidance on project eligibility  No cash grants, instead favorable loans

22 Features of Proposed Policy  Unresolved Issue  Process - Who negotiates?  How is Underwriting going to be done and who should pay for it  Key Provision - Project Evaluation – Proforma Determines Gap

23 Financing Approaches

24 New Conventional Approach

25 Feedback so far…  Need Formal Policy  Need better follow-up on developer agreements  Some want super-majority vote on development agreements  Proposed fees are counterproductive and extreme  Application deadlines will force projects elsewhere  Why does the City need outside financial or legal help?

26 Feedback so far…  10% project cap is too low  Why should City get part of ROI over 15%  If no free money (cash grants), program will not get used  List of eligible projects is limited and unjustified  Raise bar even further – Personal Guarantees, clawbacks good, conduct post mortum on all projects to determine if need was there (unjust enrichment) and evaluation of the TIF as a whole  Streamline initial evaluation of project

27 Bottom Line- Continue Incentives  City has a different bottom line than developers, who wouldn’t take cash grants?- free money is not free  Critical to conduct real due diligence on financial evaluation of projects to determine gap, city has no expertise – must have outside help  Eliminate over subsidizing (fund real gap) so the City can assist even more projects  Eliminate GRANT$, let the state fund job creation through tax credits

28 Our Next Steps  Review comments/questions  Introduce Resolution to Council  Public Hearings at Finance and Personal Committee, Committee of the Whole  Possible Workshops with F&P Committee  Final Action by Common Council  Policy Implementation

29 City Policy on the provision of incentives for economic development/TIF  Thank You!  Larry Kirch, AICP Director  City of La Crosse Planning & Development  400 La Crosse Street  La Crosse, WI  


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