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:
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
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
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
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
National View of Incentives Film Industry incentives now in 40 states, up from five states in 2002. Some states up to 30 percent tax credits. $1.8 billion in incentives given between 2006-08. State budget shortfalls are causing reexamining the credits, including Wisconsin. Governing.com
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
Rationale For Proposed Policy – What other Wisconsin Cities are doing La Crosse surveyed Wisconsin Communities -2009 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
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?
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?
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?
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
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
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$
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)
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
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
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
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
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
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
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
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
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?
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
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
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
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 54601 789-7512 firstname.lastname@example.org email@example.com