community incentives for tif and economic development: formal policies march 1, 2012 wapa spring...
TRANSCRIPT
COMMUNITY INCENTIVES FOR TIF AND ECONOMIC DEVELOPMENT: FORMAL POLICIES
March 1, 2012
WAPA Spring Conference
Larry Kirch, AICPPlanning and Development Director City of La Crosse
PRESENTATION OVERVIEW
Background - National View of IncentivesRationale for Proposed PolicyLa Crosse - Business Assistance EffortsFeatures of Proposed PolicyFeedback Next Steps
March 1, 2012WAPA 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 4th & 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
Financing Approaches
$800,000
$200,000
Traditional
BankBorrower
$700,000
$100,000
$200,000
Gap Financing
BankDeveloperCity
New Conventional Approach
$620,000
$50,000
$330,000
TIF Funded Development
BankDeveloperCity
Feedback so far…
Need Formal Policy Need better follow-up on developer
agreements Some want super-majority vote on
development agreements Proposed fees are counterproductive and
extreme Application deadlines will force projects
elsewhere Why does the City need outside financial or
legal help?
Feedback so far…
10% project cap is too low Why should City get part of ROI over 15% If no free money (cash grants), program will not
get used List of eligible projects is limited and unjustified Raise bar even further – Personal Guarantees,
clawbacks good, conduct post mortum on all projects to determine if need was there (unjust enrichment) and evaluation of the TIF as a whole
Streamline initial evaluation of project
Bottom Line - Continue Incentives City has a different bottom line than developers,
who wouldn’t take cash grants?- free money is not free
Critical to conduct real due diligence on financial evaluation of projects to determine gap, city has no expertise – must have outside help
Eliminate over subsidizing (fund real gap) so the City can assist even more projects
Eliminate GRANT$, 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 [email protected]