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HomeMy WebLinkAbout02-13-17 Community Investment F U C w DACE a Y Y 1865 OFFICE OF THE CITY CLERK KAREEMAH FOWLER,CITY CLERK COMMUNITY INVESTMENT FEBRUARY 13, 2017 3:40 P.M. Committee Members Present: Gavin Ferlic, Regina Williams-Preston, Oliver Davis, Randy Kelly Committee Members Absent: None Other Council Present: Tim Scott, Jo M. Broden, John Voorde, Dr. David Varner, Karen White Other Council Absent: None Others Present: Adriana Rodriguez, Aladean DeRose, Kareemah Fowler, Graham Sparks Agenda: Tax Abatement Briefing-Aaron Kobb and Brian Pawlowski, DCI Committee Chair Gavin Ferlic called the Community Investment Committee Meeting to order at 3:40 p.m. Having no bills to discuss on the agenda, Committee Chair Ferlic gave the floor to the presenters from the City's Department of Community Investment. Brian Pawlowski, Department of Community Investment, handed out a memo to all council members present at the meeting. He stated, This will be a brief update on the changes to the terms Community Investment uses over time. The memo outlines the changes to the state law that happened in 2013 that didn't get discussed at that point. The Council has done some things because of that state law change but I just wanted to codify it a bit more and give an opportunity to answer any questions that you may have,with an example or two (2.)Essentially, prior to 2013,the State had a schedule set for abatements that pertains to both years and percentages. At 2013,the State did away with the percentages portion of the law in the schedule. What that meant was each abatement became its own abatement, weighed on its own merits, its own year time frame. For example,the Chase Tower abatement the Council did a few years ago did not have a set normal schedule, it was much more aggressive. Community Investment has been calling that a modified abatement. In reality, it's just an abatement because there is no standard and there's no modification. There are different schools of thought on this but when we realized the flexibility it gave us and the Council, we figured out that there may be ways to utilize these abatements in a bit more of an aggressive way up front that does a couple things: instead of a nine (9) year period of tax abatement you could do a five (5) year abatement at a higher percentage. That doesn't have the petitioner paying any taxes at all for those years but allows the 455 County-City Building•227 W.Jefferson Boulevard•South Bend,Indiana 46601 Phone 574-235-9221 -Fax 574-235-9173•TDD 574-235-5567-www.SouthBendIN.gov JENNIFER M.COFFMAN ALKEYNA M.ALDRIDGE JOSEPH MOLNAR CHIEF DEPUTY/DIRECTOR OF DEPUTY/DIRECTOR OF POLICY ORDINANCE VIOLATION CLERK OPERATIONS full tax bill to come in after the last year of the abatement. Instead of the partial incremental piece that the traditional nine (9) year abatement does,the full tax bill comes in right after the last year of abatement. Why is that important? It's important because it enables us to look at TIFs (Tax-Incremental Financing) as a different way. For example,take a$13.5 million project looking for incentives. Traditionally,the Council and members of the Redevelopment Commission would give a deal that gave an abatement for nine (9) years and some type of TIF to that. In the case of a$13.5 million investment it would look something like, `Here's a nine (9) year abatement that nets X dollars, and in addition to that we'll contribute somewhere between $600-$800 thousand in TIF to build a road or a building or whatever we would help do.' What if we could have that same deal with a five (5) year one-hundred percent(100%) abatement and no TIF? We looked at it and ran the numbers, if you take that nine (9) year span juxtaposed to the five (5) year abatement, you actually come out ahead $200-$300 thousand depending on how you calculate it at the end of that nine (9) year period. If we can do that, it does a couple things: it's a full tax bill on year six (6) and it frees up that TIF. So the opportunity cost of expending that$800 thousand in TIF that was traditionally spent is now free to be used for other things. It's a different way to think about how we do abatements, not to say that's what we need to do all the time but it's just another way to think about it and how to do it. In conversations with some projects and developers, we found an openness to that. Obviously some people prefer to have cash in their project which we understand but if you don't need to do that, then you can have a farther reaching plan for TIF expenditures. I wanted to share this and entertain questions on the hopes that if we were to come to you over the course of the next years, you know not to be caught off guard if it's a five (5) year one-hundred percent (100%). Quick note,this Council did adopt an application that is still in full affect. We wouldn't do anything more aggressive than what the project qualifies for. The traditional style of abatement is still doable and feasible, but a more aggressive style is now possible. Committeemember Oliver Davis asked, Would there be some sort of timeline for projects or developers and would there be rationale given to which way a project decides to go? Mr. Pawlowski answered, Absolutely. That makes sense and we can do that, that largely comes from the application. We typically don't look at these aggressive tax abatements unless the project is pretty sizable. Specific criteria need to be met to qualify for these aggressive abatement options. Councilmember John Voorde stated, Under the old formula, it was spelled out that the repay would go back into the TIF fund. We have to be mindful that there's no more money coming in until it's all over. Mr. Pawlowski replied, Correct. The TIF assumptions for those years related to that project would stay static. But again, in the current case, you see a percentage creeping into the TIF each year. In this case, it would be empty for three (3), five (5) or however many years but in year six (6) you'd have the full amount in right away. That actually ends up being a better deal for us than if in the first year, $800 thousand or so goes out of the fund right away. It's clear we wouldn't want to fund every new project like this, but it offers an option for larger projects with better criteria. 2 Councilmember Dr. Dave Varner stated, When we look at these things and we talk about abatements or public funding as a percentage of the project, I would like to see a baseline statement for any project. The breakdown of private investment and public investment in projects would be nice to see, as well as having a baseline percentage for private and public investment. On the recent project at the Commerce Center, there was a very aggressive tax abatement used coupled with large public support. I think that may well go beyond what we've been talking about in the past. If that sets a new standard, I'd expect more people will ask for that same standard and we ought to clarify that going forward. Mr. Pawlowski replied, If we average out three (3) or four (4) years, fifteen percent(15%) is the range or the average. We the City of course wish it were closer zero (0), developers like it to be higher but fifteen percent(15%) is where it normally falls. Regional cities projects and special projects require matches or something of that nature, but the point remains. Committeemember Regina Williams-Preston stated, I wanted to clarify something John said about TIF districts. What is the expiration on TIF districts, for example, River West?Does that never end? Mr. Pawlowski replied, Yes, every TIF has an expiration date. State law mandates an expiration on TIF districts. Councilmember Jo M. Broden stated, So I understand for the Central Business District(CBD) there are overall development plans with goals and objectives. I assume the same exists for some of the other plans. Could you address for my benefit and others the alignment of the decisions being made being reflective of the plan? How true are we to the stated goals of what would best bring about the redevelopment and development of the CBD? What is the formal process? Is that at a staff level or is it at the Redevelopment Commission level? Could you give me a sense of the nuts and bolts of what drives that process? Mr. Pawlowski replied, The redevelopment plans do go before the Redevelopment Commission. We actually are working on revisions that were necessary as result of the TIF realignment. With respect to the CBD there are multiple TIFs,the River West and the River East. The plans govern types of uses that we are after or activities that we are after. So it's not necessarily a specific delineation of what we want, we try to cast a pretty broad net because you never know when people are going to come in. But in terms of the uses, it is what you would think. Mixed-Use is about as specific as we get when it comes to plans. When you talk about acquisition of properties, that is more of a developer-level conversation. I'd say the most relevant and most used land use is the Mixed-Use classification. Upon completion of the presentation, Committee Chair Ferlic adjourned the Community Investment Committee Meeting at 3:59 p.m. Respectfully Submitted, Gavin Ferlic, Chairperson 3