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HomeMy WebLinkAbout11-27-18 Personnel and Finance ,;.,o()I-" ,) dU s,PEACEj. � x ;ss OFFICE OF THE CITY CLERK KAREEMAH FOWLER, CITY CLERK PERSONNEL &FINANCE NOVEMBER 27, 2018 5:00 P.M. Committee Members Present: Karen White, Regina Williams-Preston, John Voorde Committee Members Absent: Gavin Ferlic Other Council Present: Tim Scott,Jo M. Broden(late), Sharon L. McBride (late) Other Council Absent: Jake Teshka, Oliver Davis Others Present: Graham Sparks, Bob Palmer Presenters: James Mueller, Tim Corcoran Agenda: Tax Increment Financing (TIF) Presentation- DCI Staff Miscellaneous Committee Chair Karen White called to order the Personnel and Finance Committee meeting at 5:00 p.m. She introduced members of the Committee and stated, This is the first(1st) of a four(4) part series as we begin to look at budget preparation. During the past budget discussion in preparation of 2019, a number of questions and concerns were raised. One (1) of which was TIF and we know there are a lot of opinions in terms of the use of TIF and how it should be implemented. So today we will have a discussion. It is not a debate as it is a discussion for us to really look further into TIF as we continue looking at the financial components that comprise our budget. We also discussed during that budget process that we would have quarterly updates from various department heads as well as starting discussions on the debt and the overall preparation for budget year 2020. I did send a report to the Council Members that was conducted in 2016 by a professor from Purdue University. I shared that with Dr. Mueller as well. Committee Chair White then gave the floor to the presenters. Tax Increment Financing(TIF) Presentation- DCI Staff James Mueller, Executive Director of Community Investment with offices located on the 14th floor of the County-City Building, stated, I appreciate the opportunity to discuss one (1) of our most important economic development tools. A lot of the progress that you've seen over the past few years is in no small part to the use and deployment of TIF resources. Something that came up yesterday in conversation on the Storm Water fee was the use of TIF. TIF is already used for drainage and other infrastructure needs. If you recall, we did the Water Capital rate increase for water capital. There was a lot of TIF put in for that so, this year, it is a couple million dollars for various improvements particularly on the south side. I just wanted to clarify that given the discussion. TIF is also not a magic mound of money. I think part of the misconceptions are due to INTEGRITY SERVICE'ACCESSIBILITY JENNIFER M.COFFMAN BIANCA L.Tuw)O JOSEPH R.MOLNAR CHIEF DEPUTY/DIRECTOR OF OPERATIONS DEPUTY/DIRECTOR OF POLICY ORDINANCE VIOLATION CLERK EXCELLENCE I ACCOUNTABILITY I INNOVATION I INCLUSION I EMPOWERMENT 455 County-City Building 1227 W.Jefferson Blvd.I South Bend,Indiana 46601 I p 574.235.92211f 574.235.91731 www.southbendin.gov CITY OF SOUTH BEND I OFFICE OF THE CLERK time,the excess is what goes in during the lifetime of the TIF area and it goes to the Fund in which it is being collected. In Indiana and in other states, there is a Redevelopment Commission that manages those, subject to whatever legislative constraints there may be. He continued, According to State Statute, TIF revenues are meant to pay for local public improvements and look to induce development and job creation.That is often a motive in economic development spheres but is not always the primary one (1). You can do a lot of activities but as we have talked before, these are generally isolated to things, infrastructure and less programing. There is one (1) caveat to that which is training and workforce development on project-specific items and not broad programs. So we couldn't use it for our pathways program, for example, but we could and have looked at it for specific projects. The other ones as we will sort out later are public facilities. The debt service we looked at yesterday in the River West area, for example, the Police and Fire Stations are being paid for out of the River West Development area. The Central Services Building over on Sample and some of the Century Center improvements are being paid for out of TIF. So a lot of public facilities. The Library Bond, it may not be a City public facility but it is a public facility. The Parks Bond includes more public facilities. He went on,And then there are other things.We do streets,the neighborhood plan implementations like the streetscape on Western Avenue, for example.The intersection on Lincolnway and Charles Martin is paid for with Redevelopment dollars. And we've also talked about the water capital. Although that is not preferred to be shifting from an Enterprise Fund. When there are scarce resources everywhere, it is not wise to be shifting Enterprise Fund needs to Redevelopment Fund dollars We have done it because we've seen needs and have tried to fill gaps wherever we can. Councilmember Jo M. Broden asked, Do you mind going back on the workforce development piece and how that is specific? What are the limitations on that? Dr. Mueller replied, It just has to be isolated to a project. So it can't be a programing or an ongoing operational program. It has to be a narrow, specific project. Councilmember Broden followed up, What is sitting under that right now? Dr. Mueller replied, We've used the Technology Resource Center Program that we are hoping to come online. That is one (1) where we have identified a discreet project. If it was ongoing, that would be an issue. Councilmember Broden interjected, Ongoing, is that under a year? Or are there more specifics on that? Dr. Mueller replied, The Statute is not that clear. Councilmember Broden followed, That is really surprising that workforce development is excluded out of that. Dr. Mueller stated, I think,historically, we've also contributed to projects for the schools so there have been various initiatives. Councilmember Broden interjected, But that's ongoing though. EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574.235.9173 TTD 574.235.5567 www.southbendin.gov 4 ®CITY OF SOUTH BEND OFFICE OF THE CLERK Dr. Mueller replied, The support is not an ongoing commitment. The program can continue, but it's a discreet investment that is allowed. Committee Chair White asked,James,didn't we recently start utilizing TIF dollars for professional services? I think that just happened for the last two (2) years. Dr.Mueller replied, In an effort to take a burden off the General and Income Tax Funds,we moved a lot of the staffing and professional services that the Redevelopment Commission needs over to TIF funds. That is to relieve the General and Income Tax Funds and place the burden there. Committee Chair White followed up, There has always been conversations in regards to public safety utilizing TIF funds. I know one (1) time we were told that the City of West Lafayette was able to do that. So are you aware of any cities that are looking at the public safety component? Dr. Mueller replied, We can get a full legal read on it. Our understanding is that it is not. There are things we hear about that some cities do with TIF that we then check with legal counsel and they give us a recommendation. Councilmember Tim Scott interjected, I think they got sued. Dr. Muller stated, Yes, cities do things but they may not be legal. So we have to be careful when we use examples of other cities because some of those may not be legal. Dr. Mueller continued, So, we talked about this (referencing a slide in the presentation) in the budget presentation. This is just a look at the revenue stream in each development area. If you look at 2018 in the middle and the bottom,it is the River West Development area.The reason why there is that bump up is there is the one(1)time relinquishment dollars from INDOT for taking on MLK Boulevard from Mitt Road to the Marion roundabout. You have to subtract $4.1 million from that to get closer to what our property tax revenues are in that fund for this year. The next one (1) in green is the River East Development Area and there are two(2)parts to that.There is the residential component that really is there to pay off the Eddy Street Bonds that have been issued. From our perspective and from a reporting light, it is aggregated but from an operational or strategic standpoint, we don't really necessarily even think about those dollars because they are committed to the debt service on the Eddy Street bonds. We'll get to what is left in a little bit. He went on,The South Side is the next biggest and West Washington is pretty small. At this point it is about$300,000 per year or$350,000 per year. And then Douglas Road, we have been passing that through to the General Fund and other taxing jurisdictions for the last couple of years with the eye toward closing it. The one (1) caveat there is the County is looking to do a road project there and we have some public works infrastructure in where the road project would go and there is likely to be some cost burden on us. So we may look at this as an avenue for that. Committee Chair White stated,When we are looking at those TIF districts, some of them will have an ending time regardless. EXCELLENCE ACCOUNTABILITY INNOVATION I INCLUSION I EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574.235.9173 TTD 574.235.5567 www.southbendin.gov 5 CITY OF SOUTH BEND OFFICE OF THE CLERK you didn't know the complete history until today but TIF actually started in this county in those two (2) places. It was fought for here and it spread across the country. West Washington may be the baby but it is the only one (1) that is left that started TIF throughout the County. California started earlier but, in our area, and in the Midwest. That is the one (1) thing James knows and it is the one (1) that ends the soonest. All the others are 2035 and 2037 and that was a way of saving the downtown one (1) from ending. The Legislature has been very negative toward TIF, as James had said. We actually started it and here we are having a conversation about it. Committee Chair White then gave the floor to Dr. Mueller to continue the presentation. Sue Kesim, 4022 Kennedy Drive, interrupted, But Jim has to leave early and I had a financial question I wanted him to ask. Mr. Bognar replied, Let him finish. Dr. Mueller stated, So it depends on the given year but looking holistically over the past fourteen (14) or sixteen(16) years, these (referencing a slide in the presentation) are the categories of how they have been historically categorized. The number one (1) category is called Jobs. Thinking of different projects in the recent past, which ones would qualify for jobs? We see that a lot of them have some sort of jobs associated with it. Whether that be Mixed-Use or the Portage Prairie build- out, or even the Technology Resource Center, there are a lot of ways to get to that. But I will say, for one (1), in the political environment, jobs have historically been a marker of success for economic development. That is something people focus on. If they aren't higher wage jobs or jobs that will survive automation,jobs are not the only metric for economic success. In a world right now where we have an unemployment rate of a few percent, most economists would say we are close to full employment but it is not necessarily the number of jobs but the quality of jobs and how they all work together. He continued, There has always been a heavy portion of TIF on infrastructure, historically. It has been underground infrastructure, streets, or other needs for infrastructure. TIF is also used for, as we talked about, Police and Fire Stations as well as the Central Services Building and others. This is often where Administrations look to, if we need a facility,they use it. In recent past,River West has funded Fire Station Four (4) over on Olive Street. That was just last year. They didn't do Station Nine(9)because, as you may know,it is currently not in the development area. I think had it been, people would have been happy to use TIF money for that. Any time there is a need for a public facility, I think TIF almost always gets at least a hard look as a source for that. He went on, There are a lot of remediation costs. There have been some legacy funds that have covered remediation but if you look at converting the Ignition Park landscape from where it was to shovel-ready today, that took a lot of dollars over the years. So a lot of money has gone into remediation. Historically, TIF has gone about two percent (2%) to Parks. I think given the new infusion of the Bond and such, it is a little higher I think. The My SB Parks & Trails plan had the General Obligation Bond, the River West TIF Bond, but it also had TIF cash that followed. We put $1.5 million into the Charles Black Center. So there was $3 million from the 2015 Park Bond and then we supplemented that with $1.5 million River West because we would have had to cut the project back too much to make the$3 million budget. So we found resources to do that. There was money put into Howard Park, substantial sums. There has been money put into some of the parks facilities in the south area such as Erskine and O'Brien. I think Councilmember Teshka and EXCELLENCE ACCOUNTABILITY INNOVATION I INCLUSION EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f574.235.9173 TTD 574.235.5567 www.southbendin.gov 7 CITY OF SOUTH BEND I OFFICE OF THE CLERK Tim Corcoran, Director of Planning for the Department of Community Investment with offices located on the 14th floor of the County-City Building, replied, We started the design in the spring of this year and we have now gotten to, I think, thirty percent(30%) design. We were briefed just last week on that, so,it really is a two (2)year cycle between design,bidding and construction. Or, at least, eighteen(18)months. Dr. Mueller stated, I think public feedback is coming up here shortly. We heard from the neighborhood association that this was a priority and we agreed we wanted to finish this stretch of Western, so we started moving. Mr. Corcoran stated, Public engagement happened a couple different times and usually it is early in the design process. Most specifically it happens between the ten and thirty percent(10%-30%) design phase. This one(1)is a little easier from an engineering perspective than phase one(1) and phase two (2). So that should be coming up shortly, probably in the spring of 2019. Councilmember Broden asked, How many of those leverage additional matches? Dr. Mueller replied, The Technology Resource Center will. There is already some private matching for either equipment or other programming. These neighborhood plans, when Public Works goes and gets matching dollars, they have different criteria for what is important. Safety, traffic and other basic needs of the infrastructure are what drive funding decisions for those funds. Whether it be State or Federal, it would align with those same criteria. The neighborhood plans have a more holistic look at what the priorities are for our community. Councilmember Sharon L. McBride arrived at the meeting at 5:42 p.m. Councilmember Scott asked, One(1) thing with HPC going under DCI, I look at the Cemetery, is that where we can leverage going after some national grants or grants on the historic side? Maybe into West Washington and other places? There is that status and now that is where I kind of saw the leverage with HPC and with you guys. Is there anything out there, nationally,that we've never tapped into in the past that we can now to try and leverage more? Dr. Mueller replied,They have been helpful in trying to get outside resources whether it be historic tax credits. For instance,the JC Lauber building and the Kiser Mansion project as well as the City Cemetery and the Lafayette Building, they are definitely looking for outside funding sources. Those funds are competitive, too. We just saw both our housing tax credit applications disappointingly come back with a denial. So everyone is competing for these credits and funding but yes, we have competitive projects and we hope that we will get our share over time. Dr. Mueller continued, So going into the development areas themselves, this (referencing a slide in the presentation) is the proposed that we had brought you a few months ago. This just shows all the areas together. One (1) of the questions was about what the process is for this. It is approximately three (3) months. It starts with a declaratory resolution from the Redevelopment Commission. It then goes to Area Plan and then comes to Common Council, and then it goes back to the Redevelopment Commission. Obviously there has not been a declaratory resolution from the Redevelopment Commission and there probably won't be one (1) at the last meeting of the year, but we do hope to get right out of the gates in January. The Redevelopment Commission at EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574.235.9173 TTD 574.235.5567 vwww.southbendin.gov 9 CITY OF SOUTH BEND I OFFICE OF THE CLERK Mr. Bognar interjected, Smart Streets would never have happened. Dr. Mueller stated, Well, Smart Streets and we would be facing significant revenue changes in a few years. Committee Chair White stated, We would have lost all that. Dr. Mueller stated, The River West TIF has multiple components, too, if you look at it. There is a very small component that expires a few years prior to the 2037 date. I think that is 2033 and it goes into three (3) parts. I think there are townships. Because the debt was issued, they will continue to 2037. Dr. Mueller continued, So, looking at the River East with the asterisk (referencing a slide in the presentation), we're not looking at the residential component. That pays off the Eddy Street Commons and Phase Two (II) bonds. So this is what we look at from a strategic and operational perspective. We look at what is coming in and where projects can come from. So,in 2018,we had about$8.8 million in cash carried forward. We are expecting,by the end of the year, $3.1 million. Of course we get a December receipt every year which goes into the cash carry next year because we can't spend money in the holidays. So $8.8 million of cash carried forward, part of that is the December receipt from 2017. And then we have roughly $12 million committed whether that be commitments we made in prior years or this year in terms of projects. I think the main ones you are seeing, although some haven't gone out the door, are committed. When you look at the cash balance, you will see them still in there but I think everyone is aware of the Commerce Center Project in which monies were applied. The Cascades Project and other smaller ones have money earmarked. Going forward, our priorities include expanding the boundaries to include the Zoo and the Mishawaka Avenue corridor because we believe that is a critical entry into the City. We are also looking at the northeast corridors and asking how we best connect the progress downtown and in the east bank and the progress happening closer to the University. How do we make sure we have vibrant connections and vibrant mixed-income neighborhoods long-term? There are a lot of separate issues there to try and drive that. We've seen a lot of outside investment and probably more than people would have anticipated, even just a few years ago, into that triangle area. We are trying to get ahold of and make sure that we retain our identity as a City neighborhood that is mixed-income. He went on, By doing the corridor plan, there are different strategies to do that. In the northeast corridors,we soon hope to commission a study to really figure out the costs of the different projects and options. Also, it will help us understand the long-term development potential and payback of those investments. I think, internally, the next stretch of Eddy Street, for example, is anywhere from $6 million to $8 million. If you go down to look at the cloverleaf by Jefferson School, even the lightest option is another $6 million. This is a potentially big transformative project coming down the line. There is probably not enough revenue in the River East development area to accomplish this so there is a thought of that extension and we can get into that later when we go further into the development areas. But briefly, there is a thought that given the Zoo and Fire station debt services, they would be in the new boundary area and we could shift it over into TIF. Then we could use that capacity to fund financing for this (referencing a slide in the presentation) bigger project. That is something we think would be beneficial. It's not happening right away but something that could happen in the next few years that we should consider as a community. EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION j EMPOWERMENT 455 County-City Building i 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574.235.9173 TTD 574.235.5567 www.southbendin.gov 11 CITY OFSOUTH BEND OFFICE OF THE CLERK Mr. Corcoran stated, We are signing contracts next week and we should be doing a kickoff either in January or February with the main workshop in March. Dr. Mueller stated, South Shore has gotten a lot of attention. I know Jitin sent an update a little bit ago. An announcement happened in August and there was talk of an additional study as there were unanswered questions about downtown as well as the airport. We had hoped to move quicker on getting that study commissioned but we are looking to commission that in the next few weeks and get that study underway so we have answers. I think Jitin sent a rough scope of what we are looking at so if there is anything else that Council Members are wanting to see, please reach out to Vice President Davis who has had a lot of issues and interest in that matter. Dr. Mueller continued, As we said at that time, there is a preference but it is a partnership and NICTD operates the rail.There are certain sites that we like,too,that they have taken off the table. Council President Tim Scott stated, I'm trying to get that set up with the County just like we did for the Food and Beverage Tax meeting. It looks we are trying for December 6th but I need to get with you,James. I can move it out to the start of next year,too. We are trying to get the Mishawaka Council, the St. Joseph County Council, NICTD and us all into one (1) room. It's like trying to catch Big Foot riding a unicorn. Dr. Mueller stated, Yeah, so obviously no imminent decision there. A lot of basic fact finding is yet to be done. I think once the study is commissioned, they estimate six (6) to eight (8) months. So we are looking at next summer before we get those answers back. Otherwise there is a lot of infrastructure. Like I said,there is water capital that is part of the River West obligations and other needs that arise. Dr. Mueller continued, The South Side Development Area had $7.8 million cash carried forward this year. We are expecting about $1.7 million of revenue, $1 million of which will be in December. The proportions and estimates of this is a bit of an art. Beth Leonard,our fiscal officer, has been doing it for many years. And we are never right and we can never project spot on as it is very volatile but this is the art of estimation. When it actually happens,we don't know. Sometimes we are surprised for the better, sometimes we are surprised for the worst. Earlier this year, we found that the revenue is projected to be about $1 million less in the River West TIF than we had expected. It fluctuates. There is about $7.3 million committed and $1 million pending, there are projects that are under discussion but there haven't been any formal commitments. One(1)of them is the Scottsdale Pool and,like I said,we don't have land control right now but is something people have wanted to see. Council Members and people in the south side area have been consistent in their advocacy for it. It is something we are working toward. This year, a lot of the spending in the South Side Development Area, and over the last few years, has been almost exclusive on public works and parks projects.There is nothing wrong with that but there are needs and desires to move the neighborhoods forward. One (1) of the ideas is a realignment of the South Side Development Area to include the longer-term plan of Calvert Boulevard to Riley High School in the South East Master Plan. We are going to bring a resolution forward to formally adopt that. Mr. Corcoran stated, It is going through the Legal Department right now. Dr. Mueller stated, The Miami Hills Apartments, I believe there were questions and discussion EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION I EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574.235.9173 TTD574.235.5567 www.southbendin.gov 13 CITY OF SOUTH BEND I OFFICE OF THE CLERK of things to move forward but I like doing a project and getting it done. No disrespect to other Administrations in the past but I didn't really see that in my tenure here. You guys, I think, are really good at listening to this Council and to the citizens saying this is what we need to do. Looking at Portage Prairie and the annexation of that and I remember my very first (Pt) months on Council, I got a call and got a couple asks for things out there like TIF and I wasn't for that annexation. If I was on Council, I wouldn't have done it because it is part of that sprawling you talked about earlier. But now that we have it and it is part of the City and we have all that infrastructure out there, fill it up. The good thing I'm seeing now is that is being filled up. I said it at budget time, but I think we need to look at where we are at with residential areas, relative to TIF, so we can use it for street lights, infrastructure, paving, curbs, sidewalks and those types of things. I think we need to do more of that and I think we are not seeing enough of that within all the TIF districts. I met with Scott the day we voted on changing the whole River West and we were walking by Elwood and Drewry's Complex and all that, but if you look at the sidewalks, curbs and lights and anything we could improve on Wilbur Street, we need to take advantage of that and do that. I think those are small projects that are really a win that would help a lot of people. Committeemember John Voorde stated, I agree. Committeemember Williams-Preston stated,Also Olive Street as it is one(1)of the main corridors. But talking about TIF in general, there have been a couple of meetings in the community. I know the NRC did one (1) and Community Forum did one (1) where we just got together and talked about TIF. We learned more about it with Don Inks and some folks with the Redevelopment Commission and such. One (1) of the things talked about there was if there was an appetite for if the Redevelopment Commission could, year by year, make a decision to allocate those dollars differently. Like maybe put some money back into the General Fund. But we want a better understanding of how by keeping the money in the TIF it actually gives us more control over how we spend those dollars rather than, as you were saying, putting it back in the General Fund. Is that something you have thought about at all? Or do you see what I'm saying? Is there a preference of how to use those dollars if we ran into something and would there ever be a reason that you would think it would make sense to put some of those dollars into the General Fund? I'm looking at some of the things like, you know,we are dealing with stuff with the Library but schools and things like that. Dr.Mueller replied,Yeah,when you put it back you get forty cents($0.40)on the dollar. We don't have enough funding for the infrastructure needs we already have, so, if we were worried about our fiscal situation in our General Fund or our other Income Tax Funds, I think we would be, and we have been, looking to relieve pressure on those funds by shifting as many of those costs over as possible. Because when we release it, we get forty cents ($0.40) on the dollar. We're looking and we've released the Douglas Road TIF the last couple of years. We've been looking to close it but there didn't seem to be a strategic need to keep that open. I think that is the critical question. What are we trying to get out of these development areas as a community? The West Side Main Streets Plan is a living document and there are a host of investments that can be made even after the next five(5)years. We've brought up a lot of neighborhood needs and we agree there are a lot of neighborhood needs we need to look at across the board. Reducing revenue sources to address those needs is clearly a poor strategy. Why would we do that? So yes, we look at it and we don't want to keep an area open that makes no sense. But of course, right when we were about to close it, there may be the project. Of course the cost the County will impose on us will have to come out EXCELLENCE ACCOUNTABILITY INNOVATION ' INCLUSION EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574.235.9173 TTD 574.235.5567 www.southbendin.gov 15 CITY OF SOUTH BEND OFFICE OF THE CLERK models of that in our area that we might want to think about making it happen in those neighborhoods. Committee Chair White then opened the floor to members of the public. Mr. Bognar stated, I do have to leave but I have three(3) very different questions. First(1St)of all, we're calling ourselves West Downtown. The last meeting of NICTD, I think it's important to note, the South Shore money, the major government money, has not been approved. If it was approved tomorrow by the Federal Government, it is still two (2)or two(2)and a half years away. There are all sorts of studies that are being done so, the fact is, the South Shore is nowhere near starting anything and there is no evidence they have it will be approved even though they are going to try and do that. I know Dave out there wants that extension down into a different part of Indiana. I think it's important for Council to know that even if there was money available for our part, it isn't going to happen until the government comes up with the money. Is that a fair statement to make? Dr. Mueller replied,Yeah, I think they were hoping for the double-tracking project to be approved. There are three(3)projects,to clarify. There is the West Lake project which is the extension to the farther northwest Indiana and down south off the main line. There is the double-tracking over in Michigan City that saves a lot of time for everyone east of that station. Then there is the relocation project that is particular to where our station should be in our community. The double-tracking and the relocation projects were connected, in a sense, with a preliminary understanding between the County and the Redevelopment Commission about considering trying to figure out the relocation issue. At the time,it was conceived, and people had been driving it to be just to the west side of the airport. The County would take care of their share of the double-tracking. Our County share is $18.5 million. The four(4) counties had to put that in and the State has a share. Both are a quarter of the cost. And then fifty percent (50%) is supposed to come from the Federal Government. Mr. Bognar continued, My second (2nd) question is in regard to your mention of professional services. I do know last year money for the Redevelopment Commission went to an Engineer that would specifically work on these kinds of projects. When you read an awful lot about TIF throughout the county, one(1) of the big moves now is professional services. When I look at a lot of these TIF districts, we see a lot of numbers for professional services which probably means it is outside consultants. Have we thought about expanding internally with our own internal people? We have jobs in the City and we would be able to do this and it would get more people involved. There is so much work that needs to be done and why are we not keeping it internal and hiring the best people internally? We would have much more control over it. That is one (1) question. The second (2nd) question I wanted to ask is in regards to my concern about two (2) of the TIFs and they are River East and River West. One (1) of the questions I wanted to ask came about when I was looking at, for example, the River East residential area. There are projections that go out to 2022 of property tax revenues. For example, in 2018 it is $4 million. In 2019 it is $4.4 million. 2020 is $4.3 million. 2021 is $5 million. 2022 is $5.6 million. Those are all listed as estimates in hoping it is going to be there. Rosemary Mandrici is across the hallway here discussing matters. You can't get any information out of her as to estimates on property taxes. How are these numbers figured out? My concern is it shows quite a bit of debt in these two (2) locations. I'm looking at what the gateway had and if we aren't going to be able to grow the property tax base, how are we getting these estimates? No one can seemingly get any estimates out of that particular office. Do EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 1574.235.9173 TTD 574.235.5567 www.southbendin.gov 17 CITY OF SOUTH BEND OFFICE OF THE CLERK are seeing now is a little bit of a shortfall just given the timing of when the improvements come online, when they get reassessed, and then when you actually get the money the following year. As you see the projects moving forward roughly on time and once that new value comes, I think you can look at area improvements around there and how much value that generates. We can look at the exact numbers but I think once everything is built, the Assessor would have to go really far out. And that is what all scrutiny came to. We felt comfortable about those projections because there is a lot of investment happening here and you really have to undervalue it to be in a problem situation. So that is on the Eddy Street Bonds. He continued, On the professional services piece,we just went to the Redevelopment Commission to fund another engineer. They will be an on-staff engineer. They aren't a full-time engineer as this is a trial but we are trying to fill that gap because there are so many projects that need engineering.We've done a good job of overloading our Engineering Department with TIF projects. So we did go and try this trial with another person that we are managing. But looking at the big professional service costs, we need a good accountant and we do a lot of that in-house but we do have to go outside, particularly for bond counsel. We need a good lawyer and we do a lot of that in-house. Most of the day-to-day work is done in-house but there are specialty cases that no City attorney could necessarily have. It wouldn't make sense for us to have specialty people on staff just waiting idle. They are expensive but we do have to go out there. Engineering, I don't think, is looking to move into an in-source model. I think we've thought about it and thought that we could do some of the design in-house. We've thought about whether or not we could save money if we hired more internal engineers to do some of the smaller stuff but I don't think that is the strategy in the Engineering Department. That is something we have considered. And then if you look at planning resources, I think our planning team has tried to keep down the cost of planning. We do need outside consultants at times but we try to minimize the cost by doing a lot of work in-house. We do negotiate those down by filtering through the things we can do. We do try to keep those costs down but, yes, professional services are huge. If you think of a streetscape project, we are talking about ten percent(10%) or so. We are trying a pilot this year on the inspection side. So on the front end you have design and engineering and that is around ten percent (10%) of the project cost. On the backend you have inspection to make sure it has all been done right. Parks has actually hired and in-sourced an inspector because they have so many projects to see if that would bring down cost. So we do look at in-sourcing and how to save money but a lot of this is highly-skilled output that is going to cost whether we pay them in-house or externally. Engineers, architects and the rest are highly educated and therefore highly compensated. Ms. Kesim stated, I had a couple questions. One (1) is that there was $92,000 for an emergency demolition from DCI through CDBG funding. I was wondering what was demolished and what was the emergency? It was sixty-four(64) eighteen(18), account number 600-1201-415.31-06. Dr. Mueller replied, I will have to get back to you on that. Offhand I can't think of why CDBG would have been used for demolition. Ms. Kesim stated, One (1) of my other questions is about the Eddy Street Capital Funds, #759. The land is showing$17 million in building,$5,974 in#385 and that reduces it down to$16 million for bond proceeds in 2018. What I'm wondering is if this is going to cause another deficit because of the debt service cost coming up for Eddy Street. I'm wondering if we are going to fall short. EXCELLENCE ACCOUNTABILITY I INNOVATION INCLUSION EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574 235 9173 TTD574.235.5567 www.southbendin.gov 19 11 CITY OF SOUTH BEND OFFICE OF THE CLERK Committee Chair White requested Dr.Mueller to follow up with Ms.Kesim outside of the meeting. Bill Dunn, 1620 Southwood Avenue, stated, Listening to this and looking back over the number of years it has been discussed, I think James and Tim made a good point about changing our stance on how to use TIF funds. Now it is a more aggressive approach to abatements. I end up with two (2) questions. One(1)is what metrics, if any, are we keeping to tell us of the success? I know that is a complicated question just based on tax values, assessments and what not. But what are the metrics that tell us whether or not we have achieved our goal? Secondly, assuming we had something like that in place, have we ever done a project that we wish we hadn't done? Dr. Mueller replied, I will start with the last one (1) and it is probably yes. I don't know exactly off hand but yes, absolutely,there are projects that don't wear as well with time. I think sometimes we go back and maybe we should have known better but with the information at the time it seemed like a good thing. Mr. Dunn interjected, And that goes back to my question about the metrics. One (1) of the most damning statements in the world of investments is, gee, it seemed like a good idea at the time. But when we figure out that maybe it wasn't a good idea, it seems like the value in that is to learn the lesson and where it went wrong from where we anticipated. Now that doesn't necessarily mean reading the tea leaves on the next deal,but there have to be some lessons learned from this process. Dr. Mueller replied, There are good metrics. We talked about property tax and when we look at development we look at return on a project. We can look at that. The challenge is, in our current system, we don't have any control over the assessments. So there are other things we can track in the annual tax abatement report. We track what we can there in terms of what was promised and what was delivered. Mr. Dunn interjected, But see,that would tell us. The fact we have no control tells us,well, we are making our estimates now. We should look ahead for, what, four (4), five (5), six (6), ten (10) years under abatements. Surely there is something that would tell us whether or not the assessments panned and their portion would be more conservative or more transient. Dr. Mueller replied, Yeah, we can run those numbers but the assessments are all over the place. If it was predictable we could adjust to that but it is not obvious how it will turn out. Ms. Kesim interjected, I have one(1) more. Committee Chair White replied, Ok I will let you ask but Councilmember McBride has to go back to work and she has some questions too. Ms. Kesim stated, One (1) more comment. In reading the reports we mentioned with Ball State, Purdue and all that, I don't feel like the City has been good at separating TIF and abatement. They recommend that you don't give abatement to TIF areas because you are cutting yourself off at the knees. Dr. Varner pointed out sixty-four(64) abatements that at zero (0) dollars for ten(10) years cuts us off at the knees for ten(10)years.The abatements are way too extensive and they shouldn't be given in a TIF area. You either give one (1) or the other. Give TIF dollars or abatements but don't give both. Then there is the Enterprise Zone. I really feel there needs to be a better tracking EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION EMPOWERMENT 455 County-City Building 227W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574.235.9173 TTD574.235.5567 www.southbendin.gov 21 .10)CITYOF SOUTH BEND OFFICE OF THE CLERK we have, I think, some of the larger geographic TIF areas. If we didn't and we were all consolidated, the revenue out of that would be nothing. Dr. Mueller replied, That is a growth assumption. There is a lot of analysis that follows this. It depends on indefinite growth. So you are right,we have gotten some from that growth but we can't keep growing and expanding. If we don't keep expanding we suddenly run into a sustainability challenge. I think, I mean, there is obviously an appropriate use on the boundaries for less- developable industrial uses and whatever there may be. But we are about to commission a quick study to look at the net value of properties. We had someone come to look at the value per acre. So we are actually going to try to figure that out across the County and figure out what the net value is per parcel. It will break it down to say we get this much return per acre, but you have this much cost per acre, and then we figure out if we are in the red or in the black. We want to find out which ones are in the red or in the black. Committeemember Voorde clarified,I don't think we ought to invest willy-nilly,which the County may be doing in an area like New Carlisle. They are spending tens of millions of dollars and they have nothing to show for it. I think you have to be careful about what you are doing but it is appropriate and I'm not challenging anything you are saying, really, I'm just recognizing that the investments made in the past are now taking care of the ramifications of how we've changed over time. Dr. Mueller replied, Yeah, I mean, the biggest taxpayer in the River West Development Area is TireRack. We one hundred percent (100%) agree I'm just saying we have to careful about what the sustainability is. Committeemember Voorde clarified, I'm not talking about investing willy-nilly and hoping something happens, I'm talking about not encumbering so much debt so that there is nothing left to invest in the core because the core can't pay for itself. Once you put in seed money, then you are encouraging other investment in there and we will see that and it will address all sorts of issues with both assessed value as well as social issues. Councilmember Broden stated, I have about seven (7) but I'll go through them fast. I don't think you've addressed the adjacency or loans between the TIFs. Can you do that and what are the rules for that? You don't have to answer that now but you can get to it. The other regards me hearing a lot about the dissolution of City property and those being given away. Or,they go formally for less than market value. So what is the strategy? I'm sure it's different per property but what overall is the operating philosophy there? Then three (3), similarly, the debt service to available TIF funds ratio. You're stacking that on over time so what is the thought about that? We can look at it any given year but then you obviously want to be cognizant of what is accumulating. I would like to know the philosophy behind that and if there is a ratio or kind of a guide. Dr. Mueller interjected, I'm going to lose these questions Councilmember Broden followed up, I'll give them into the record. Councilmember Scott stated, We'll have minutes. EXCELLENCE i ACCOUNTABILITY I INNOVATION INCLUSION I EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574.235.9173 TTD574.235.5567 www.southbendin.gov 23 CITY OF SOUTH BEND j OFFICE OF THE CLERK Dr. Mueller replied, We don't have a hired lobbyist. We talk to AIM and do personal outreach. So I raised this with some of our local Senate delegations who were already working on a tax package. My understanding, in our area Senator Mishler is a leader on these and we've talked to him for sure about these issues. Councilmember Broden followed up, And then, I think I came in on this, is there a schematic on our commitments, the debt service, the projects associated with those across the timeline that includes TIF and tax abatement?Then if there are some assumptions or underlying projections,do you have a tool that you use to get at that and to keep track of all that? Can that be shared in a way with Council and the public so that it's transparent and informative? Dr. Mueller replied, Obviously we track tax abatements with the annual tax abatement reports every year. We do track our obligations. I don't think we have it all in one (1) place where there is also property tax receipts from the parcels. We can look at that but we would have to figure out how to make that less cumbersome. Councilmember Broden followed up, I just think it would be helpful. But also, to piggyback on Sharon's comment,I have another question. I know over the time previous to when I sat here,there were improvements to the application of the petitioners and the scoring. That has been a huge improvement, I think. I think maybe the return on investment, that reporting and the valuations that happen, doing that internally,what are some of the changes or key lessons learned?.You don't have to answer that. Dr. Mueller replied, We look at the returns on every project when we are considering them. That is one(1) of the things I think that isn't appreciated is there are plenty of things that come and you never see it because we know it is under water or it wouldn't make sense. We don't bring them forth because they wouldn't get a favorable recommendation. Or, they ask for too much. We look at the number and the need. Those things aren't seen but it is important to say we do screen on the front end to look at the return and the value proposition for the City on every project, including the public ones like the Library for example.There was scrutiny there for sure. They asked for$10 million. We didn't give them that and we had to figure out what the right value proposition was for us. I think Council was pushing for more information on what the return was. Some of the things were hard for them to quantify. They had gone to Umbaugh to get foot traffic metrics and I had suggested something we could look at. Nevertheless, we couldn't quite quantify those but we got some input output models on the construction and some of the other things. Some of this is hard to do. Any analysis, there is a balance between moving things forward and looking back and analyzing. The question is the balance because we have one (1) or maybe two (2) analysts on our stuff. And everyone else is trying to do stuff and move projects through and keep things on time. We have thought about when we go through the budget process adding another analyst. This year there were a lot of budgetary needs. There is a potential homeless coordination position, there is the Engagement Specialist, and we have more staffing potential than we ask for or that we could manage. We value analysts. I have a PhD so I certainly value analysis, but we are judged more on delivery. It is good to have it and we try to find ways within the bandwidth we do have to get better information out there, it is just hard for us to justify to put too much on the analysis side. Councilmember Broden interjected, But a percentage of your time has to be dedicated to that. It has to be right and informative because you don't want to keep doing the same thing and hoping to get better results,right? EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION ' EMPOWERMENT 455 County-City Building 227W.Jefferson Bvld South Bend,Indiana 46601 p 574 235 9221 f 574.235.9173 HD 574.235.5567 www.southbendin.gov 25