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Wendy Ford, Economic Development Coordinator at 319-356-5248 or wendy-ford@iowa-city.org. We ask that
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Agenda
City Council
Economic Development Committee
Wednesday, April 5, 2017
4:00 p.m.
Emma Harvat Hall
City Hall
1. Call to Order
2. Consider approval of minutes from the March 23, 2017 Economic Development
Committee Meeting
3. Continue Discussion of TIF Policies
4. Staff time
5. Committee time
6. Other business
7. Adjournment
MINUTES CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE
MARCH 23, 2017 EMMA HARVAT HALL, CITY HALL, 12:00 P.M.
Members Present: Susan Mims, Jim Throgmorton, Rockne Cole Staff Present: Wendy Ford, Geoff Fruin, Simon Andrew, Sarah Greenwood-Hektoen
Others Present: Ryan Sempf (Chamber)
RECOMMENDATIONS TO COUNCIL:
None CALL MEETING TO ORDER:
Chairperson Mims called the meeting to order at 12:00 P.M. She then asked those present to introduce themselves. Mims noted as members were gathering that they discussed setting a
time limit due to what could be lengthy discussions. They decided that 1:15 P.M. would be the deadline for ending today’s meeting.
CONSIDER APPROVAL OF MINUTES:
Minutes of the December 13, 2016 meeting were reviewed. Throgmorton moved to approve the minutes as presented.
Cole seconded the motion. The motion carried 3-0.
Discuss TIF Policies:
Mims noted that they have a very comprehensive eight-page memo in their meeting packets, put
together by Ford and other staff members. Ford gave Members a brief background about the
item, noting that when the current Committee started, they underwent a strategic planning session that resulted in seven different goals. One of these goals was to promote a strong and
resilient local economy, with a sub-goal to review and consider amending City tax increment financing policies. As part of this review, staff was asked to begin a process of community engagement to examine all aspects of TIF, including concerns and praises about the policies.
Ford noted that over a period of about six months, staff conducted eight different focus groups
involving 60-70 people. Staff compiled feedback from both the focus groups and the individual
participants, who also took an online survey. Staff then prepared a lengthy document, which Members received in their December 13, 2016 packet, providing the survey results and focus
group summaries. At this meeting, Members asked staff to frame policy decisions and obtain
more information for those areas that seemed less clear than others, particularly regarding building height, sustainability, and labor-related issues.
Ford stated that staff assembled one final roundtable of developers and architects to help distill opinions about these issues. The group provided a lot of feedback around the economics of
building size and how building size impacts building use. Ford continued to share the concerns
of the building community, noting how buildings with more than five stories are required to go from wood frame to steel frame construction, for example. This essentially doubles the cost of
framing the buildings, making the economics more difficult, especially for shorter steel framed
EDC 4-5-2017 packet page 2
buildings. The more height, the more opportunity there is for the building to cash flow, attracting investors and commercial lenders. Developers stated that the market for permanent residents is
an environment can be differentiated from student-type housing with building amenities available
and views that the buildings. Ford noted a relative small percentage of downtown residences are occupied by ‘permanent residents.’ Developers would like to increase the number of ‘permanent’
residences, according to Ford, which puts the growth of downtown on a more diverse path. Ford noted three policy decision points regarding building height. The first one would be to lay
out a clear and predictable policy on building height for TIF projects. Second would be to determine how to consider the architectural impact of a project on adjacent properties. The third, revolves around how historic preservation can be encouraged. She noted staff has been
discussing the opportunities surrounding the Unitarian Church, for example, and that perhaps there are other opportunities for incenting historic preservation.
Throgmorton then spoke to Ford’s decision points, stating that the first item would undoubtedly need some detailed and lengthy discussion. He suggested they address all of the other issues
and then return to building height issues. He asked who the four people were that were involved
in the roundtable discussion. Ford answered, listing Kevin Monson of Neumann Monson Architects, Martha Norbeck of C-Wise Consulting, Justin Bishop of OPN Architects, and Marc
Moen of the Moen Group. Mims stated that she believes they should start the conversation and
see where they stand. Cole stated that he agrees with Throgmorton, that they should focus on those areas where they will get consensus first and then address the other issues at the end.
Everyone concurred. Regarding sustainability, Throgmorton stated that he agrees that LEED silver certification should
be required. Hektoen asked for clarification about whether Throgmorton means actual
certification or ‘the equivalent thereof.’ Throgmorton affirmed certification, and other Members concurred. Mims noted that she would be fine with the silver certification portion, but that she
needs more information about the suggestion by Martha Norbeck to require at least 8 points be attained in the energy efficiency category of LEED points. Norbeck had made this suggestion right after the roundtable meeting and presented the idea in a letter to the EDC and City Council.
Throgmorton suggested they ask for more feedback from the development community on the additional eight points.
Cole suggested that perhaps a higher LEED standard could be required for the highly desireable upfront TIF assistance. Ford noted that the financial implications of providing more upfront
financing could be substantial for the City. Cole continued, stating his belief the City could
withstand this risk and in the end, it would be worth it for achieving the higher standards.
Throgmorton suggested doing a mix of upfront and rebate to lessen this risk. Fruin then spoke briefly to the issue of requiring silver LEED, and that it is not a given downtown when it comes to development. He also noted that there is a big cost difference between silver and gold LEED
certification. Regarding upfront, he stated that they can mitigate their risks, but they can’t
eliminate their risks. He added that Iowa City has not seen default on TIF financing, but that other cities have. He suggested the committee might need to consider how to articulate when
upfront financing is appropriate.
Members continued to discuss TIF policies, with Throgmorton stating that he strongly prefers
rebates, which has been the City’s practice, but that he believes there could be merit to providing
partial upfront assistance as an incentive for LEED gold certification. Mims stated that they need to evaluate how much the City willing to invest in LEED against the return to the City. She noted
that they need to know the difference in cost between the silver and gold LEED certifications, and
EDC 4-5-2017 packet page 3
decide if the benefit to the City in general is worth the additional money. She added that they would need to really review this type of policy in considering upfront money, and come up with a
plan to be able to recover what the City has invested should a project default. Hektoen added
that the City currently mitigates its risk in this situation with ‘minimum assessment agreements,’ that attach to the project and sometimes other assets that the developer owns in the same urban
renewal area. Mims stated that with more and more developers coming in from out of the area, they need to make sure that this type of policy is written in a way to deal with bigger, lesser known firms. Fruin added that it is good to have well defined economic development policies on
TIF. This helps developers see what the City is looking for with well-defined policies in place. This in turn, allows staff to know that they can draft a development agreement before the project is presented to Council.
Mims stated that what she is hearing is that all three Members are in support of having silver LEED certification on residential and mixed-use projects.
She stated that the City would also consider TIF on industrial or other such projects that don’t meet silver LEED and Throgmorton added his inclination to require an industrial project seeking
TIF to make improvements that would be equivalent to 8 LEED energy efficiency points, but that they need feedback from developers on whether they feel this would be a viable thing to do. Mims questioned how we know that 8 points is appropriate, and that perhaps the right number is
more or fewer than 8, and that she wants the feedback before they decide this.
Moving on to affordable housing, Ford reminded Members of the affordable housing element that
was added to the economic development policies, which includes the four bulleted points on page four of her memo. The policy decision point will be to determine if they want to make any
refinements to the policies currently in place. Ford referred to the first bullet point – a minimum
of 15% of the residential units in a TIF-assisted project must be affordable for a minimum of 20 years, or the term of the development agreement. She added that a new clarification to this
policy, which staff would like to see clarified in policy, is that only the financial gap above the 10% required affordable units in Riverfront Crossings and the 15% required through economic development incentives would be considered for City financing. The fourth point in the Affordable
Housing policy is that the City can negotiate a fee in lieu of providing affordable housing, and this fee would then be used for the City’s affordable housing purposes. Mims stated that she is comfortable continuing with this policy. She added that this can always be negotiated on a
project-by-project basis. She is also comfortable with the AMI amounts and the 110% for owner-occupied. Members agreed that staff could do some minor tweaking to clarify these points, but that in general they are in agreement. Cole asked if we should provide definitions of affordable
housing and workforce housing. Fruin noted that the policies are not focused on workforce housing and are not incentivized under current policies. Cole stated that he would be okay with
incentivizing workforce housing as well, because it would go towards having housing for all
income levels. The other Members stated that they would not be in favor of this. Mims stated that the market is doing a good job in this area, without the need for City financial assistance,
and that she would like to see what the form-based code can do for that ‘missing middle’ piece
and workforce housing that they’ve talked about.
Moving to social justice, Mims noted that she thinks we may be challenged by what we as the
City can do with regards to the suggestions submitted by leadership in a local a labor organization. Fruin spoke to Members about discussions with the labor group. Hektoen also
addressed oversight issues and that monitoring such policies would be challenging. She noted
agreements could be made with the developers to abide by the labor requirements, but they often have several subcontractors under them, don’t necessarily have contractors determined at
the time of the development agreement and would be challenged to monitor the contractors
EDC 4-5-2017 packet page 4
employees and/or subcontractors. Mims stated that she is comfortable leaving this policy as is and having City staff direct people to the appropriate agencies when enforcement is needed.
Cole stated that he believes they need to put this in the TIF agreement, to lay out expectations,
and if expectations aren’t met, then the City would be able to enforce this. Members continued to discuss this issue, with Mims stating she is amenable to not include this issue in TIF. Cole
stated that he believes they have greater control by having an agreement with the developer, who then needs to convey expectations to the general contractor, who in turn would do so with the subs. He would still like to get feedback on this issue before they make a final decision.
Discussion continued on how to handle this issue, with Fruin stating that he will make contacts and get a written response to Members on this.
On to item five, other requirements – Mims noted the time and asked if Members wanted to continue. They agreed to at least start the conversation. The first issue – quality of jobs – was discussed briefly. Cole asked if it would be possible to add the project labor agreement as a
requirement. Fruin noted that this is something separate and they agreed to address it later. As
to the first issue, Members agreed to the current language.
Secondly, class-A office space; Mims noted that they had begun to require class-A office space in TIF-related projects. She believes they should stick with this requirement and Throgmorton agreed. Cole stated that one concern he has is the need for low-cost office space for
entrepreneurs and start-ups. He noted that class-A space is extremely expensive and he believes they should encourage cost-effective office space, as well. Fruin spoke to the history of
this and why they have used TIF for class-A space.
Moving on to the topic of hotels, Throgmorton referred to Josh Schamberger’s recent guest
opinion regarding the number of hotels in the area. He questioned if they shouldn’t tighten up
the requirements for new hotels, not immediately but in the future, and then gauge how the market is responding. Mims spoke to how they might add some flexibility here and how staff
might craft such language.
The Members had agreed to end the meeting at 1:15 p.m. and continue discussion at the next
meeting, to be scheduled immediately.
STAFF REPORT:
None.
COMMITTEE TIME: None.
OTHER BUSINESS:
None.
ADJOURNMENT:
Cole moved to adjourn the meeting at 1:15 P.M. Throgmorton seconded the motion.
Motion carried 3-0. Council Economic Development Committee
EDC 4-5-2017 packet page 5
ATTENDANCE RECORD 2016 - 2017
NAME TERM EXP.
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Rockne Cole 01/02/18 X X X X X X X X
Susan Mims 01/02/18 X X X X X X X X
Jim Throgmorton 01/02/18 X X X X X X X X
Key:
X = Present O = Absent
O/E = Absent/Excused
EDC 4-5-2017 packet page 6
Date: March 30, 2017
To: Economic Development Committee
From: Wendy Ford, Economic Development Coordinator
Re: TIF Policy Review discussion, continued from March 23, 2017
At your meeting on March 23, you began discussion of the TIF policy points of discussion
outlined in the staff memo dated March 10, and included again with this packet.
The memo organizes six areas of consideration for decisions related to Tax Increment
Financing policy: 1) Building form and height, 2) sustainability, 3) affordable housing, 4) social
justice, 5) “other,” and 6) TIF mechanics. The March 23 EDC discussion focused on the topics
of sustainability, affordable housing, and social justice.
We will pick up the discussion on Wednesday, April 5 where we left off on March 23.
Please let me know if you have any questions in the meantime.
EDC 4-5-2017 packet page 7
Date: March 10, 2017
To: Economic Development Committee
From: Wendy Ford, Economic Development Coordinator
Re: TIF Policy Review
Introduction
In January of 2016, the City Council established a set of seven Strategic Planning Priorities,
including one to Promote a Strong and Resilient Local Economy. In support of that planning
priority, Council listed seven initiatives, including one to review and consider amending the
City’s Tax Increment Finance (TIF) policy.
The Economic Development Committee asked staff to frame key policy decisions. The goal is to
tailor a set of TIF policies that offer a balance of specificity and flexibility. Ideally, policy
decisions will align with Strategic Plan objectives, other City planning documents, and standard
measures such as the state’s high quality jobs thresholds, blight remediation and expansion of
tax base.
Staff conducted eight focus groups between June and November, 2016. Focus groups included
developers, architects, engineers, members of labor and worker justice organizations, members
of social service oriented non-profit groups, members of community promotional non-profit
groups, taxing entities and others. A lengthy report was presented to the Economic
Development Committee (EDC) at your December 13, 2016 meeting. Feedback from the focus
groups indicated that those associated with the development process were critical of the project
and design approval process in part because of a lack of clarity for what is required for a project
to merit TIF. People with expertise in sustainability seemed to reach consensus that LEED
Silver Certification could be required of most traditional TIF projects. It was also noted that
place-making is a public benefit, important to making a welcoming community, and includes the
provision of Arts, Cultural and Social Services yet it is difficult to fund these public benefits using
project-based TIF.
Upon reviewing the focus group work in December, 2016, the EDC asked staff to solicit
additional stakeholder input on key decisions for the next meeting. The issues EDC members
identified for further discussion include building height and form, sustainable features, and the
process through which incentives are considered. Local organized labor leaders have also
reached out to the City with recommendations for TIF policy revisions. Staff conducted a
roundtable to refine the focus group input. This roundtable consisted of three architects and a
developer. Staff also communicated with a local labor representative to ensure a solid
understanding of their issues.
EDC 4-5-2017 packet page 8
This memo organizes the economic development issues addressed during the review process,
provides supporting information from community focus groups and staff and presents policy
decision points for each.
1. Balancing building height and form with building economics
Deemed the most important policy by developers and architects, the building height issue
downtown is critical because it determines more than the aesthetics of new downtown buildings.
It shapes the residential population and thus, downtown diversity because of the economics of
the buildings themselves.
Developers note that the vast majority of student housing developers do not seek TIF because
student housing projects cash flow on their own and need no external support. In Iowa City,
student housing developments tend to be 4-7 stories tall, the maximum allowable with wood
frame construction. There is one recent exception in the RISE at Court and Linn, a large
development with a high rise tower dedicated to housing more than 500 students. Large or
small, the market value for student housing developments is so high they are able attract
enough investors and debt to avoid a financial gap. The economics are simple: smaller buildings
are less expensive to build requiring only wood framing, and are very lucrative because of their
premium downtown location and the ability at times to attract large rents from people living
together.
Developers indicated that there is very little market for permanent residents in smaller buildings
downtown. First, the student-aged population can typically outbid other segments of the market.
Second, the older demographic wants dwelling units in buildings that are differentiated from the
student population, with amenities, other permanent residents and, often with views found in
higher rise buildings.
Developers say there might be a market for permanent residents in mid-rise buildings, but the
economics of mid-rise buildings are challenging. Generally, the requirement for steel
construction begins when the building exceeds 5 stories, essentially doubling framing costs per
square foot. Limiting a building to 7 or 8 stories does not allow for enough additional income to
pay for the added expense of the steel frame building without incentives. When there isn’t
enough income, the value is lower and so is the appeal to investors and bankers, which creates
an unnecessarily large financial gap per square foot of building. As the building gets taller, the
market value begins to be high enough to attract investment and banker interest, thus shrinking
the financial gap per square foot.
Developers point out that of more than 2,000 housing units in downtown Iowa City, only 75
condos are occupied by permanent residents; fewer than 4% of all downtown residents. The
other 96% is predominantly student-aged persons. Each new permanent resident downtown
adds to the diversity that we have been working to encourage. By allowing only mid-rise
buildings in mid-block parcels downtown, the diversity we seek in our downtown population will
be harder to achieve and the financial gaps will be more expensive per square foot. More
EDC 4-5-2017 packet page 9
importantly, the development community may likely focus on the lucrative student market thus
not even attempting to work with the City on TIF projects.
Policy Decision points:
a) Determine a clear, predictable policy on building height for TIF projects.
Is the height permitted by the underlying zoning code sufficient or is there
another guideline the Council wishes to use?
b) Determine how to consider architectural impact on adjacent properties.
Is staff design review sufficient? It is important to note that most projects are not
fully designed at the development agreement phase. Changes are often
necessary throughout the design process; general compliance with initial
concepts rather than exact adherence to early design phase documents can be
used.
c) Promotion of Historic Preservation and reinvestment into existing building stock.
Project-based TIF depends on substantial increases in property value. Often
times this cannot be achieved when density is not increased. Thus, Council may
want to consider district-wide TIF applications for renovations or less time
consuming processes such as tax abatement.
2. Sustainability Features
There was consensus that LEED, while imperfect for every project type, is a good standard to
achieve for most new construction. In discussions with architects who design to LEED
standards regularly, there was consensus that LEED Silver Certification is the appropriate level
to require for a downtown building project, with some exceptions based on project scope or
location.
Focus group participants agreed that LEED is a good standard because it covers a wider group
of metrics than just energy efficiency and thus, leverages higher quality projects. Buildings earn
LEED points across a range of categories such as site, water, energy, materials, indoor
environmental quality, etc. One concern from a roundtable member after our meeting was that a
building could achieve LEED Silver without scoring any points in energy efficiency, so her
suggestion was to require LEED Silver certification with a minimum of 8 energy efficiency
points. For those projects that would not be appropriate for LEED Silver certification (perhaps
outside of downtown and RFC or rehabs of historic buildings), one idea was to require
documentation of energy efficiency equal to 8 LEED points. The 8 point standard was not
reviewed and addressed with other focus group members. Roundtable participants also noted
that a metric other than LEED may be needed for manufacturing facilities; their discussion
applied generally to residential and mixed use buildings.
EDC 4-5-2017 packet page 10
They agreed that while downtown projects should be able to achieve LEED Silver, achieving
LEED Gold certification would be a greater burden financially, requiring more financial gap filling
by the City.
Other measures of sustainability were also discussed, such as simply exceeding the current
energy code by 20%. This could be a measure or option available to developers when projects
are not well-suited for LEED.
Policy Decision point:
a) Determine sustainability standards to require for TIF projects.
Options may include LEED Silver, LEED Silver with a baseline for energy
efficiency points, or for those projects not suited for LEED, 20% or greater than
energy code requirements, if applicable.
3. Affordable Housing
In May of 2016, Council adopted a resolution approving inclusion of affordable housing goals in
Economic Development policies. The following policies are for new construction projects that
include residential dwelling units and have requested City financing:
A minimum 15% of the residential units must be affordable for a minimum of 20 years, or the
term of the developer’s agreement, whichever is longer. It should be noted that only the gap
between affordable units required through economic incentives and those otherwise
required by code (for example, the required 10% in Riverfront Crossings) will be considered
for City financing.
For rental housing, dwelling units shall be targeted to households at a maximum of 60%
Area Median Income (AMI). The City may negotiate dwelling units being designated for
households at a lower AMI.
For owner-occupied housing, dwelling units should be targeted to households at a maximum
of 110% AMI.
The City may negotiate a fee-in-lieu of on-site affordable housing with the fee to be used for
affordable housing purposes (for example, grants/loans for construction of affordable
housing, down payment assistance for income-qualified households, etc.). Fee-in-lieu of
negotiations currently allow the flexibility for providing affordable housing units off-site; off-
site provision is something Council may consider addressing more explicitly.
Policy Decision point:
a) Determine any refinements to above policy such as flexibility in the location of where
affordable units required for a project may be alternatively located.
EDC 4-5-2017 packet page 11
4. Social Justice
Wage Theft
In November of 2015, Council adopted a resolution aimed at ensuring the City will not contract
with any person or entity who has participated in Wage Theft by violation of the Iowa Wage
Payment Collection law, the Iowa Minimum Wage Act, the Federal Fair Labor Standards Act or
any comparable state statute or local ordinance, which governs the payment of wages.
Contractors in TIF building projects
Representatives of organized labor have submitted four recommendations for changes to the
City’s economic development policies. The recommendations address organized labor’s
concerns regarding contractors and subcontractors who use leased employees, sometimes
known as independent contractors. The concern is that an independent contractor can operate
essentially as an employee without the protection and benefits afforded to employees.
The labor representative made four recommendations for any project involving TIF. Staff
understands the goals of these recommendations, and believes to some degree the City’s
economic development policies can help meet these objectives. However, there are significant
enforcement challenges and in some cases existing enforcement mechanisms better suited to
meet these goals. The four recommendations with staff commentary are listed below.
i. The requirement that all contractors and subcontractors be in compliance with all tax
obligations (workmen’s comp, payroll, corporate, etc.);
Staff comment: Annual rebate certifications required by the City could also require a
statement from developers that to the best of their knowledge, all tax obligations have
been met. However, existing state and federal enforcement mechanisms are more
appropriate, as there may be cases in which there is a dispute as to whether obligations
have been met.
ii. That there be no use of leased employees (sometimes known as independent
contractors);
Staff comment: Monitoring of this requirement would be extremely challenging, and the
goal of this recommendation could be partially met with the inclusion of items iii and iv
below.
iii. That all contractors be in compliance with registration/licensing requirements at the Iowa
Workforce Development’s Iowa Contractor Registration; and
iv. All subcontractors are disclosed.
Staff comment on recommendations iii and iv: Not all contractors and subcontractors will
be known by the developer at the time of the development agreement. A policy could
EDC 4-5-2017 packet page 12
include that the City, at its sole discretion, may request disclosure during the
construction process. Violations of State registration and licensing requirements are
more appropriately enforced by the State.
Policy Decision point:
a) Determine whether to adopt any of the recommendations above.
5. Other requirements
When certain projects are presented that align with other stated City goals and priorities, related
standards apply. Below are four for your consideration.
1) Quality of jobs created and/or maintained. An EDC member asked for clarification on the
definition of high quality jobs. The City has required that for a project to be awarded
incentives based solely on jobs, the jobs must meet the same quality standards as those
used by the State of Iowa High Quality Jobs Program. Each year, the State updates its
Average Wage and Laborshed Area data. Traditionally, the City has also required that most
jobs to be created meet or exceed 120% of the average, which for FY17 is $24.17 per hour.
This threshold could be adjusted down to the average or to any other point the Council feels
is appropriate.
2) Class A office space. Historically, the City has required that new office space or office space
in an old building on first floor or above be built or renovated to BOMA (Building Owners and
Managers Association International) Class A standards (see below for definitions):
Class A
Most prestigious buildings competing for premier office users with rents above average
for the area. Buildings have high quality standard finishes, state of the art systems,
exceptional accessibility and a definite market presence.
Class B
Buildings competing for a wide range of users with rents in the average range for the
area. Building finishes are fair to good for the area. Building finishes are fair to good for
the area and systems are adequate, but the building does not compete with Class A at
the same price.
Class C
Buildings competing for tenants requiring functional space at rents below the average for
the area.
3) Hotels. The City views hotels positively because of the visitor population they attract and the
hotel motel tax they generate. Visitors spend money and their economic impact is
EDC 4-5-2017 packet page 13
significant. The 7% hotel tax on every room-night sold is also a boon to the community,
adding up to more than $1 million per year in Iowa City.
4) Community engagement. Iowa City values the tangible aspects of new buildings, new jobs,
new office space, historic rehabilitation, etc., There may be another measure to consider
too: the level of community engagement of the entity requesting TIF. Exemptions may
include a company offering a job training program or willingness to improve and maintain a
public space. You may want to consider stating this value in an introductory paragraph
about TIF policy.
5) Public Improvements. You may want to consider a statement in the policy as it relates to the
use of TIF for Public Improvements. TIF revenues can be used to forward the goal of
ensuring a vibrant and walkable core. Stating this in the TIF policy reinforces the link
between public improvements and economic development with projects such as the
pedestrian mall renovation and/or streetscape improvements. Likewise, catalyst projects,
such as the Riverfront Crossings Park that will drive the private redevelopment opportunities
in the neighborhood would be another means to further economic development activity in
the Riverfront Crossings Area. The public improvements category could also encompass
the Arts, a significant component of place making and arguably, an economic development
catalyst.
Policy Decision points:
a) Determine whether to adopt a wage threshold for incentives based on jobs alone.
b) Determine whether to specify that any office space in buildings receiving
incentives meet BOMA Class A office standards.
c) Determine if we want to consider prioritizing hotels, assuming a positive market
study showing need.
d) Determine whether to state community engagement is important to prospective
TIF recipients.
e) Determine whether to make a policy statement about the use of TIF for public
improvements serving as economic development catalysts.
6. TIF Mechanics
1) Rebate vs. upfront TIF. The EDC has previously stated a preference to grant TIF rebates.
The reason for this simple: it puts the majority of the risk on the developer. The project has
to be successfully built, meet taxable valuation requirements and pay property taxes in order
to receive the first rebate. Conversely, if the City grants TIF up front, the funds are spent and
there is no guarantee that the project will be built and pay taxes, generating the TIF to repay
the City’s up front financing. As a safeguard against the possibility that TIF would not be
generated from a project granted upfront financing, the City has used Minimum Assessment
agreements to ensure that property taxes from developers’ other property holdings will be
used to repay the City when upfront TIF is granted.
EDC 4-5-2017 packet page 14
At the Developer roundtable, a concern was raised that without upfront TIF, more significant
projects will not happen because they will not be able to attract the necessary financing.
This, in turn, will feed into the diversity problem noted in the building height discussion
above. There was discussion that perhaps the size and scope of projects could determine
eligibility for upfront TIF, but there was no consensus on what size or scope to merit upfront
financing might be. It may be appropriate to consider additional public benefit for any upfront
TIF.
2) Developer Equity. The EDC has historically required that Developer Equity be at least equal
to the TIF, ensuring that the developer has as much ‘skin in the game’ as they are asking
from the City. Developer equity does not include project debt. This has proven to work well
and you may wish to consider keeping the policy going forward.
3) Length of TIF term. The length of a TIF term, whether in the form of rebates to the developer
or repayments to the City for funding upfront incentives, has been determined by the need
demonstrated in the financial analysis. A policy you may wish to consider would be whether
to cap the length of time a TIF can be allowed or remain flexible, depending on the project.
Policy Decision points:
b) State whether rebates or upfront are preferred or not and under what conditions,
if any, upfront TIF may be granted.
c) State whether Developer Equity should be equal to the gap filled by TIF.
d) Determine caps, if any on term length for TIF.
We will discuss these policy decision points at your meeting on March 23. If you need any
background information, please feel free to email or call me (wendy-ford@iowa-city.org: 319-
356-5248).
EDC 4-5-2017 packet page 15