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HomeMy WebLinkAbout8-12-24 Council EDC Agenda PacketCity Council Economic Development Committee Monday, August 12, 2024 8:00 A.M. Emma J. Harvat Hall City Hall, 410 E. Washington AGENDA 1. Call to order 2. Consider minutes of the July 1, 2024 Economic Development Committee Meeting 3. Develop recommendation to full City Council for approval of revised Tax Increment Financing Policy 4. Old or New Business 5. Adjournment If you will need disability-related accommodations in order to participate in this program/event, please contact Rachel Kilburg Varley, Economic Development Coordinator at 319-356-5248 or rkilburg@iowa- city.org. Early requests are strongly encouraged to allow sufficient time to meet your access needs. 7 August 2024 Josh Moe, Iowa City Council Subject: "Tax Increment Financing (TIF) Policy" Fellow Economic Development Committee Members, At our August 6 city council meeting the council voted to reject the revised TIF (Tax Increment Financing) policy revisions and asked the Economic Development Committee to propose revisions. It is my understanding that the sustainability portion of the revised policy is the portion that requires additional consideration. Over the past three weeks, since the revised TIF policy was made public, I've spoken with a variety of stakeholders including sustainability experts, architects, engineers, developers, and the city sta3. My goals were manifold: I wanted to learn more about the purpose and e3ect of the current policy. I wanted to understand the objections to the proposed policy revisions. I want us to move us, expeditiously, towards finality on an improved policy. Purpose of the TIF Policy The City Council votes on each TIF project and the current and proposed TIF policies are not binding. A TIF policy does not restrict current or future councils, rather it is a communication tool: The purpose of having a policy is to communicate council's values to professional sta3 and would- be developers. The development of a TIF project requires considerable time and resources to assemble, including investments by would-be developers wanting to utilize TIF and investment of city resources to vet the merits of the proposed TIF project. Our city established a policy so that city sta3 and would-be developers can develop proposals with a high likelihood of council approval. Regardless of the policy, each councilor can demand di3erent standards than our TIF policy or none at all. The decision to grant TIF is made when the proposal is presented to council and voted on by council. For each TIF project, the public will have the opportunity to share their opinions. E ects of Past Policy & Purpose of Revision Our previous policy (2017) was prescriptive, and I believe the policy prevented innovation in the realm of sustainability. For us to do better and bring this policy in alignment with our strategic plan and climate action plan, I believe we should elevate the importance of embodied carbon reductions, we should work harder to promote full-building electrification, and we should privilege innovative strategies that leverage the specifics of each site. Objections to the Proposed Changes The current policy (2017) names LEED (Leadership in Energy and Environmental Design) Silver as a prerequisite for TIF and the proposed revisions (2024) allow for alternative carbon reduction strategies, but those alternative carbon reduction strategies are less specific than LEED and lack clear, measurable goals. Furthermore, the proposed policy allows for unnamed strategies that do not require third-party verification. Third-party verification can mean many things. In the context of a LEED project, there are multiple checks at di3erent times. The initial proposal is typically created by a licensed architect or engineer, i.e. primary consultant. This design professional, if licensed, has a legal and ethical obligation to public health safety and welfare. For many municipalities and the University of Iowa, the work done the licensed, primary consultant is su3icient. A second consultant specializing in LEED is typically hired to both review the primary consultant’s work and facilitate the rigorous review process conducted by Green Business Certification Inc. (GBCI) including pre-certification review, a construction review, and a post-construction review. This subconsultant may work for the developer or the city. Finally, the certification by GBCI confirms the work done by the primary consultant, subconsultant, and testing agencies are legitimate. Objections to LEED Our current policy identifies LEED for several reasons. The two major benefits are simplicity and credibility. LEED simplifies the complexity of sustainability into a simple points system and is made credible by the review process described above. This points system is also a weakness: It removes sta3 and council from important conversations and value judgments about our specific climate action goals. The multiple checks that create credibility are also a weakness: sub consultation and certification is not free. These are additional costs to the project and those costs increase the increment, or untaxed portion of the improvement. Challenges to Allowing Alternate Climate Action Strategies There are many dimensions to sustainability and multiple rating systems that gauge performance. Comparing di3erent systems is highly specialized, time-consuming work that requires resources the council has not provided to our professional sta3. It would be my personal, long-term goal that we devote more resources to climate action so that our professional sta3 may one day develop more measurable climate action goals for buildings and have the capacity to measure and verify building performance. In the interim, sustainability consultation can be procured from vendors such as licensed engineers and architects. Proposed Revisions ADD paragraph #4 to heading "Tax Increment Financing (TIF) Policy" "City Council shall vote on each TIF proposal and is not bound by this TIF Policy. The development of a TIF project requires considerable time and resources to assemble, including investments by would-be developers wanting to utilize TIF and investment of city resources to evaluate the merits of the proposed TIF project. This policy establishes guiding principles so that city sta3 and would- be developers can e3iciently develop proposals with a high likelihood of council approval." REPLACE final preamble sentence under "Climate Action and Resilience" with This may include one or more of the following: “Examples of leadership in sustainable development include:” REVISE bulleted list under "Climate Action and Resilience" · Green Building Certification: Achieving LEED Silver of higher certification for new construction or major rehabilitation of commercial, mixed-use, or residential construction. · Alternative Green Building Certification: Other sustainable building ratings systems or standards that exceed the current energy code by a minimum of 25%. · Energy Performance: Exceed adopted Energy Code Performance by 25%. · Electrification: Full Building electrification supported by on-site renewable energy su3icient to o3-set 10% or more of total projected annual energy use. · Embodied Carbon Reduction: Whole Building Life Cycle Assessment that produces a 15% reduction in Global Warming Potential (GWP) ADD text to paragraph after bulleted list: LEED Certification includes third-party verification. For alternative systems that do not include third-party verification, a narrative written by a licensed green building professional shall accompany the proposal explaining why an alternative path was chosen, how carbon reductions will be measured, and how the alternative path serves to achieve our city's carbon reduction goals. This narrative shall be procured by the city and paid for by the developer. Respectfully, Josh Moe Proposed Tax Increment Financing Policy | August 2024 Tax Increment Financing (TIF) Policy Tax Increment Financing (TIF) is a tool to provide financial assistance for projects within a designated urban renewal area and TIF District. Iowa City’s use of TIF is intended to remove slum and blight and/or advance economic development by encouraging residential, commercial, or industrial development in line with this policy document. Alignment with the City’s Strategic Plan will provide the first indicator about whether a project may be eligible for TIF. To the extent that a project helps achieve the City’s Strategic Plan objectives and is located within an established Urban Renewal Area (Exhibits A, B), it may be eligible to be considered for TIF. The City of Iowa City’s current Strategic Plan priorities are attached as Exhibit C. The full plan can be found online at www.icgov.org/strategicplan. TIF support for projects located in the Downtown or Riverfront Crossings must also demonstrate alignment with the Downtown and Riverfront Crossings Master Plan. Recognizing that some minimal or non-tax-generating activity and/or investment in public infrastructure may influence additional private economic development activity, TIF may be an appropriate tool to further investment in Iowa City’s public infrastructure, arts and cultural, recreational, historic, and/or natural assets. The City may utilize TIF to improve or develop new public infrastructure and/or other amenities and uses that further goals and objectives in other adopted planning documents, including but not limited to, the Comprehensive Plan, Urban Renewal Area plans, Climate Action plans, Affordable Housing plans, and public facility and recreation plans. Understanding that TIF is made possible by the increased value in real property, and that many of these economic activity generators are tax exempt, a TIF project that advances these public interests would only be possible by using existing, district-wide increment. Additionally, catalyst projects that encourage additional unsubsidized private development in an Urban Renewal Area, either directly or indirectly, may be given special consideration for TIF incentives. Climate Action and Resilience The City of Iowa City has established goals and a Climate Action Plan to reduce community-wide carbon emissions by 45% from 2010 levels by 2030 and achieve net-zero carbon emissions by 2050. In order to aid the City in meeting climate action and resilience goals, projects should clearly demonstrate leadership in sustainable development. This may include one or more of the following: • Achieving LEED Silver or greater certification for new commercial, mixed-use or residential construction; or certifying in other proven sustainable building rating systems or environmental management standards (subject to City approval). • Demonstrating notable performance above the adopted Energy Code. • Full building electrification and utilization of on-site renewable energy. • Excellent inventory and/or impact results demonstrated by a comprehensive and Proposed Tax Increment Financing Policy | August 2024 reputable Life Cycle Assessment (LCA). This may include innovative adaptive reuse and historic preservation efforts. • Decarbonization strategies that exceed building and energy code requirements. • Building design with promotes EV-readiness and/or pedestrian, bike, and transit mobility, in addition to other sustainable development strategies such as those listed above. The City will work in partnership with the project developer to ensure each project has a tailored strategy that demonstrates leadership in climate action and resilience. Historic Preservation TIF-supported projects located in historic districts should increase the diversity and vibrancy of the district, while also preserving and enhancing the historic character. Building design should be contextual to the area and complement the historic character of the district. This may be achieved through design considerations such as size, form, materials, and engaging pedestrian-level streetscape. Historic preservation projects may be eligible for TIF funding from district-wide increment to incentivize historic renovation projects that may not add enough taxable value to rely solely on the subject property’s increment. Affordable housing TIF projects in any urban renewal area with a residential component as part of the project must provide a minimum of 15% of the rental units as affordable to tenants at or below 60% AMI (area median income) for a minimum 20-year compliance period, with a strong preference for permanent affordability or longer-term commitments. If those housing units are for sale, 15% of the units must be targeted to households at or below 110% AMI. Current AMI limits are available on the City’s website: https://www.icgov.org/government/departments-and-divisions/neighborhood-and- development-services/neighborhood-services/community-development/resources-for- organizations-receiving-city-funds. Developers may be eligible to negotiate a fee-in-lieu of providing on site affordable housing, or to provide affordable housing elsewhere in the community, subject to the City’s sole discretion. In exchange for the increased density allowed in the Riverfront Crossings (RFC) zone, any project with housing in the district, regardless of whether it is a TIF project, must include 10% affordable housing. TIF policy in the RFC zone is that any financial gap due to affordable housing created by zoning requirements (10%) is the responsibility of the developer and that affordable housing above the required 10% in RFC could be TIF eligible if the financial analysis determines a gap. Economic Justice The City will not contract with or provide any economic development incentives to 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 (FLSA) or any comparable state statute or local ordinance, which governs the payment of wages, workplace safety, child labor, or other labor laws. Misclassification of employees as independent contractors is a violation of the FLSA and is included in the definition of wage theft. Proposed Tax Increment Financing Policy | August 2024 Development Agreements for TIF projects shall include in the contract for the construction of the Minimum Improvements, between the Developer and the General Contractor, written provisions requiring compliance with all state, federal, and local laws and regulations governing wages, child labor, workplace safety, and other labor laws, proof of which must be provided to City prior to the start of construction. Additionally, the General Contractor of a TIF-supported project will be required to provide the Developer and City, no later than the filing of an application for a building permit, a list of the names and addresses of each subcontractor and the dollar value of the work the subcontractor is expected to perform. Quality Jobs When a TIF project is based on the creation or retention of jobs, certain wage thresholds must be met to help ensure the City’s financial participation only serves to increase the average area wage. This policy does not require that every job associated with a TIF project, such as those that might be created by the addition of a new retailer in a building, or the construction jobs required to build a TIF project, meet these standards. Rather, as a policy to incentivize the addition or retention of high paying jobs to the local economy, a jobs-based TIF incentive would be structured using the thresholds of the State of Iowa High Quality Jobs Program. Underwriting and Application The following criteria are designed to provide a consistent and transparent process for the review and analysis of all applications for TIF assistance. a) Application: Developer must submit a complete application. b) “But For” Test: TIF support tied directly to private projects must meet a “but for” standard. That is, each project must sufficiently demonstrate need for the City’s financial assistance, such that without it, the project would not occur. TIF assistance in the form or rebates will be used as gap financing as determined through a gap analysis. The City may enlist third party support to review private project financials and evaluate the need for TIF. Use of a third party is not anticipated when TIF is being utilized to rebate costs of public infrastructure, state and federally-supported affordable housing projects, and projects that support non-property tax generating economic activity. c) Structure of TIF financing: The City reserves the right to determine the method of TIF financing that is in the best interests of the City. This includes variables such as the percentage of increment utilized, maximum rebate amount, and maximum term. d) Developer equity: For private development projects, developer equity must be equal to or greater than City funding. TIF assistance shall not exceed the amount of equity provided by the Developer. Equity is defined as cash, unleveraged value in land, or prepaid costs attributable to the project. e) Project based TIF: TIF for private developments must generate TIF increment sufficient to be self- supporting. Only in exceptional cases will the City consider using district-wide increment. Proposed Tax Increment Financing Policy | August 2024 Exhibit A Urban Renewal Areas Enabling Tax Increment Financing Proposed Tax Increment Financing Policy | August 2024 Exhibit B City-University Project 1 Urban Renewal Area Proposed Tax Increment Financing Policy | August 2024 Exhibit C City of Iowa City FY2023-2028 Strategic Plan The full Strategic Plan document is available online at www.icgov.org/StrategicPlan. VALUES • Racial Equity, Social Justice & Human Rights: We prioritize diversity, equity, and inclusion, eliminatination of systemic barriers, and facilitating equal access for all. • Climate Action: We are leaders in reducing greenhouse gas emissions and adopt sustainable energy, transportation, land, and water practices. • Partnerships & Engagement: We are transparent and foster trust, involve the public in decision- making, and offer facilities and services that foster community connection. IMPACT AREAS & STRATEGIES Neighborhoods & Housing • Update City Comprehensive Plan and Zoning Code to encourage compact neighborhoods with diverse housing types and land uses. • Partner in projects that serve as models for desired future development. • Create inviting and active outdoor spaces with unique and engaging recreation offerings. • Address the unique needs of vulnerable populations and low to moderate-income neighborhoods. Mobility • Expand the access and convenience of environmentally friendly and regionally connected public transit. • Design and maintain complete streets that are comfortable and safe for all users. • Grow and prioritize bike and pedestrian accommodations. Economy • Reinforce Iowa City as a premier community to locate and grow a business. • Ensure appropriate infrastructure is in place for future business growth and development. • Cultivate a strong entrepreneurial and small businesses ecosystem with a focus on creating new pathways to success for marginalized populations. • Build Iowa City’s image as the Greatest Small City for the Arts. • Strengthen the Iowa River’s role as a signature community amenity and tourism generator. Safety & Well-Being • Implement and expand innovative public safety models and facilities to improve outcomes and relationships within the community. • Partner with non-profits to address the most emergent and foundational community safety and well-being needs. • Build community by fostering social connections and developing safe, accessible public spaces for gathering.