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HomeMy WebLinkAbout2014-04-24 Info PacketCITY COUNCIL INFORMATION PACKET CITY OF 10WA CITY www.icgov.org April 24, 2014 IP1 Council Tentative Meeting Schedule IP2 Agenda APRIL 28 JOINT MEETING MISCELLANEOUS IP3 Memo from City Manager: Payment in Lieu of Taxes (PILOT) Agreements IP4 Memo from Neighborhood Services: FY14 Annual Action Plan Amendment # 2 IP5 Memo from Neighborhood Services: FYI Annual Action Plan IP6 Copy of email from Transportation Planner: Annual Bike / Bus / Car Race IP7 Copy of email response from City Manager to Peter Bixler: Redistricting Concerns IP8 Memo from Neighborhood Services Coordinator: Iowa City Community School District Attendance Area Development Proposal IP9 Copy of letter from Mayor to Chairperson Neuzil and Board of Supervisors: Joint meeting between City and County IP10 Article from City Manager: New data shows city growth outpaces suburbs I1311 Article from City Manager: Top 10 reasons for anew American Dream IP12 Copy of Press Release: Citizens Police Review Board Community Forum IP13 Copy of Press Release: Charter Review Commission beginning deliberations, seeks public input DRAFT MINUTES IP14 Charter Review Commission: April 22 IP15 Human Rights Commission: March 18 :. . city c CITY OF IOWA CITY Date Time Friday, April 25, 2014 12 Noon Monday, April 28, 2014 4:30 PM Tuesday, May 6, 2014 5:00 PM 7:00 PM Tuesday, May 20, 2014 5:00 PM 7:00 PM Tuesday, June 3, 2014 5:00 PM 7:00 PM Tuesday, June 17, 2014 5:00 PM 7:00 PM Tuesday, July 1, 2014 5:00 PM 7:00 PM Tuesday, July 15, 2014 5:00 PM 7:00 PM Tuesday, August 5, 2014 5:00 PM 7:00 PM Tuesday, August 19, 2014 5:00 PM 7:00 PM Tuesday, September 2, 2014 5:00 PM 7:00 PM Tuesday, September 16, 2014 5:00 PM 7:00 PM Tuesday, October 7, 2014 5:00 PM 7:00 PM Tuesday, October 21, 2014 5:00 PM 7:00 PM .#ouncil Tentative Meeting Schedule IN Subject to change April 24, 2014 Meeting Location Special Formal Meeting Emma J. Harvat Hall Joint Meeting /Work Session Ed. Services Ctr/ ICCSD Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Work Session Meeting Emma J. Harvat Hall Formal Meeting Tuesday, November 4, 2014 5:00 PM Work Session Meeting Emma J. Harvat Hall 7:00 PM Formal Meeting Tuesday, November 18, 2014 5:00 PM Work Session Meeting Emma J. Harvat Hall 7:00 PM Formal Meeting Tuesday, December 2, 2014 5:00 PM Work Session Meeting Emma J. Harvat Hall 7:00 PM Formal Meeting Tuesday, December 16 2014 5:00 PM Work Session Meeting Emma J. Harvat Hall 7:00 PM Formal Meeting AGENDA Joint Meeting Johnson County Board of Supervisors City of Iowa City City of Coralville City of North Liberty City of Tiffin Iowa City Community School District Board Clear Creek Amana School District Monday, April 28, 2014 Iowa City Community School District Educational Services Center 1725 N. Dodge St. Iowa City, IA 52245 4:30 PM (Meeting preceded by 4:00 P.M. Reception) Call to Order Welcome and Introductions 1. Attendance Area Development Update (Iowa City Schools) 2. Facilities Master Plan Update (Iowa City Schools) 3. Budget Adjustment Update (Iowa City Schools) 4. Citizen concerns re: roads in the vicinity of the new high school (County) 5. Other Business. Adjourn OW.A �r CITY OF IOWA CITY ALNWNR�51. r of MEMORANDUM Date: April 24, 2014 To: City Council From: Thomas M. Markus, City Manager (with substantial contributions from City staff) Re: Payment in Lieu of Taxes (PILOT) Agreements Introduction = 1240 For some time now I have been reviewing the Payment in Lieu of Taxes (PILOT) agreement between the City of Coralville and the University of Iowa Hospitals and Clinics at Iowa River Landing. My interest in examining this agreement was to learn how it compares to Iowa City's agreements with the University of Iowa. During my initial review I had the opportunity to speak with representatives of both the University of Iowa and the City of Coralville. A recent article by Gregg Hennigan of the Gazette entitled, "University of Iowa Pays Coralville $1 Million for Tax - Exempt Clinic; City Keeps it All" (attachment A) was discussed by Council at their March 25, 2014 meeting and I was directed to respond to fourteen questions (attachment B). In an effort to provide the appropriate context for the questions that were presented I have added additional background and compiled this report with the following sections: A. Tax exempt status B. General information about PILOT agreements C. Existing agreements, specifically the Iowa City Fire Protection Agreement and the two Coralville PILOT agreements D. A summary of payments to Johnson County municipalities E. Information about the process that preceded the approval of the subject agreement F. Answers to the City Council's questions. A brief summary and recommendations for City Council consideration are also included at the conclusion of this report. My intention in providing this report is to present the facts of the situation in a respectful and professional manner. The City of Iowa City currently benefits from a strong relationship with the University of Iowa and is actively collaborating on several significant projects that will help define the University, our community and the State of Iowa for generations to come. Both organizations value transparency and understand the need for these types of reviews to ensure that appropriate public policy and practices are being pursued by leaders of the respective organizations. Through this review and the discussions that follow, we must carry ourselves in a professional manner and make certain that we can continue to collaborate on important public improvements and policy. 1 r �I,;. ®, CITY OF 10WA CITY Mink 4q 0" MEMORANDUM In developing this report it became clear that PILOT agreements can have a significant and positive financial impact on a community. According to the Board of Regents' staff, there are currently only two PILOT agreements in the State of Iowa, both for facilities located in the City of Coralville. The first University of Iowa PILOT agreement (PILOT 1), dated 1996, covers tax exempt properties at the Oakdale Research Park and provided $154,869 to Coralville in FY2013. The second University of Iowa PILOT agreement (PILOT 2), dated 2010, covers the tax exempt clinic located in Iowa River Landing and provided $1,013,011 to Coralville in FY2013. A third University of Iowa PILOT agreement (PILOT 3) is being contemplated for a project similar to PILOT 2. This project would be located on property acquired by the University in 2012 across the street from the Coralville clinic in PILOT 2. Based on conversations with University staff, it is now my understanding that additional medical buildings may be contemplated beyond a second clinic facility. For purposes of this report, I narrowed the discussion to include the existing PILOT 1 and PILOT 2, as well as the anticipated PILOT 3. Should PILOT 3 occur, it is estimated that the amount of funding provided to Coralville by the University will surpass, by a significant margin, the funding provided to any of the three State of Iowa university hometowns. This in spite of the fact that university facilities located in Coralville represent a small fraction of the square footage that is located in Iowa City, Ames or Cedar Falls. The PILOT agreements provide significant funding to the recipient community beyond the already significant beneficial impact created by the siting of a University facility. The lack of a consistent Board of Regents' policy for contractual relationships with municipalities has an unintended consequence of fueling an increasingly competitive economic development environment by subsidizing economic growth through selective agreements with vastly different terms between neighboring cities. In the case of PILOT 2, the over $1,000,000 payment is not only ample enough to cover the cost of providing municipal services to the University, but it is also being used to further the economic development of Iowa River Landing. This PILOT 2 is combined with a very generous parking agreement that includes the University paying the entire debt service on a Coralville -owned parking facility that serves the larger Iowa River Landing district. Together, these agreements subsidize parking for non - hospital uses in the district and provide an endless stream of revenue that supports the economic development efforts of Coralville, which have included public infrastructure build -out, public facility and green space improvements, retail space acquisition and recruitment, and significant commercial incentives to private businesses. While all of these actions are undoubtedly beneficial to Coralville, they impact the regional economic development environment in a way that directly impacts Iowa City and other nearby communities. The above described PILOT agreements, and related contracts with the City of Coralville, create an untenable and disparate distribution of the State's financial resources. In my opinion, the Board of Regents M r CITY OF 10WA CITY ' �'� � MEMORANDUM needs to develop a consistently applied practice for PILOTS, and similar agreements, that provides a more rational, transparent and equitable payment policy to cities hosting their facilities. Finally, after considerable review of this topic it is clear to me that this issue is not a dispute between Iowa City and Coralville. It is evident that the City of Coralville was acting in the best interest of their community and there is certainly nothing to suggest that they had any motivations other than to further their community objectives. Rather, I believe this is an issue created due to a lack of a Board of Regents' policy or consistent university practice concerning contractual relationships with municipalities. The inconsistency in how the University and Board of Regents handles PILOT, fire service, parking and related agreements with cities not only creates glaringly inequitable distributions of state controlled financial resources, but it also has significant and lasting unintended economic development consequences. M r CITY OF IOWA CITY ' Mink all MEMORANDUM A. Property Tax Exemption for Nonprofits A history and background of nonprofit tax exempt status is provided below through excerpts from a policy focus report from the Lincoln Institute of Land Policy entitled, "Payments in Lieu of Taxes — Balancing Municipal and Nonprofit Interests" by Daphne A. Kenyon and Adam H. Langley copyrighted 2010 (attachment Q. This is the same report referenced in Mr. Hennigan's recent article. While this report addresses nonprofit as opposed to tax exempt state institutions, I believe the conclusions are still valid. In fact it would seem likely that state institutions would experience far less pressure to enter into PILOT agreements than would a nonprofit organization. Below are excerpts from the report that I believe provide important context to this issue. 1. Kenyon and Langley describe the origins and rationale of nonprofit property tax exemptions: Payments in lieu of property taxes must be understood within the context of the history, rationale, and dimensions of the property tax exemption for charitable nonprofits, which is provided in all 50 states and the District of Columbia. The roots of the property tax exemption are based on case law and can be traced to the British legal traditions that settlers brought with them to the American colonies, although explicit property tax exemption did not arise until much later (Gallagher 2002, 3). Annual state property taxation did not become the norm until the 1830s, and explicit codification of property tax exemption for charitable nonprofits followed. For example, in 1859 the Kansas Constitution became the first state constitution that explicitly exempted churches from taxation (Diamond 2002,120-121). Rationales for the Tax Exemption Various rationales for the charitable property tax exemption have evolved over time, including two that are particularly relevant today. First, the property tax exemption for charitable nonprofits can be justified as part of the decision to properly define the property tax base. Swords (2002) argues that the proper base of the property tax is property in private hands. Since nonprofits are established in order to benefit the public, property owned and used by nonprofits should not be part of the tax base. Second, the property tax exemption is often justified as an appropriate subsidy to encourage the activity of nonprofits, also known as the quid pro quo theory. According to this theory, because nonprofits provide benefits to society, including reducing the services that need to be provided by government, they are deserving of a tax subsidy. In recent years, the quid pro quo rationale has become increasingly important at the state level, as states have moved toward narrower definitions of 18 r CITY OF I0VVA CITY Mink m i MEMORANDUM organizations eligible for exemption than those used at the federal level (Brody 2007). Critics point out that the property tax exemption is an imprecise policy for subsidizing charitable activities, because it primarily benefits nonprofits with the most valuable landholdings, not those providing the greatest public benefits (Bowman, Cordes, and Metcalf 2009, 280 -281). There is also a geographic mismatch between the benefits provided by a tax - exempt nonprofit and the cost of the exemption in forgone property tax revenues. While the benefits are often broadly dispersed throughout a metropolitan area, a state, or the nation, the cost of the property tax exemption is concentrated in the host municipality. (Kenyon and Langley, 10 -11) 2. Nonprofit property must be owned and used for an exempt purpose in order to be tax exempt. Kenyon and Langley continue: Normally property must be both owned and used by a nonprofit to qualify for exemption from the property tax. In no state is nonprofit ownership alone sufficient for an exemption; the property must actually be used for an exempt purpose. As a result, many charitable nonprofits do in fact pay substantial property tax bills. For example, in Cambridge, Massachusetts, the Massachusetts Institute of Technology is by far the largest property taxpayer in the city because of its ownership of properties used by biotechnology firms, for rental housing, and other non - educational activities (City of Cambridge 2009, 85). The "use" requirement also means that taxes are owed when a nonprofit holds property for future development, although some period of time for construction is allowed. (Kenyon and Langley, 12 -13) 3. Challenges to Tax Exempt Status While hospitals have met challenges to their tax exempt status, this has rarely been the case for universities: Hospitals attract more court challenges to their tax - exempt status than any other type of nonprofit organization. One important reason is that uninsured patients have been charged significantly higher rates than insured patients, because private insurers and the government negotiate large discounts for their members, and then nonprofit hospitals have employed aggressive tactics to obtain payments from their patients (Connoly 2005). It can be difficult to distinguish the operations of nonprofit A r �I,;. ®, CITY OF 10WA CITY Mink 4q 0" MEMORANDUM and for - profit hospitals, because they often provide similar levels of charity care (Brody 2007, 279, Shofroth 2005). A search of state cases in which health care institutions litigated a denial of property tax exemption found that for the 1990- 2007 period there were 141 cases from 42 states. These cases were decided about evenly for and against the health care institution (Fanning 2008). (Kenyon and Langley, 15) On the other hand, universities do not seem to face frequent challenges to their tax - exempt status, except for ancillary properties that are not being used for educational purposes. This is likely because the majority of state constitutions explicitly provide for property tax exemptions for educational institutions. Churches and religious organizations also are usually free of such challenges due both to constitutional protections and political support, although they sometimes must account for individual properties not directly tied to religious activities. Social service organizations provide a large share of government services through contracts, often have limited revenues, and enjoy considerable political support, so they, too, are largely unaffected by challenges (Lemov 2010). (Kenyon and Langley, 16) 4. Tax Impact is More Significant in Central Cities and College Towns Looking at statewide averages obscures the fact that nonprofit property tends to be highly concentrated in central cities and college towns (Netzer 2002). For these municipalities, the nonprofit tax exemption can significantly shrink the tax base. (Kenyon and Langley, 18) 5. State Property is Tax Exempt The following information was provided by the City Attorney's Office: Iowa Code Chapter 427 PROPERTY EXEMPT AND TAXABLE, governs exemptions from property tax. They reach state property right off the bat: 427.1 Exemptions. The following classes of property shall not be taxed: 1. Federal and state property. a. The property of the United States and this state, including state university, university of science and technology, and school lands, except as otherwise provided in this subsection. The exemption herein provided shall not include any real property I r �I. ®, CITY OF 10WA CITY ' '� 0" MEMORANDUM subject to taxation under any federal statute applicable thereto, but such exemption shall extend to and include all machinery and equipment owned exclusively by the United States or any corporate agency or instrumentality thereof without regard to the manner of the affixation of such machinery and equipment to the land or building upon or in which such property is located, until such time as the Congress of the United States shall expressly authorize the taxation of such machinery and equipment. In the chapter quoted above, "state university' is the University of Iowa, and "university of science and technology" is Iowa State. The legal starting point is that the property is entirely tax - exempt. UIHC is governed by the Board of Regents. See 262.7(1): 262.7 Institutions governed. The state board of regents shall govern the following institutions: 1. The state university of Iowa, including the university of Iowa hospitals and clinics. 2. The Iowa state university of science and technology, including the agricultural experiment station. 3. The university of northern Iowa. 4. The Iowa braille and sight saving school. 5. The state school for the deaf. 6. The Oakdale campus. 7. The university of Iowa hospitals and clinics' center for disabilities and development. 7 r CITY OF IOWA CITY ' Mink all MEMORANDUM B. Payments in Lieu of Taxes (PILOT) In the same report, Kenyon and Langley, also provide a history and background of PILOT agreements. Again, I feel this information provides important context to the issue before the City Council. 1. Definition: Payments in lieu of taxes (PILOTS) are payments made voluntarily by tax - exempt nonprofits as a substitute for property taxes. In recent years, local government revenue pressures have led to heightened interest in PILOTS, and over the last decade they have been used in at least 117 municipalities in at least 18 states. (Kenyon and Langley, 18) 2. What Are PILOTS? Payments in lieu of taxes are usually negotiated between a municipality and individual nonprofits. PILOTS can be ad hoc payments by one or more nonprofits, or they can be standard payments from a wide range of nonprofits when a local government has a systematic PILOT program that provides guidance regarding expected contributions. PILOTS can be one -time payments, but negotiations sometimes lead to contracts stipulating continued payments for many years. PILOTS are often framed in two ways. First, they are considered a means to partially offset property tax revenue forgone because the nonprofit's property is tax exempt. Second, they are thought of as contributions to cover the nonprofit's share of the cost of public services provided by municipalities that are normally funded with property taxes (e.g., fire services, road maintenance, or snow removal). Regardless of the stated rationale, both of these arrangements are PILOTS according to the definition used in this report. The basis for deciding upon an appropriate PILOT amount varies across municipalities. Some ask tax - exempt institutions to pay a specific proportion of the property taxes the institution would owe if taxable. Others base the PILOT on some measure of the size of the nonprofit's property, such as square footage, or the size of its economic activity, such as number of employees or dormitory beds. The cost of basic services provided to nonprofit institutions is also used as a guide, but in many cases PILOTS are completely ad hoc and negotiated without any apparent basis. :9 r �I,;. ®, CITY OF 10WA CITY Mink 4q ft" MEMORANDUM In all cases, a primary characteristic of a PILOT is that it is voluntary, that is there is no law requiring a nonprofit to make a PILOT. (Kenyon and Langley, 6) 3. The Problems PILOT Agreements Attempt to Address PILOTS are a tool to address two problems with the property tax exemption provided to nonprofits. First, the exemption is poorly targeted, since it mainly benefits nonprofits with the most valuable property holdings, rather than those providing the greatest public benefits. Second, a geographic mismatch often exists between the costs and benefits of the property tax exemption, since the cost of the exemption in terms of forgone tax revenue is borne by the municipality in which a nonprofit is located, but the public benefits provided by the nonprofit often extend to the rest of the state or even the whole nation. PILOTS can provide crucial revenue for certain municipalities, and are one way to make nonprofits pay for the public services they consume. However, PILOTS are often haphazard, secretive, and calculated in an ad hoc manner that results in widely varying payments among similar nonprofits. In addition, a municipality's attempt to collect PILOTS can prompt a battle with nonprofits and lead to years of contentious, costly, and unproductive litigation. (Kenyon and Langley, 2 -3) 4. What is Driving the Interest in PILOT Agreements? Two major factors drive the high level of interest in PILOTS around the country: growing scrutiny of the nonprofit sector, and increasing pressure on municipalities to find new sources of revenue. Growing Scrutiny of the Nonprofit Sector Commercial activity in the nonprofit sector and news reports scrutinizing the behavior of nonprofit organizations have raised issues about the nonprofit property tax exemption, and have possibly reduced public support for it. In some cases, public support for tax exemption of nonprofits is tied to their charitable nature, but that support is reduced when they pursue commercial activities. Weisbrod (2004, 43) describes a "wave of commercialization among nonprofits," which includes charging user or admission fees, seeking revenues from marketing relationships, research and development partnerships with for - profits, joint purchasing partnerships between nonprofits and for - profits, and engaging in unrelated business activities that have little to do with the nonprofit's social mission. 01 r CITY OF IOWA CITY ' Mink all MEMORANDUM Cordes and Steuerle (2010, 2) describe a blurring of the line between nonprofit and for - profit organizations: 'Many nonprofits have found it advantageous to operate more like businesses in some respects, some for - profit businesses have adopted some nonprofit attributes, and businesses and nonprofits have discovered mutual benefit from acting as partners, both in for - profit and not-for-profit ventures." (Kenyon and Langley, 7 -8) 5. Arguments for PILOT Agreements a. Nonprofits should pay for the public services they consume. Some of the services provided by municipal governments are essential for the operation of nonprofits, while others are not. For example, members of Boston's PILOT Task Force have established a 25 percent standard, whereby the city would seek PILOTS equal to 25 percent of the property taxes that would be owed if the nonprofits' properties were fully taxable. This goal was set "since approximately 25 percent of the City's budget is allocated for core City services such as police protection, fire protection, and public works — services consumed by tax - exempt institutions" (City of Boston 2009, 26). (Kenyon and Langley, 29) b. PILOT agreements provide essential revenue for some municipalities and allow tax exporting. PILOTS are also a way for municipalities to export their tax burden to nonresidents, because most revenues for universities, retirement homes, and sometimes hospitals come from people who live outside the municipality (Brody 2005). (Kenyon and Langley, 30) c. PILOTS can address inequities created by the charitable property tax exemption. Generally the greatest tax savings go to large nonprofits with the most valuable landholdings, especially hospitals, higher education institutions, and tax - exempt housing facilities, while most small nonprofits receive relatively little in tax benefits. The large nonprofits are the same ones most frequently targeted for PILOTS. Conversely, smaller nonprofits, especially social service providers, are rarely targeted. (Kenyon and Langley, 31) d. PILOTS can reduce inefficient location decisions made by nonprofits. 10 r , CITY OF 10WA CITY ' I '�� MEMORANDUM According to economic theory, the charitable property tax exemption distorts the location decisions of nonprofits because it creates an incentive for them to locate in center cities where the tax savings are high compared to adjacent municipalities (Quigley and Schmenner 1975). It is well established that property taxes are capitalized into selling prices —for otherwise identical properties, the one with higher property taxes will have a lower selling price, which equalizes total expenses over the life of the property (Yinger et al. 1988). Consequently, within a given metropolitan area, nonprofits have a financial incentive to locate in municipalities with high tax rates, because their decisions are based solely on selling prices, not property taxes (McEachern 1981). (Kenyon and Langley, 31 -32) 6. Arguments Against PILOT Agreements a. PILOTS are often ad hoc, secretive, and contentious. Many of the problems with PILOTS result from the fact that they are voluntary payments. As a result, PILOTS are haphazard —the level of PILOT amounts normally depends more on the aggressiveness of municipal officials than on property values or the level of public services consumed by nonprofits. Consequently there are huge horizontal inequities, with similar nonprofits making very different PILOTS even within the same municipality. (Kenyon and Langley, 32) b. PILOTS provide limited and unreliable revenue (Kenyon and Langley 2010, 33). C. PILOTS could lead nonprofits to raise fees, cut services, or reduce employment (Kenyon and Langley 2010, 33). 7. Trigger for Inclusion in PILOT Program Municipalities must decide when it is appropriate to request PILOTS from nonprofits. One approach is to solicit PILOTS when nonprofits purchase previously taxable property and thus remove it from the tax rolls, or when they make significant improvements to existing tax - exempt properties. This approach is currently used in Boston. Nonprofits may be more likely to support this approach, because they can take the PILOT cost into consideration when deciding to expand, as opposed to being surprised by a new request for PILOTS over which they have no control. Municipalities also will be able to more gradually adjust their budgets instead of facing a sudden drop in their tax base, and are in a better position to request a PILOT when the nonprofit is requesting a building permit from the local government. 11 r CITY OF IOWA CITY Mink all MEMORANDUM However, relying on a trigger for inclusion in a PILOT program leaves a large share of tax - exempt property out of consideration for PILOTS and thus will normally not raise as much revenue as a strategy of targeting all nonprofits would raise. In addition, seeking PILOTS only during expansion discourages capital investment and raises the cost of entry for new nonprofits. (Kenyon and Langley, 39) 8. Basis Used to Calculate PILOTS Arguably the fairest basis to calculate PILOT amounts is the assessed value of tax - exempt property, because the PILOT is proportional to the nonprofit's tax savings from the property tax exemption. Like regular taxpayers, owners of exempt property are more likely to view a PILOT request as fair if they view the assessed value as accurate. While current assessments are often unreliable, it is not as difficult to obtain accurate assessments of exempt property as is commonly believed. Some guidance can be found in recent efforts by the Boston Assessing Department to estimate the value of exempt property owned by educational and medical institutions in the city for FY2009. The department first used its statutory authority to obtain detailed facility information from these organizations. Since the types of properties owned by many nonprofits have relatively few transactions that can be used for comparable sales, the city relied primarily on the income approach for assessments and used a cost approach for some special purpose items. The department then allowed the institutions to review these assessments, and made adjustments when necessary (City of Boston 2009, 40). The Boston PILOT Task Force recommended seeking PILOTS equivalent to 25 percent of the taxes a nonprofit would have paid if their properties were not exempt. Other cities take different approaches. For example, Cambridge, Massachusetts, uses square footage as the basis. In Baltimore, PILOTS were based on an organization's annual operating income, which is a rough proxy for a nonprofit's ability to make a PILOT (Leland 2002, 203). PILOTS can also be linked to some measure of economic activities, as in the part of Yale's PILOT that is based on the number of residence beds and the number of employees (Kelderman 2010). Sometimes there is no apparent basis for a PILOT other than the negotiations between the nonprofit and municipality to set an acceptable amount. (Kenyon and Langley, 39) 12 j r CITY OF I0VVA CITY MEMORANDUM 9. Recommendations for Municipalities Table 10 General Recommendations for Municipalities Recommendation Explanation PILOTS are not PILOTS can provide crucial revenue for municipalities highly reliant on appropriate property tax revenue or with a significant share of total property value for all owned by tax - exempt nonprofits. In some cases, legal and municipalities administrative costs may outweigh the revenue potential. PILOTS are not Municipalities should focus on nonprofits owning large amounts of tax - appropriate exempt property and providing modest benefits to local residents for all relative to their tax savings. nonprofits Municipalities This should make local officials more aware of the benefits that should work nonprofits provide to local residents and the financial constraints collaboratively they face. Nonprofits may offer suggestions that reduce the burden with nonprofits of PILOTS for their organizations, while still making a financial when seeking contribution to the local government. PILOTS Negotiating individual PILOT Case -by -case negotiation enables consideration of the unique agreements is financial constraints for each nonprofit, but can lead to large best for munici- discrepancies in PILOT amounts among similar nonprofits. polities with few nonprofits Systematic PILOT programs are best This approach promotes horizontal equity among tax - exempt for municipalities nonprofits, fosters transparency, makes payments more with a large predictable, and may raise more revenue than negotiating numberof individual agreements. nonprofits Consider Because of the serious pitfalls of PILOTS, alternatives should be alternatives to considered, ranging from increased user fees to grants from the state PILOTS. to municipalities that host tax - exempt nonprofits. (Kenyon and Langley, 44) 13 j r CITY OF I0VVA CITY MEMORANDUM 10. Recommendations for Systematic PILOT Programs Table 11 Recommendations for Systematic PILOT Programs Recommendation Explanation A target is a useful starting point for negotiations, and may be based on Set target for the percentage of local government spending on services directly contributions benefiting nonprofits. Use a basis to Using exempt property values as a basis promotes equity, while using calculate square footage as a basis is easier to administer. payments Make adjustments Nonprofits should be able to reduce their cash payments in return for for providing certain public services for local residents. community benefits Consider soliciting PILOTS Nonprofits avoid an unexpected new expense, and municipalities avoid facing when property a sudden drop in their tax base. However, this significantly erodes th revenue potential of PILOTS. Phasing in property tax exemptions over severs is taken off tax years also achieves these goals. rolls Use a threshold to determine which A threshold level of property value or annual revenues excludes nonprofits nonprofits to lacking the financial resources to make meaningful contributions. include Reach multiyear Long -term agreements reduce uncertainty about future payments for PILOT both nonprofits and municipalities. agreements (Kenyon and Langley, 45) 14 r CITY OF IOWA CITY ' Mink all MEMORANDUM C. Existing University of Iowa /Municipal Agreements It is critical that the City Council understand the primary contractual agreements that are currently in place between the University and /or Board of Regents and the cities of Iowa City and Coralville. In this section, I aim to provide a brief description of the Iowa City Fire Services agreement, as well as the two Coralville PILOT agreements. However, keep in mind, that these are not the only agreements or relationships that the University has with the two communities. Many of these other relationships are discussed in subsequent sections of this memo. 1. Iowa City Fire Services Agreement (dated June 1957, amended May 1959, March 1961 (attachment D) a. Iowa Code 262.33, Fire Protection Contracts provides, "The state board of regents shall have power to enter into contracts with the governing body of any city or other municipal corporation for the protection from fire of any property under the control of the board, located in any such municipal corporation or in territory contiguous thereto, upon such terms as may be agreed upon." b. The Iowa City fire agreement is sometimes referred to as a PILOT agreement however, it is more properly defined as a service agreement for fire services, despite some similarities to a PILOT agreement. c. The agreement has no end date but can be modified by mutual agreement of the City of Iowa City and the State Board of Regents. d. The agreement provides, "In consideration of an annual payment by the State University of Iowa of a pro -rata share of the annual expense of the Iowa City Fire Department, the City of Iowa City agrees to furnish adequate fire protection facilities and adequate fire protection, including semi- annual inspections and reports of fire hazards, to the State University of Iowa for all property owned and operated by the State University of Iowa located within Johnson County, Iowa." This paragraph suggests that our fire contract covers all University -owned properties located within Johnson County. This issue will need to be addressed in the future. e. The payment from the University of Iowa to Iowa City is derived from a formula based on property square footage. The agreement resulted in a payment of $1.76 million in fiscal year 2012 -2013, which equates to approximately 23.5% of the Iowa City Fire Department's total operating budget. 15 r CITY OF IOWA CITY ' Mink all MEMORANDUM f. While the agreement is silent on the City's use of funds, Iowa City has used the funds to offset the annual costs of operating the Fire Department g. According to the Board of Regents' staff, Ames, Iowa has a fire protection service agreement with the Board of Regents that results in payments amounting to about 25% of the City fire budget. The response from the Board of Regents did not comment on a fire services agreement with the City of Cedar Falls. In response to an Iowa City inquiry, staff from Cedar Falls indicated that they have a fire service agreement that generates approximately 16% of the fire department's annual budget. 2. Cora lvi Ile PILOT Agreements According to the Board of Regents' staff, there are only two PILOT agreements in the state of Iowa. Both are agreements involving the University of Iowa and the City of Coralville. a. PILOT 1— Agreement for the Payment of City Services at the Oakdale Research Park (dated October 22, 1996. (attachment E) i. The City of Coralville and the University of Iowa entered into an agreement In March of 1989 to facilitate development of the University of Iowa Oakdale Research Park. The University of Iowa Research Park Corporation ( "Park Corporation ") manages the research park on behalf of the University of Iowa and leases portions or the research park from the University of Iowa. ii. From the University's website: The University of Iowa Research Park Corporation is a not -for- profit organization incorporated in the State of Iowa on April 24, 1989. It was established to build a nucleus of businesses in Iowa that are drawn by the strengths of the University and the private sector. The organization subleases portions of the Oakdale Research Park to tenants under operating lease agreements. The leased ground remains publicly owned so it is tax - exempt. Buildings and other capital improvements are subject to tax. iii. The Oakdale Research Park was designed to promote academic research in harmony with the educational mission of the University of Iowa and to promote the development of the community by attracting commercial tenants. iv. The PILOT states as follows: "The Park Corporation will add language to its future land leases, reminding its future tenants of their tax obligations and requiring future tenants to covenant that in the event the tenant becomes tax exempt, or transfers interest to a tax exempt entity, 16 r CITY OF IOWA CITY ' Mink all MEMORANDUM the tenant or its successor shall make payments to the City in lieu of the City's taxes. The payments would be in amounts equivalent to the tax receipts the City would have received had the improvements not become tax exempt. The prospective tax provision would be applicable in all instances unless prohibited by the State or Federal government." My interpretation is that this PILOT is based on reimbursing the City based on the City tax rate. (If my interpretation is incorrect, I expect the City of Coralville will advise accordingly) This is a major difference from the University's policy in PILOT 2 for the Iowa River Landing ambulatory clinic. Both agreements exist for properties within TIF districts, however, PILOT 1 reimburses Coralville based on the City's tax rate, whereas PILOT 2 is based on a calculation that includes the tax rates of the County and School District. Thus PILOT 2 is more generous. v. According to the Board of Regents' staff, the City of Coralville collected $154,869 in 2013 consistent with the terms of this agreement. Other jurisdictions (e.g. County, School District) are not reimbursed based on their tax rates. vi. The term of the agreement is tied to the duration of the Research Park Ground Lease and extensions thereof. The agreement may be amended by written mutual consent of the parties. vii. There is no specific reference to how the funds could be used (presumed to be any lawful municipal purpose). b. PILOT 2 — Payment in Lieu of Taxes Agreement. Dated June 1, 2010 (attachment F) i. This agreement applies to a site (the "SMF land ") located north of Ninth Street in Iowa River Landing. The University of Iowa Hospitals and Clinics constructed a 150,000 gross square foot medical office building. ii. The agreement is between the City of Coralville and the Board of Regents on behalf of the University of Iowa Hospitals and Clinics. iii. In terms of a formula the agreement states the payment is $1,000,000. The basis for this payment is not spelled out in the agreement, i.e. there is no formula in the agreement to explain how the $1,000,000 was derived. iv. There is a fairly complex formula for adjusting the $1,000,000 payment on an annual basis. Essentially, the $1,000,000 amount is adjusted annually based on the changes in the tax levy 17 r �I. ®, CITY OF 10WA CITY ' '�� MEMORANDUM rate from one year to the next. The tax rate used is the CVI District Tax Levy Rate which means the aggregate combined tax levy rate which includes the rates for the County, City, School District, and all other taxing authorities levying taxes at this location in Johnson County. While the rates of these taxing jurisdictions are used for the calculation, there is no payment remitted to the organizations. v. According to the aforementioned Gazette article, "Coralville received its first payment last yearat$1,026,774 and $1,013,011 this year." (Hennigan, 2014) vi. There is no end date or terms to amend the language stated in the agreement. vii. There does not appear to be any restriction on use of funds (verified by the City of Coralville) as long as they are used for a lawful municipal purpose. Coralville officials have stated that the funds are used to support the overall objectives of the Iowa River Landing area. According to Coralville budget documents, the funds are being used to repay the series 2011C bond issue. Ef 3 r �I. ®, CITY OF IOWA CITY ' '�� MEMORANDUM D. Overview of 2013 University of Iowa Payments in Support of Johnson County Municipalities Iowa City and Coralville also receive various fees for services, in -kind services, and payments for joint initiatives. In response to several City of Iowa City questions related to the PILOT agreements, the Board of Regents' staff voluntarily submitted the following list of payments, which we found to be non - comprehensive. Additional payments not included in the Board of Regents' summary are subsequently included in this report. As submitted by the Board of Regents' Staff (my comments on the relationship of these payments to the PILOT discussion are found in the following section): Fire Protection Coverage to City of Iowa City $1,760,000.00 Sewer & Water Fees $2,406,168.00 (Iowa City = $2,170,000, Coralville = $236,168) Iowa City Landfill $ 134,000.00 Road maintenance and capital cost of construction for 33 miles of public roadways on or adjacent to campus (annual maintenance costs) $ 349,000.00 UI budget to maintain University Police Department, including costs to patrol in downtown Iowa City. $7,362,668.00 (Includes downtown IC patrol budget = $200,000.00) (UI Police serves all campus facilities and provides mutual support to other local law enforcement agencies) Payment to Iowa City School District for grade school children living in Hawkeye Court and Hawkeye Drive family student housing (includes bus service fees) $ 195,616.00 Iowa City Downtown District $ 100,000.00 Iowa City Public Library $ 35,000.00 Real estate taxes on leased or owned property in Johnson County $2,341,879.00 (Iowa City = $1,300,000, Coralville = $977,700, North Liberty = $47,000) Payment in lieu of taxes (PILOT) to City of Coralville for Iowa River Landing $1,013,011.00 19 r �I. ®, CITY OF IOWA CITY ' '�� MEMORANDUM Payment in lieu of taxes (PILOT) to City of Coralville for UI Research Park for buildings UI owns on Research Park Campus $154,869.00 ($77,108.00 = National Advanced Driving Simulator Building) ($77,761.00 = two buildings at 2656 & 2660 Crosspark Road) " * ** In 2013 University began a new model of providing housing for graduate students and students with families. University entered into long term partnership with Balfour Beatty for them to build, own, operate and manage graduate student housing on the University's Hawkeye Campus. In doing so, the value of the new buildings and improvements in the Balfour development will be fully assessed by Iowa City and will add new tax revenue to the City of Iowa City. This property had previously not been taxed when it was owned and managed by the University. University and Balfour anticipate a Phase 11 commencing in 201512016, which will add further valuation and taxes to the City." In response to the Board of Regents list outlined above, I respectfully offer the following comments: 1. Sewer and water fees These fees reflect the cost of the actual use of water and sewer service by the University of Iowa. These fees are charged by both cities and have no relevance to the discussion of PILOT agreements. 2. Landfill This fee is a specific user charge to the University for placing University waste in Iowa City's landfill. This fee has no relevance to the discussion of PILOT agreements. 3. Road maintenance I presume this is an expense incurred by the University for the maintenance of their roads. The albeit minor relevance to PILOT may be that this charge would be covered by the two PILOT agreements in Coralville as those roads presumably are not maintained by the University but by the City of Coralville. This expense in Coralville would be very small as presumably this would be limited to the specific properties' frontages in PILOT 2. 4. University of Iowa Police expense r CITY OF IOWA CITY Mink all MEMORANDUM This number primarily represents a University expense for providing public safety on campus. This expense may have relevance to the PILOT discussion because in the case of the two PILOTS in Coralville the city police department is being utilized for law enforcement. I would note that it is more than possible that the University's public safety department could have provided service to the clinic in Iowa River Landing. The other relevance is that there is an expense item of $200,000 for downtown Iowa City patrol. Much of this patrol is for enforcement of liquor law violations which creates the nexus in part back to the University. It is our understanding that the University is considering changing its approach to patrolling in the downtown area. It is unknown at this time what effect, if any, this will have on Iowa City's Police Department or the safety of the public in general. Lastly, mutual aid provided by the University Police Department is referenced. As you are aware, mutual aid works reciprocally and Iowa City's Police Department provides the same service to the University. Similar reciprocity exists between the cities of Iowa City and Coralville. 5. Iowa City Community School District This fee is not relevant to the PILOT discussion because in both cases of the Coralville PILOTS the schools in the County are not receiving any funding from the University. This is despite the fact that the PILOT 2 is partially based on the School District tax rate. 6. Iowa City Downtown District The Iowa City Downtown District (ICDD) is not a City entity. In fact, because of their contribution the University has an official voting member on the ICDD Board, whereas the City does not. Iowa City has an ex- officio (non- voting) member. A healthy, vibrant downtown is a shared priority of the University and City. On multiple occasions, the University has emphatically stated the importance of downtown as a benefit to students and employees and their related recruitment to campus. Thus it seems the University directly benefits from their payment to the ICDD. This payment does not seem to have relevance to the PILOT discussion. 7. Iowa City Public Library The University no longer makes this payment; it expired in 2013 and the University did not renew the relationship. It is my understanding that this fee was to help pay for the children's literature collection at the Iowa City Public Library. This partnership was of specific benefit to University students in the School of Education's early childhood programs. The University did pledge $50,000 to be paid in five equal annual installments to the Iowa City Public Library Friends Foundation beginning in 2013. The money will be placed in the gift account that was used to help fund the building improvement project. None of these funds will be used for library operations. This payment does not seem to have relevance to the PILOT discussion. 21 r , CITY OF IOWA CITY ' I '�� MEMORANDUM 8. Realestatetaxes This tax is paid by the University through their lease of privately owned properties for University /Hospital purposes. This does have relevance to the PILOT discussion. Unlike the two PILOT agreements in Coralville, the taxes are distributed to all taxing jurisdictions instead of one entity keeping all of the proceeds. Another significant point is that these are compulsory taxes, whereas all PILOT agreements are voluntary. Further, these taxes are subject to the property tax reform rollback, whereas the PILOT agreement payment may increase as other commercial tax liabilities fall. Additionally, commercial property tax owners can appeal their taxes, whereas the PILOT agreement assumes a steady non - appealable flow of income not subject to the same market volatility. As previously mentioned, the above list voluntarily submitted by the Board of Regents staff omitted several other payments to municipalities in Johnson County. The following is a sample of other payments not noted on the Board of Regents staff submitted list: 1. Johnson County Ambulance Service — FY13 approximately $240,000 Johnson County Ambulance Service has three categories of service provided to the University. First, 911 response to dorm rooms and facilities for which they charge $695 per call. The response for the last year was 297 calls. The fee is billed to the individual receiving the service at a collection rate of 55% to 60% for payment. This arrangement has been in place since 1966. Second, standby service for athletic events and commencement exercises generates about $70,000 per year and has been an ongoing service for at least 25 years. Third, mobile case contract generated $87,000 in FY13. This service has been provided for about 17 years. For the past five years the service was operated under a contract. The contract expired on March 29, 2014 after the service was put up for bid. The new contract was awarded to SE Iowa Ambulance Service which is privately owned by Frazier Ambulance Services in Des Moines, Iowa. The new contract is for a three year period and beat the Johnson County bid by $1000 per month. The County's loss of this revenue and the fact that Coralville keeps the entire PILOT 2 payment, which is partially based on the County's tax rate, has some bearing on the PILOT agreement discussion. 2. UniverCity $515,000 22 r �I,;. ®, CITY OF 10WA CITY Mink 4q 0" MEMORANDUM This program provides funds to acquire single family homes currently being used for rental property located in our neighborhoods close in to downtown Iowa City and the University of Iowa main campus. To date, the City has acquired 48 homes; by August 1 the total will be 56. The City has completed rehabilitation on many of the homes and has sold 36 to buyers who agree to own and maintain them as owner occupied homes. This neighborhood enrichment program is designed to balance the mix of rental and ownership properties, while providing affordable housing options within walking distance to the downtown and university campus. As expected, our most significant number of buyers is university employees. The University investment in this program covered activity beginning in April 2010 and is scheduled to end at the end of June 2014. It is our understanding that one or more Board of Regent members did not believe this program was an appropriate expenditure. This program has little relevance to the PILOT discussion and the University's role has now ended. 3. Washington Street Master Plan $15,714 This planning project provided funds to develop a master plan for the south side of Washington Street in downtown Iowa City. The proportional share provided by the University reflects their ownership of the Jefferson Hotel property. This item does not have much relevance to the PILOT agreement discussion. 4. Animal Shelter approximately $4,000 capital and $4,000 per year These amounts provide for the University's proportional share of costs to construct a new animal shelter and the University's proportional share of the operating costs. This item has minor relevance to the PILOT discussion. 5. Summer of the Arts $65,000 This amount provides funding for the City of Iowa City's summer long cultural arts festivals. As the University becomes more of a year -long learning institution, this program provides a cultural scene throughout the summer enjoyed by University students and employees. I believe this item has some relevance to the PILOT discussion. At the time of this writing I did not have a chance to determine if the University provides resources or support for other festivals in Johnson County, such as Coralville's Fry Fest or North Liberty's Blues and Barbeque. 6. Iowa Initiative for Sustainable Communities (IISC) up to $15,000 paid by the City IISC is an interdisciplinary program provided by the University to help cities across the state to become more sustainable. This has no relevance to the PILOT discussion. 23 r CITY OF 10WA CITY ' Mink � MEMORANDUM 7. Common Area Maintenance charges from the UI to Coralville $150,000 /year This pays for common area maintenance services in Iowa River Landing. This has minor relevance to the PILOT issue. 8. Developer fee paid to Oliver McMillan $1,430,482 University staff described this payment as follows: "UIHC did pay professional services fees and related out -of- pocket expenses to Oliver McMillan. OM was the overall planning firm retained by the City of Coralville to design Iowa River Landing. UIHC also retained OM (as a result of its earlier selection by Coralville) to assist with the integration of the building design, parking and site development. OM assisted with building programming for various users that would be occupying the building and went through the formal selection process to retain the architect, engineers and interior designers for UIHC's buildings. OM reviewed and approved all site plans, building specifications, etc., and was integral in the selection of JE Dunn as UIHC's Construction Manager for the project. OM played a crucial role in working with bond counsel for various financing aspects of the project. UIHC paid OM $1,430,482 in fees for these services during the lengthy period of project development. OM's costs were paid by UIHC from the some source of funds used for the other IRL clinic costs." A copy of the retainer agreement can be found in attachment G. This item has some relevance to the PILOT discussion. Staff was not able to ascertain if OliverMcMillan was paid a developer fee for the parking facility. According to University staff, "The $1.4M was for all development fees the U has paid to OM for anything in any way connected to IRL." However, the parking agreement between Coralville and the University references a developer fee but does not define a developer or amount. The City of Coralville issued the $22 million parking revenue bond in 2012 for the parking facility, but Iowa City staff was not able to determine what expenses were covered by this bond. The construction contract for the parking facility was approximately $12 million so it is possible that a developer fee was also included with other expenses, such as facility design and site work. While the City of Coralville issued the parking revenue bond, the University is paying the full debt service (principal and interest) on the revenue bond. This was confirmed by University staff who indicated "UIHC pays the full debt service on the parking ramp." Therefore, if a developer fee was paid to OliverMcMillan, it would have likely been paid by Coralville through the bond proceeds, which are being paid off in full by the University through payment to the City of Coralville. 9. Burlington Street Dam Project $49,000 The University paid for $49,000 of $360,140, or 14% of the total consultant contract. If you factor in City staff time administering the project the percentage contribution drops further. IJ r �I,;. ®, CITY OF 10WA CITY Mink 4q ft" MEMORANDUM The project could potentially be a significant benefit to the University if the deadly nature of the 12' roller dam is mitigated. The City anticipates a cost sharing arrangement for the dam safety and fish passage project. Also, if the whitewater component is constructed, the University would benefit as the Campus Recreation and Wellness Center would be enhanced and have the opportunity to offer one -of -a -kind educational and recreational opportunities. The City is in preliminary discussions with University Recreation Services to expand the Campus Recreation and Wellness Center and offer boat rental and river access. The whitewater feature would be a short distance downstream from the recreation facility and main campus. I believe that this project has significant value to the University from a wellness, safety, marketing, research and education standpoint. This project does not have relevance to the PILOT discussion. 10. Parking arrangements in both Iowa City and Coralville Please see the related discussion on pages 37 -39, 47 -48 of this report. This issue is definitely worthy of evaluation as the University provides a significantly larger level of support for the Iowa River Landing parking system versus the parking system in Iowa City. Additionally, as the funds for the parking agreement with Coralville come from patient fees, the stark contrast in parking policies at the Coralville clinic and the clinics at the main campus are noted. 25 r �I. ®, CITY OF IOWA CITY 4 � MEMORANDUM do E. Staff Analysis of Board of Regents Review Process of the University of Iowa Hospitals and Clinics Ambulatory Care Facility at Iowa River Landing. (IRL Report on Board of Regents Agenda 4- 28/29- 2010 - attachment H) Staff has reviewed publicly available staff reports, presentation materials, minutes and audio recordings from various Board of Regents meetings that included the ambulatory care facility in Iowa River Landing on the agenda. While it is possible some relevant meeting materials may have been missed, it is believed that the following is an accurate description of the timeline and key issues. 1. Determining a Need and Selecting a Site a. The University engaged two consulting firms from FY 2005 through FY 2008 to assist with a strategic assessment, operational assessment and physical assessment of the UIHC operation. From these planning efforts the need for off -site ambulatory care services was determined. b. In June of 2008, UIHC staff gave a presentation to the Board of Regents entitled "Ambulatory/Outpatient Facilities Project ". The need for the new facilities were described at this meeting and under slides with the heading "Proposed Solution ". Staff presented a concept for a 20 acre campus with four to six buildings ranging in size from 75,000 to 150,000 gross square feet. Later in the same presentation the UIHC outlined a process that included "complete discussions with the City of Coralville about ground lease and covenants /restrictions ". The materials in this June 2008 presentation clearly indicate that discussions with the City of Coralville had been taking place for quite some time prior to the meeting itself. c. At the June 2008 Board of Regents meeting, Regent Lang appeared to indicate his support for 'as small a footprint as possible' and raised questions regarding the cost of having only two buildings versus the four to six that were proposed. d. The UIHC staff noted that multiple sites in Iowa City, Coralville and North Liberty were assessed; however, no details of this assessment were discussed with the Board of Regents. According to materials from the February 2010 Board of Regents meeting, the site identification process began in March of 2008. These same materials indicate that a subcommittee (presumably UIHC officials) was appointed in July of 2008 to "develop off -site ambulatory care plans' and that from August to December of 2008 the UIHC spent time to "consider Coralville proposal on developing clinic at Iowa River Landing ". This seemingly contradicts information from the June 2008 meeting, which make it clear that detailed discussions with Coralville took place well before those dates. al r �I,;. ®, CITY OF 10WA CITY Mink 4q 0" MEMORANDUM e. Despite language representing a 'Coralville proposal' there is no record that could be found of any public Request for Proposal (RFP) type of process, similar to the one the UIHC recently used for its administrative office building that will be located in north Coralville. It is unknown through a review of the public record how the UIHC identified and evaluated sites for the desired off -site ambulatory care facilities. 2. Type of Operations in the New Facility a. The UIHC staff provided a detailed project overview at the February 2010 Board of Regents meeting. Formal approval authority was then granted at the April 2010 Board of Regents meeting. Materials from these two meetings describe the vision for the facility and the benefits to patients and the UIHC. b. UIHC staff outlined the need for off -site facilities to keep up with robust growth in clinic volume (50% in the previous 14 years). The growth was causing increased congestion on roadways, parking capacity issues, and other issues that detracted from a positive patient experience. c. It is clear that the new facility is designed to accommodate a relocation of clinics that were in existence in some form on the UIHC main campus. In other words, there is no difference in the type of clinic services that were offered at the main campus and those that are offered at the Iowa River Landing facility. Certainly a newer facility allowed for some expansion and likely enhanced service offerings and patient experiences. d. It was noted in recent media reports that the University's determination to enter a PILOT agreement for the new facility, despite not having a PILOT for the clinics on the main campus or for the sports medicine clinic, was because the main campus and sports medicine clinic have integrated research and educational components. In the April 2010 Board of Regents meeting materials, the report to the Board on the Iowa River Landing facility states "the educational and research missions will also be enhanced through development of the necessary space to enable students, residents and fellows to gain necessary clinical experience in accord with accrediting body standards, and by providing the type of facilities required to conduct innovative research directed toward more clinically efficacious diagnosis and treatment of disease ". The materials go on to read that the project supports the UIHC strategic plan by providing facilities that are required to assist UIHC's efforts "to advance world class discovery through excellence and innovation in biomedical and health services research" and "to develop world class health professionals and scientists through excellent, innovative and humanistic educational curricula for learners at every stage ". These statements clearly indicate that education and research are integral parts of the Iowa River Landing facility, much like they are for the main campus and 27 r CITY OF IOWA CITY Mink all MEMORANDUM sports medicine operations. It appears the materials presented to the Board of Regents at the time of approval of the project, contradict the University's recent position that education and research distinguish the main campus from the ambulatory care facility in Iowa River Landing. 3. Discussion of Project Agreements The Iowa River Landing project involves five separate agreements with the City of Coralville. The details of these agreements were discussed to varying degrees in the February and April 2010 Board of Regents meetings. a. The February 2010 meeting was the time when the UIHC provided the most detailed overview of the project. However, at this meeting the PILOT agreement with Coralville is only mentioned in brief. The written and verbal presentations at this meeting do not include any detail. At no time is the $1 million payment discussed in the meeting. However, there were approximately eight pages of pro -forma information presented to the Board of Regents and the figure was listed as a line item in those materials. No substantive discussion of that line item occurred at the February 2010 meeting. b. At the April 2010 meeting there was discussion of the $1 million PILOT. There was also notation in the UIHC report to the Board. In the written materials it was stated that "this initial amount was derived by applying the prevailing tax rate to the value of the facility if it were to be developed as a commercial office building and subsequent annual adjustments will be based on changes in the tax rate." There was no discussion or written materials on the definition of 'prevailing tax rate'. There was also no discussion on how the 'prevailing tax rate' differs from the tax rate used for the Research Park PILOT (Pilot 1), which appears to be based solely on the Coralville municipal tax rate despite being in a TIF district. None of the Board of Regents meeting materials that were reviewed described a rationale for this discrepancy. c. During the April 2010 Board of Regents meeting, there was discussion about how the PILOT was calculated. Staff reported that the PILOT was based on a $28 million figure received from the contractor involved with the design studies and that the number was based on the shell and exterior components (not a commercial building as indicated in the written staff report). Staff indicated that the actual cost of the building was approximately $53 million and that there was an additional $20 million in equipment ($73 million total project cost). During the meeting staff is asked about the $28 million figure and states "the 28 is a number that was developed for use in determining the amount of the PILOT agreement ". This statement and the fact that the total building cost was $53 million raises a question whether the $28 million figure was backed into by the two parties to create a million dollar PILOT. Iowa City subsequently contacted the County W r �I. ®, CITY OF IOWA CITY ' '�� MEMORANDUM Assessor's office, which verified that they did not assist in valuing the property or determining payments for the PILOT. d. Iowa City staff could not find any Board of Regent materials and did not hear any discussion surrounding the need for a PILOT, despite that a PILOT was not paid for the clinics when they operated on the main campus. At no time was there discussion about a difference in research or educational missions. As previously mentioned a contrary message was delivered to the Board of Regents stating how the new facility would enhance research and educational efforts. Similarly, there was no discussion or conveyance that stated a policy or practice to pay taxes or PILOTS for clinics or any medical offices that are disconnected from the main campus. The only explanation provided for the PILOT was offered in the University staff report to the Board of Regents in April of 2010, which stated "Establishes a mechanism by which UIHC pays the City for police, fire and other services provided to the Ambulatory Care Facility (ACF) and for construction and maintenance of streets, sidewalks, storm water drainage and other improvements and facilities serving or benefitting the ACF ". This reasoning does not offer an explanation of use of the overlapping tax rate nor does it offer insight why accommodations for 'construction' type of services are paid in perpetuity. e. During the February 2010 meeting it is noted that OliverMcMillan is a party to the agreement. The role of OliverMcMillan is to be "responsible for all integration of building design, parking and site development to the satisfaction of the UIHC and the City of Coralville ". However, the UIHC staff report also indicates that "Based on the University's preference OliverMcMillan selected Neumann Monson to design the building." From this statement it appears OliverMcMillan was integrally involved in the project in the early design stages. At the February 2010 Board of Regents meeting the UIHC staff states "the development fee we would pay OliverMcMillan is related to the work they do." There is no discussion or written materials that describe any fee paid to OliverMcMillan. Staff subsequently received information from the University indicating their payment to Oliver McMillan totaled $1,430,482. Staff reviewed the agreement and two of the three subsequent amendments of the University's agreement with Oliver McMillan. The payments to OliverMcMillan were consistent with the amount the University reported to Iowa City staff. The one confusing element of the agreements related to dates of the performance period versus the execution of the agreement itself. The original agreement had a performance period of October 2008 to April 2009, however it was not signed by the University until May of 2009, well after the stated performance period in the contract. It appears the first amendment to the agreement actually was executed in April of 2009, approximately one month before the original agreement was W r , CITY OF 10WA CITY ' I '�� MEMORANDUM executed. The reason for the odd sequencing of dates was not something that we pursued as it did not seem to have much relevance to the discussion. As previously mentioned in this report, it is unknown if a second developer fee was paid to OliverMcMillan for the parking facility. The parking agreement references such a fee, but staff could not determine if a payment was made by the City of Coralville for this parking facility. If so, it is possible that it was paid with parking deck revenue bond proceeds. The parking deck revenue bonds are being paid in full by the University through payments to Coralville. This was confirmed by University staff who indicated "UIHC pays the full debt service on the parking ramp." e. Few details are provided on the Common Area Maintenance (CAM) agreement. It is noted that the annual charge is $1 per sq. ft., which other (unnamed) major tenants in Iowa River Landing also pay. The UIHC charge is $150,000 per year plus inflationary factors. The staff report indicates this fee is for "maintaining, repairing and as necessary, replacing common area driveways and parking areas, removing snow and ice, sweeping, striping and replacing pavement and lawn maintenance." f. The parking agreement is covered in detail at the February 2010 meeting. Those materials indicate that "the model for cost sharing will allocate about 75% of the cost of the parking structure and operations to the UIHC'. City staff's review of the parking agreement and discussions with Coralville staff leads us to believe that the UIHC appears to have paid more than the 75% share of the parking structure costs. In fact, University staff have indicated that the "UIHC pays the full debt service on the parking ramp." The details of the parking agreement are discussed in the City Council question and answer portion of this report. 4. Future Expansion in Iowa River Landing a. At the February 2010 meeting there was considerable discussion about future development in Iowa River Landing, beyond the first building. During the meeting, a regent inquired about purchasing additional land to the south and the UIHC staff replied that acquisition was evaluated but at the time unattainable. b. Since that time, the UIHC has acquired additional property and eventually plans to construct a second facility. There were no discussions at the Board of Regents meetings about future agreements with Coralville or OliverMcMillan. However, it is City staff's impression from discussions with University and Coralville officials that a PILOT 3 is being contemplated. ti] r CITY OF IOWA CITY ' Mink all MEMORANDUM The staff review of the Board of Regents approval process was helpful to understand the circumstances surrounding the building and the ultimate decision to enter the PILOT and other related agreements. In reviewing the meeting materials, it is difficult to determine an accurate timeline of the project origins. It is clear that a need for an off -site facility was identified through an internal planning effort, but the lack of a traditional site selection process and the appearance of conflicting dates on Board of Regent materials complicated our review. It does appear that the UIHC and the City of Coralville were having discussions on the Iowa River Landing parcel well before the site identification process commenced. It is also clear that clinics that were operating on the main hospital campus were relocated to the new clinic in Iowa River Landing. There was no discussion regarding the reasoning behind a PILOT agreement, except that it was to compensate for municipal services, construction and maintenance operations provided by the City of Coralville. Not mentioned were more recent university official offered explanations including a practice of paying taxes or PILOTS for sites off of the main hospital campus, for fair pay reasons with private providers, or because of the lack of an educational or research component to the facility. Research and education were actually stressed as a benefit to the Iowa River Landing clinic. Similarly, there was no discussion about the difference in computation methodologies for this PILOT and the PILOT in the Oakdale Research Park, which is also located in a TIF district. Further, the facilities in the Oakdale Research Park (PILOT 1) are not medical clinic facilities. These above -noted issues, as well as the others mentioned in this section of the report, make it difficult for Iowa City staff to fully understand the process and thought behind the establishment of the facility and the crafting of the various agreements. 31 r CITY OF IOWA CITY ' Mink all MEMORANDUM F. Answers to City Council Submitted Questions Regarding University of Iowa /Coralville PILOT 1. Typical PILOT vs. property taxes. Typically PILOT agreements are understood to be a payment for services rendered and the rate, or amount, of the payment was based on those services. For example, Iowa City has an agreement with the University of Iowa for fire protection. The UI /Coralville PILOT uses the entire property tax rate (city, school district, county, etc.) and Coralville keeps it all. Can the justification for this be explained? Iowa City's fire services agreement uses the square footage served as a basis for determining the charge to the University of Iowa. The result is that the University pays their proportional share of the Fire Department's budget based on the ratio of square footage to the total square footage in the community. The City's Fire Department building construction costs are not included in this computation. According to the Board of Regents April 28 -29, 2010 agenda item #2, page 3: Payment in Lieu of Taxes Agreement • Establishes a mechanism by which UIHC pays the City for police, fire, and other services provided to the Ambulatory Care Facility (ACF) and for construction and maintenance of streets, sidewalks, storm water drainage and other improvements and facilities serving or benefitting the ACF, and • City to be paid $1,000,000 for the first year of ACF operation and adjusted annually thereafter. This initial amount was derived by applying the prevailing tax rate to the value of the facility if it were to be developed as a commercial office building and subsequent annual adjustments will be based on changes in the tax rate. The first paragraph states the purpose for which the PILOT payments are being made, i.e. municipal services and for construction and maintenance of various improvements. The second paragraph states the formula that was developed to pay for those services. It would be necessary to know what the costs described in paragraph one actually were before you could determine if the formula provides the appropriate tool equating revenue to the likely expenses. However, it is clear that the PILOT in Iowa River Landing was intended to compensate Coralville beyond the value of the services they provide to the facility. There doesn't appear to be any justification presented that the costs and the formula are in sync. Further, it should be noted that Coralville's other PILOT agreement on the research park uses an entirely different formula: "The payments would be in amounts equivalent to the tax receipts the 32 r CITY OF I0VVA CITY Mink m i MEMORANDUM City would have received had the improvements not become tax exempt." This methodology is less generous than the second PILOT because it seemingly only reimburses Coralville for the municipal share of their taxes. Additionally, it is worth noting that PILOT 1 provides funding for non - clinic type operations and businesses. Even though the Oakdale Research Park only uses the municipal tax rate, in comparison to PILOTS across the country it is still considered very generous. More information on the use of PILOT 2 funds are provided in subsequent portions of this report. 2. How much would it cost to contract privately for the services listed in the PILOT? A detailed list of the exact expenses would need to be known before one could calculate their respective costs. Once a complete list was compiled one could compare the public cost versus providing the same on a privatized basis which would likely require some form of bidding process. The PILOT language is so general that it makes it very difficult to discern exactly what is being covered. The City of Iowa City fire service and parking agreements, on the other hand, are directly related to the cost of the service being provided. 3. PILOT agreements are different than property taxes, so why /how should the fact that property is in a TIF district affect the terms of a PILOT? I am not sure that it should. Despite the need to attract development that pays taxes to help pay down the improvements invested into a TIF district there are other considerations that may be of value. I believe in this case Coralville expressed their need to create some increment to pay off their TIF investment, but to me that is a bargaining position not a mandate for the tax exempt organization to follow. In this specific case, the stated purpose of the PILOT 2 (at least at the time of approval) is to reimburse the City for typical municipal services which would have been provided in a PILOT arrangement whether in a TIF district or not. The costs should be covered by the municipal portion of the tax rate alone. Typically, the municipal portion of the tax rate would exceed the typical services that a PILOT would cover for a tax exempt property. However, it should be noted that this PILOT 2 uses the combined tax levy rate which would provide revenue beyond what would typically be charged or needed to cover typical City expenses. According to the City of Coralville's submittals to the State of Iowa and Moody's documents, PILOT 2 payments are used to fund the debt service on the Series 2011C bond issue. The funds borrowed through this bond issue are not for operational service delivery costs, even though PILOT 33 r �1,;. ®, CITY OF 10WA CITY Mink 4q 0" MEMORANDUM agreements are typically understood to reimburse for services delivered. Rather, through a series of bond anticipation note refundings, these dollars were used for capital improvements to the district meant to attract further economic development. Moody's reported on the Series 2011C issue, "the city expects to repay debt service out of a payment in lieu of taxes from the University of Iowa (revenue debt rated Aa1 /stable outlook) Hospital and from tax increment revenues." (attachment 1) These were obligations that already existed for the City of Coralville, thus the compensation from the University has freed up other TIF revenue that would have otherwise been obligated for these bond payments. This additional funding could be used for expenses that include public infrastructure, green space, land acquisition, construction, acquisition and marketing of leasable commercial space and /or economic development incentives to private businesses. The combined principal and interest payments budgeted in FY2015 for the 2011C issue are $1,011,013. According to the Gazette article, the PILOT 2 payment from the University to Coralville this year is $1,013,011. These numbers are consistent with the Moody's report that suggests the PILOT will be used to pay off Coralville bonds. The University appears to have paid fair market value for the land which typically means the price takes into consideration at least some of the public improvements that served that property. Further, the ambulatory care facility is arguably the most significant catalyst in the Iowa River Landing which should help Coralville attract further investment and development into the project. As noted, PILOT agreements are voluntary and I know of no other entity in Johnson County that could rival the University's ability to negotiate a fair and prudent agreement for itself. We have a number of University facilities inside our TIF districts (attachment J). We view them as extremely valuable assets in terms of what they add to the district with added foot traffic, such as the possible tourist attraction capacity with the new music building and possible art museum. We value the catalyst capacity of many of the University facilities inside a TIF district or not. Additional tax exempt property is also planned for Iowa River Landing, including the multimodal transportation facility. In prior years there have also been discussions about an arena project in Iowa River Landing that may involve significant University of Iowa participation. It is unknown to Iowa City staff if this project is still being contemplated and if it is, whether a tax - exempt status will be sought for the facility. 4. Like Coralville, Iowa City has the goal of increasing our tax base in our TIF districts. Does the University of Iowa have property in any Iowa City TIF districts? If so, what properties? Do we have PILOT agreements for those properties? Yes, the University of Iowa does have property /facilities in Iowa City TIF districts. At least 36 parcels in Iowa City TIF districts are University- owned. Please see the attached list of University properties within Iowa City TIF districts provided by the City Assessor. (attachment J) 01 r CITY OF IOWA CITY ' Mink all MEMORANDUM No, we do not have a PILOT agreement for these properties. 5. How was the $28 million exterior building value calculated for the UIHC clinic in Coralville? Is there a way to determine if it is reasonable? See answer to #6. 6. Where did the 28,643 multiplier come from in the PILOT? Did they just work backwards from the goal of $1,000,000 and the current tax rate to get the multiplier? During the April 2010 Board of Regents meeting, there was discussion about how the PILOT was calculated. Staff reported that the PILOT was based on a $28 million figure received from the contractor involved with the design studies and that the number was based on the shell and exterior components (not a comparable commercial building as indicated in the written staff report). Staff indicated that the actual cost of the building was approximately $53 million and that there was an additional $20 million in equipment ($73 million total project cost). During the meeting staff is asked about the $28 million figure and states "the 28 is a number that was developed for use in determining the amount of the PILOT agreement ". This statement and the fact that the total building cost was $53 million raises a question whether the $28 million figure was backed into by the two parties to create a million dollar PILOT. Iowa City staff subsequently contacted the County Assessor's office, which verified that they did not assist in valuing the property or determining payments for the PILOT. It appears the Coralville 2011C bond issue is being repaid with PILOT 2 funds (attachments I & K). This bond issue appears to be a refinancing of previous bond anticipation notes dating back several years. The repayment schedule and the amount of the PILOT appear to be nearly identical. It is unknown if the payment of this debt obligation played any role in determining the PILOT 2 amount or if this is simply a coincidence. 7. It would seem that the PILOT, executed in June 2010, gave Coralville money to help pay the incentives for Von Maur, whose deal was completed in 2011. On one hand, Coralville says they are trying to increase tax revenues, and on the other they gave incentives, including capping Von Maur's taxes. This seems contradictory. Is there an explanation for this? In response to this question, the City of Coralville replied, "There is no connection between the University of Iowa Hospital agreement and Von Maur." I also asked Coralville if there were any restrictions on the use of the PILOT proceeds. There did not appear to be any restrictions articulated in the agreement. The response was, "1 do not believe there are any restrictions on the use of the funds." (attachment L) However, as mentioned above, 35 r �1,;. ®, CITY OF 10WA CITY Mink 4q 0" MEMORANDUM Coralville's State of Iowa budget forms note that the PILOT funds are designated, though not apparently legally required, to be used for the debt service payments associated with bond issue 2011C. Typically, incentives provided to a business within a tax increment financing (TIF) district are recovered from the tax increment revenues generated by that business. With the property tax limitation given to Von Maur, it seems highly unlikely that Von Maur will generate tax increment revenues sufficient enough to repay the incentives provided to them by the City of Coralville. Given this likelihood, the funding sources for the Von Maur incentives have most likely been derived from another source. Because bond issue 2011C was used to refund previous obligations, the University PILOT agreement presumably freed up the monies for other uses, including further economic incentives to private businesses in Iowa River Landing. See attachment M for a list of IRL property tax payers and expected revenue. Note that the PILOT 2 agreement makes the tax exempt University clinic the largest taxpayer in the district. Currently, we do not know how the past incentives (construction of the facility, Sycamore Mall lease termination, etc.) to Von Maur were financed, nor do we know how ongoing incentives to Von Maur are being financed. Regardless of whether the PILOT funds are directly financing the Von Maur incentives or not, the PILOT clearly gives the City and the Iowa River Landing district additional wherewithal to allocate resources to where it has needs. Despite, Coralville's statement that there is no connection between the UIHC clinic and Von Maur, it appears that both the clinic operation and the adjacent parking facility that the University is paying the full debt service on played a role in the recruitment of Von Maur from Iowa City to the Iowa River Landing site. The development agreement' between OliverMcMillan /Coralville and Von Maur contains recitals in the declarations section that clearly references the clinic and adjacent parking facility. Secondly, OliverMcMillan /Coralville agreed to a covenant in the agreement that stated that no later than the third anniversary of the Von Maur opening date that the clinic would be open and operating. Also in the agreement is a restriction from clinic employees parking in the Von Maur parking lot, as well as stipulations on how Coralville manages the on and off - street parking in Iowa River Landing including the facility that serves the clinic and that is being paid for by revenue bonds that the UIHC is paying the full debt service on through payments to Coralville. Interestingly, the agreement states "the parties understand and agree that at no time shall any hospital, clinic or medical office be considered an Acceptable Tenant ", which gives reference to an Acceptable Tenant list in the 'initial retail area' that Von Maur has the right to approve additions to in the future. (Attachment N — Excerpts from the OliverMcMillan /Coralville and Von Maur agreement) ' The development agreement that was reviewed by Iowa City was an unsigned copy. Verification of this document should be made before the reader can rely on the information. We will continue our efforts to verify these items. rI7 r �I,;. ®, CITY OF 10WA CITY Mink 4q ft" MEMORANDUM The Iowa City City Council posed the question of whether giving Von Maur tax incentives and capping their real estate taxes, while having a tax exempt UIHC clinic pay a $1,000,000 PILOT is a contradictory strategy. I would say in part it is contradictory. The PILOT would be consistent with Coralville's strategy to raise revenues and pay down costs associated in the Iowa River Landing. The incentives and reduced property taxes to Von Maur seem inconsistent with the stated objective of trying to increase tax revenues. 8. The article stated the prominent location /value of the property was the rational for the PILOT. What are the differences in the value of the UIHC clinic location and Von Maur's location which are right next to each other? UIHC paid approximately $2,000,000 for their property, whereas Von Maur paid $10. Despite the price difference, it is my opinion that the University clinic is a much more valuable catalyst or anchor for the Iowa River Landing development. The County Assessor answered this question as follows, "The price per sq. ft. of land value for Von Maur is $10.50 which includes a 20% downward adjustment for size and inferior location. The site of the clinic is superior to Von Maur's and would be $16 + if it was taxable. The lot size of the clinic lot is 1.31 acres = 57,063 sq." Additionally, it appears the University also made a contribution of $2,610,257 toward the land for the adjacent parking facility. Their contribution, which is rolled into the debt service the University is paying for the parking deck, was made despite the fact that Coralville retains full ownership rights ofthe land. 9. If you take the IRL PILOT on a per square foot basis and applied it to the University's properties within Iowa City, how much revenue would it generate? The first annual payment in the UIHC /Coralville PILOT was $1,026,774. This amounts to approximately $6.85 per square foot for the 150,000 square foot facility. The 2012 University of Iowa square footage in Iowa City was 16,793,584. At $6.85 per square foot, this would equal approximately $115 million. 10. Please compare the parking arrangement UIHC clinic has with Coralville vs. any similar arrangements between the University and Iowa City. Below is a summary comparison of the two parking systems. A complete report and accompanying documentation prepared by our Transportation Services Director is available under attachments O & P. The information provided below reflects Iowa City's staff's best efforts to interpret available 37 r I. ®, CITY OF 10WA CITY ' '� 0" MEMORANDUM information. Additional details on the agreement were sought but not obtained by the time this report was released. According to the Board of Regents staff report, "The Iowa River Landing project including the parking deck which was funded through University Hospitals Building Usage Funds acquired from depreciation allowances of third parties underwriting the cost of patient care plus hospital net earnings from paying patients, and hospital revenue bond proceeds." The patients and visitors at the main campus pay parking fees, while there is free parking at the Iowa River Landing clinic. Revenues from patient care at the main campus presumably help pay for the free parking at Iowa River Landing. a. Iowa City /University of Iowa Parking Relationship Overview i. The University of Iowa Parking and Transportation Department currently receives 615 permits divided amongst several Iowa City parking facilities. The current annual payment received by the City is $556,320. ii. University Parking and Transportation pays annually for permits at the same rate as the general public. iii. Permits are valid at all dates and times. iv. There are no contracts in place and permits are not guaranteed. Permits not reissued by the University are still paid. V. The University Parking and Transportation is not required to pay for permits that they return to the City of Iowa City. vi. With a 5% increase in permit fees every 5 years, total permit payments through FY2031 would be $11.5 million vii. With a 5% increase in permit fees every 5 years, total permit payments through FY2050 would be $25.4 million. b. Coralville /UIHC Parking Relationship Overview i. The UIHC has access to 554 of 770 spaces in the Iowa River Landing West parking facility ii. Exclusive access is permitted 6:OOam — 6:OOpm, Monday — Friday and 6:OOam — 12:OOpm on Saturday (business hours of the clinic) iii. The UIHC is paying the City of Coralville the full bond payment for the $22 million parking revenue bond issued in 2012 to finance this facility. At the time of this report Iowa City staff is unclear exactly what was included in the $22 million revenue bond (land acquisition, design, additional developer fee to Oliver McMillan, site work, construction, etc.) This bond 0.9 r CITY OF IOWA CITY ' Mink all MEMORANDUM issue was a private placement, thus was not rated by a ratings agency and documents are not posted publically. iv. The parking revenue bond expires in FY2031 with payments totaling over $30 million V. The City of Coralville maintains ownership of the facility after the bond payments are completed vi. The UIHC is paying operational costs for the top two levels of the Iowa River Landing West Parking Facility as long as they are in this location vii. FY2015 operating costs for UIHC portion is budgeted at $171,456 viii. Total estimated combined bond and operating payments from UIHC to City of Coralville assuming 2% annual increase in operating costs through FY2050 would be $39.3 million ix. If payments exceed the amount needed to cover the costs outlined in the agreement, the excess is returned to the UIHC The difference in approaches to parking relationships between the two communities is very clear. The University has never participated in the construction financing for decks in Iowa City that partially serve their employees, students and visitors. Iowa City's model is purely demand based with no long -term commitment from either party. The University pays the same cost as the public and only pays for passes that they desire and can return unused passes at any time. The Iowa City passes are good at all times and not limited to operating hours of the University as is the case in the Iowa River Landing agreement. In the case of the Iowa River Landing agreement, the UIHC is paying the full principal and interest costs associated with the $22 million parking revenue bond that paid for the facility. University staff verified this by indicating "UIHC pays the full debt service on the parking ramp." The University has rights to a portion of the spaces during operating hours of the facility. Further the UIHC pays a proportional share of operating and maintenance costs. Unlike, the Iowa City agreement the Coralville agreement is not demand based. The payments assume full use of the facility from day one and thus provide a steady, predictable stream of revenue to the City. In reality, parking demand at the Iowa River Landing facility will grow over time as the clinic expands its reach and builds out in the unfinished space of the building. In Iowa City, the University only is required to pay for permits they actually need and use from a month to month timeframe. These two approaches could not be more different, and the risk and stability varies considerably between the models. Further, the economic development implications for each community are quite different. 11. In addition to the purchase price of the land, the PILOT agreement, and the parking agreement, were there other payments made by the University for this project? M r CITY OF IOWA CITY Mink all MEMORANDUM Yes, there was a common area maintenance fee of $150,000 per year with inflationary factors and a developer fee payment made from the University to Oliver McMillan, the master developer for IRL. The following information was provided by University staff, "UIHC did pay professional services fees and related out -of- pocket expenses to Oliver McMillan. OM was the overall planning firm retained by the City of Coralville to design Iowa River Landing. UIHC also retained OM (as a result of its earlier selection by Coralville) to assist with the integration of the building design, parking and site development. OM assisted with building programming for various users that would be occupying the building and went through the formal selection process to retain the architect, engineers and interior designers for UIHC's buildings. OM reviewed and approved all site plans, building specifications, etc., and was integral in the selection of JE Dunn as UIHC's Construction Manager for the project. OM played a crucial role in working with bond counsel for various financing aspects of the project. UIHC paid OM $1,430,482 in fees for these services during the lengthy period of project development. OM's costs were paid by UIHC from the some source of funds used for the other IRL clinic costs." As previously mentioned, the University is paying the full debt service on the $22 million parking revenue bond for the parking facility. It is unknown if bond proceeds were used to pay OliverMcMillan a developer fee for this facility. 12. Does the Board of Regents have a written policy on PILOTS? It seems that there should be consistent agreements between the Regent's institutions and the communities in which they have property. According to the Board of Regents staff, "...the Board of Regents does not have a specific written policy addressing PILOT agreements." There are only two PILOT agreements in the State of Iowa involving Regent institutions. Both agreements are between the Board of Regents on behalf of the University of Iowa and the City of Coralville. 13. We have and want to continue a good working relationship with the University. Are there ways in which this will impact that? I believe that as long as we maintain a professional and respectful approach in our dealings with the University by sticking to the facts in this review, then our relationship should not be impacted. I know that the University, like the City needs to conduct their business in an open and transparent fashion. While at times this topic may cause either party to disagree with the other, it does not mean it has to impact the relationship. I fully recognize the value and importance that our S r CITY OF IOWA CITY ' Mink all MEMORANDUM University brings globally, nationally, and to our state, region, and more specifically to our city. We will continue to work towards the betterment of both organizations and where specific projects are undertaken in Iowa City the University can expect our full cooperation. The current review of the PILOT agreements in Coralville has brought to focus a very different approach to the University /City relationship in our neighboring community. So different in fact that this review becomes necessary to determine if Iowa City needs to consider alternatives to Iowa City's traditional relationship with the University, at least as it relates to the subjects of tax exempt status, service agreements, and PILOT agreements. While I have publicly been quoted as saying that I believe our service agreement for fire service is fair, I must admit that in contrast to what the two PILOT agreements provide, we are not doing nearly as well. The Council will need to review this issue in greater detail to determine if there is a need for a new direction. We will want to achieve what the City Council determines to be a fair and reasonable relationship compared to the University and all of their municipal partners. 14. Is there other information which we should be aware of? I have two more issues to consider. The first issue I would like to raise is the issue of clinics paying property taxes. A University of Iowa official is quoted in the Gazette article as saying, "...the hospital has a history of paying property taxes for its clinics." As noted in the staff review of the Board of Regents process: It was noted in recent media reports that the UIHC's determination to enter a PILOT agreement for the new facility, despite not having a PILOT for the clinics on the main campus or for the sports medicine clinic, was because the main campus and sports medicine clinic have integrated research and educational components. In the April 2010 Board of Regents meeting materials, the report to the Board on the Iowa River Landing facility states "the educational and research missions will also be enhanced through development of the necessary space to enable students, residents and fellows to gain necessary clinical experience in accord with accrediting body standards, and by providing the type of facilities required to conduct innovative research directed toward more clinically efficacious diagnosis and treatment of disease ". The materials go on to read that the project supports the UIHC strategic plan by providing facilities that are required to assist UIHC's efforts "to advance world class discovery through excellence and innovation in biomedical and health services research" and "to develop world class health professionals and scientists through excellent, innovative and humanistic educational curricula for learners at every stage ". These statements clearly indicate 41 r , CITY OF 10WA CITY ' I '� 0" MEMORANDUM that education and research are integral parts of the Iowa River Landing facility, much like they are for the main campus and sports medicine operations. The City Assessor provided the following list of properties that pay taxes where clinic type activities are conducted by either UIHC or Mercy Hospital. UI Quick Care rents a part of three taxable properties in Iowa City: a. 1843 Lower Muscatine Rd (Sycamore Mall parcel- 1014457007) b. 767 Mormon Trek Blvd (1017265001) c. 201 S Clinton St Suite 195 (Old Capitol Town Center - 1010392002) UIHC rents the entire building at 1130 S Scott Blvd (0918329008). This is a taxable property valued at $1,048,290 which paid $38,780 in the most recent tax year. Later this month, the Board of Regents will be asked to approve the purchase of the Pediatric Associates building near downtown Iowa City. If this purchase goes through it is presumed the University will continue to pay property taxes, as the overall clinic use will not change. The current practice generates about $35,000 in taxes, which is split between the multiple taxing entities in Iowa City. Mercy Hospital is also a tax exempt organization. This information was similarly provided by the City Assessor. a. The portion of Mercy Plaza at 540 E Jefferson (1010431001) that is rented to Doctors and other retail users is taxable. b. 601 Bloomington St, 1067 Ryan Ct and 269 N 1s` Ave are medical offices or clinics that are taxable. The total taxable value of the four properties used for medical purposes by Mercy Hospital is approximately $12,823,510, which translates to approximately $442,259 in taxes paid. The second issue is the University of Iowa's second purchase of land in Iowa River Landing. The second purchase consists of three parcels of land at 120 E. Ninth St., 808 E. Second St. and 116 E. Ninth St. The University was expected to purchase these properties for $1.8 million plus tenant relocation costs up to $475,000 as reported KCRG -TV9 news. Further the report stated the property consisted of 1.74 acres and would be used for a second building similar to the Iowa River Landing clinic. The property would be connected via an existing underground tunnel to the clinic located north of the purchased property. I previously met with University officials who left me with the understanding that the second Iowa River Landing site may not be developed for a number of years. Further, my recollection was that 42 r �I. ®, CITY OF 10WA CITY ' '� 0" MEMORANDUM there had been no decision as to whether a PILOT agreement would be entered into regarding this site. The following information was provided by University staff: "The development of a second major clinic on the Iowa River Landing site has been contemplated by UI Healthcare (UIHQ for some time — going back to the time of development of the current Iowa River Landing capital project. It would also involve clinic space and ample adjacent parking. A second clinic on this site has not been before the Regents for 'Permission to Proceed with Project Planning ", and it is not yet clear when that will occur. When we spoke, 1 indicated that the next Iowa River Landing clinic project was not expected to start soon given the other major capital projects being undertaken by UI Healthcare through 2016. However, the timing of subsequent planning and construction actions are within the discretion of UI Healthcare leadership and the Board of Regents. On a related topic with the second clinic, we indicated to you earlier that property tax issues or payments -in- lieu -of options are a part of project planning and thus have not been considered yet internally, with Coralville, or with the Board of Regents." Now that we know that there are only two Board of Regents' PILOT agreements in place across the State of Iowa, it may be the appropriate time for the Board of Regents to develop a policy for PILOT agreements. As communities continue to face economic pressures such as rising pension costs, increasing demands for social services, and property tax reform, the logical progression will be to pursue both cost cutting and alternative sources of revenue. With the knowledge that the Board of Regents has already entered into two PILOT agreements and that a third might be considered (all in the same city), it is likely that the three hometowns of Iowa's universities may want to pursue available revenue options for similar service accommodations and circumstances. Iowa City needs to consider whether or not to reach out to the Board of Regents to encourage this conversation. 43 r �I. ®, CITY OF IOWA CITY ' '�� MEMORANDUM Summary The subject of this report is focused on PILOT and related agreements. Even though the Coralville Iowa River Landing PILOT agreement has been the subject of recent news articles, it was approved in 2010 and the details are now becoming known to the general public. According to Board of Regents' staff there are only two PILOT agreements in the State of Iowa. Both agreements are between the University of Iowa and the City of Coralville. For lack of better terminology I refer to these agreements as PILOT 1 and PILOT 2. Even though the City of Iowa City does not have a PILOT agreement, the City has a Fire Services Agreement. The following is a brief description of the Fire Services Agreement and each PILOT agreement. 1. Fire Services Agreement (FSA) — Iowa City The FSA was entered into in 1957 with subsequent minor amendments. The agreement provides funding to pay for fire services at University properties based on a square footage formula which equates to their proportional share of the University building square footage compared to the total square footage of buildings in Iowa City. The agreement generated $1,760,000 in revenue for Iowa City in FY13. The Board of Regents has similar agreements with Ames and Cedar Falls. 2. PILOTI— Coralville The first agreement was entered into in 1996 and provides that tax exempt entities in the Oakdale Research Park will make payments to the City of Coralville equivalent to the tax receipts the city would have received had the improvements not been tax exempt. This would appear to equate to a tax levy rate of $13.528 for FY13. This PILOT generated approximately $154,869 in FY13. Of particular note, it is my interpretation that PILOT 1 is based solely on the City's tax rate, despite the fact that it is located in a TIF district. (If I am misreading this agreement I expect the City Coralville will advise accordingly) This approach leads one to believe the PILOT was intended to compensate for City provided services only and not to enhance the broader goals of the urban renewal area. This approach differs from PILOT 2, which is described below. 3. PILOT 2— Coralville The second agreement was entered into in 2010 and provides that University of Iowa will pay to the City of Coralville an annual PILOT in an amount exceeding $1,000,000. This agreement is for development on the land known as the "SMF land ", located north of Ninth St. which now houses the ambulatory clinic in Iowa River Landing. The amount was computed and is adjusted annually using the aggregate tax levy rate which in 2013 was calculated at $30.532. This PILOT generated $1,013,011 in FY13. The tax rate used to calculate the voluntary payment includes County and School District levies. The funds can presumably be used for any purpose. Coralville officials have indicated it is used to support the larger objectives of the Iowa River Landing project. EV r �I,;. ®, CITY OF 10WA CITY Mink 4q 0" MEMORANDUM In fact, through a review of state forms and publicly available reports from Moody's, we have learned that PILOT funds are apparently being used to repay a 2011C bond issued by Coralville. This bond appears to refund a series of bond anticipation notes dating back to at least 2005. The net effect is that the University's PILOT is paying bond obligations for Iowa River Landing and thus freeing up TIF revenue to support objectives such as public infrastructure, retail space acquisition and commercial incentives to private businesses. 4. PILOT 3— Coralville The University purchased additional land in Iowa River Landing in 2012 for a second clinic facility similar to the building identified in PILOT 2. According to University officials, "property tax issues or payments - in- lieu -of options are a part of project planning and thus have not been considered yet internally, with Coralville, or with the Board of Regents. When discussing this question with a Coralville official he made it quite clear that Coralville was expecting another PILOT for this site. When one considers the likelihood of PILOT 3, it should be pointed out the drastic difference in the financial relationship that the University has with the two cities, Coralville and Iowa City. If PILOT 3 is a similar amount to PILOT 2, then payments to Coralville from the University will surpass those made to Iowa City. This is despite Iowa City's significantly larger University building footprint of 16,840,439 square feet in 2013 versus the Coralville facilities in PILOT 1 (3 buildings /square feet unknown), PILOT 2 of 150,000 square feet, and a possible PILOT 3 covering an estimated 150,000 square feet for a rough estimated total of 450,000 square feet. In an effort to develop a metric to get the discussion closer to an apples to apples comparison, below is a tax levy comparison to show the drastic difference in the methods used in the different approaches. Having looked at any number of metric comparisons, they all show a sizable financial disparity. Tax Levy Rate Comparison Iowa City Fire Service Coralville PILOT 1 Coralville PILOT 2 Coralville PILOT 3 Agreement Square Footage of 16,840,439 Unknown 150,000 TBD Property Covered FY 2013 Payment $1,760,000 $154,869 $1,013,011 TBD from the University Equivalent Tax Levy $0.6067 $13.528 $30.53195 TBD Rate* Payment as % of the Actual City Tax 3.5% 100% 225.69% TBD Levy Rate M r �I,;. ®, CITY OF 10WA CITY Mink 4q ft" MEMORANDUM The tax levy rate is the rate that was used in each case times the taxable value to establish the amount of payment for each of the different properties. As relates to this conversation, the Board of Regents sent an overview of 2013 University of Iowa payments to Johnson County municipalities, which had been prepared by University staff. The list omitted several items so Iowa City staff added a number of payments that we thought of that were not on that list. It is possible, if not likely, that others exist that are still not identified. Certain comments have been made publically which relate to items on this list attempting to offset the impact of the above comparison. Many of the items (e.g. payments for water and sewer) have little or no relevance to the PILOT discussion and simply confuse the conversation. Others have some relevance and contribute to the overall picture on how the University interacts with cities. However, when looked at as a whole, I do not see how such contributions offset or justify the vastly different approaches to PILOTS and related agreements that are discussed in this report. While many service agreements and partnerships exist between the University and local jurisdictions, these payments are typically related to the cost of service delivery and are of a scale similar to others across the state and the nation. The PILOT agreements on the other hand, appear to have no basis in the cost of services being delivered and are sizable enough that the other agreements pale in comparison. In my opinion, trying to throw in the myriad of other municipal payments simply muddles the discussion without having significant relevance to this issue. The staff review of the Board of Regents approval process was helpful to understand the circumstances surrounding the building and the ultimate decision to enter the PILOT and other related agreements. In reviewing the meeting materials, it is difficult to determine an accurate timeline of the project origins. It is clear that a need for an off -site facility was identified through an internal planning effort, but the lack of a traditional site selection process and the appearance of conflicting dates on Board of Regent materials complicated our review. It does appear for certain that the UIHC and the City of Coralville were having discussions on the Iowa River Landing parcel well before the site identification process commenced. It is also clear that clinics that were operating on the main hospital campus were relocated to the new clinic in Iowa River Landing. There was no discussion regarding the need or reasoning behind a PILOT agreement, except that it was to compensate for municipal services, construction and maintenance operations provided by the City of Coralville. Since the time of approval, it has become clear the PILOT pays for more than City services and supports the larger economic development activities within the Iowa River Landing development. Not mentioned in the Board of Regents materials was a more recently offered explanation for the PILOT including a practice of paying taxes or PILOTS for medical clinic sites off of the main hospital campus, for fair pay reasons with private providers, or because of the lack of an educational research component to the En r , CITY OF 10WA CITY ' I '� 0" MEMORANDUM facility. Research and education were actually stressed to the Board of Regents as a benefit of the Iowa River Landing clinic. There was no discussion about the difference in computation methodologies for this PILOT and the PILOT in the Oakdale Research Park, which is also located in a TIF district. These above -noted issues, as well as the others mentioned in this section of the report, make it difficult for Iowa City staff to fully understand the process and thought behind the establishment of the facility and the crafting of the various agreements. Finally, even though it is not a PILOT agreement, the parking arrangement between the University and the respective jurisdictions are worthy of note. Iowa City provides the University with 615 parking permits and is reimbursed $556,320 on an annual basis. No contracts are in place, permits are not guaranteed, and the University can return any unused permits at any time In Coralville the University has exclusive use of 554 of the 770 spaces in the Iowa River Landing West parking deck during defined business hours. The University is paying the full principal and interest cost of the $22 million parking revenue bond that supported the facility. Even though the University is paying the full cost of the revenue bond which included land acquisition expenses, ownership of the deck will reside with the City of Coralville. Additionally, the UIHC pays an annual proportional share of operating and maintenance costs. It should be noted that according to the presentation received at their meeting held on February 3, 2010 the Board of Regents was told that "the model for cost sharing will allocate about 75% of the cost of the parking structure and operations to the UIHC. While this appears fairly accurate for the operating and maintenance costs it appears (from the information that Iowa City has been able to attain) to vary from the capital side as the University is paying for the retirement of the associated $22 million parking revenue bonds. The difference in approaches to parking relationships between the two communities is very clear. Unlike the Iowa City agreement the Coralville agreement is not demand based. In Iowa River Landing, the payments assume full use of the facility from day one and thus provide a steady, predictable stream of revenue to Coralville. In reality, parking demand at the facility will grow over time as the clinic expands its reach and builds out in the unfinished space of the building. The University has never participated in the construction financing for decks in Iowa City that partially serve their employees, students and visitors. By paying the entire revenue bond associated with the facility, as well as the full operations and maintenance on two levels that it has limited use of, it appears clear that the University is subsidizing parking for the larger commercial development in the Iowa River Landing. These two relationships are very different and as a result each City carries a significantly different level of financial risk and reward. A question I did not get a chance to pursue is why would the University organization enter into such an agreement when they as an organization have the most significant experience of any entity in Johnson County in building and operating parking facilities? I would imagine their financial strength and breadth of parking operations would afford them lower borrowing costs and that economies of scale in operations 47 r , CITY OF 10WA CITY ' I '� 0" MEMORANDUM could lower operational and maintenance costs. At the end of the day, I presume that the City or Coralville needed to maintain control for purposes of ensuring service to the larger Iowa River Landing development. This presumption is partially derived from language in the OliverMcMillan /Coralville's agreement with Von Maur, which has several provisions on how the public parking facilities, street parking and parking within Von Maur's lot can and cannot be regulated. In my opinion, the parking agreement certainly matches the significant generosity of PILOT 2 and is a far departure from the University's relationship with Iowa City. When you combine the parking agreement with the PILOT, the total benefit to the City of Coralville is difficult to express in words. First, the University is paying the full cost of a parking revenue bonds used to construct the facility, which they have limited use of and they are paying proportional operating and maintenance costs. Secondly, the PILOT provides a steady stream of revenue in perpetuity that not only pays for municipal services but also supports the Coralville's economic development objectives. The stream of revenue affords the City incredible flexibility to pursue public improvements and commercial incentives, such as those provided to Von Maur shortly after the clinic agreement was executed. Since the PILOT has no expiration, the stream of revenue will continue to afford this flexibility for decades to come. These two University / Coralville agreements, have a significant impact on the regional economic development climate. Iowa City routinely speaks with businesses that pit sites in our community with sites available in Iowa River Landing. In order to compete for these projects, Iowa City must be willing to incentivize to substantial degrees. Prior to offering my recommendations, I want to emphasize two very important points. First, the City of Iowa City currently benefits from a strong relationship with the University of Iowa and is actively collaborating on several significant projects. Through this review and the discussions that follow, we must act in a respectful manner and ensure that we can continue to collaborate on important public improvements and policy. Our relationship with the University carries more importance than any one issue. However, it is our duty as public servants to raise these types of questions and have open and frank discussions about matters involving public policy and resources. It is my expectation that both organizations can carry on these discussions in a professional manner while continuing to work effectively on very important projects in the community. Secondly, it is evident to me that this issue is not a dispute between Iowa City and Coralville. I believe that the City of Coralville was acting in the best interest of their community and Coralville has no obligations to consider the impacts that these agreements may have on other communities. As previously mentioned, I believe this is an issue created due to a lack of a Board of Regents policy or consistent university practice concerning contractual relationships with municipalities. The inconsistency in approaches in how the University and Board of Regents handle PILOT, fire service, parking and related agreements with cities not only creates glaringly inequitable distributions of state controlled financial resources, but it also has considerable unintended economic development consequences. EH r �I. ®, CITY OF IOWA CITY ' '�� MEMORANDUM Recommendations Probably the most difficult aspect of preparing this report was the formulation of a recommendation to City Council. Two possible approaches that I have considered create a "Horns of the Dilemma" type of conflict for me. On one side, as you know, I have been quoted as saying, "1 found our fire service agreement to be fair when 1 started with the City and that has not changed upon learning of the U of 1 /Coralville PILOT." Further, "1 wouldn't try to make the argument that our agreement is unfair because another seems most generous ". said that asking for more in light of what Coralville receives for one property "doesn't seem like the ethical thing to do." At times I am prone to understatement. At the time of the above quote I had not completed as much review as I have now undertaken. At the time I found the PILOT 2 terms to be at the extreme high end of the outliers in the universe of PILOT agreements that I had been familiar with. Since then I have found no significant comparable for such a limited amount of square footage. I have not undertaken a comprehensive study and therefore my knowledge is from discussions I have had with other town and gown city officials over the years. These discussions along with the study by the Lincoln Institute demonstrate the PILOT 2 agreement is an anomaly related to other PILOT agreements. Piecing together the story of how this agreement came about, I am of the understanding that hospital administration officials were anxious to acquire this specific property and likely acquiesced to the terms of the agreement put forth by Coralville officials. Neither party seemed to understand the context of this agreement versus all other town and gown relationships across the country let alone the three town and gown relationships that exist in Iowa. Further review suggests that the agreement negotiations had progressed to such a degree that some felt it had created an inertia that could not be stopped. Nowhere in the staff reports to the Board of Regents does it say that this PILOT 2 was based on a policy or practice related to clinics off the main campus or a need to play fair related to other medical facilities both private and public tax exempt and nonprofit. Similarly, there was no mention of how this facility differed from the facility (main campus) where the clinics previously existed. As a matter of fact, the Board of Regent materials stress the enhancements to research and education that the new facility would eventually facilitate. The argument that the PILOT 2 agreement was rooted in a desire to play fair with other private service providers has been made more recently in media reports to justify the arrangement. City staff has questioned this argument because: Wo r �I,;. ®, CITY OF 10WA CITY Mink 4q ft" MEMORANDUM 1. The Iowa River Landing facility houses the same clinics that previously existed in Iowa City. Iowa City was never approached by the University expressing their desire to pay more in the interest of fairness. 2. The obvious counter to this justification is that PILOT 1 provided funds for tax exempt properties that are not medical clinics and this location is also in a TIF district but uses only the city tax rate. 3. When staff suggested that the services provided in Iowa River Landing previously existed in Iowa City and Iowa City is also home to UIHC clinics, University staff countered saying they were different because the Iowa City facilities were associated with the University mission of research and education and that the IRL clinic was not research /education based. However, in reviewing the University comments to the Board of Regents, they claimed that the Iowa River Landing clinic would support their mission of research and educational opportunities which seems to refute the recent argument that the Iowa River Landing clinic is unique insofar as potential PILOTS are concerned. So on this side of the Horns of the Dilemma my recommendation would be to suggest that the Council address a letter and a copy of this report to the Board of Regents stating their position that the PILOT 2 and the related parking agreement was overly generous and created a significant public payment that was not warranted and that has resulted in considerable unintended consequences. Further, this side of the dilemma would argue that the same PILOT arrangement should not be repeated in a third PILOT agreement. This side of the dilemma would also ask the Board of Regents to develop a clear policy creating guidelines for the future use of PILOT agreements so that municipalities know what to expect and the use of state dollars does not create inequities between neighboring jurisdictions. Presumably such guidelines would be significantly more conservative than the terms of PILOT 2. This approach would require someone from the University or Board of Regents to recognize that this agreement exceeded any rational approach to PILOT agreements. On the other side of the Horns of the Dilemma the City would take our lead from PILOT 2 and become as aggressive as Coralville was in dealing with the University. This side of the argument would be that the University has created an unbalanced financial relationship between the two jurisdictions and the only way to balance the table is for the University to substantially increase their payments to Iowa City. In an ever more competitive economic development environment the University has unknowingly created a significant advantage to Coralville with PILOT 2 literally subsidizing and underwriting the Iowa River Landing development. The University has become a major financial partner in the development aspects of Iowa River Landing. To be clear, their partnership extends well beyond that of just property owner and catalyst. Their ongoing payments and subsidization of parking are clearly being used to further the economic development goals of the TIF district. This side of the dilemma would recommend that the City Council send a letter expressing the need for Iowa City to be paid more based on the new model established by PILOT 2. We would ask the Board of Regents 401 r CITY OF IOWA CITY Mink all MEMORANDUM to codify the PILOT 2 provisions into policy so that not only Iowa City, but Ames and Cedar Falls would be eligible for payments based on the newly established methodology. Finally, irrespective of what path the City Council chooses to follow, I think there is one extremely important consideration that the Board of Regents needs to consider. The PILOT payment the University is making in perpetuity not only covers expenses related to City services, but it also supports the slum and blight urban renewal area that runs without expiration. The University is paying the PILOT as if it were contributing to a TIF district. However, the PILOT funds are not regulated in the same manner that the TIF funds are regulated. For example, there are no reporting requirements or provisions that prohibit the use of funds for the relocation of a business. The Iowa Legislature and Governor recently reformed the TIF law to specifically preclude communities from using funds for the relocation of business. This action was to a large degree fueled by Coralville's use of TIF in the Von Maur project. Ironically, the State of Iowa controlled clinic in Iowa River Landing was a key component in the development agreement OliverMcMillan /Coralville executed with Von Maurz. That agreement specifically includes a covenant that requires the clinic to be open and operating no later than the third anniversary of the Von Maur initial opening date. The agreement further talks extensively about parking considerations that include the facility that the University is paying the full debt service on via their parking agreement with Coralville. With a stream of public revenue, in excess of a million dollars per year, I would think the State would want to ensure that its future funds are not being used for purposes prohibited in the TIF laws of the State. Further, I would think the State has an interest to make certain the final use of its funds (i.e. the PILOT payments) are required to be as transparent as municipal TIF funds are required to be. Whatever path the City takes on this issue, we need to make sure to continue an open dialogue with the University leadership. Despite any differences that the City and University may have on this issue, it is imperative that we have productive discussions that seek a fair solution for both public entities. From my standpoint, I will make every effort to maintain an open line of communication and positive working relationship. In conclusion, I acknowledge that we may not have the complete story behind how PILOT 2 evolved. The problem is the negotiation process and results were not the subject of public negotiation and did not receive significant public review at the time of approval. Further, relying on people's four year old memories can alter perceptions of what actually happened. With that in mind, if this report omits important details or has interpreted information incorrectly, I expect that we will need to be open to 2 The development agreement that was reviewed by Iowa City was an unsigned copy. Verification of this document should be made before the reader can rely on the information. We will continue our efforts to verify these items. 51 r �`i� CITY OF IOWA CITY 2 14MEMORANDUM adjusting our views and understanding of the issue. I expect that those who have a more detailed knowledge can and will speak up and set the record straight. 52 INDEX OF ATTACHMENTS • AttachmentA— Gazette article 3/16/14 • Attachment B— Questions from Iowa City City Council 3/25/14 • Attachment C— Policy Focus Report - Lincoln Institute of Land Policy, "Payments in Lieu of Taxes, Balancing Municipal and Nonprofit Interests" • Attachment D — Fire protection agreement between the University of Iowa and Iowa City • Attachment E — Oakdale Research Park PILOT agreement ( "PILOT 1 ") • Attachment F — UIHC Ambulatory Clinic PILOT agreement ( "PILOT 2 ") • Attachment G — Oliver McMillan /University agreement and subsequent amendments • Attachment H — Board of Regents agenda report, April 28 -29, 2010 • Attachment I — Moody`s document for Coralville 2011C bond issue • Attachment J — University of Iowa owned properties in Iowa City TIF districts • Attachment K— Long Term Debt Schedule excerpt from Coralville FY2015 state budget forms • Attachment L — Kelly Hayworth/Tom Markus email exchange (Von Maur) • Attachment M — Iowa River Landing property tax payers • Attachment N — Excerpts from Coralville/Von Maur agreement • Attachment O — Parking agreement report from Iowa City Transportation Services Director and accompanying documentation • Attachment P— Parking agreement financial comparison • Attachment Q— Tom Moore/Tom Markus email exchange (other municipal agreements) • Attachment R— Wendy Ford /Jeff Davidson/Tom Markus email exchange (TIF properties) • Attachment S— David Kieft/Tom Markus email exchange (Parking agreement) • AttachmentT — Gazette article 4/2/14 • Attachment U — Gazette article 3/27/14 University of Iowa pays Coralville $1 M for tax- exempt clinic; city keeps it all I TheGazette Page 3 of I 1 Attachment A keeps clinic; city "In contrast to Von Maur, the university did not get a good deal" Tweet ....— .............. ......_......_....,............ ° This nnrtinn nflhe *t S 0 I CORALVILLE — The University of Iowa pays the city of Coralville more than $1 million a year in place of property taxes for a medical clinic that is tax exempt in a deal that is unusual in Iowa and nationwide. The exterior of UI Health Care clinic at Iowa River Landing in Coralville, Iowa. (Justin Wan/The Gazette -KCRG TV9) The city in turn keeps all that money even though the agreement is based on a tax rate that includes the tax levies of Johnson County and the Iowa City Community School District. The "payment in lieu of taxes," as it is known, is for the Ul Health Care clinic in Coralville's Iowa River Landing district off Interstate 80 and First Avenue. At a little more than $1 million a year for the 150,000- square -foot property, it's an agreement many cities in the United States would love to have, said Daphne Kenyon, an economist who co- authored a leading report on payments in lieu of taxes, or PILOTS. "I have not before heard of a specific case where the actual dollar amount of a PILOT for one individual development was so high," said Kenyon, a fellow at the Lincoln Institute of Land Policy, a Massachusetts -based think tank. The $73 million outpatient clinic in Iowa River Landing opened in fall 2012 and had 27,382 patient visits in its first year. It is home to a dozen medical specialties and other services, freeing up space at the main hospital in Iowa City. Another Coralville land deal in Iowa River Landing — the use of tax breaks in 2011 to attract a Von Maur department store — has received intense scmtinv. http: / /thegazette.com/2014 /03/16 /university -of -iowa- pays- coralville -Im- for -tax- exempt- cli... 3/31/2014 University of Iowa pays Coralville $1M for tax- exempt clinic; city keeps it all I TheGazette Page 4 of 11 But the PILOT agreement mostly has gone unnoticed, although it was approved by the Iowa Board of Regents, which oversees the state's public universities and the University Iowa Hospitals and Clinics, and the Coralville City Council in public meetings in 2010. Coralville received its first payment last year at $1,026,774. This year's amount is $1,013,011. The payment is adjusted annually based on the tax rate. The agreement has no end date. Rep. Tom Sands, a Republican from Wapello and chairman of the Iowa House of Representatives Ways and Means Committee, said he had been unaware of the agreement but questioned Coralville's rationale for keeping the full amount when county and school district taxes are part of the equation, and noted the UI and its hospital are part of the state government. "You've got one entity of government paying another entity of government and, without knowing the full scope of the agreements, you just question whether that's in the best interest of the taxpayers that are all involved," he said. UI and Coralville officials, however, defended the agreement as reasonable. Iowa River Landing is a 180 -acre former blighted area that the city owns and is redeveloping with hotels, stores, office space and residential units. City Administrator Kelly Hayworth said one of the project's goals is to generate more tax revenue for Coralville, and the clinic — at the entrance and visible from 1 -80 — is on one of the most valuable sites in the district. "And so one of the things we said (to university officials) is that, `We'd be glad to sell you the lot and all of that, but that's one of the conditions, that we have a PILOT,' " Hayworth recalled. `Because that was so important, that was a major part of what we were doing there." The exterior of Ul Health Care clinic at Iowa River Landing in Coralville, Iowa. (Justin Wan/The Gazette -KCRG TV9) UI Senior Vice President and Treasurer Doug True said hospital officials wanted that specific location for its prominence and its convenience for patients and staff. He also said the hospital has a history of paying property taxes for its clinics. "UI Health Care very much wanted that site for its patients," he said. "That (PILOT) was the tax consequence of it." There seems to be more interest in PILOTS in recent years as municipalities look to not- for -profit organizations and colleges that don't pay property taxes but receive city services, Kenyon said. The agreements are voluntary but have been the source of friction in communities. Hundreds of PILOT payments found in studies, media reports or researched by The Gazette failed to turn up one comparable to the Ul- Coralville deal when it came to the amount paid, $1 million, for the size of the property, 150,000 square feet. http: / /thegazette.com/2014 /03/16 /university -of -iowa- pays- coralville -lm- for -tax- exempt- cli... 3/31/2014 University of Iowa pays Coralville $1M for tax - exempt clinic; city keeps it all I TheGazette Page 5 of 11 The most lucrative agreements usually involve large hospitals or the entire campus of a college or university. The city of Iowa City, where the bulk of the UI campus and the UI Hospitals and Clinics are located, received $1.76 million in fiscal 2013 for providing fire service to 16.8 million square feet of campus. The payment is determined by a formula that includes the square footage of UI buildings, the Fire Department's expenses and a couple of other variables. City Manager Tom Markus said he found the agreement fair when he started with the city, and that has not changed upon learning of the UI- Coralville PILOT. "I wouldn't try to make the argument that our agreement is unfair because another seems most generous," he said. He also said that asking for more in light of what Coralville receives for one property "doesn't seem like the ethical thing to do." In addition to the Iowa River Landing clinic, Coralville is to get $150,984 in lieu of taxes this year for three properties in the UI Research Park. The Lincoln Institute of Land Policy has a database from a 2011 survey of 288 not - for -profit organizations that made payments in lieu of taxes. Only 17 paid more than $ I million, and all but one of those were either elite private schools — Harvard, Yale and Stanford topped the list — or hospitals. The Lincoln Institute did not survey public universities because most, like the UI, are part of state governments and are not nonprofits, Kenyon said. Other examples The Gazette found included: • Only four of the 13 medical institutions that participated last year in Boston's PILOT program, arguably the most successful in the nation, paid more than $1 million. All 13 had property values nearly double to 64 times higher than the $28 million value placed on the Iowa River Landing clinic for the UI- Coralville PILOT. • Syracuse University pays the city of Syracuse, N.Y., about $1 million a year in acknowledgement of city services it receives on its 680 -acre campus. • Aside from Iowa, two of eight Big Ten schools that responded to an inquiry have PILOT agreements. The University of Minnesota, Twin Cities pays about $50,000 a year. Penn State University paid nearly $2.4 million in 2012 . for several services. • Iowa State University paid Ames $1.47 million for fire service last fiscal year. ISU also has paid $935,220 in property taxes this fiscal year for seven buildings it owns and operates in its research park. • Cedar Falls is budgeted to receive $587,450 from the University of Northern Iowa this year for providing fire service to nearly 4.8 million square feet of building space. With the Iowa River Landing medical clinic in a tax increment financing, or TIF, district, Coralville's controversial use of that economic development tool also has come into play with the UI- Coralville PILOT. To determine the $1 million payment, the UI and the city set the value of the exterior of the clinic at $28 million. The interior is not subject to the PILOT. The taxes are calculated using the full rate for the tax district. That includes not just the city's tax rate, but also those from several other bodies, the biggest being Johnson County and the Iowa City Community School District. Hayworth, the city manager, said Coralville keeps the full payment because the property is in a TIF district. In a TIF deal, the taxes resulting from the increased value of a redeveloped property go back into the TIF district and not to tax- collecting bodies. Coralville is putting the money toward other projects and to pay back some of the expenses the city incurred buying the Iowa River Landing properties and cleaning them up, Hayworth said. If the payment from the medial clinic was an even $1 million this year and was distributed as a regular property tax collection not in a TIF district, approximately $190,500 would go to Johnson County, $387,000 to the Iowa City school district and $382,500 to Coralville. http: / /thegazette.com/2014 /03/16 /university -of -iowa- pays- coralville -1 m -for -tax- exempt- eli... 3/31/2014 University of Iowa pays Coralville $1M for tax- exempt clinic; city keeps it all I TheGazette Page 6 of 11 Johnson County Supervisor Rod Sullivan, a vocal opponent of what he sees as TIF abuses by cities, said it's inappropriate for county and school taxes to be part of the equation in determining the tax rate when Coralville gets all the money. "It doesn't necessarily make sense," he said. "It's hard to justify for me " Hayworth said if the TIF district were to end, either the other tax - collecting bodies would get their shares, or the UI would only pay the equivalent of the city's taxes. He was not immediately sure. The agreement does not spell out that scenario. The TIF district has no expiration date. Johnson County resident Douglas Paul, a member of a citizens group critical of how Coralville does business, said the use of the full tax rate was unfair to taxpayers in the county, school district and state. The state backfills some of the revenue school districts lose to tax increment financing. Paul was part of a lawsuit that unsuccessfully tried to stop the Von Maur deal. Von Maur received $9.5 million from Coralville to build its store, paid $10 for the property and has its property tax payments capped at $150,000 a year plus inflationary adjustments, with Coralville paying anything over. A recent assessment of the store's value could put its tax bill at more than double that. The UI paid the city $2 million for the clinic property and each year pays the $1 million PILOT and its share for a city-built parking ramp, which last year was $1.1 million. "In contrast to Von Maur, the university did not get a good deal," Paul said. Hayworth disagreed. "The site that the university hospitals wanted was the prime site of any of the locations in Iowa River Landing ... and so we were very clear up front that if they wanted that site, the whole purpose of this was to generate tax dollars for the redevelopment of the area," he said. The PILOT agreement says "the city will provide police, fire and other services to the Property and construct and maintain streets, sidewalks, storm water drainage and other improvements and facilities serving or benefiting the Property." The Coralville Police Department responded to 90 calls for service at the clinic in 2013. The Fire Department responded to six incidents, all of them for malfunctioning fire alarms. Coralville's Fire Department budget this year is $938,435. Its Police Department budget is $4.1 million. The UI's True said the hospital making a payment in lieu of taxes for the clinic is not surprising. The hospital has seven other clinics in Iowa City, Coralville and North Liberty away from the hospital's main campus. All are in rented spaces on which the owners pay property taxes, which are passed on to the hospital through the leases, True said. The amount paid by those clinics last year was $117,406, according to the UI. Of the seven clinics, five are small QuickCare sites for walk -ins and two are family medicine clinics. The Iowa River Landing clinic has 13 specialties, counting surgery, radiology services, a pharmacy, a hearing aid center, cardiac rehabilitation services and more, aoeordinu to its wehsite. The leadership of the hospital is committed to the clinics paying taxes just as the clinics of not-for-profit hospitals do, True said. So even if hospital officials had decided on a location other than Iowa River Landing for the outpatient clinic, a PILOT agreement would have been made, he said. "We would have determined a method and gained our board's approval to pay an equivalent amount of tax," he said. "That's sort of a principle that they operate under." The Board of Regents office referred all questions to the UI. http: / /thegazette.com/2014 /03/ 16 /university -of -iowa- pays- coralville- I m- for -tax- exempt- cli... 3/31/2014 University of Iowa pays Coralville $1 M for tax- exempt clinic; city keeps it all I TheGazette Page 7 of 11 By and large, medical clinics are not considered charitable in nature and therefore must pay property taxes, even those run by tax- exempt nonprofit hospitals, said Julie Roisen, the property tax division administrator for the Iowa Department of Revenue. The UI hospitals' clinics, however, are exempt from property taxes because they are owned by the university, which is part of the state government, Roisen said. The UI does not pay taxes on its sports medicine facility in Iowa City, away from the hospital campus. UI spokesman Tom Moore wrote in an email that the "Sports Medicine Clinic" has notjust clinic space but also research and faculty offices. It was built on UI land and "does not occupy private commercial space within the community." The UI bought the land for the Iowa River Landing clinic from the city of Coralville. The Iowa River Landing clinic is expanding into open space on its fourth and fifth floors. The UI, through the Board of Regents, also owns property immediately to the south for a potential second facility. True said no decision has been made on whether to build another clinic. "Many, many factors would be involved in it," he said. "How it'd be used, what kind of clinical services ... parking, taxes." PILOT Agreement of4 Tweet .This portion of the http: / /thegazette.com/2014 /03/16 /university -of -iowa- pays- coralville -1 m- for -tax- exempt- cli... 3/31/2014 Attachment B Questions regarding UI — Coralville PILOT 1. Typical PILOT vs property taxes. I thought a PILOT, Payment in Lieu of Taxes, was to pay for services rendered and the rate, or amount, was based on those services. For example Iowa City has an agreement with UI for fire protection. The UI — Coralville PILOT uses the entire property tax rate (city, school district, county, etc.) and Coralville keeps it all. Can you explain the justification for this? 2. How much would it cost to contract privately, for the services listed in the PILOT? 3. PILOT agreements are different than property taxes, so why /how should the fact that property is in a TIF district affect the terms of a PILOT? 4. Like Coralville, Iowa City has the goal of increasing our tax base in our TIF districts. Does the University of Iowa have property in any Iowa City TIF districts? If so, what properties? Do we have PILOT agreements for those properties? 5. How was the $28 million exterior building value calculated for the UIHC clinic in Coralville? Is there a way to determine if it is reasonable? 6. Where did the 28,643 multiplier come from in the PILOT? Did they just work backwards from the goal of $1,000,000 and the current tax rate to get the multiplier? 7. It would seem that the PILOT, executed in June 2010, gave Coralville money to help pay the incentives for Von Maur, whose deal was completed in 2011. On one hand, Coralville says they are trying to increase tax revenues, and on the other they gave incentives, including capping Von Maur's taxes. This seems contradictory. Am I missing something? 8. The article stated the prominent location / value of the property was the rational for the PILOT. What are the differences in the value of the UIHC clinic location and Von Maur's location which are right next to each other? ($2 million vs $10 sale prices.) 9. If you take the IRL PILOT on a per square foot basis and applied it to the UI property in Iowa City, how much revenue would it generate? 10. Please compare the parking arrangement UIHC clinic has with Coralville vs any similar arrangements between the University and Iowa City. 11. In addition to the purchase price of the land, the PILOT agreement, and the parking agreement, were there other payments made by the University for this project? 12. Does the Board of Regents have a written policy on PILOTS? It seems that there should be consistent agreements between the Regent's institutions and the communities in which they have property. 13. We have and want to continue a good working relationship with the University. Are there ways in which this will impact that? 14. Is there other information which we should be aware of? ;Alo o�, 6w W7 I Z4 Payments in Lieu of Taxes: Balancing Municipal and Nonprofit Interests Daphne A. Kenyon and Adam H. Langley Policy Focus Report Series The policy focus report series is published by the Lincoln Institute of Land Policy to address timely public policy issues relating to land use, land markets, and property taxation. Each report is designed to bridge the gap between theory and practice by combining research findings, case studies, and contributions from scholars in a variety of academic disciplines, and from professional practitioners, local officials, and citizens in diverse communities. About This Report In recent years, local government revenue pressures have led to heightened interest in pay- ments in lieu of taxes (PILOTS), which are payments made voluntarily by tax - exempt nonprofits as a substitute for property taxes. This report provides case studies of several municipalities that have pursued PILOTS in the past decade, as well as a broader picture of PILOT use in the United States. While PILOTS can provide crucial revenue for municipalities with large nonprofit sectors, there are also major problems with how they are currently collected in many places. To avoid these problems, the report provides general guidelines for when municipalities should consider PILOTS, highlights the importance of municipal— nonprofit collaboration on PILOTS, and outlines alternative ways to raise revenues from tax - exempt nonprofits. It also offers more detailed recommendations for how to design PILOT programs that are fair to nonprofits while raising meaningful revenue for municipalities. Copyright © 2010 by Lincoln Institute of Land Policy All rights reserved. LLINCOLN INSTITUTE OF L A N D P O L I C Y 113 Brattle Street Cambridge, MA 02138 -3400, USA Phone: 617 - 661 -3016 or 800 - 526 -3873 Fax: 617 - 661 -7235 or 800 - 526 -3944 Email: help@Iincolninst.edu Web: www.lincolninst.edu ISBN 978 -1- 55844 -216 -0 Policy Focus Report /Code PF028 ................. Contents 2 Executive Summary 4 Chapter 1: The Nonprofit Sector and Local Government Finances 4 Overview of the Nonprofit Sector 6 What are PILOTS? 7 Heightened Interest in PILOTS 10 Chapter 2: The Property Tax Exemption for Nonprofits 10 Rationales for the Tax Exemption 11 State Variations in Legal Requirements 13 Challenges to the Property Tax Exemption 16 Tax Savings for Different Types of Nonprofits 18 Tax Revenue Forgone Due to the Property Tax Exemption 20 Chapter 3: Case Studies of PILOT Programs and Initiatives 21 Boston, Massachusetts 24 The MacDowell Colony in Peterborough, New Hampshire 25 Providence, Rhode Island 25 Yale University in New Haven, Connecticut 26 State and Federally Funded PILOT Programs 27 Potential for Municipal PILOT Programs 29 Chapter 4: Arguments For and Against PILOTS 29 Arguments For PILOTS 32 Arguments Against PILOTS 35 Chapter 5: Implementing and Structuring a PILOT Program 36 Municipal Strategies to Obtain PILOTS 37 Building Support for a PILOT Program 38 PILOT Program Features 41 Alternatives to PILOTS 43 Chapter 6: Findings and Recommendations 46 References 48 Acknowledgments 49 About the Authors 49 About the Lincoln Institute of Land Policy ................. Executive Summary haritable nonprofit organizations, which include private universities, hospitals, museums, soup kitchens, and churches, are exempt from property taxation in all 50 states. Many nonprofits reduce local government spend- ing by offering services that would otherwise be provided by those governments, but at the same time these nonprofits impose a cost on municipalities by consuming public services, such as police protection and roads. Payments in lieu of taxes (PILOTS) are pay- ments made voluntarily by tax- exempt non - profits as a subsfitute for property taxes. In recent years, local government revenue pressures have led to heightened interest in PILOTS, and over the last decade they have been used in at least 117 municipalities in at least 18 states. Large cities collecting PILOTS include Baltimore, Boston, Phila- delphia, and Pittsburgh. Boston has one of the longest standing PILOT programs and the most revenue productive program in the United States. PILOTS are a tool to address two problems with the property tax exemption provided to nonprofits. First, the exemption is poorly targeted, since it mainly benefits nonprofits with the most valuable property holdings, rather than those providing the greatest pub- lic benefits. Second, a geographic mismatch often exists between the costs and benefits of the property tax exemption, since the cost of the exemption in terms of forgone tax revenue is borne by the municipality in which a nonprofit is located, but the public benefits provided by the nonprofit often extend to the rest of the state or even the whole nation. PILOTS can provide crucial revenue for certain municipalities, and are one way to make nonprofits pay for the public services 2 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY they consume. However, PILOTS are often haphazard, secretive, and calculated in an ad hoc manner that results in widely varying payments among similar nonprofits. In ad- dition, a municipality's attempt to collect PILOTS can prompt a battle with nonprofits and lead to years of contentious, costly, and unproductive litigation. This policy focus report offers the follow- ing recommendations. PILOTS are one revenue option for municipalities. They are most appropri- ate for municipalities that are highly reliant on the property tax and have a significant share of total property owned by nonprofits. For example, a Minnesota study found that while PILOTS could increase property tax revenue by more than ten percent in six municipalities, there was negligible revenue potential from PILOTS for the vast majority of Minnesota cities and towns. Similarly, PILOTS are not appropriate for all types of nonprofits. PILOTS are most suitable for non- profits that own large amounts of tax- exempt property and provide modest benefits to local residents relative to their tax savings. ................. Municipalities should work collab- oratively with nonprofits when seeking PILOTs. The best PILOT initiatives arise out of a partnership between the munici- pality and local nonprofit organizations, be- cause PILOTS are voluntary payments and because both sectors serve the general pub- lic and have an interest in an economically and fiscally healthy community. In some cities, case -by -case negotiation with one or several nonprofits is best, as is the case between Yale University and New Haven. In cities with a large number of nonprofits, such as Boston, creating a systematic PILOT pro- gram can promote horizontal equity among tax- exempt nonprofits and raise more reve- nue than negotiating individual agreements. State and local governments should consider alternatives to PILOTs. State governments should consider providing grants to local governments that host tax- exempt nonprofits to compensate them for their loss of property tax base, as in Connecticut. Municipalities can also consider alternative ways to raise revenue from tax- exempt nonprofits, such as increasing user fees. KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 3 ................. CHAPTER 1 ON The Nonprofit Sector and Local Government Finances he United States benefits from a large and diverse nonprofit sector that includes a wide array of organizations: private universities, hospitals, art museums, soup kitchens, and churches. Many nonprofits reduce spending by municipalities by offering services that would otherwise be provided by the local government. However, nonprofits also impose a cost on municipalities because they consume public services, such as police protection and roads, but normally do not pay taxes for these services since most property owned by charitable nonprofits is exempt from tax- ation in all 50 states. Some municipalities have attempted to recoup part of this cost through payments in lieu of taxes (PILOTS) from some nonprofits. This report defines PILOTS as payments "made voluntarily by tax- exempt nonprofits as a substitute for property taxes" (Brody 2005, 275). OVERVIEW OF THE NONPROFIT SECTOR The nonprofit sector accounts for roughly one -tenth of the U.S. economy, whether measured by employment or total spending (Walker 2005). This report focuses on 501(c)(3) charitable nonprofits, which include most of the nonprofits active in the arts, education, health care, human services, and religion- 1. 14 million of which are registered with the Internal Revenue Service (IRS). Nonprofits with 501(c)(3) status include both public charities and private foundations. There are 4 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY also 456,000 other nonprofits registered with the IRS that do not qualify for 50 1(c)(3) sta- tus, including business leagues, labor unions, social clubs, professional organizations, and political action committees. These other non- profits are generally not exempt from prop- erty taxes (National Center for Charitable Statistics 2010). Figure 1 shows the relative importance of each type of charitable nonprofit sorted by each category's share of total revenues in the charitable sector. Hospitals and higher edu- cation institutions control 51 percent of total revenues and 42 percent of assets, but account for only 1 percent of charitable nonprofits ................. registered with the IRS. In contrast, religious and human services organizations account for 43 percent of registered charita- ble nonprofits, but only a small fraction of total assets or revenue reported to the IRS. In general, resources in the charitable nonprofit sector are extremely concentrated. The great majority of organizations are small and have few financial resources, while a small number of large nonprofits have the great majority of revenues, assets, and em- ployees. For example, 62 percent of charita- ble nonprofits filing IRS Form 990 (the tax return most nonprofits are required to file), had annual revenues below $100,000, Note: Religious congregations are not required to register with the IRS; nonprofits with gross receipts under $25,000 and religious congregations are not required to file IRS Form 990 with financial information. The number of organizations includes all 501(c)(3) charitable nonprofits registered with IRS (1,138,289), but revenues and assets for each subsector only include charities that filed IRS Form 990 (598,110). Source: National Center for Charitable Statistics (2010). KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 5 ................. accounting for 1.2 percent of total revenue for all filing charitable nonprofit organizations; 2.9 percent had annual revenues above $10 million, accounting for 84.7 percent of total revenue. Average revenues were $45,500 for the first group and $134 million for the sec- ond group (National Center for Charitable Statistics 2010). Throughout this report, the term non- profit is used to refer to the subset of non - profits typically eligible for exemption from property taxation, which are the 501(c)(3) charitable nonprofits, although state re- quirements for exemption often diverge from federal law. WHAT ARE PILOTS? Payments in lieu of taxes are usually negoti- ated between a municipality and individual nonprofits. PILOTS can be ad hoc payments by one or more nonprofits, or they can be standard payments from a wide range of nonprofits when a local government has a systematic PILOT program that provides guidance regarding expected contributions. PILOTS can be one -time payments, but negotiations sometimes lead to contracts stip- ulating continued payments for many years. PILOTS are often framed in two ways. First, they are considered a means to par- tially offset property tax revenue forgone because the nonprofit's property is tax - exempt. Second, they are thought of as contributions to cover the nonprofit's share of the cost of public services provided by municipalities that are normally funded with property taxes (e.g., fire services, road maintenance, or snow removal). Regard- less of the stated rationale, both of these arrangements are PILOTS according to the definition used in this report. The basis for deciding upon an appro- priate PILOT amount varies across munici- palities. Some ask tax- exempt institutions to pay a specific proportion of the property taxes the institution would owe if taxable. Others base the PILOT on some measure of the size of the nonprofit's property, such as square footage, or the size of its economic activity, such as number of employees or dormitory beds. The cost of basic services provided to nonprofit institutions is also used as a guide, but in many cases PILOTS are completely ad hoc and negotiated without any apparent basis. In all cases, a primary characteristic of a PILOT is that it is voluntary; that is, there is no law requiring a nonprofit to make a PILOT. However, municipalities may en- courage PILOTS in several ways. Nonprofits may agree to make PILOTS because they realize that they share an interest in the fis- cal health of the local government. For ex- ample, a college's ability to attract students would be impacted negatively if the college is located in a run -down city with inadequate public services. Some nonprofits may feel pressured to make a PILOT because they know local agencies have the power to grant or withhold zoning changes, building permits, and the like. Finally, in a few cases muni- cipalities have threatened to revoke a non - profit's tax exemption or levy a tax or fee in order to obtain a PILOT. Unless otherwise specified, in this report the term PILOT refers only to voluntary payments made by nonprofits to municipali- ties. However, the term is often used more broadly, and can refer to payments from the state or federal government to local govern- ments to compensate them in part for the forgone property tax revenues on publicly owned property. Also, local governments sometimes offer businesses the opportunity to make a PILOT instead of full payment of property taxes as an economic incentive to encourage the business to locate or stay in that municipality. 6 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY HEIGHTENED INTEREST IN PILOTS Press accounts suggest growing interest in PILOTS since the early 1990s. Recent high - profile efforts to create or expand PILOT programs have occurred in Pittsburgh, Providence, Boston, and elsewhere. Although no systematic comprehensive survey of PILOT use is available, this report found that since 2000 PILOTS have been used in at least 18 states (figure 2). Seventeen of those states account for 35 cities and towns with PILOTS. In addition, 82 out of a total of 351 municipalities in Massachusetts have collected PILOTS (Massachusetts Depart- ment of Revenue 2003). Two major factors drive the high level of interest in PILOTS around the country: growing scrutiny of the nonprofit sector, and increasing pres- sure on municipalities to find new sources of revenue. ................. Growing Scrutiny of the Nonprofit Sector Commercial activity in the nonprofit sector and news reports scrutinizing the behavior of nonprofit organizations have raised issues about the nonprofit property tax exemption, and have possibly reduced public support for it. In some cases, public support for tax exemption of nonprofits is tied to their charitable nature, but that support is re- duced when they pursue commercial activi- ties. Weisbrod (2004, 43) describes a "wave of commercialization among nonprofits," which includes charging user or admission fees, seeking revenues from marketing rela- tionships, research and development part- nerships with for - profits, joint purchasing partnerships between nonprofits and for - profits, and engaging in unrelated business activities that have little to do with the nonprofit's social mission. Source: Authors' research (see chapter 3). lunicipalities with PILOTS unicipalities with PILOTS unicipalities with PILOTS icipality with PILOTS icipalities with PILOTS KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 7 ................. Cordes and Steuerle (2010, 2) describe a blurring of the line between nonprofit and for -profit organizations: "Many nonprofits have found it advantageous to operate more like businesses in some respects; some for - profit businesses have adopted some non- profit attributes; and businesses and non - profits have discovered mutual benefit from acting as partners, both in for -profit and not - for -profit ventures." Public confidence in nonprofits has fallen in the last decade. A 2008 Brookings Institu- tion study found that, "General confidence in charitable organizations appeared to hit its modern low point in 2003 and has not moved up or down significantly since" (Light 2008, 2). Although some of this decline in confidence may simply reflect the public's increasing cynicism about all public institu- tions, including government and the media, since the 1990s several high - profile events have likely reduced public trust in nonprofits. In one case, the head of the United Way of America served seven years in jail for de- frauding that organization of more than $1 million. Other reports showed that Stanford University overcharged the federal govern- ment by more than $200 million, including charges "for flowers, furniture, parties, a grand piano, football tickets, and deprecia- tion on a yacht as `indirect research costs "' (Youngman 2002, 39). About the same time, the Philadelphia Inquirer ran a series of articles on the high salaries and assets that exist in some parts of the nonprofit sector in that city. Youngman (2002) points out that even when there is no real change in behavior, media attention and government inves- tigations can create the perception that there is a spike in scandals. Beginning about 2005, reports that hospi- tals were charging uninsured patients more 8 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY than privately insured patients caught the public's ire (Anderson 2007). More recently, both New Hampshire and New jersey gov- ernment officials have focused on the issue of high salaries for nonprofit executives, and New jersey legislators have placed limits on what charities can pay their CEOs if they provide services for the state (Gore 2010). This increasing public scrutiny has led to challenges of nonprofits' tax- exempt status (Strom 2010). PILOTS made by nonprofits offer what some consider a middle - ground approach, whereby nonprofits maintain their property tax exemption, but municipalities still receive some money to offset revenues forgone due to the exemption. Local Government Revenue Pressures In a September 2009 survey of city fiscal conditions, the National League of Cities reported that pessimism about the ability to meet city fiscal needs was at its highest level in the history of its 24 -year survey (Hoene and Pagano 2009). Even worse, because city fiscal conditions typically lag behind eco- nomic conditions by about two years, many municipal officials expect budget shortfalls to worsen through 2012 (McFarland 2010). Over the last three decades local govern - ments have faced a combination of steep declines in federal aid and erosion of the property tax base. Figure 3 shows sources of general revenue for local governments, which include cities, towns, and villages; counties; school districts; and special districts. Between 1977 and 1992, federal aid to local govern- ments as a share of total general revenues which was never high fell 62 percent It has risen since then, but is still less than half of what it was 30 years ago. The share of general revenues from state aid in 2007 is identical to the share in 1977. During this 30 -year period, the relative importance of the property tax has declined falling from 34 percent of general revenues ................. in 1977 to 28 percent in 2007. The erosion in the property tax base is due to a wide variety of factors, including the growth of tax limitations, exemptions, and other forms of special property tax treatment, none of which are expected to turn around in the foreseeable future (Augustine et al. 2009, 4). For example, since the late 1970s many states have imposed property tax limits on local governments. By 2006, 34 states had some type of limit on property tax rates, 29 states had limits on property tax reve- nues, and 14 states had statewide limits on property tax assessments. Only seven states did not have any of these limits, and thus left complete control of property tax deci- sions to local governments (Anderson 2006). With declining federal aid and constraints on property taxes, local governments have needed to find other ways to raise revenue. The most notable increases are seen in user charges, but in some municipalities, efforts to find new revenue sources have included soliciting PILOT contributions from non- profits that own property exempt from property taxes. KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 9 ................. r w- CHAPTER 2 The Property Tax Exemption for Nonprofits ayments in lieu of property taxes must be understood within the context of the history, rationale, and dimensions of the property tax exemption for charitable nonprofits, which is provided in all 50 states and the District of Columbia. The roots of the prop- erty tax exemption are based on case law and can be traced to the British legal tradi- tions that settlers brought with them to the American colonies, although explicit prop- erty tax exemption did not arise until much later (Gallagher 2002, 3). Annual state prop- erty taxation did not become the norm until the 1830s, and explicit codification of prop- erty tax exemption for charitable nonprofits followed. For example, in 1859 the Kansas Constitution became the first state constitu- tion that explicitly exempted churches from taxation (Diamond 2002, 120 -121). RATIONALES FOR THE TAX EXEMPTION Various rationales for the charitable prop- erty tax exemption have evolved over time, including two that are particularly relevant today. First, the property tax exemption for charitable nonprofits can be justified as part of the decision to properly define the prop- erty tax base. Swords (2002) argues that the proper base of the property tax is property in private hands. Since nonprofits are estab- lished in order to benefit the public, proper- ty owned and used by nonprofits should not be part of the tax base. Second, the property tax exemption is often justified as an appropriate subsidy to encourage the activity of nonprofits, also known as the quid pro quo theory. According to this theory, because nonprofits provide benefits to society, including reducing the 10 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY i R l� services that need to be provided by govern- ment, they are deserving of a tax subsidy. In recent years, the quid pro quo rationale has become increasingly important at the state level, as states have moved toward narrower definitions of organizations eligible for ex- emption than those used at the federal level (Brody 2007). Critics point out that the property tax ex- emption is an imprecise policy for subsidiz- ing charitable activities, because it primarily benefits nonprofits with the most valuable landholdings, not those providing the great- est public benefits (Bowman, Cordes, and Metcalf 2009, 280 -281). There is also a geographic mismatch between the benefits provided by a tax- exempt nonprofit and the cost of the exemption in forgone property tax revenues. While the benefits are often broadly dispersed throughout a metropolitan area, a state, or the nation, the cost of the property tax exemption is concentrated in the host municipality. 1 M ................. STATE VARIATIONS IN LEGAL REQUIREMENTS The criteria that nonprofits must satisfy to qualify for a property tax exemption are de- termined at the state level in state consti- tutions, statutes, and rulings by state courts. In 27 states federal designation as a 501(c)(3) organization is necessary for state tax ex- emption (Bowman, Cordes, and Metcalf 2009, 273). However, states often adopt a narrower definition, and thus 501(c)(3) des- ignation is no guarantee that a nonprofit will be tax- exempt at the state level. Seventeen states grant local governments the authority to determine which nonprofits qualify for tax exemption within certain categories, although the enumerated categories may be a fairly small part of the nonprofit sector (Bowman 2002, 32). State constitutions normally provide for a charitable tax exemption, but vary in whether this exemption is mandated or authorized (figure 4). Since the majority of state Source: Brody (2010a). State constitution mandates charitable exemption (17) State constitution authorizes legislature to give charitable exemption (25) State constitution does not address taxes or exemption (8) KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 11 ................. constitutions leave authority over the chari- table tax exemption to legislatures, "states generally have laws exempting the property of churches, schools, and `charitable' orga- nizations;" in states where the constitution is silent on this exemption, courts have ruled that "granting exemption is within the in- herent power of the legislature" (Gallagher 2002, 4-5). However, only 1 1 states define charity statutorily, and thus clarifying the parameters of what types of nonprofit orga- nizations qualify for the charitable tax ex- emption is often left to state courts (Bow- man and Fremont -Smith 2006, 203). Since all states have a charitable tax ex- emption, the definition of what constitutes a charity may be the most important issue in determining the breadth of a state's exemp- tion. Particularly important is whether a charity must provide a public benefit or re- lieve government of a burden to obtain tax - exempt status. Providing a public benefit is the broader definition that often results in a wider range of nonprofits receiving tax - exempt status. That said, relief of a government burden is not normally inter- preted narrowly to mean services that government actually provides, but rather, services that government views as bene- ficial (Brody 2007, 276). Table 1 shows the range of state require- ments that charities must meet to obtain tax - exempt status. These differences across states mean that legal challenges to nonprof- its' tax - exempt status will also vary. At least 10 states have multipart tests that have been specified by state courts or in state statute to determine whether a nonprofit qualifies for the charitable tax exemption, such as Illinois' five -part test described in box 1 (Bowman 2002, 43). Normally property must be both owned and used by a nonprofit to qualify for exemp- tion from the property tax. In no state is nonprofit ownership alone sufficient for an exemption; the property must actually be used for an exempt purpose. As a result, many charitable nonprofits do in fact pay TABLE 1 State Requirements for Charitable Tax Exemption Number of States Yes for Yes No Unknown Known States Tax - exempt charities are ALLOWED TO: Charge a fee to recipients of its services 41 3 6 93.2 If yes, must charge poor people below cost 12 27 8 30.8 Make a profit, as long as it is retained for institutional purpose 36 7 7 83.7 Support political candidates or influence legislation 16 23 11 41.0 Serve a predominantly social function 12 28 10 30.0 Distribute net income to its members or officers 0 42 8 0.0 Tax - exempt charities are REQUIRED TO: Provide a general public benefit 38 7 5 84.4 Provide service to rich and poor without regard to ability to pay 24 13 13 64.9 Relieve government of a burden 19 21 10 47.5 Provide a substantial part of its services for free 15 22 13 40.5 Derive most income from public funds or private donations 14 23 13 37.8 Source: Compiled from Bowman (2002, 40 -44). 12 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY substantial property tax bills. For example, in Cambridge, Massachusetts, the Massa- chusetts Institute of Technology is by far the largest property taxpayer in the city because of its ownership of properties used by bio- technology firms, for rental housing, and other noneducational activities (City of Cambridge 2009, 85). The "use" requirement also means that taxes are owed when a nonprofit holds prop- erty for future development, although some period of time for construction is allowed. The treatment of ancillary property espe- cially parking lotsis a frequent subject of litigation, and state courts vary in whether they interpret the use requirement narrowly for each property, or whether they take into consideration that an individual property may not itself be used for an exempt pur- pose but is necessary for a charity's overall operations (Bowman 2002, 35 -37). Finally, state laws vary in the treatment of property that is partially used for an exempt purpose, with nonprofits sometimes completely losing or maintaining their exemption. The most common approach is to allocate property taxes based on the share of the property used for a nonexempt purpose (Brody 2007, 283). The treatment of rental property can be complicated. Nonprofits that rent space from a for -profit entity are normally not eli- gible for a property tax exemption. Property that is owned by a nonprofit and rented to another charity that uses it for an exempt purpose is also sometimes taxable, although courts have occasionally decided "to permit exemption only when the lease arrangements are at or below cost" (Gallagher 2002, 8). CHALLENGES TO THE PROPERTY TAX EXEMPTION The complexity of property tax laws, reve- nue pressures of municipalities, evolving or- ganizational practices of nonprofits, and the 71111? 1 '1111 ................. changing political climate all contribute to challenges to the property tax exemption for nonprofits. "Nonprofit entities have shown remarkable success in state supreme courts and statehouses in defending exemptions against municipal and legislative challenge" (Brody 2010b, 88). However, the following situations often lead to challenges to a non - profit's exemption and are considered by courts (Brody 2007, 275 -279): • Charging fees: Normally charging fees does not in and of itself lead to a revo- cation of tax- exempt status, especially if the fees are below market rates, a large share of customers are charged a lower a KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 13 ................. fee based on their ability to pay, or the fees subsidize a charity's general mission. Not receiving a large share of revenue from donations: Nonprofits that are largely financed with fees may face more scrutiny, but generally courts treat government funding and private donations similarly. Competing with for -profit businesses: Compefition alone does not normally lead to revocation of tax - exempt status, but it is a consideration. Perhaps most important is whether a nonprofit's opera- tions are distinguishable from for -profit competitors. Serving a broad charitable class: Courts often consider whether a charity serves onprofit hospitals attract frequent legal challenges to their tax exemptions, and three such cases de- cided by state supreme courts are of particular interest. Two cases decided in 1985 show how similar rulings can lead to very different outcomes. In Utah County v. Inter- mountain Health Care, the Utah Supreme Court found that two nonprofit hospitals failed to meet the state constitution's charitable standard because they provided insufficient charity care, and thus their tax exemption was revoked (Fanning 2008, 33). Similarly, in Hospital Utilization Project (HUP) v. Commonwealth of Pennsylvania, the Pennsylvania Supreme Court found that a hospital support facility could not qualify for a sales tax exemp- tion because it did not meet the requirements of a purely public charity in the state constitution. This ruling also had implications for the property tax exemption in the state (Gallagher 2002, 12). The impact of these rulings played out very differently, however. In Utah, health care organizations worked with the State Tax Commission to develop standards requiring health care nonprofits to maintain charity care plans, publicize the availability of subsidized care, and provide unreimbursed care that exceeds the value of their a broad group, as opposed to being more like a member - serving organization. • High executive compensation: While courts do not seem to have consistent rulings on this issue, they distinguish between cases of justifiable high pay for executives who have successfully man- aged large nonprofit organizations, and cases of nonprofits that unjustifiably ap- pear to be zeroing -out profits by passing on large salaries to executives. In addition to these scenarios that might lead to questions about certain nonprofits' tax exemptions, several types of organiza- tions are particularly likely to face challenges property tax exemption. The Utah Supreme Court upheld the constitutionality of these standards in a 1994 decision. Utah's approach, which has been termed a "community benefit reporting requirement," has been adopted in some form by 16 states. The Pennsylvania Supreme Court established a five -part test to determine whether a nonprofit qualified for a charitable tax exemption. This HUP test set a high threshold to qualify for the charitable tax exemption, and resulted in confusion due to the many different interpretations by courts around the state. 14 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY to their exemptions. While court rulings vary depending on state law, it is possible to make some generalizations. Hospitals attract more court challenges to their tax- exempt status than any other type of nonprofit organization. One important reason is that uninsured patients have been charged significantly higher rates than in- sured patients, because private insurers and the government negotiate large discounts for their members, and then nonprofit hospitals have employed aggressive tactics to obtain payments from their patients (Connoly 2005). It can be difficult to distinguish the operations of nonprofit and for -profit hospi- tals, because they often provide similar levels ................. of charity care (Brody 2007,279; Shafroth 2005). A search of state cases in which health care institutions litigated a denial of property tax exemption found that for the 1990 -2007 period there were 141 cases from 42 states. These cases were decided about evenly for and against the health care institution (Fanning 2008). Nonprofits providing long- term -care housing, including retirement homes and low- income housing, maybe the second most frequent target of legal challenges to the nonprofit property tax exemption, particularly when the housing is offered at market rates. Courts recognize "the clear contrast between, for example, elderly By 1994 at least 1,000 nonprofit organizations had their tax - exempt designation challenged formally or informally (Leland 1995, 592). The HUP test and subsequent court cases led "cities, counties, townships, and school districts across Pennsylvania to solicit PILOTS under the threat of challenges to charitable tax exemptions," including the creation of one of the nation's most comprehensive PILOT programs in Philadelphia (Gallagher 2002, 16). In 1997 Pennsylvania's legislature passed Act 55, the Purely Public Charity Act, clarifying ways charities could meet the requirements for tax exemption, which made it easier for nonprofits to qualify as public charities. The Pennsylvania Supreme Court affirmed these new standards, and challenges to nonprofits' tax exemption and pressure to make PILOTS abated. For example, PILOT contributions in Philadelphia fell from $8.8 million in 1996 to roughly $800,000 in 2001 (Glancey 2002). The third case, Provena Covenant Medical Center v. The Department of Revenue, was decided by the Illinois Supreme Court in 2010. The Illinois Department of Revenue had ruled that a nonprofit hospital should lose its property tax exemp- tion because it did not meet parts three and five of the five- part test put forth in 1968 by the court in Methodist Old Peoples Home v. Korzen): 1. The nonprofit must have no capital stock or shareholders. 2. It must earn no profits or dividends, but instead derive funding mainly from private and public charity. 3. It must dispense charity to all who need and apply for it. 4. It does not provide gain or profit in a private sense to any person connected with it. 5. It must not place obstacles in the way of those who need the charitable benefits it provides. The court upheld the revocation of the hospital's tax exemp- tion because Provena provided insufficient charity care and granted price reductions to less than one percent of its patients under the hospital's charitable care program. It is too soon to tell what the repercussions of the Provena ruling will be. Some commentators predict that it will affect health care nonprofits across the country (Yue and Colias 2010); others note that the Illinois charitable standard for nonprofits differs from that in other states and predict that the major impact of the ruling will be limited to health care nonprofits in that state (Columbo 2010). KFNYON AND LANGLFY • PAYMENTS IN LIEU OF TAXES 15 ................. people who live in their own homes and pay taxes, and those who live in a property owned by a charitable institution that does not" (Gallagher 2002, 5 -6). Health clubs also face challenges to their property tax exemption because of similari- ties between nonprofit clubs like the YMCA and for -profit competitors. Other types of targeted nonprofit organizations include arts organizations (Gallagher 2002, 5); childcare facilities (Brody 2007, 282); "land set aside for conservation" (Brody 2007, 285); and organizations taking "controversial positions on social, economic, and cultural issues" (Youngman 2002, 33). On the other hand, universities do not seem to face frequent challenges to their tax- exempt status, except for ancillary prop- erties that are not being used for educational purposes. This is likely because the majority of state consfitutions explicitly provide for property tax exemptions for educational institutions. Churches and religious organi- zations also are usually free of such chal- lenges, due both to constitutional protec- tions and political support, although they sometimes must account for individual prop- erties not directly tied to religious activities. Social service organizations provide a large share of government services through con- tracts, often have limited revenues, and enjoy considerable political support, so they, too, are largely unaffected by challenges (Lemov 2010). TAX SAVINGS FOR DIFFERENT TYPES OF NONPROFITS The importance of the property tax exemp- tion varies significantly for different types of nonprofits. Many nonprofit organizations rent space instead of owning property, and thus generally do not receive any benefit from the property tax exemption. Among nonprofits that do own real property, the tax savings from the exemption vary widely. Although it is difficult to confirm hard num- bers, table 2 shows estimates of the tax sav- ings from the property tax exemption for 16 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY different types of nonprofit organizations (Cordes, Gantz, and Pollak 2002). Overall, this study estimates that only one -third of nonprofit organizations own real property, but this fraction is much higher for larger nonprofits with higher revenues and for non- profits that need significant amounts of property in order to carry out their core mis- sions, such as retirement homes, hospitals, and higher education institutions. The table highlights the concentration of financial re- sources in the nonprofit sector, because a small number of large nonprofits with very ................. large tax savings inflate the average savings ($203,144) far above the median savings ($18,259) received by nonprofits that own property. For the typical nonprofit organization, the savings from the property tax exemption equals roughly 2 percent of total revenues for the organization. However, for the small minority of nonprofits with revenues below $100,000 that own real property, the prop- erty tax exemption is much more impor- tant--the median tax savings equals 14 per- cent of total revenues. On the other hand, TABLE 2 Estimated Tax Savings from the Property Tax Exemption for Nonprofits that Own Real Property (1997) Percent of Tax Savings for Organizations Tax Savings as a Percent Number of Nonprofits that that Own Real Property (S) of Total Revenues ( %) Nonprofits that Own Real Own Real Property Property ( %) Average Median Average Median All Organizations 151,689 33 203,144 18,259 9 2 Revenue Level $100,000 or less 54,762 7 13,018 7,001 54 14 $100,001 - $500,000 48,526 28 32,861 8,961 11 4 $500,001 - $1,000,000 15,435 51 30,546 13,313 4 2 $1,000,001 - $5,000,000 21,430 70 58,577 24,257 3 1 $5,000,001- $10,000,000 4,998 83 147,031 82,281 2 1 Over $10,000,000 6,538 88 1,390,062 427,902 2 2 Organization Type Performing Arts 5,491 19 79,103 10,079 4 2 Human Service/ Multipurpose 24,138 40 49,989 13,443 5 2 Museums 1,904 44 133,682 20,181 16 4 Housing/Shelter 6,613 58 63,526 27,576 20 9 Higher Education 1,898 62 1,477,483 381,507 4 2 Retirement Homes 4,393 81 214,039 80,492 15 6 Hospitals 4,000 70 1,736,467 515,603 4 2 Notes: This table presents rough approximations, not precise calculations. The authors used the following methodology. First, they took the Federal Reserve Board's estimate of real estate owned by nonprofits in 1997 ($900 billion), and made adjustments to remove property owned by churches and nonprofits that are not registered as 501(c)(3) organizations, and to account for nonprofits excluded from the National Center for Charitable Statistics' (NCCS) database of IRS Form 990 returns. These adjustments resulted in a $365 billion estimate of property owned by charities in the sample. Second, the $365 billion total was allocated to individual charities based on each organization's share of the total value of land, buildings, and equipment. The authors address the inclusion of equipment by assigning a value of $0 to all organiza- tions with a value of land, buildings, and equipment below $100,000. Third, to reach an estimate of each charity's tax savings from the property tax exemption, each organi- zation's estimated real property value is multiplied by the average effective commercial property tax rate for each state in 1997 (Minnesota Taxpayers Association 1999). Source: Cordes, Gantz, and Pollak (2002, Table 4 -6) KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 17 ................. Philadelphia Boston Baltimore New York City Denver Columbus, ON Portland, OR Fort Worth Charlotte San Francisco Jacksonville, FL Seattle Washington, DC Houston San Jose Los Angeles Dallas San Diego Nashville Phoenix Tucson Memphis El Paso the total dollar value of the property tax exemption goes primarily to large nonprof- its. Those with revenues above $10 million receive nearly two- thirds of the total tax savings from the property tax exemption, despite representing only 4.3 percent of nonprofits that own real property. Large discrepancies in tax savings are also evident when looking at different types of nonprofits. The importance of the tax savings when measured as a percent of total revenues is highest for retirement homes and other nonprofits engaged in housing 00/ 2% 4% 6% 8% 100/ 12% Note: These staysvcs should be viewed as rough esvmates. Policy makers should exercise cauvon when drawing conclusions from these data, because the quality of assessments of exempt property is wide - ranging and often unreliable (Lipman 2006b). Source: Lipman (2006a). and shelter. Hospitals and higher education institutions receive by far the largest absolute tax savings from the property tax exemption. There are also large differences in the im- portance of the property tax exemption within each type of nonprofit. TAX REVENUE FORGONE DUE TO THE PROPERTY TAX EXEMPTION The reduction in the property tax base caused by the charitable tax exemption has two related effects on municipalities decreased property tax revenues, and higher property tax rates for businesses and home- owners. Assuming tax rates are constant, the percentage of would -be property tax collec- tions forgone due to the charitable tax ex- emption ranges widely at the state level de- pending on the size of the nonprofit sector, from about 1.5 percent to 10 percent, with a national average around 5 percent of prop- erty tax revenues (Bowman, Cordes, and Metcalf 2009). Looking at statewide averages obscures the fact that nonprofit property tends to be highly concentrated in central cities and college towns (Netter 2002). For these mu- nicipalities, the nonprofit tax exemption can significantly shrink the tax base. The Chronicle of Philanthropy analyzed property assessment rolls in 2006 to determine the impact of the nonprofit property tax exemption in 2 3 of the 30 largest cities in the United States (Lipman 2006a). Figure 5 shows that the value of exempt property owned by non- profits varies widely, from 10.8 percent of total property value in Philadelphia to 1.9 percent in Memphis and El Paso. While this figure highlights the variation across cities, the statistics for individual cities should not necessarily be viewed as definifive, given differences in the emphasis placed on assessing tax- exempt property (Lipman 2006b). For example, the Boston Assessing 18 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY W TOWN HALU3 MEMO i Department recently conducted a detailed assessment of tax- exempt property and found that properties owned by universities and medical institutions alone were equiva- lent to 14.0 percent of total assessed value (City of Boston 2009), which is much higher than the 8.4 percent shown in figure 5. In addition to the percentage of proper- ty value owned by tax- exempt nonprofits, a city's reliance on the property tax relative to other revenue sources affects the impact of the nonprofit property tax exemption on municipal budgets. Forgone property tax revenue will not have as large an impact on the budgets of local governments with a heavier reliance on sales and excise taxes, user fees, or state aid. In general, the nonprofit tax exemption is small compared to the total property tax base, but is large compared to other kinds of state and local tax exemptions for nonprofits (box 2). Furthermore, the value of government- ................. After the property tax exemption, the two largest state and local tax savings for nonprofits are exemptions from income and sales taxes. Nonprofits also receive an indirect tax subsidy from the deductibility of charitable contributions from state and local income taxes, and from the ability to issue tax -free bonds. Every state ex- empts charitable nonprofits from property taxes, and all 45 states with corporate income taxes also exempt charitable nonprofits. Exemption from sales taxes is not as common: 24 of 45 states with general sales taxes exempt purchases by charitable nonprofits, while another 16 states exempt purchases for specific categories of charitable nonprofits. Only 15 of 45 states exempt sales by charitable nonprofits (Bowman and Fremont -Smith 2006). Sherlock and Gravelle (2009) made the following estimates of fiscal year 2009 forgone revenue from the charitable tax exemption at the state and local level: Property tax exemption: $17 -32 billion Income tax exemption of investment income: $7 -9 billion Income tax deduction for charitable contributions: $3.6 billion Sales tax exemption: $3.3 billion These estimates are a lower bound, because they do not include the value of religious property and the sample does not include all charitable nonprofits (although it includes almost all large non- profits). Both of the studies cited here estimated the forgone reve- nues from these state and local tax subsidies for nonprofits using data from the IRS Form 990 and information about the extent of nonprofit tax exemptions in each state. owned property that is tax- exempt is gen- erally much greater than the value of tax - exempt nonprofit property. In some cases the exempt value from property tax relief programs for homeowners, business tax abatements, and other tax incentives may also be larger than the value of the non- profit tax exemption. Furthermore, a large portion of nonprofit tax exemptions accrue to religious entities, which are generally not targeted for PILOTS. KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 19 ................. _= CHAPTER 3 = Case Studies of PILOT Programs and Initiatives Harvard Medical School, Boston 0 btaining systematic information on PILOTS is difficult for a num- ber of reasons. Governments that employ a payment arrangement defined here as a PILOT do not always use that term. Alternatively, some governments apply the term PILOT to a type of payment not included in our definition, such as a payment from a governmental or for -profit entity to a municipality as a substitute for full property taxes. It is easier to obtain in- formation on broadly applied PILOT pro- grams such as the one in Boston, but more difficult to obtain information on PILOTS made by single institutions under ad hoc or short -lived agreements. Furthermore, neither party to the transaction may be willing to make detailed PILOT information public. To understand the scope of PILOTS in recent years, this report began with a 1998 survey of municipal finance directors and key community leaders in 73 large cities across the United States. This study was the first to gather information on PILOT activity nationwide (Leland 2002). It found PILOTS in seven large cities in six states: Baltimore, Boston, Detroit, Indianapolis, Minneapolis, Philadelphia, and Pittsburgh. We have used Google's search engine and a comprehensive literature review to com- pile information on municipal PILOTS in place since 2000. This compilation included both large cities and smaller municipalities that host an educational institution or hos- pital that plays a major role in the city's economy, such as the small town of Lebanon, New Hampshire, which receives payments from the Dartmouth- Hitchcock Medical Center. Each of the seven cities where Leland found a PILOT program in 1998 20 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY has continued to collect revenues from PILOTS since 2000, and our research un- covered many additional municipalities with PILOTS. This finding might leave the im- pression that PILOT use is growing. How- ever, both the scope (large cities vs. all municipalities) and methodology (survey vs. literature review and Google search) in these two studies are different, and thus no definitive conclusion regarding any trend in PILOT use can be reached. A systematic, comprehensive survey of PILOT use for every municipality in the United States is not available, but several sources provide information on their likely magnitude. First, U.S. Census data show that PILOTS made by nonprofits are just one of many items included under "miscel- laneous revenue, not elsewhere classified" or falling "within the definition of general revenue, but not classifiable as a tax, inter- governmental revenue, or current charge." That entire category accounted for 5 percent of municipal revenue in FY2007 (Census of Governments 2007), indicating that, in aggregate, PILOTS contribute only a small fraction of municipal revenues. Second, a study of hospital PILOTS focused on the 10 private hospitals included in the US. News 2004 Honor Roll (Schiller 2004). Five of them made PILOTS, one for- merly made a PILOT, and four had not made any. Hospital PILOT amounts ranged from a $300,000 fire service fee paid to Durham, North Carolina, by the Duke University Medical Center to $5.8 million in fire and police service fees paid to Palo Alto, Califor- nia, by the Stanford Hospital and Clinics. A third source in The Chronicle of Higher Education (2010) examined PILOTS made by research universities across the United States. After applying the PILOT definition used in this report, and focusing only on private colleges, we determined that 16 of the top private research universities in the ................. United States made PILOTS to the munici- palities in which they are located. Among the universities that reported PILOTS, annu- al contributions ranged from $500,000 from the University of Notre Dame to $7.5 mil- lion from Yale University. Some of these PILOTS are long - standing, dating to the 1920s, but four were instituted since 2000. The basis for payments ranges from assessed value, number of employees, or number of residence beds to what the university thought it could afford. In Pitts- burgh, all voluntarily contributing nonprof- its pay into a public service fund organized by local nonprofits, but the individual con- tribution amounts are not revealed. Information on PILOTS in selected cities and towns illustrates that the revenue gener- ated by PILOTS is often small, amounting to a fraction of 1 percent of the city budget (table 3). However, on occasion PILOT revenue can comprise a significant portion of the budget, as in Bristol, Rhode Island, where PILOT revenue from Roger Williams University contributes nearly 5 percent of the city budget. Several case studies illus- trate the factors affecting both the potential and pitfalls of PILOTS. BOSTON, MASSACHUSETTS As a city renowned for its many world -class colleges, universities, and hospitals, Boston has one of the longest standing PILOT programs and the most revenue productive program in the country. In FY2009 Boston obtained $15.7 million in PILOTS from all tax- exempt nonprofits. Even so, this is a small percentage of the total city budget (0.66 percent). Educational and medical institutions accounted for $14.9 million of this total, which is only 4.3 percent of what these organizations would have paid if they were liable for property tax payments at the commercial rate (table 4). Educational and medical organizations would have KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 21 ................. contributed 24.6 percent of city property tax revenue if they were taxable enfifies (City of Boston 2008; 2009; Boston Assessing Department 2010). When a nonprofit expands its real estate holdings, particularly when it acquires pre- viously taxable property and applies for tax exemption or when it begins new construc- tion, the Boston city government initiates a conversation with the objective of reaching a PILOT agreement between the city and the nonprofit. Factors that affect the pay- ment include the size and usage of the property or project. Agreements extend between 10 and 30 years, and negotiated payments are subject to an annual escala- tor clause. Community service benefits pro- vided by nonprofits are taken into account and can offset up to 25 percent of the negotiated cash PILOT. In January 2009 Boston Mayor Thomas Menino initiated a PILOT Task Force to review the current PILOT program, with the likely but not explicitly stated goal of raising additional revenue from nonprofits. While Boston University, Harvard University, Massachusetts General Hospital, Brigham and Women's Hospital, and Tufts Medical Center each make annual payments to the city over $1 million dollars, many nonprofits make no PILOT. An additional concern is the wide range in payments. In the latest year for which data are available, Harvard paid nearly $2 million, while Boston College paid less than $300,000. The issue of increasing PILOT amounts is viewed very differently by some government officials and representatives of nonprofit groups. According to City Councilor Stephen Murphy, a member of the city's PILOT Task Force, 13 of the city's 16 private colleges and universities contribute revenues under PILOT agreements, but these agreements fail to compensate the city adequately for its services (Marcelo 2009). Twice Murphy has petitioned the legislature to allow full taxation of nonprofit organizations and Representa- tive Michael Moran (D- Boston) sponsored a bill to assess nonprofits at 25 percent of the value of their property. In contrast, Richard Doherty, president of the Association of Independent Colleges and Universities in TABLE 3 PILOT Contributions City to Municipal Revenue Revenue Revenue Generated as Generated ($) City Budget (S) Year Share of Total Budget ( %) Baltimore, MD 5,000,000 1,493,018,000 FY2001 0.33 Boston, MA 15,685,743 2,380,000,000 FY2009 0.66 Bristol, RI 2,100,000 44,017,031 FY2009 4.77 Butler, PA 15,000 8,442,098 FY2010 0.18 Cambridge, MA 4,508,000 466,749,012 FY2008 0.97 Detroit, MI 4,160,000 2,460,000,000 FY1998 0.17 Lebanon, NH 1,280,085 42,312,510 FY2010 3.03 Minneapolis, MN 158,962 1,400,000,000 FY2009 0.01 New Haven, CT 7,500,000 648,585,765 FY2010 1.16 Pittsburgh, PA 4,416,667 496,611,848 FY2007 0.89 Providence, RI 2,500,000 444,544,123 FY2010 0.56 Note: In the cases of Baltimore, Bristol, Pittsburgh, and Providence, the total payment was divided by the number of years for an estimated annual payment. Source: Authors' research. 22 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY ................. Note: PILOT includes three categories: cash PILOT (91.6% of total), community service credits (5.3 %), and property taxes paid on properties that would normally quality as exempt based on their use (3.2%). Source: City of Boston (2009, 44 -45). Massachusetts, has stated, "The colleges and universities and teaching hospitals in Boston pay about $15 million a year in payments in lieu of taxes ... that's the highest amount, I believe, of any city in the country" (Short - sleeve 2009). The PILOT Task Force issued recom- mendations in April 2010 that cover many important features for a systematic PILOT program, including using a basis for calcu- lating PILOT amounts (in this case, assessed value); granting community benefit offsets KFNYON AND LANGLFY • PAYMENTS IN LIEU OF TAXES 23 Institution Exempt Value (FY2009) (S) Property Tax Revenue if Taxable (S) PILOT Amount (S) PILOT as % of Revenue if Taxable Educational Institutions Boston University 2,115,919,700 57,362,583 4,892,138 8.53 Harvard University 1,477,225,500 40,047,583 1,996,977 4.99 Suffolk University 237,230,300 6,431,313 375,290 5.84 Berklee College of Music 161,741,600 4,384,815 361,222 8.24 Boston College 561,952,500 15,234,532 293,251 1.92 Mass. College of Pharmacy 106,910,300 2,898,338 227,980 7.87 Tufts University 151,760,200 4,114,219 152,159 3.70 Lmerson College 1//,826,400 4,820,8/4 139,368 2.89 Showa Institute 54, /18,800 1,483,42/ 120,966 8.15 Wentworth Institute of Technology 207,977,400 5,638,267 40,747 0.72 Northeastern University 1,351,225,100 36,631,712 30,571 0.08 Simmons College 152,572,500 4,136,240 15,000 0.36 New England Law Boston 15,888,500 430,737 13,125 3.05 Emmanuel College 165,162,000 4,477,542 0 0.00 Fisher College 16,719,000 453,252 0 0.00 Wheelock College 60,362,200 1,636,419 0 0.00 Medical Institutions Massachusetts General Hospital 1,457,667,100 39,517,355 2,200,964 5.57 Brigham and Women's Hospital 815,886,700 22,118,688 1,315,822 5.95 Tufts Medical Center 581,770,900 15,771,809 1,015,628 6.44 Mass. Bio- Medical Research Corp 146,236,500 3,964,472 818,728 20.65 Children's Hospital 691,857,800 18,756,265 250,000 1.33 Boston Medical Center 300,928,700 8,158,177 221,644 2.72 Beth Israel Deaconess Med. Center 823,114,100 22,314,623 167,000 0.75 Dana Farber Cancer Institute 226,522,000 6,141,011 131,475 2.14 Spaulding Rehabilitation Hospital 86,751,700 2,351,839 77,534 3.30 Caritas St. Elizabeth's Med. Center 252,504,700 6,845,402 0 0.00 Faulkner Hospital 181,881,400 4,930,805 0 0.00 New England Baptist Hospital 144,781,500 3,925,026 0 0.00 Total of All Institutions 12,725,095,100 344,977,325 14,857,589 4.31 Note: PILOT includes three categories: cash PILOT (91.6% of total), community service credits (5.3 %), and property taxes paid on properties that would normally quality as exempt based on their use (3.2%). Source: City of Boston (2009, 44 -45). Massachusetts, has stated, "The colleges and universities and teaching hospitals in Boston pay about $15 million a year in payments in lieu of taxes ... that's the highest amount, I believe, of any city in the country" (Short - sleeve 2009). The PILOT Task Force issued recom- mendations in April 2010 that cover many important features for a systematic PILOT program, including using a basis for calcu- lating PILOT amounts (in this case, assessed value); granting community benefit offsets KFNYON AND LANGLFY • PAYMENTS IN LIEU OF TAXES 23 ................. MacDowell Colony that reduce a nonprofit's cash PILOT; and extending the range of nonprofits targeted for payments beyond colleges, universities, and hospitals to secondary educational in- stitutions and cultural institutions, such as museums (City of Boston 2010). THE MACDOWELL COLONY IN PETERBOROUGH, NEW HAMPSHIRE The MacDowell Colony, founded in 1907 to promote the arts, operates an artists -in- residence program in 32 art studios and various common buildings on 450 acres in Peterborough, New Hampshire. Artists from across the country compete for a MacDowell Fellowship. Former fellows include Leonard Bern- stein, Willa Cather, Aaron Copland, Alice Walker, and Thornton Wilder. In 2005, 246 artists including one New Hampshire resident were selected to receive fellowships. The Peterborough Board of Selectmen challenged the colony's tax exemp- tion on the basis that, among other reasons, it "failed to meet the statutory requirement that residents of New Hampshire be admit- ted to a charity's benefits." Selectmen of- fered to accept a substantial PILOT, but when MacDowell refused the offer, the town revoked the organization's tax exemption. Without its tax- exempt status, MacDowell Colony's property tax bill would have been $160,000 per year (Town of Peterborough v. The MacDowell Colony, Inc. 2008). MacDowell appealed the selectmen's decision. Eventually the New Hampshire Supreme Court voted in favor of MacDowell, ruling its promotion of the arts benefits the general public, which automatically includes residents of New Hampshire. A MacDowell Colony (2008) press release states, "While defending MacDowell's charitable status required significant time and resources, the Colony's board of directors felt the issue was sufficiently important to pursue at the 24 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY highest level. MacDowell hoped the case would set a precedent, one that would safe- guard other charitable organizations from increasing pressure by municipalities to pay taxes they do not owe." PROVIDENCE, RHODE ISLAND In 2003 the City of Providence reached an agreement with its four private colleges for payments in lieu of property taxes totaling $48 million over 20 years. At the time Mayor David Cicilline argued, "With total annual budgets of $750 million, combined endow - ments of $2 billion, and over 25,000 students the vast majority of them from outside of Providence —these institutions are thriving in our city. Yet for all the annual police, fire, public - works, and other services these enor- mous institutions consume, they pay virtual- ly no compensation to the city" (Perry 2003). By 2009 the economic downturn forced Providence to search for more revenue, and the value of property owned by nonprofits had more than doubled since the start of the decade. For both reasons, Providence sought to increase the revenues raised from colleges, and planned to obtain PILOT revenue from hospitals for the first time. The colleges ob- jected, citing the earlier agreement and not- ing they faced their own financial challenges. State legislation was filed that would allow a tuition tax, a $150 fee per semester for each full -time student from out of state, as well as legislation to allow Rhode Island cities to collect payments up to 25 percent of the property tax liability that would be owed if exempt properties were subject to full taxation (Marcelo 2009). In September 2009 the city established a Commission to Study Tax - Exempts with several objectives, including determining the costs associated with providing city services to tax- exempt organizations and developing a methodology for valuing community part- nerships made by tax- exempt institutions. ................. EE j t OF The commission has not yet issued its final report. It is important to note that Rhode Island and Connecticut are the only two states where the state government makes PILOTS to municipalities hosting private non- profit hospitals and educational institutions. YALE UNIVERSITY IN NEW HAVEN, CONNECTICUT In 1991 Yale entered into a formal agree- ment with New Haven to make a $1.2 million annual PILOT, and over time that financial contribution has risen (Kodrzycki and Munoz 2009, 23). In February 2009 Yale agreed to increase its payments by 50 percent, with the university contributing around $7.5 million per year starting in 2010 (Zapana 2009), but the story of Yale's contribution to New Haven goes far beyond its PILOT. Since the mid- 1980s, Yale has been actively involved with public officials and corporate leaders in fostering New Haven's economic development A study of resur- gent U.S. cities concluded that universities can make a substantial difference in a city's economic future, noting that, "Yale emerged as the engine of New Haven's revitalization" Yale University KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 25 ................. (Kodrzycki and Munoz 2009, 21). In addi- tion to its role as a major employer and in- cubator for the biomedical sector, Yale has been involved in the city's revitalization in other ways, including funding The Center for the City, an organization aimed at tap- ping New Haven's civic resources to tackle its social problems; redevelopment of sever- al blocks of the city's retail center; and pay- ing a stipend for Yale employees buying homes in the city (Kodrzycki and Munoz 2009, 23). Although Yale's efforts stand out for their magnitude, other town -gown economic development collaborations have evolved in places such as Greensboro, North Carolina, Philadelphia, Pennsylvania; and Worcester, Massachusetts. From the local government perspective, colleges and universities can be important anchors for employment and economic development, and from the col- lege or university perspective, fixed assets make relocation difficult and a city's posi- tive image helps it attract students, faculty, and staff (Sungu- Eryilmaz and Greenstein 2010, 8). STATE AND FEDERALLY FUNDED PILOT PROGRAMS State- funded programs in Connecticut and Rhode Island make PILOTS to municipali- ties for exempt property owned by nonprofit educational and medical institutions. Some- times these are called GILOT programs (grants in lieu of taxes) to distinguish them from the types of PILOTS described previously. Under Connecticut's program, which is the more long - Standing and well- financed of the two, the State reimburses municipali- ties for revenue forgone because of the property tax exemption afforded to colleges and hospitals. Initially the state reimbursed local communities for 25 percent of the amount that colleges and hospitals would have paid in property taxes if they were taxed. Over time, this percentage was raised several times, until it was set at 77 percent in 1999 (Carbone and Brody 2002). In FY2008, Connecticut's total payment under the pro- gram was $122.4 million, which was paid to 57 municipalities and 7 special districts (State of Connecticut 2008). Rhode Island reimburses municipalities for tax revenue forgone from nonprofit educational institutions and hospitals, state - owned hospitals, veterans' residential facili- ties, and correctional facilities, but on a much smaller scale. Under this program, introduced in 2006, municipalities are reimbursed for 27 percent of tax revenue forgone. For FY2010, Rhode Island will pay out $27.6 million (State of Rhode Island 2009). One of the strongest arguments in favor of a state- funded PILOT program is that the property tax exemption for nonprofits is created by the state and typically provides benefits to citizens beyond municipal bor- ders. Another argument is that the statewide treatment of nonprofits can be more system- atic than local PILOTS, which often appear to be ad hoc in nature. There are some difficulties with such a program, however. State budget problems may mean that the funding is unreliable from year to year. Just as States tend to cut aid to local governments during recessions, they are likely to cut appropriations under PILOT programs. A different kind of prob- lem is an incentive for local assessors to overstate the value of nonprofit property covered under Such a program, Since any overstatement will increase State grant reve- nue at no cost to the municipality. To coun- teract this temptation, a State PILOT pro- gram must include Some monitoring of local assessment practices. The federal government also has several programs for compensating local governments 26 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY for forgone taxes on property owned by the federal government. The U.S. Payments in Lieu of Taxes (PILT) program makes pay- ments to local governments (primarily coun- ties) for public land owned by the Interior Department or the U.S. Forest Service. In FY2009, the PILT program directed $382 million to local governments, with 84 per- cent going to 12 states in the Mountain West and Pacific regions, including Alaska (U.S. Department of the Interior 2010). Many states also make PILOTS on behalf of state - owned property, notably in capital cities. POTENTIAL FOR MUNICIPAL PILOT PROGRAMS Nonprofits vary greatly in the amount of revenue they earn and the value of the assets they control. Four nonprofit sectors Percent of Property Tax Levy More than 10.0% (18 municipalities) 2.5% -10.0% (68 municipalities) 1.0% -25% (78 municipalities) 0.0% -1.0% (144 municipalities) 0.0% no value (35 municipalities) ❑ Did not report (8 municipalities) ................. hospitals, health other than hospitals, higher education, and human services account for 59 percent of nonprofit assets and 78 percent of revenues. Of these four sectors, hospitals have the largest proportion of both revenues and assets. The Massachusetts Department of Rev- enue conducted a survey in FY2003 of the state's 351 municipalities to look at property owned by tax- exempt charitable and educa- tional institutions (McArdle and Demirai 2004). These organizations owned property worth $22 billion, or approximately 3 per- cent of total property value in the state. However, there were large variations across communities. Figure 6 shows the share of property tax revenue from these organizations if the property tax exemption was removed and they were taxed at the commercial tax Note: Figure shows estimates for charitable and educavonal instituvons if taxed at the commercial tax rate. Source: McArdle and Demirai (2004). KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 27 ................. rate in each municipality. While tax revenues forgone due to the property tax exemption were less than 1 percent of total property tax revenues in the majority of the state's municipalities, they exceeded 2.5 percent of total property tax revenues in one - quarter of the municipalities, and exceeded 10 per- cent of total revenues in 18 communities. The Minnesota Budget Project and Prop- erty Tax Study Project(2000)researched the revenue potential of PILOTS in the state's 2,700 cities and towns based on the value of property owned by charitable insti- tutions and hospitals, but not governments, churches, or colleges. Table 5 indicates that if cities and towns were to collect property taxes from charitable institutions and hospi- tals, the impact on total local property tax revenues would vary greatly. While 78 per- cent of Minnesota cities and towns would receive no additional property tax revenue because they have no charitable institutions or hospitals, six cities and towns would be able to increase property tax collections by more than 10 percent, assuming they held the tax rate constant. Alternatively, they could reduce the tax by 10 percent on the rest of the taxpayers. Number of Cities and Towns enue 7thanl se in 2,105 0, No nonprofits 447 125 1 -5% 17 5-10% 6 Greater than 10% Note: Revenue would be collected from charitable instituvons and hospitals but not governments, churches or colleges. A tax rate of 0.38 % was assumed. Source: Minnesota Budget Project and Property Tax Study Project (2000). The number of nonprofits, expenses, and assets by U.S. region is shown in table 6. Northeastern states host a disproportionate - ly large share of nonprofit organizations, while the South has the smallest share. This same pattern holds for nonprofits' expenses, although nonprofits in the West have the lowest level of assets. The potential to raise revenue from PILOTS is likely to be con- centrated in the Northeastern states and in certain cities and towns, with health and education nonprofits being the most likely revenue generators. TABLE 6 Nonprofits by U.S. Census Region Region rr Number of Organizations Expenses Assets per 10,000 Population per Capita (S) per Capita (S) Northeast 12.8 5,462 11,325 Midwest 10.9 3,800 7,139 South 9.0 2,690 5,186 West 10.5 3,125 4,757 Total 10.9 3,601 6,751 Source: Wing, Pollak, and Blackwood (2008, 198 -200). 28 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY ................. CHAPTER 4 Arguments For and Against PILOTs here are several compelling reasons to expect charitable nonprofits to make PILOTS to their host munici- palities, but major problems exist in the way PILOTS are currently collected in many places. ARGUMENTS FOR PILOTS Nonprofits should pay for the public services they consume. Perhaps the most basic reason to expect non- profits to make PILOT contributions is that these organizations directly benefit from the public services provided by municipalities, and thus should make payments to offset their cost. Some of the services provided by municipal governments are essential for the operation of nonprofits, while others are not. One way for municipalities to determine an appropriate level of PILOT contributions is to distinguish between public services that directly benefit nonprofits, as opposed to services that benefit specific residents or the community as a whole. For example, members of Boston's PILOT Task Force have established a 25 percent standard, whereby the city would seek PILOTS equal to 25 percent of the property taxes that would be owed if the nonprofits' properties were fully taxable. This goal was set "since approximately 25 percent of the City's budget is allocated for core City services such as police protection, fire protection, and public works--services consumed by tax- exempt institutions" (City of Boston 2009, 26). Figure 7 shows several categories of spending made by municipal governments in FY2007. The first three categories total 37.8 percent of municipal budgets, and in- clude core public services that are essential w r KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 29 ................. for the operation of nonprofits police and fire protection, sewers and waste manage- ment, and roads. This is considered a low - end estimate of the public services used by nonprofits because other types of services that directly benefit nonprofits are not in- cluded in these categories. County govern- ments and special districts also provide ser- vices directly benefiting nonprofits, but do not normally receive PILOTS and thus are not included in the figure. PILOTS provide essential revenue for some municipalities and allow tax exporting. For municipalities with a large share of tax- exempt nonprofit property, PILOTS can provide essential revenue that can be used to provide improved public services, lower property tax rates, or pursue other policy goals. PILOTS are sometimes dismissed be- cause they currently make a small contribu- tion to municipal budgets when measured in percentage terms. However, the revenue that could be generated with expanded use of PILOTS is considerable, even with non- profits paying a quarter or less of what they would pay if their properties were all taxable. Relative size is not the only way to mea- sure the importance of a PILOT program; the dollar value matters, too. For example, in FY2009 nonprofit organizations in Bos- ton made PILOTS worth $15.7 million. Although that payment was only 0.66 per- cent of the city's budget, it was more than enough to fund snow removal for an entire winter, or about half of the budget for the city's library system (City of Boston 2008; 2009). PILOTS are also a way for municipalities to export their tax burden to nonresidents, because most revenues for universities, retire- ment homes, and sometimes hospitals come from people who live outside the municipal- ity (Brody 2005). Some economists may oppose this strategy, because property taxes serve as the "price" for local services (Fischel 2001), and thus a tax that is exported to nonresidents may lead to overspending by municipalities. However, tax exporting may be a justifiable policy to the extent that the benefits provided by nonprofits spill over Source: Census of Governments. 30 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY ................. into surrounding communities, while the costs in terms of forgone revenues are con- centrated in one city. This is particularly the case when economically strong suburbs sur- round a center city whose tax base has been depleted due to a high number of nonprofits. PILOTS can address inequities created by the charitable property tax exemption. One critique of the charitable property tax exemption is the perceived inequity in the distribution of tax savings. Generally the greatest tax savings go to large nonprofits with the most valuable landholdings, especially hospitals, higher education institutions, and tax- exempt housing facilities, while most small nonprofits receive relatively little in tax ben- efits. The large nonprofits are the same ones most frequently targeted for PILOTS. Con- versely, Smaller nonprofits, especially Social Service providers, are rarely targeted. Because nonprofits that rent space from private owners are generally not eligible for the property tax exemption, about two- thirds of nonprofit organizations do not receive any benefit from the exemption (Cordes, Gantz, and Pollak 2002). However, to the extent that landlords pass on some portion of their property taxes in the form of higher rent, organizations that rent still pay prop- erty taxes. This raises concerns about hori- zontal equity, since two nonprofits that are similar in almost every respect may receive dramatically different tax benefits solely because one nonprofit owns its property while the other one rents. PILOTS can reduce inefficient location decisions made by nonprofits. According to economic theory, the charitable property tax exemption distorts the location decisions of nonprofits because it creates an incentive for them to locate in center cities where the tax Savings are high compared to adjacent municipalities (Quigley and Schmenner 1975). It is well established that property taxes are capitalized into Selling KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 31 ................. prices —for otherwise identical properties, the one with higher property taxes will have a lower selling price, which equalizes total expenses over the life of the property (Yinger et al. 1988). Consequently, within • given metropolitan area, nonprofits have • financial incentive to locate in municipali- ties with high tax rates, because their deci- sions are based solely on selling prices, not property taxes (McEachern 1981). The empirical evidence that the chari- table tax exemption leads nonprofits organi- zations to locate in municipalities with high property tax rates more frequently than they would without the tax exemption is weak, but this potential inefficiency is still a concern (Hansmann 1987; Chang and Tuckman 1990). By making nonprofits pay more for choosing to locate in high -tax municipalities with a large share of tax- exempt properties, PILOTS can help offset distortions created by the property tax exemption. PILOTS can also address two other inefficiencies: the in- centive for tax- exempt nonprofits to have a higher ratio of capital and land to labor, and to own property instead of renting. ARGUMENTS AGAINST PILOTS PILOTS are often ad hoc, secretive, and contentious. Table 7 contrasts PILOTS with many desirable features of a tax system. Many of the problems with PILOTS result from the fact that they are voluntary payments. As a result, PILOTS are haphazard the level of PILOT amounts normally depends more on the aggressiveness of municipal officials than on property values or the level of pub- lic services consumed by nonprofits. Conse- quently there are huge horizontal inequities, with similar nonprofits making very different PILOTS even within the same municipality. The processes that lead to PILOTS are harshly criticized by many nonprofits that view PILOTS as a kind of extortion. Even though they are legally tax- exempt, non- profits may feel that it is in their best interest to make a contribution, because otherwise they could face the possibility of having their property tax exemption challenged in court, face resistance when trying to secure building permits, or lose government con - tracts. In the process of fighfing over PILOTS, both municipalities and nonprofits can spend TABLE 7 Desirable Desirable Features of a Tax System Common Pitfalls with PILOTS Horizontal equity: Taxpayers in similar situations pay similar Because PILOTS are voluntary, two tax -exempt nonprofits with similar property taxes. For example, two homeowners with similar property values often make very different PILOTS. values pay similar property taxes. Vertical equity: Taxpayers with a greater ability to pay often Large nonprofits with highly valued real property may pay less in PILOTS than face higher tax bills. smaller nonprofits with lower property values. Low administrative costs: The costs of government adminis- The costs of government administration for PILOTS (including costs for assessing tration plus compliance costs for the private sector are low tax -exempt property), the expenditures nonprofits make to avoid or reduce PILOTS, relative to the amount of revenue raised. and the potential costs of litigation for both parties can all be high. Revenue sufficiency: The tax system raises enough revenue PILOTS normally raise little revenue relative to what nonprofits would pay if to pay for the desired level of public services. taxable, but can still provide crucial revenue for some municipalities. Transparency: The tax system should be simple and easy PILOTS are often negotiated secretly, and the payments are often determined to understand. in an ad hoc way with no underlying basis. Predictability: Tax rates should be fairly stable from year to PILOTS are often short -term agreements, which leave municipalities uncertain year so taxpayers can plan for future liabilities, and govern- that they will continue to raise sufficient revenue, and nonprofits concerned that ment should be able to rely on a stable revenue stream. they will be asked for higher and higher payments in the future. 32 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY significant amounts of money on legal fees and end up with their reputations tarnished. PILOTS provide limited and unreliable revenue. PILOT programs normally do not generate significant revenue relative to the size of mu- nicipal budgets. Leland (2002) summarized PILOT programs in several large cities in the 1990s, and found that PILOTS as a percent- age of these cities' budgets were relatively small: 0.15 percent in Baltimore; 0.17 per- cent in Detroit; 0.54 percent in Philadelphia; 0.77 percent in Pittsburgh; and 1.37 percent in Boston. It can also be difficult for municipalities to negotiate long -term PILOT agreements that provide a reliable revenue source, even from nonprofits willing to make significant finan- cial contributions. Brody (2010b, 88) outlines a frequent source of conflict between munic- ipalities and nonprofits: Municipalities above all seem to be seek- ing a predictable revenue stream that they can count on for budgeting purposes, but colleges [and other nonprofits] justifiably fear agreeing to long -term commitments. It is not just concern about future revenue needs�colleges worry about a creeping line of scrimmage. Hence the insistence by nonprofits that contributed to the Pittsburgh Public Service Fund that each year's collective multimillion dollar PILOT was a "gift" that couldn't be com- pelled or become a base line for future contributions. Nonprofits often reject the idea of making PILOTS because they want to avoid any di- rect challenge to the property tax exemption itself and are worried about creating the im- pression that they are taxable organizations. Concern about establishing the precedent that nonprofits are taxable is justifiable. While most state constitutions allow for tax exemp- ................. tions for charitable nonprofits, state court decisions and new statutes can dramatically narrow the interpretation of these constitu- tional provisions. It is important for local governments interested in voluntary contri- butions from nonprofits, but not interested in challenging the property tax exemption itself, to make this intent explicit in the contracts signed between nonprofits and municipalities that form the basis of on- going PILOT agreements. The limited revenue potential of a PILOT program must be weighed against the possi- bility of significant legal and administrative costs. To be fair for nonprofits, PILOT pro- grams should consider the community ben- efits provided by each nonprofit organization, and the assessed value of its tax- exempt property. However, collecting these data entails some administrative costs for munici- palities and compliance costs for nonprofits. Finally, heavy -handed requests for PILOTS can strain relationships between municipali- ties and nonprofits, which is another cost to consider since successful partnerships can be very beneficial for municipalities. PILOTS could lead nonprofits to raise fees, cut services, or reduce employment. The added cost of making PILOTS may have some negative consequences for non- profits, such as the possibility that they will raise fees charged to their beneficiaries, cut services, reduce employment, or relocate. Certainly it is important to consider the implications of the extra expense. Non- profits will respond differently based on the type of organization, their reliance on different revenue sources, their current budget situation, and other factors. How- ever, as long as PILOTS are truly voluntary, and not just voluntary in name, a non- profit presumably would decline to make a PILOT if doing so would have severe KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 33 ................. consequences, such as forcing the non- profit to drastically cut core services or relocate. One of the most likely reactions of non - profits to the extra expense of a PILOT is to increase user fees, which accounted for 49 percent of revenues for charitable non - profits in 2005 (Wing, Pollak, and Black- wood 2008, 134). This response is especially likely for nonprofits that rely heavily on fees and provide services where demand does not fall much in response to higher prices, such as a marginal increase in college tuition. Because fees will normally be paid in part by beneficiaries who live outside the muni- cipality, this response is effectively a type of tax exporting, and possibly a better match between the benefits and costs of the nonprofit. While it is doubtful that nonprofits would make severe cuts to their main operations because of a PILOT, they could decide to cut charitable services that are not central to their core mission. For example, in response to making a $2 million PILOT, Brown Uni- versity "eliminated more than $600,000 in support for HELP, an urban health and education program" (Worcester Regional Research Bureau 2004, 3). Nonprofits often argue that PILOTS could force them to cut payrolls or make other changes that would diminish the economic benefits that accrue to the local community. There is no doubt that these benefits can be significant. In addition to direct employment, large nonprofits such as hospitals, universities, and museums can serve as anchor institutions that bring non- residents into city centers, create businesses to supply goods and services demanded by the anchor institutions, and foster urban renewal (Penn Institute for Urban Research 2009). Universities can provide particularly large dividends for a community's long -term success, including a more highly skilled workforce, innovative start -ups, a vibrant cultural life, and all of the jobs and tax revenue that go along with these benefits (Appleseed Consultants 2003). However, focusing on the general eco- nomic benefits generated by nonprofits is not an argument against PILOTS per se. For -profit businesses are also major employ- ers and generate similar economic benefits, and do pay property taxes. Higher PILOTS could reduce property tax rates for for -profit businesses, and in turn increase employment in the private sector. Other possible responses by nonprofits include attempts to raise donations to cover the expense of the PILOT, or to lower oper- ational costs through efficiency improvements. However, it is normally not possible to rely on increased donations to cover the cost of PILOTS, because PILOTS are unlikely to encourage philanthropy and are often sought during recessions when nonprofits also face declines in donations and government grants (National Council of Nonprofits 2010). Furthermore, during a recession non- profits will have already pursued cost - cutting measures to raise efficiency in response to general declines in revenue. 34 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY ................. CHAPTER 5 Implementing and Structuring a PILOT Program n light of the problems with the way PILOTS are currently solicited in many municipalities, this chapter offers some guidance on how to avoid common pit- falls for municipalities interested in seeking PILOTS from nonprofits and describes the processes often used to obtain PILOTS. It also examines various features of established PILOT programs and Some alternative ways to raise revenues from nonprofits and other entities. PILOTS are not appropriate for all municipalities. Before implementing a PILOT program, municipal officials Should consider Some key information most importantly, the value of tax- exempt property owned by nonprofits as a percentage of total property value in the municipality. PILOTS can pro- vide essential revenue for municipalities with a large Share of tax- exempt property, but they may not be worth the cost and effort in municipalities without a large nonprofit sector. Municipalities should also consider the types of nonprofits that own property in their communities, and their ability to contribute to the local budget (Worcester Regional Research Bureau 2004). Public officials also must have a Solid understanding of the legal basis for the charitable property tax exemption. Munici- palities are probably more likely to receive Significant PILOTS if they are located in States with a narrower definition of charity or more Stringent requirements on the use of exempt property. In addition, local politi- cal support for PILOTS must be considered. Tax- exempt nonprofits often fight PILOT attempts aggressively, and municipalities are more likely to obtain PILOTS if they have Support from taxpayers, politicians, public KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 35 ................. employees, the local media, and others before trying to institute such a program. MUNICIPAL STRATEGIES TO OBTAIN PILOTS Municipalities that have successfully solicited PILOTS from nonprofits have often employed a "carrot and stick" approach with explicit appeals to the nonprofits' sense of commu- nity responsibility, as well as the potential consequences of not contributing. The Carrot: Appeals to Community Responsibility and Fairness Requests for PILOTS are often couched in terms of community responsibility and fair- ness. In particular, some people argue that it is fair to expect nonprofits to make payments to partially cover the cost of local public services, and that a contribution is part of being a good neighbor. For example, a letter from the City of Cambridge, Massachusetts (2010), to tax - exempt property owners appeals to a sense of fairness: "It is only fair to expect exempt property owners to make some contribution towards the cost of municipal services." It notes that despite being much less than what a taxable entity would pay, a payment would be a "significant and appreciated contribu- tion to the fiscal well -being of the City" The letter also explains that PILOTS help provide an adequate level of public services that benefit both tax- exempt property own- ers and other residents of the community, which is another common appeal. Universities in particular are often sym- pathetic to this argument since so many of their students and faculty live in the area and a vibrant community helps attract stu- dents. Finally, making a PILOT can improve a nonprofit's public image, which can be particularly important for nonprofits with strained relations in the local community or with controversial expansion plans. The Stick: Coercive Strategies that Lead to PILOTS Appeals to community responsibility are often not enough for municipalities to obtain significant PILOT amounts, so local govern- ments may choose to use one or more other strategies to obtain PILOTS. First, the threat of new fees or taxes on charitable nonprofits imposed either locally or at the state level has led nonprofits to make PILOTS, because these voluntary contributions are viewed as preferable to the fees or taxes. While it is impossible to know the intentions of municipal officials, it appears that fees on nonprofits are often introduced as a strategic tool to compel PILOTS. For example, a tuition tax proposed in Pittsburgh in 2009 was dropped when local colleges and universities agreed to make PILOTS worth about $5 million per year (Urbina 2009). In Baltimore, a 2001 propos- al to impose an energy tax on all nonprofits was dropped once "the city's nonprofit hos- pitals, colleges, universities, and nursing homes agreed to pay the city a total of $20 million over the next four years" (Anft 2001). In Watertown, Massachusetts, Har- vard University agreed in 2002 to make a PILOT worth at least $3.8 million per year with a 3 percent annual adjustment through 2054. Based on an interview with the town manager, a newspaper article said that "the turning point in the negotiations fol- lowed a push by Watertown officials for a bill in the Legislature that would have forced all tax- exempt institutions to pay taxes on properties that represent more than 2.5 percent of a community's tax base" (Flint 2002, A1). Second, potential challenges to a non- profit's property tax exemption have led to PILOTS because the nonprofit believes these payments are better than risking a complete revocation of the organization's tax exemp- 36 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY ................. tion. A tax- exempt nonprofit may decide that making a PILOT will help avoid any formal challenge to the organization's exemption. In other cases, a nonprofit may face a legal challenge to its property tax exemption and decide that its best option is to settle and reach a PILOT agreement, either because of the uncertainty of litigation or simply to avoid further legal fees (Leland 1994). Third, municipalities have control over building permits, zoning decisions, and other factors that influence nonprofits' operations, and nonprofits may decide to make PILOTS to maintain good relations with local govern- ment officials and receive favorable treat- ment in the future. Using these or other coercive Strategies is a high -risk, high - reward decision for municipalities. Some of the largest PILOTS in the country were preceded by these tactics, at least implicitly. However, this approach often antagonizes the nonprofit community, can entail significant legal costs, may hurt the local government's reputation, and is not guaranteed to work. The legality of fees and taxes imposed on tax- exempt organizations is often uncertain, and may be overturned by courts. At the same time, charitable non- profits have a strong track record of defend- ing their property tax exemptions against a legal challenge (Brody 2010b). Ultimately, while nonprofits may make PILOTS to receive favorable treatment on building permits, zoning decisions, and other regulations, an explicit quid pro quo arrangement is probably illegal. A federal district court ruled in Northwestern Universiy v. Ciy of Evanston (2002) that the city could not place a large part of the university's campus in a historic district which solely contained the university with restrictions on future development in retaliation for the university's refusal to make PILOTS. In many respects, threatening to use the Stick appears better than actually using it. BUILDING SUPPORT FOR A PILOT PROGRAM PILOTS are voluntary payments, and thus building Support for a PILOT program among tax- exempt nonprofits is essential, even when a degree of coercion is involved. Even if a municipality is insistent on receiv- ing some sort of PILOT, maintaining flex- ibility about specific program features is important. For example, nonprofits may wish to receive more credit for community benefits, or have plans for phasing in a PILOT agreement. While the municipality may receive smaller PILOTS than it had hoped for at the beginning of negotiations, working in collaboration with nonprofits will make them more likely to participate in a PILOT program. Having most major nonprofits in a municipality buy into a pro- posed PILOT program has major benefits, KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 37 ................. such as reducing criticism related to hori- zontal inequities and putting more pressure on nonprofits to make voluntary payments so they would not be one of the few insti- tutions not participating. Boston's creation of a task force in January 2009 to expand its PILOT program provides some guidance for other cities. The task force included representatives from the major stakeholders: hospitals (2 task force mem- bers); universities (2); businesses (2); local government (1); community organizations (1); and labor (1). Despite their divergent interests, the members met regularly over 14 months and were able to reach agreement on a series of recommendations. Forming a similar task force is one way for muni- cipalities to build support for a PILOT program in their communities. PILOT PROGRAM FEATURES Systematic PILOT Program vs. Individual PILOT Agreements For larger cities with a significant number of nonprofits owning tax- exempt property, a systematic PILOT program is desirable because it can address many of the prob- lems associated with PILOTS. However, for smaller municipalities that only have one or a handful of nonprofits that will be targeted for PILOTS, it may be more realistic to reach individual agreements with each organization. Types of Nonprofits Targeted Municipalities must decide which types of nonprofits to target for PILOTS. While many people oppose the idea of asking small social service providers or religious organizations for PILOTS, turning this basic idea into a consistent policy can be difficult because of the wide range of services pro- vided by nonprofits and the fact that people often disagree about which types of activities should be subsidized via tax exemption. One way to address this problem is to develop a list of general principles, and then solicit PILOTS only from nonprofits that do not satisfy these requirements. This approach was taken under Philadelphia's Voluntary Contribution Program in the mid- 1990s. The city sought PILOTS from charities that did not meet the five criteria of a "purely public charity" as defined by the state supreme court. As a result, only about 50 of 580 charities in the city were asked for a PILOT. While this approach worked reasonably well in Philadelphia, courts had widely varying interpretations of the "purely public charity" test throughout the rest of the state, which illustrates the ambiguities that can result from this type of list of general principles (Glancey 2002). An alternative approach is to set a threshold level of assessed value or operating revenues for inclusion in a PILOT program. For example, Boston's PILOT Task Force recommended establishing a threshold of $15 million in assessed property value for a non- profit to be included in its PILOT program. This approach focuses attention on those nonprofits that would normally make the largest PILOTS, but can result in similar non- profits being treated very differently solely because of their size, which is a poor proxy for both the community services provided by nonprofits and their ability to make PILOTS. Some municipalities ask for PILOTS from specific types of nonprofits. For example, Detroit has targeted housing facilities for low- income residents and the disabled (Le- land 2002, 203). Finally, in many municipal- ities the decision about which organizations to target is easy, because their nonprofit sec- tor is dominated by a single large institution. Another view is that fairness requires municipalities to ask all property - owning tax - exempt nonprofits for PILOTS. These advo- cates argue that since PILOTS are voluntary, obtaining at least modest contributions from 38 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY all nonprofits builds support for a PILOT program, because large nonprofits and spe- cific types of organizations do not feel un- fairly singled out. With a universal program, incorporating community benefit offsets is an even more important element in the negotiations. TriggerforInclusion in PILOT Program Municipalities must decide when it is appro- priate to request PILOTS from nonprofits. One approach is to solicit PILOTS when nonprofits purchase previously taxable prop- erty and thus remove it from the tax rolls, or when they make significant improvements to existing tax- exempt properties. This ap- proach is currently used in Boston. Non- profits may be more likely to support this approach, because they can take the PILOT cost into consideration when deciding to expand, as opposed to being surprised by a new request for PILOTS over which they have no control. Municipalities also will be able to more gradually adjust their budgets instead of facing a sudden drop in their tax base, and are in a better position to request a PILOT when the nonprofit is requesting a building permit from the local government. How- ever, relying on a trigger for inclusion in a PILOT program leaves a large share of tax - exempt property out of consideration for PILOTS, and thus will normally not raise as much revenue as a strategy of targeting all nonprofits would raise. In addition, seeking PILOTS only during expansion discourages capital investment and raises the cost of entry for new nonprofits. Basis Used to Calculate PILOTS Arguably the fairest basis to calculate PILOT amounts is the assessed value of tax- exempt property, because the PILOT is proportional to the nonprofit's tax savings from the prop- ................. erty tax exemption. Like regular taxpayers, owners of exempt property are more likely to view a PILOT request as fair if they view the assessed value as accurate. While cur- rent assessments are often unreliable, it is not as difficult to obtain accurate assess- ments of exempt property as is commonly believed. Some guidance can be found in recent efforts by the Boston Assessing Department to estimate the value of exempt property owned by educational and medical institu- tions in the city for FY2009. The depart- ment first used its statutory authority to obtain detailed facility information from these organizations. Since the types of properties owned by many nonprofits have relatively few trans- actions that can be used for comparable sales, the city relied primarily on the income approach for assessments and used a cost approach for some special purpose items. The department then allowed the institu- tions to review these assessments, and made adjustments when necessary (City of Boston 2009, 40). The Boston PILOT Task Force recommended seeking PILOTS equivalent to 25 percent of the taxes a nonprofit would have paid if their properties were not exempt. Other cifies take different approaches. For example, Cambridge, Massachusetts, uses square footage as the basis. In Balti- more, PILOTS were based on an organiza- tion's annual operating income, which is a rough proxy for a nonprofit's ability to make a PILOT (Leland 2002, 203). PILOTS can also be linked to some measure of economic activities, as in the part of Yale's PILOT that is based on the number of residence beds and the number of employees (Kelder- man 2010). Sometimes there is no apparent basis for a PILOT other than the negotiations between the nonprofit and municipality to set an acceptable amount. KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 39 ................. Multiyear Agreements Some PILOTS include a multiyear agree- ment between the nonprofit and the muni- cipality, often with an escalator clause. For example, the Massachusetts Institute of Technology's PILOT to Cambridge is sub- ject to a 2.5 percent annual increase (Kel- derman 2010). The advantage of a multi- year agreement is that it reduces uncertain- ty for both nonprofits and municipalities. Community Benefit Offsets One of the central arguments for PILOTS is that some charitable nonprofits provide modest public benefits to local residents relative to their tax savings. There are two ways to address this critique: these organiza- tions can make PILOTS (essentially reduc- ing their tax savings), or they can provide greater public benefits for local residents. Some municipalities have pursued the second approach by incorporating commu- nity benefit offsets into their PILOT pro- grams. That is, the nonprofits' target cash PILOTS are reduced in return for providing public services directly benefiting local resi- dents. This approach was a key component of Philadelphia's Voluntary Contribution Program in the mid - 1990x, and the PILOT Task Force in Boston also emphasized the importance of community benefits in their recommendations. There are several reasons that municipal- ities interested in PILOTS should consider community benefit offsets. First, nonprofits may be better able to provide many public services than municipal governments, and they can often do so at a lower cost. For ex- ample, given their resources and expertise, nonprofit hospitals are in a particularly good position to provide free health clinics for local residents. This approach is also more likely to foster mutually beneficial partner- ships between municipalities and nonprofits. Nonprofits are normally more willing to contribute in -kind services than to make PILOTS, and may be able to raise private donations to support these initiatives, whereas PILOTS could possibly discour- age philanthropy. The difficult part about incorporating community benefit offsets into a PILOT program is deciding what services should count for offsets. It is crucial that a muni- cipality is clear and consistent about its priorities—that is, which types of services would be most beneficial for residents. Then nonprofit leaders and city officials can work together to identify the best oppor- tunifies to leverage nonprofits' expertise, TABLE 8 Community Benefit Offsets to Reduce Cash Should count as an offset PILOTS Should not count as an offset Job training for local residents Job creation Scholarships reserved for local residents Scholarships available to all students Public health clinic Unreimbursed medical care that was billed for Property taxes voluntarily paid on property being used for an exempt purpose Property taxes paid on property that is not actively used for an exempt purpose After school tutoring for local students Not applicable Legal aid Not applicable After school arts, music, and sports programs Not applicable Note: These are rough guidelines, but decisions about which benefits should count depend on the needs of individual municipal it es and the capacity of local nonprofits to provide services. For another set of guidelines, see City of Boston (2009, 75 -79). 40 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY ................. TABLE 9 Ways Municipalities Can Obtain Voluntary Contribution Contingent Contribution Compulsory Contribution Nonprofits Only PILOTS Municipal service fees Tuition tax SILOTs All Property n/a Fees For - profit entities pay property Owners Charges taxes on all property; Special assessments Nonprofits pay property tax on property not used for exempt purposes resources, and interests to reach these goals. The Boston PILOT Task Force rec- ommends that only "those services that are `above and beyond' the tax- exempt organi- zation's business model should be consid- ered for PILOT credits" (City of Boston 2009, 7). Table 8 provides some suggestions for which types of activities should count for community benefit offsets based on the description above. To consider community benefit offsets, municipalities must have a way to estimate the cash value of donated in -kind services or volunteer hours to reduce a nonprofit's target cash PILOT. Experience from Phila- delphia's Voluntary Contribution Program shows that nonprofits can be "trusted to value their services fairly" (Glancey 2002, 217). Finally, municipalities may wish to estab- lish a limit on the amount that community benefits can reduce a nonprofit's target cash PILOT. For example, one of the Boston PILOT Task Force's recommendations was to increase the maximum community bene- fit offset from 25 percent of the cash PILOT to 50 percent (City of Boston 2010). ALTERNATIVES TO PILOTS There is a wide range of alternatives to formal PILOT programs for cash - strapped municipalities with a substantial or growing nonprofit sector. Table 9 divides the options into those that apply to nonprofits only or to all entities, and distinguishes three types of contributions. Voluntary Contributions Nonprofits can make direct contributions to their municipalities by providing needed services such as health clinics, legal clinics, or scholarships, often referred to as services in lieu of taxes, or SILOTs. These arrange- ments are very similar to community benefit offsets, but a city can have SILOTs without having a PILOT program. For example, Vanderbilt University does not make a PILOT to Nashville, but does provide police protection for areas of Nashville surround- ing its campus (Nelson 2010). Some analysts believe that municipalities would be better off pursuing partnerships with local nonprofits to provide needed pub- lic services and foster economic development than by seeking PILOTS. For example, the Worcester Regional Research Bureau (2004, 16) concluded that instead of Seeking PILOTS "the City [would] be better served by increas- ing the tax base through economic develop- ment projects in collaboration with the insti- tutions of higher learning." Contingent Contributions Municipal service fees are charged only to nonprofits to pay for government services that taxable entities pay for with property taxes or other general revenues, such as police protection and road maintenance. This option is rarely used because of legal challenges, but since 1973 Minneapolis has levied street maintenance fees against nonprofits based on the square footage KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 41 ................. of exempt properties. In 2010 this fee is expected to generate $775,000 in revenue from 1,600 tax- exempt organizations in- cluding churches and cemeteries (Hjelle and Hjermstad 2009). User fees are typically paid by nonprofits and for -profit businesses alike, so when mu- nicipalities reduce the proportion of their budgets financed by property taxes and in- crease the proportion financed through user fees this shift in revenue sources will bring in additional revenue from nonprofits. For example, if garbage collection is currently financed through the property tax, a munic- ipality can use a fee instead, and apply that fee to nonprofit organizations as well as other property owners. There are some fees that fall between a user fee (which can be charged to nonprofits) and a tax (which cannot). Fees that fall in this gray area are often litigated in state courts, with the rulings varying by state. In the case of fire protection fees, the highest court in West Virginia ruled that a fire and flood protection fee was not a tax, but the highest court in Massachusetts ruled a Bos- ton fire protection fee to be an unconstitu- tional tax (Youngman 2002, 25 -26). Some issues considered by courts include whether the fee is paid by all organizations or only tax- exempt nonprofits, whether property values are the basis used to calculate the fee, and whether the level of payment is directly tied to the amount consumed by the non- profit (i.e., garbage removal) or not (i.e., fire protection). Both nonprofits and other entities usually have to pay special assessments, which are based on property values and used to pay for improvements that benefit specific prop- erties in a municipality. For example, special assessments may be used to pay for sewer hookups for properties in a certain part of a municipality. Compulsory Contributions Tuition tax proposals have been proposed or considered in several states and municipali- ties, but none has yet been levied. However, three Maryland counties do levy energy taxes solely on nonprofits (Anft 2001, 3). Depending upon the state constitution and state law, a municipality might be able to reduce the amount of property tax reve- nue forgone by limiting the amount of the tax exemption. This can be done by limit- ing the dollar value of the exemption (i.e., exempt values only up to $5 million) or the number of acres that can be exempt. Many nonprofits own property that is not central to their charitable purpose, known as ancillary property. States take different approaches to determining whether ancil- lary property should be tax- exempt (Galla- gher 2002). For example, Dartmouth Col- lege must pay property taxes on dorms and dining halls because they are not exempt under New Hampshire law, but other states do not require colleges to pay property taxes on such ancillary property J. F. Ryan Associates 2005, 6). One common critique of the property tax exemption is that it is granted by state governments, but the cost is borne by local governments. Consequently, states may ex- empt a broader range of nonprofits from taxation than they would if they had to bear the full cost of the exemption. In 2002, Vir- ginia voters approved an amendment to the state constitution that transferred authority over granting tax exemptions to local gov- ernments. Fairfax County soon decided to make all future property purchased by non- profits taxable, although existing tax- exempt property was not affected (Shafroth 2005, 811). An alternative way to address this cri- tique is for the state government to provide grants to municipalities hosting tax- exempt nonprofits, as is done in Connecticut. 42 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY ................. CHAPTER 6 ,7 =4 Findings and Recommendations haritable nonprofits are generally exempt from property taxation across the United States at the same time that they benefit from a variety of public services provided by local governments. Some municipalities have at- tempted to recoup part of these public ser- vice costs through payments in lieu of taxes (PILOTS), which are voluntary payments made by nonprofits as a Substitute for property taxes. In recent years, municipal revenue pres- sures and greater Scrutiny of the nonprofit Sector have led to a heightened interest in PILOTS, and Since 2000, PILOTS have been used in at least 117 municipalities in at least 18 States. PILOTS typically contribute a Small percentage of revenues to city budgets, often less than 1 percent. But the dollar magni- tudes can be significant, such as Boston's $15.7 million PILOT from nonprofits in FY2009, and the percentage contribution can be significant in smaller cities, such as in Bristol, Rhode Island, where PILOTS account for 5 percent of the city's budget. With an annual PILOT of $7.5 million, Yale Univer- sity makes the largest payment among col- leges and universities in the United States. PILOTS are an attempt to compensate for the revenue loss from the property tax exemption for nonprofits and for Several problems with that tax exemption. Nation- wide, the forgone revenue from the property tax exemption for nonprofits was estimated at $17 billion to $32 billion in FY2009 in one Study, and about 5 percent of total prop- erty tax revenues in another. The percentage varies considerably among cities depending KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 43 ................. upon the size of their nonprofit sector and reliance on property tax revenues. A survey of the largest cities in the United States found that the nonprofit tax exemption reduces the property tax base from 10.8 percent in Philadelphia to 1.9 percent in Memphis and El Paso (see figure 5). The charitable property tax exemption for nonprofits has several inherent flaws when viewed as a subsidy to encourage charitable activities —the currently dominant rationale for the exemption. Frequently there is a geo- graphic mismatch between the benefits pro- vided by tax- exempt nonprofits and the cost of the exemption in forgone property tax revenues. While the benefits are broadly dis- persed throughout a metropolitan area, a state, or the nation, the cost of the charita- ble property tax exemption is concentrated in a small number of municipalities, espe- cially center cities and college towns. Additionally, the property tax exemption primarily benefits nonprofits with the most valuable landholdings, not those providing the greatest public benefit. Thus, there are no tax savings for nonprofits that rent, and the greatest tax savings go to large nonprofits, especially hospitals, universities, and long- term housing facilities. PILOTs can provide crucial revenue for certain municipalities while addressing some of the problems with the charitable proper- ty tax exemption, but there are serious prob- lems with PILOTs as well. Because they are voluntary payments, PILOTs are haphazard and often calculated in an ad hoc manner, with the level of payments normally de- pending more on the aggressiveness of municipal officials than on property values or the amount of public services consumed by nonprofits. As a result, similar nonprofits often pay very different amounts; PILOTs frequently lack transparency and predict- ability; they can strain relations with non - profits; and they often raise little and unreli- able revenue. Given the major differences across municipalities, there is no single set of recommendations: PILOTs are appropri- ate for some municipalities and nonprofits, but not all (table 10). Among its general recommendations, this report suggests that municipalities should work collaboratively with nonprofits when seeking PILOTs to minimize the burden TABLE 10 General Recommendations for Municipalities Recommendation Explanation PILOTS are not appropriate PILOTS can provide crucial revenue for municipalities highly reliant on property tax revenue or with a signifi- for all municipalities. cant share of total property value owned by tax - exempt nonprofits. In some cases, legal and administrative costs may outweigh the revenue potential. PILOTS are not appropriate Municipalities should focus on nonprofits owning large amounts of tax - exempt property and providing modest for all nonprofits. benefits to local residents relative to their tax savings. Municipalities should work This should make local officials more aware of the benefits that nonprofits provide to local residents and collaboratively with nonprofits the financial constraints they face. Nonprofits may offer suggestions that reduce the burden of PILOTS for when seeking PILOTS. their organizations, while still making a financial contribution to the local government. Negotiating individual PILOT Case - bycase negotiation enables consideration of the unique financial constraints for each nonprofit, agreements is best for munici- but can lead to large discrepancies in PILOT amounts among similar nonprofits. palities with few nonprofits. Systematic PILOT programs This approach promotes horizontal equity among tax - exempt nonprofits, fosters transparency, makes are best for municipalities with payments more predictable, and may raise more revenue than negotiating individual agreements. a large number of nonprofits. Consider alternatives to PILOTS. Because of the serious pitfalls of PILOTS, alternatives should be considered, ranging from increased user fees to grants from the state to municipalities that host tax - exempt nonprofits. 44 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY ................. TABLE 11 Recommendations for Systematic PILOT Programs Recommendation Explanation Set a target for contributions. A target is a useful starting point for negotiations, and may be based on the per- centage of local government spending on services directly benefiting nonprofits. Use a basis to calculate Using exempt property values as a basis promotes equity, while using square payments. footage as a basis is easier to administer. Make adjustments for Nonprofits should be able to reduce their cash payments in return for providing community benefits. certain public services for local residents. Consider soliciting PILOTS Nonprofits avoid an unexpected new expense, and municipalities avoid facing when property is taken off a sudden drop in their tax base. However, this significantly erodes the revenue tax rolls. potential of PILOTS. Phasing in property tax exemptions over several years also achieves these goals. Use a threshold to determine A threshold level of property value or annual revenues excludes nonprofits lacking which nonprofits to include. the financial resources to make meaningful contributions. Reach multiyear PILOT Long -term agreements reduce uncertainty about future payments for both agreements. nonprofits and municipalities. placed on nonprofits for the revenue collected (table 11). Negotiating individual PILOT agreements works best for municipalities with few nonprofits, while a systematic PILOT program is best for municipalities with a large number of nonprofits. For municipalities interested in imple- menting a PILOT program, the Yale —New Haven collaboration and Boston's PILOT program provide useful models. Yale's in- volvement with the New Haven community is an example of how a single nonprofit can play a critical economic development role in a troubled city. Boston has long obtained PILOTS from many of its hospitals, colleges, and universities. Recently the mayor created a task force consisting of major stakeholders and charged them with reaching a consen- sus on changes for this voluntary program. The task force illustrates the importance of building support for a PILOT program, and its recommendations cover many important features of a systematic PILOT program. Because of the serious pitfalls of PILOTS, this report also sets forth a menu of alterna- tives to PILOTS that municipalities can use to raise revenue from tax- exempt nonprofits. These options include reaching agreements with nonprofits to provide requested services in lieu of taxes; increasing reliance on user fees and special assessments, which normally can be charged to tax- exempt organizations; and considering revocation of the property tax exemption for individual properties that are not actively used for nonprofits' charitable purposes. Broader changes can address a problem of accountability with the charitable proper- ty tax exemption: that is, it is granted by state governments, but the cost is borne by local governments. Connecticut has ad- dressed this problem by making state pay- ments to municipalities that host tax- exempt hospitals and universities, while Virginia has transferred authority over the charitable property tax exemption from the state to local governments. In an era of fiscal constraint, in which both municipalities and nonprofits play critical roles in serving the public, PILOTS are no panacea for cash - strapped local governments. 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Sungu- Eryilmaz, Yesim, and Rosalind Green- stein. 2010. Town -gown cooperation in com- munity development. Communities and Banking Summer: 8-10. Federal Reserve Bank of Boston. Swords, Peter. 2002. The charitable real property tax exemption as a tax- base - defining provision. In Property -Tax Exemptionfor Charities, ed. Evelyn Brody, 377 -382. Washington, DC: Urban Institute Press. Town of Peterborough a. The MacDowell Colon, Inc. 943 A.2d 768 (NTL 2008). Urbina, Ian. 2009. Pittsburg Mayor strikes a deal to abandon tuition tax. New York Times, December 22. KENYON AND LANGLEY • PAYMENTS IN LIEU OF TAXES 47 ................. U.S. Department of the Interior. 2010. Payments in lieu of taxes. http: / /www.doi.gov/ pilt/indevhtml Utah County a Interrrwuntain Health Cane Inc., 709 P2d 265 (Utah 1985). Walker, David M. 2005. Tax- exempt sector: Governance, transparency and oversight are critical for maintaining public trust. Testimony before the House Committee on Ways and Means by Comptroller General of the United States. Washington, DC: U.S. Government Accountability Office. April 20, Weisbrod, Burton A. 2004. The pitfalls of profits. Stanford Social Innovation Review Winter: 40-17, Wing, Kennard T, Thomas H. Pollak, and Amy Blackwood. 2008. Nonprofit almanac: 2008. Washington, DC: Urban Institute Press. Worcester Regional Research Bureau. 2004. Will PILOTS fly in Worcester? Taxing non - profits and other options. March 24. www. wrrb.org 17eports 104- 04pdotpdf Yinger John, Howard S. Bloom, Azel Borsch - Supan, and Helen F Ladd. 1988. Property taxes and house values: The theory and estimation of Woo - jurisdictional property tax capitalization San Diego: Academic Press. Youngman, Joan M. 2002. The politics of the property-tax debate: Political issues. In Property -Tax Exemptionfor Charities, ed. Evelyn Brody, 23-46. Washington, DC: Urban Institute Press. Yoe, Lorene, and Mike Colias. 2010. Illinois Supreme Court upholds trying against Proven in tax - exempt case. Cmin's Chicago Bunnes, March 18. Zapana, Victor. 2009. Yale to up payment to city. Yale Daily New, February 27. ACKNOWLEDGMENTS We are grateful to Bethany Paquin for her able research assistance and comments on report drafts, which contributed significantly to the quality of this report. Michael Laderman also provided valuable research assistance by collecting extensive information about municipalities' use of PILOTS. We thank the following Lincoln Institute staff and fellows for their helpful comments on the work in progress and other contributions: Richard Dye, professor at the Institute of Government and Public Affairs, University of Illinois, and visiting fellow at the Lincoln Institute; Gregory K. Ingram, presi- dent and CEO; Ann LeRoyer, senior editor and director of publications; Jane Malme, fellow; Emily McKeigue, managing editor; and Joan Youngman, senior fellow and chairman of the Institute's Department of Valuation and Taxation. These outside reviewers also helped improve the report with their careful reading and insightful comments: Evelyn Brody, Professor, Chicago -Kent College of Law; Pamela Leland, Principal and Founder, The Leland Leadership Group, LLC; and David Sjoquist, Director, Fiscal Research Center, Andrew Young School of Policy Studies, Georgia State University. In addition, special thanks go to the following Massachusetts -based individuals who participated in a September 2010 review session on the draft report: James A Chiavelli, Communications Director, Office of Government Relations and Community Affairs, Northeastern University Stephen Cirillo, Director of Finance, Town of Brookline Richard Doherty, President, Association of Independent Colleges and Universities in Massachusetts John Erwin, Executive Director, Conference of Boston Teaching Hospitals Andrew Johnson, Assessing Department, City of Cambridge Eric A. Lustig, Professor, New England Law School, Boston Kevin A. McCluskey, Senior Director of Community Relations for Boston, Harvard University Ronald W. Rakow, Commissioner of Assessing, City of Boston John Robertson, Deputy Legislative Director, Massachusetts Municipal Association Although the authors took reviewer comments seriously in crafting their recommendations, the final report's recommendations are not meant to represent the views of the individuals or organizations listed above. 48 POLICY FOCUS REPORT • LINCOLN INSTITUTE OF LAND POLICY ABOUT THE AUTHORS Daphne A. Kenyon is a visiting fellow in the Lincoln Institute's Department of Valuation and Taxation and principal of D. A. Kenyon & Associates, Windham, New Hampshire. She has worked on a wide range of public finance issues as professor of economics at Dartmouth College and Simmons College, as a policy analyst for nonprofits and government, and as a consul- tant. She currently sits on the New Hampshire State Board of Education and the Education Commission of the States. Adam H. Langley is a research analyst in the Lincoln Institute's Department of Valuation and Taxation, where he has coauthored papers on property tax relief programs, education finance, and state -local government fiscal relationships. He earned his B.A. in political studies from Bard College, and is currently a master's student in economics at Boston University. He previously worked in the New York State Assembly. ABOUT THE LINCOLN INSTITUTE OF LAND POLICY www.lincolninst.edu The Lincoln Institute of Land Policy is a leading resource for key issues concerning the use, regulation, and taxation of land. Providing high - quality education and research, the Institute strives to improve public dialogue and decisions about land policy. As a private operating foundation whose origins date to 1946, the Institute seeks to inform decision making through education, research, policy evaluation, demonstration projects, and the dissemination of information, policy analysis, and data through our publications, Web site, and other media. By bring- ing together scholars, practitioners, public officials, policy makers, journalists, and citizens, the Lincoln Institute integrates theory and practice and provides a nonpartisan forum for multi- disciplinary perspectives on public policy concerning land, both in the United States and internationally. t" L._. I Payments in Lieu of Taxes Balancing Municipal and Nonprofit Interests OUTPATIENT n recent years, local government revenue pressures have led to heightened interest in payments in lieu of taxes (PILOTS), which are payments made voluntarily by tax - exempt nonprofits as a substitute for property taxes. Over the last decade PILOTS have been used in at least 117 municipalities in at least 18 states. PILOTS can provide crucial revenue for certain municipalities, and are one way to make charitable nonprofits —which are exempt from property taxation in all 50 states —help pay for the public services they consume. However, PILOTS are often haphazard, secretive, and calculated in an ad hoc manner that results in widely varying payments among similar nonprofits. In this report Daphne A. Kenyon and Adam H. Langley, visiting fellow and research analyst at the Lincoln Institute of Land Policy respectively, explore PILOT use across the United States within the context of municipal revenue pressures and the property tax exemption for nonprofits, and they make these recommendations. • PILOTs are one revenue option for municipalities. PILOTS are most appropriate for municipalities that are highly reliant on the property tax and have a significant share of total property value owned by nonprofits. PILOTS are also most suitable for nonprofits that own large amounts of tax - exempt property and provide modest benefits to local residents relative to their tax savings. • Municipalities should work collaboratively with nonprofits when seeking PILOTS. Because PILOTS are voluntary payments and because both nonprofits and municipalities share a commitment to serving the general public, the best PILOT initiatives arise out of partnerships between municipalities and non- profit organizations. Boston's PILOT program and the agreement between Yale University and New Haven are examples of successful collaborative arrangements. • State and local governments should consider alternatives to PILOTS. Because there can be problems with PILOTS, this report also sets forth alternatives for augmenting municipal revenues. State governments should consider providing grants to local governments that host tax - exempt nonprofits to compensate them for their loss of property tax base, as in Connecticut. Municipalities can also consider such alter- natives as user fees, charges, and special assessments, which are paid by both nonprofits and for - profit entities. U of I / Iowa City Attachment D It is agreed that the oro ®reta share of the annual exnenses of the Iowa _City fire Den-7rtm-ent to be -aid by the State University of Iowa to the City of io&a City abal'1 be btaed on the folloviog formula, State Univeraity.of Iowa ®a share equals S;x I S + C y I F ry [i'i'i e�'?✓'L •�'iv �,i e,. -� a7,d `x /5 RAJ �'.� 04% definition The Fire Protection Agreement, dated June 2 1. 1957. between the City of Iowa City and the State Board of Regents to hereby amended as of this F" day of 9 .1959. by cbamging the the r.. & U'RivIsrsitY Share Of annual expenses to read as follows: CITY OF I® CITY STATE BOARD OF RZGENTS Peter F. Awn® City Manager David Am Dancero Secretary • a � 0 1 "10 CITY OF IOWA CITY and STATE BOARD OF REGENTS The —.ire Protection Agreement dated June 2:, 1957 between the City of Iowa -�itr and the State Board of Regents and Supplement #1 thereto, dated a. y 8, 1959, is further arnended this 10th day of March. 1961 by adding the following Eaords within the parentheses appearing in Supplement f 1 t "and $34, 375 for the year 1960' CIT' :r_ ION A CITY By Peter F. Roan, City Manager 0 "PILOT I" Attachment E AGREEMENT FOR THE PAYMENT OF CITY SERVICES AT THE OAKDALE RESEARCH PARK cc k61041- This agreement is entered into this day of Ate, 1996 by and between the University of Iowa Facilities Corporation (hereinafter referred to as "Facilities Corporation "), the University of Iowa Research Park Corporation (hereinafter referred to as "Park Corporation ") and the City of Coralville (hereinafter referred to as "City ") hereafter collectively referred to as the Parties. Whereas, the City entered into an agreement with the University of Iowa dated March 1, 1989 for the purpose of jointly exercising their respective powers to facilitate the development of the University of Iowa Oakdale Research Park ( "Park "); Whereas, the Park Corporation leases from the University of Iowa, pursuant to a ground lease agreement dated March 1, 1989 and recorded with the Johnson County Recorder on August 30, 1989, Book 1079, Page 490, a portion of the University of Iowa's Oakdale Campus, located in the City of Coralville, consisting of 173.5 acres described on Exhibit A, for development of the Park; Whereas, the Park was designed to promote academic research in harmony with the educational mission of the University of Iowa and to promote the development of the community by attracting commercial tenants; Whereas, the City has furnished essential support in the early stages of the development of the Park; Whereas, the Parties acknowledge the value of certain City sponsored tax incentives in pursuing the mission of the Park; Whereas, portions of the Park infrastructure were developed by the City through City sponsored funding sources including the November 1, 1989 General Obligation Bond Issue; Whereas, the City provides essential services to each Park tenant; Whereas, the Park Corporation intends to lease property to the University of Iowa or its designee for the development of the National Advanced Driving Simulator. Whereas, the Facilities Corporation, a tax exempt entity, owns the building located at 2501 Crosspark Road within the Park and leases the building to the University of Iowa; Whereas, the Facilities Corporation recognizes the unique mission of the Park with regard to utilizing University of Iowa land for developing commercial enterprise and thus recognizes the need to pay fees for City services; Whereas, it is in the best interest of the Parties to clarify issues regarding fees for City services provided to Park tenants; Now Therefore, it is hereby agreed as follows: 1. The Facilities Corporation will leave the 2501 Crosspark Road property on the City of Coralville tax roll until the November 1, 1989 General Obligation Bond Issue has been defeased. Thereafter, in the event the Facilities Corporation would decide to remove the property from the tax roll, payments for City services would be made to the City equivalent to amounts the City would have received through tax assessments; 2. The Park Corporation will add language to its future land leases, reminding its future tenants of their tax obligations and requiring future tenants to covenant that in the event the tenant becomes tax exempt, or transfers interest to a tax exempt entity, the tenant or its successor shall make payments to the City in lieu of the City's taxes. The payments would be in amounts equivalent to the tax receipts the City would have received had the improvements not become tax exempt. The prospective tax provision would be applicable in all instances unless prohibited by the State or Federal government; 3. In the case of the National Advanced Driving Simulator (NADS), the Park Corporation will include language in its prospective lease with the tenant representing the NADS project requiring the tenant to make payments to the City for City services equivalent to amounts the City would have received through tax assessments attributable solely to the value of the building construction as financed from State funds -- estimated at $5.7 million; 4. That this agreement shall extend for the duration of the Research Park Ground Lease and extensions thereof; 5. That this agreement may not be altered, modified, or amended except in writing signed by the parties hereto. WHEREFORE, this agreement is entered into by and between the parties as of the date first written above. University of Iowa Facilities Corporation By: V1lN.�W. baL 97r,�!_ Darrell wyrick, President University of Iowa Research Park Corporation avis, Le is D President City of Coralville By:� Ji/m FA ause�tt, mayor City Clerk ACKNOWLEDGMENT OF THE CITY OF CORALVILLE STATE OF IOWA ) )ss: JOHNSON COUNTY ) On this J614L day of 'VU , 1996, before me, a Notary Public in and for the State of Iowa, personally appeared Jim Fausett and Arlys Hannam, to me personally known, and who, being by me and duly sworn, did say that they are the Mayor and City Clerk, respectively, of the City of Coralville, Iowa; that the seal affixed to the foregoing instruments is the corporate seal of the corporation, and that the instrument was signed and sealed on behalf of the corporation, by authority of its City Council, as contained in No Q6-' 0 passed (the Resolution adopted) by the City Council, on the �� tUkday of aatg-G 1995, and that the Mayor and City Clerk acknowledged the execution of the instrument to be their voluntary act and deed and the voluntary act and deed of the corporation, by it voluntarily executed. IN19 -0 ary gu�lic in and for said County and State 1 \hollins�. 7 "PILOT 2" - UIHC / IRL Attachment F PAYMENT IN LIEU OF TAXES AGREEMENT THIS PAYMENT IN LIEU OF TAXES AGREEMENT, made and entered into as of June 1, 2010 (the "Agreement "), by and between the Board of Regents, State of Iowa (the "Regents "), on behalf of the University of Iowa Hospitals and Clinics, and the CITY OF CORALVILLE, IOWA (the "City "); WHEREAS, the City is the owner of certain property (the "SMF Land ") located north of Ninth Street within a certain area of the City known as the Iowa River Landing (the "IRL ") and the City has agreed to sell the SMF Land to Regents and Regents has agreed to construct thereon a medical office building which will include approximately 150,000 gross square feet of medical office, clinical facility and related space and certain finish materials, fixtures, furnishings, equipment and appliances for the foregoing (the "SMF" or the `Building" and, together with the SMF Land, the "Proper') for the benefit of the University of Iowa Hospitals and Clinics ( "UIHC'); and WHEREAS, once the Building is constructed, the Property will be operated by UIHC which is under the control of Regents and as such the Property will be exempt from taxation pursuant to Section 427.1 of the Code of Iowa; and WHEREAS, notwithstanding that the Property is exempt from taxation pursuant to Section 427.1 of the Code of Iowa, the City will provide police, fire and other services to the Property and construct and maintain streets, sidewalks, storm water drainage and other improvements and facilities serving or benefiting the Property; NOW THEREFORE, the Parties agree as follows; 1. In consideration of the foregoing, Regents agrees to make an animal payment (the "Annual Pilot ") to the City in lieu of taxes in an amount equal to $1,000,000 (adjusted as hereinafter provided) such payments to be made in perpetuity on or before April 15 of each year commencing April 15, 2013, and to be for the fiscal year (the "Applicable Fiscal Year ") ending on the June 30 following such April 15 payment: date. 2. The parties agree that the amount of the Annual Pilot for an Applicable Fiscal Year (i) shall be increased for each Applicable Fiscal Year to an amount equal to the sum of (a) $1,000,000 plus (b) an amount equal to 28,643 multiplied by the Differential Tax Levy Rate for such Applicable Fiscal Year and (ii) shall be reduced (but not below $0) in the event that all or any portion of the Property loses its exemption from taxes because of a sale, a change in use, a change in law or for any other reason, such reduction to be by an amount equal to the amount of tax revenues, if any, received by the City during the Applicable Fiscal Year as a result of taxes levied by the City with respect to the Property for such Applicable Fiscal Year. For purposes of this Agreement, the tern "Differential Tax Levy Rate" shall mean the amount (expressed as dollars per thousand dollars of valuation) by which the sum of the CVI District Tax Levy Rates for such Applicable Fiscal Year exceed $34.91281 per thousand dollars of valuation, the CVI District Tax Levy Rate for the fiscal year ending June 30, 2010 (the "Base -1- 4843- 7673 - 9332 \10 61312010 J Draft Dated 6/3/10 Fiscal Year ") and the term "CVI District Tax Levy Rate" means the aggregate combined tax levy rates for Johnson County, Iowa, the City of Coralville, Iowa, the Agricultural Extension District, the Kirkwood Connnunity College, the Iowa City Community School District, the Area Education Agency 10, the State of Iowa, the Johnson County Assessor, and any other governmental entity or taxing authority levying taxes against property in Johnson County, Iowa for such Applicable Fiscal Year. -2- 4843- 7673 - 9332 \10 6/3/2010 Draft Dated 6/3/10 IN WITNESS WHEREOF, Regents has executed this Payment In Lieu of Taxes Agreement all as of the date first above written. BOARD OF RE GENTS, STATE OF IOWA By: Nam Title. STATE OF IOWA ) i'� O SS: COUNTY OF 1� ) he foregoing instrument was acknowledged before me this Cl Ay of 3401—c 20I0, by as the of Board of Regents, State of Iowa, on its half. Notary Public r RUTH ILEM E-TUTTLE cornmisalc� t 731889 [Seal/Stamp] My C.mrr!, - n Expires December 9; 2010 [Execution Page for Payment In Lieu of Taxes Agreement] IN WITNESS WHEREOF, the City has executed this Payment In Lieu of Taxes Agreement all as of the dale first above written. CITY OF CORALVILLE, IOWA i vii ii l...�_.i` �� : By: . ✓�� Thorsten Johnso uty 0r c STATE OF IOWA ) ) ss COUNTY OF JOHNSON ) (Seal) The foregoing instrument was acknowledged before me this 24 day of June, 2010, by Jim L. Fausett and Thorsten Johnson, as the Mayor and City Clerk of the City of Coralville, Iowa, respectively, on its behalf. KEVIN 0- OLSON ., e0mml 5jDN Number T2792� Notary Public My Cammierppn Eepfet e�� [Seal/Stamp] [Execution Page for Payment In Lieu of Taxes Agreement] Attachment G THE UNIVERSITY OF IOWA PROFESSIONAL SERVICES AGREEMENT THIS AGREEMENT for professional Services (hereinafter "Agreement`) is made by and between The University of Iowa (hemlhefter'UnlversM and 011verMcMlllan, L-C, 733 8th Avenue, San Diego, California 92101 (hereinafter "Contractor). FOR CONSIDERATION of the mutual promises and covenants cantained herein, the University and Contractor agree as follows: SCOPE OF WORK A, Professional Services: Contractor agrees to provide Professions( Services (hereinafter ' Services') as described below: In conjunction with the University and the City of Corelvllle, lava, Contractor shall perform pre- development services with respect to the proposed development and construction of a medical of laelolinlc building (hereinafter 'MOB") to be initially occupied by the University and Included as part of the Iowa River Landing project in the City of CoreNiile, Iowa. Such services shall include: 0) A design and planning chera8e to be held In Iowa. 01) Development of a site master plan. 010 Selection of an architect, engineer, and Interior designer. (Iv) Commencement of the process by which a general contractor shall be selected. (v) Documentation of the various legal agreements to be entered Into between the University, the City of Corelvllle and Contractor. (vi) Commencement of the process by which a construction lender shall be selected for the recordation and funding of a construction loan at end of the Performance Period (es defined hefow). (vii) Conduct of regularly scheduled telephone conferences with.agents and/or representallves of the University and the City of Corelville for the purpose of facilitating the exchange of Information and questions with regard to the planning and development of the MOB. Such telephone conferences shell be held no lase frequently than weeWy, unless otherwise agreed to by Contractor, the University and the City of Coralvllle. Performance Monitoring: To ensure satisfactory and timely performance. Contractor shall produce the fallowing written reports or other written documents to Kenneth Fisher (hereinafter "Project Mimegef) -by the dates indicated: monthly updates of planning and design documents, costs t0 dale. C. Revisions to Scope of Walk: The University reserves the right to make changes to the Services to he provided which are within the Scope of Work above. Such changes and any added cost or cost reduction to the University must be agreed to M writing and signed by the University and Contractor prior to proceeding wlih any change. 2. PERFORMANCE PERIOD The performance period of this Agreement shall begin on the effective date, October 30, 2008, and shall not extend beyond April 30, 2009, unless amended by written mutual agreement. COMPENSATION AND PAYMENT A. Fee: The University agrees to payihe Contractor for Services provided pursuant to this Agreement on the following terms, not to exwed.$344,828.00 for the term of this Agreement The overall schedule of the Contractor's fee based on current project scope and cost estimate during the course of the development and conebu'ction of the MOB Is attached as Exhibit 1. Contractor agrees that the University's obligation to pay compensation under this Agreement shall be extingulshed upon the recordation and initial funding of a construction loan to finawe the cost of constructing the MOB. Reimbursement of Expenses and Costs of Third Parry Consultants: The University agrees to reimburse Contractor for related expenses In connection with performance of the Servicea. Such expenses shall Include amounts paid or incurred by Contractor for services provided and wets Incurred by third -pedy consultants, Including architects and engineers. The budge( far these Costs ofThlyd Party Consultants is attached as Exldbil 2. All expenses must be documented by receipts, excluding meals, and submitted for payment approval cancurreni with submission of an Invoice for payment as provided in provision 3A above. Expense vouchers must Include an Itemized list of miscellaneous expenses. I.e. taxi fare, parking, lips, etc. Contractor will not be reimbursed for dry donning, laundry, valet expenses, and charges for entedalnmeht Expenses for travel and lodging shall be reimbursed In accordance with the University's travel policy, which Includes the following guidelines and maximum fates: (t) Air travel, not to exceed the watch class rate. (11) Auto rentals while at University location, not to exceed standardimidsize car doss, nor "Good one auto for every three (3) Consultant employees an site. Sea Informational attachment on car rental provider(s). (II0 Actual meal coals not to exceed $28 per day. Alcohol Is not a reimbursable expense. (iv) It Is preferred that lodging Is direct billed to the University (see informational attachment). If/when the contractor pays for accommodations, relmbursement to the consullantfcantrador may not exceed $83 per day (base mom rate). Contractor agrees to be responsible for any and all expenses incurred by Canbactor or Contractor's personnel, which exceed the above guidelines and rates. C. invoice for Payment: Within thirty (30) days after the performance period (as the.sams may be emended by written mutual agreement), If tie Univerelty's obligation to pay compensation as required herein has NOT been exgngulahed, then Contractor shell submit an invoice for payment to: University of Iowa Accounts Payable 202 PCO Iowa City, IA 522422600 All Invoices should include a reference to this Agreement and the compensation rate and number of hours or days of service It payment Is to be made other than fixed fee. D. Taxes Liability: Contractor agrees that Conlrector is solely responsible for payment of Income, social security, and other employment taxes due to the proper taxing authorities, and that the University will not deduct such taxes from any Payment to Contrector. CONFIDENTIALITY: Contractor agrees to keep confidential and not to disclose to third parties any Information provided by the University pursuant to this Agreement without the Unlveralty's prior written consent. This provision shall survive expiration and termination of this Agreement, INTELLECTUAL PROPERTY RIGHTS: Contractor agrees that any computer programs, software, documentation, copyrightable wort, discovedea, inventlona, or improvements (hereinafter "Work ") developed by Centractorsoieiy, arwilh others, resulting from the performance of Contractors responsibilities and obligations pursuant to this Agreement are "works made for hire" and the property of the University. If for any reason the Work would not be considered a work made for hire under applicable law. Contractor does hereby sell, Design, and transfer to the University. Its successors and assigns, the entire right, HUD and interest in and to the Work, Including but not limited to exclusive rights to reproduce, distribute, prepare derivative works, display and perform the Work. Contractor agrees to provide whatever assistance Is necessary for the University to preserve Its commercial Interest including, but not limited to, . the filing of patent and copyright protection. This provision shall survive expiration and termination of this Agreement TERMINATION OF AGREEMENT A. Tertninagon for Breach of Agreement: The University may terminate this Agreement upon ten (10) days written notice for breach of this Agreement or any obligation thereof by the Contractor. B. Termination for Convenience: Either Party may terminate this Agreement for convenlence by providing thirty 30 days prior written notice. C. Payment Upon Tennlnallon: Upon termination for any reason, the University shall pay Contractor all fees and expenses in accordance with provision 3 above already provided or Incurred through the effective date of termination. In the event of termination pursuant to Subsection A above, Contractor shall be liable to the University for any additional expenses Incurred by the University for satisfactory CompleUOn of the Services. INDEPENDENT CONTRACTOR RESPONSIBILITIES A. Independent Contractor Status; It is expressly.understood that Contractor is an Independent contractor and not the agent or employee ofthe University. Consultant Is not entitled to tax withholding, workers' compenmlion, unemployment compensation, or any employee benefits, statutory orotherwise. B. Authority: Contractor shall not have the authority to enter into any contract to bind the University and shall not represent to anyone that Conbactorhas Such authority. LIABILITY A, Contractor Liability; To the fullest extent allowed by law, Contractor agrees to indemnify and hold harmless the University of Iowa, the State of Iowa, the Board of Regents, State of Iowa and their agents and employees from and against all claims or losses Including reasonable attorneys' fees, arising out of or resulting from the negligence or omissions of the Contractor, Its partners, directors, ofOcam, employees, licensees, subcontractors or agents, in the provision of products and services under this contract. During the performance of Services. Contractor shall be In compliance with all applicable slate and federal laws, and all applicable provisions of the Policies and Procedures of the Board of Regents, State of Iowa and the University of Iowa, Including bud not limited to the University of Iowa Conflict of Interest policy. Refer to University Operations Manual at Imp:fAvww.ufowo.edul- ourtopmenua0. Insurance ProvlBions Without limiting any fiabililles or any other obliga0ohs of the Contractor, Contractor shall provide certificates of Insurance documenting the minimum insurance coverage requirements listed below unless otherwise agreed to in writing. Coverage may be by Contractor's self - insurance plan or with outside Insurance providers, all subject to University, approval. Such Insurance coverage must be maintained until all obligations under the Agreement are Walled, @ Applicable Workers Compensation insurance to cover liability Imposed by Federal and State statutes having jurisdiction over Contractor's employees engaged In the performance of the Contractors service. Employer's Liability Insurance of no less then $600,000 each employee and $500,000 each accident. (I) Commercial General Liability insurance with a minimum limit of ONE MILLION DOLLARS ($1,000,000) per occurrence. This policy shall Include coverage for bodily Injury and property damage, Including completed operations, personal injury, coverage for contractual employees, blanket contractual and products and completed operations. Policy shall contaln a severabsity, of interests provision. (Ill) Commerdal Automobile Uebility Insurance with a combined single limit for bodily Injury and property damage of not less than ONE MILLION DOLLARS ($1,000,000) with respect to Contractors owned, norvomed, hired, or borrowed vehicles, assigned to or used In performance of this agreement. ov) Umbrella Liability insurance with a minimum limit of $1,000,000 per vocurrence!$10.000,000 in the aggregate, and shall apply to all underlying and primary liability coverages required above. (v) Errors and Omissions (Professional Services Liability) insurance with a minimum limit of $1,000,000 per claim. The policy shall Include coverage for contingent bodily Injury liability. (A) The Commercial General Liability, Commercal Automobile Liability and Umbrella Liability policies required herein shell be endorsed to include the State of Iowa; University of Iowa; Board of Regents, State of Iowa, their agents, officials and employees as additional insured. (vii) Contractor and Its insurers providing the required coverages shall waive all rights of subrogation or recovery against the Slate of Iowa; University of lows; Board of Regents, Stale of Iowa, their agents, offcuils and employees. (vlli) All required insurance policies shall be Issued by reputable Insurance companies duly authorized to engage In the Insurance business In the State of Iowa, with an A.M. Bast's rating of A -, VII or better. These policies shell be primary coverage. Certificates shell opeclfy name of the project and provide that no lees Than So days nollpe of non• renewal, oenwilefon or materiel Cheops shall be given to the University of Iowa. (j TWO (2) Csrryfcelea must be euhmlgad with a[Anod agreement as evidence of campfence with the show requirements. Caffigcales shell show Me Waiver of subrogation and lhlrly (80) days notice for canceled or non - renewed pofGes. Send Ceromtes to: The University of Iowa Purchasing Department 202 PCO Iowa Oily. Iowa 622A2 -2600 AUm (Insert Purchasing Agents Name) (y) Failure an the pen of the Contractor to procure or maintain required Insurance shell conciliate a materiel breach of contract upon which The University may immediately lemrmata en Agreement. or, el IIO dlaunalWn, pmcufear renew such ineurence end pay any and all prerdldmu In connac9onlhshaWiih, and all moneys so paid by.The University, shall be repaid by the Contractor to The Unlwfaliy upon demand, orThe University may ofuet the coat of the premiimts against any moneys duo In Contractor. a0 The University maerveu the tight to request and receive oad)nad copies of any or all of the above policies endlor ondomemenls. (Mb The Urduereily raservec the right to waive or reduce me lnotmnce requirements at the Un)vera0ys soie'diecretion. ASSIGNMENT OR MODIFICATION; Any eoalgluaent atmod l[ca0on of this Agreement shell be wild only bywn[ten mutual agreement signed by both Parties. 10, GOVERNING LAW; This Agreement ahall be governed by and cunstrund under the lows of the State of [aura which shell oleo be the venue for any disputes erieing Immeundar. 1f. USE OF UNIVERSITY NAME: Conttractoragreeo ILWll not use the name of intellectual property, Including but not grafted to, University trademarks N any manner, Including commercial advertising or as a busineoo reference, without the ospreessd priorwriltan cencent of the Unlvgrslty. IN WITNESS WHEREOF, the Parfes 11erete have caused Ihls Agreement to be a acuted In duplicate on of the invest data Bet forth balm. THE UNIVERSITY OF (IOWA 6lgnaaue 0 l/ / 1 �a6LZ�he� Noma iItetor of p�antngof p�anlnq Tight 5jitilo� oato CO f:TO Signature - %v /af Sill penalty Name Chief Financial Ocer '110a l-b -o9 Date Attachment Travel Informational AOvlsory University Preferred travel Vendom/Dlecounle Cordractors /Consullents who are contracted to provide, professional services to the University of Iowa are eligible for some University travel discounts and may utilize the services of the univers(tp%e travel service provldam. Preferred Travel Agencies, Meacham Travel Services .(319) 381 -1300 Shorra Travel Sorvlces (318) S6&0011 Winebrenner Red Carpet Travel Service (319) 3847100 Airlines If be applied Car Rental A list of lum or the Univr this list, the to the Wdaina discount rate. Disclaimer: The above general Information Is. provided for the convenience of University contractors and consultants. The decision to use any particular vepdar listed above rests solely with the consultant or contractor, The Univerally does not warrant, endorse, of guarantee the, quality; quantity, or appropdeteness of any goods or services a vendor may provide. Exhibit 1 Contractor Fee 1 January2000 $ 68,986 2 February 200B 60,ge8 3 March 2009 103,440 4 April 2008 103,448+ End of performance period fur pmrasaicnal services agreement 6 Mgy2009 103,440 (total fee from January 2009 through Apri12009 equal to $344,82a 6 June 2009 103,448 7 July 2009 103,446 8 August 2009 103,448 9 September 2008 103,448 10 0dobar2009 103,446 11 Ndvember2009 103,448 12 December 2009 103,448 13 January 2010 103,448 14 Febmary2010 103,448 15 March 2010 103,448 10 April 2010 103,448 17 May 2010 103,448 18 June 2010 103,443 19 July2010 103,448 20 August 2010 103,448 21 September2010 107.443 22 Odobar2010 103,448 23 Novembar2010 103,448 24 Decembar2010 103,446 25 January, 2011 103,448 26 February 2011 103,448 27 March 2011 103,448 29 Apd12011 103,448 29 May 2011 103A48 Protected opening of MOB 30 June 21111 68,966 Tots ave opment Services Fee $ 3,000,000 + Equal to 0% of projected code of MOB Exhibit 2 Costs of Third Party Consultants (1) Charefte costs based on proportionate share of cheretle costs based on estimated project coats of uses in the master developmerlL The ounenl master development consists of the following uses and square foomges: WHO Phase Phmo I Office S51,00D,000 Phase I non- ambuixlory $4,000,000 Phase 1 'Surgery facility' S2,800,000 3uhmlul S57;80D,000 Pha ; 2 Phase 2 Molt $69,00D,000 Tolut Phue l &2 $125,900,000 24% Stories $90,000,000 17% Mixed Useftlall Ramp JODuarv2D09 Eatrvow 7009 MI[WIL 09 8Od12009 NMI Ami ttect and Engineering Fees $ - $ 160,000 S 150,000 $ 150,000 $ 450,000 Prawnstluc6an$am= Fee 33,333 33,333 33,333 100,000 Third Party Reimbursabtee 15,000 16,000 15,000 45,000 %DO Costs (1) 0.663 513,000,000 2% 9,06$ Tatai $ 198,333 108.3% -s198.333 $ 696,000 (1) Charefte costs based on proportionate share of cheretle costs based on estimated project coats of uses in the master developmerlL The ounenl master development consists of the following uses and square foomges: WHO Phase Phmo I Office S51,00D,000 Phase I non- ambuixlory $4,000,000 Phase 1 'Surgery facility' S2,800,000 3uhmlul S57;80D,000 Pha ; 2 Phase 2 Molt $69,00D,000 Tolut Phue l &2 $125,900,000 24% Stories $90,000,000 17% Mixed Useftlall Ramp $140,000,000 MAW For Sine Tewnhomes(Gums) S60,000,00D 7,500.00 ApOmnml- 250unin(Gumc) _ S50,000,000_ RDO PlaaNn; a DONen SahtOml 5250,000,00D 47% Arena 4,000110 TowlChamdocoate 70,000 Square fact (Gums) 528,000,000 5% Intermodal Perking 650 Spaces 513,000,000 2% Drury Hotel I90Raama(Gurss) SnXO,00D 4% Total 5529,390,00D (OD% The budget of the chemtts Includes the following 6uDb IALNRn Awlseda 4500.00 MAW 5,000.00 Caere, Jaimean 7,500.00 NmmUHen ManaonA,el, 7,513D.00 RDO PlaaNn; a DONen 7,500.00 PAPPAGEOROPJHAYN 7,300.00 On is 4,000110 TowlChamdocoate 41,600.00 times 24 96 = 9,663.40 I-,-, 44adw� First Amendment to Professional Services Agreement between The University of Iowa (University) and OliverMeMillan LLC, 733 80' Avenue, San Diego, CA 92101 (Contractor) dated January 12, 2009. The Parties mutually agree to revise the following sections: Section 2, Performance Period shall be revised to read: "The performance period of this Agreement shall begin on the effective date, October 30, 2008, and shall not extend beyond October 31, 2009, unless amended by written mutual agreement." Section 3, A, Fee shall be revised to read: "Fee: The University agrees to pay the Contractor for Services provided pursuant to this Agreement on the following terms, not to exceed $876,529.00 for the term of this Agreement. The overall schedule of the Contractor's fee based on current project scope and cost estimate during the course of the development and construction of the MOB is attached to this First Amendment as REVISED Exhibit 1. University shall make monthly payment for this work in accordance with Section 5, C, as amended below." Section 3, B, Reimbursement of Expenses and Costs of Third Party Consultants shall be revised to read: "The University agrees to reimburse Contractor for related expenses in connection with performance of the Services. Such expenses shall include amounts paid or incurred by Contractor for services provided and costs incurred by third - party consultants, including architects and engineers. The budget for the Costs of Third Party Consultants is included in MOB Pre -loan Budget, which is attached, as Exhibit 3. The attached Exhibit 3 shall replace and supersede Exhibit 2 to the January 12, 2009 Professional Services Agreement. All expenses must be documented by receipts, excluding meals, and submitted for payment approval concurrent with submission of an invoice for payment as provided in provision 3A above. Expense vouchers must include an itemized list of miscellaneous expenses, Le, taxi fare, parking, lips, etc. Contractor will not be reimbursed for dry cleaning, laundry, valet expenses, and charges for entertainment. Expenses for travel and lodging shall be reimbursed in accordance with the University's travel policy, which includes the following guidelines and maximum rates: (i) Air travel, not to exceed the coach class rate. (ii) Auto rentals while at University location, not to exceed standard/midsize car class, nor exceed one auto for every three (3) Consultant employees on site. See informational attachment on car rental provider(s). (iii) Actual meal costs not to exceed $31 per day. Alcohol is not a reimbursable expense. (iv) It is preferred that lodging is direct billed to the University (see informational attachment). If/when the contractor pays for accommodations, reimbursement to the consultant/contractor may not exceed $120 per day (base room rate). Contractor agrees to be responsible for any and all expenses incurred by Contractor or Contractor's personnel, which exceed the above guidelines and rates." Section 3, C, Invoice for Payment shall be revised to read: "The Contractor shall submit monthly invoices for payment to: University of Iowa Accounts Payable 202 PCO Iowa City, IA 52242 -2500 All invoices should include a reference to this Agreement and the compensation rate and number of hours or days of service if payment is to be made other than foxed fee." All of provisions of the Agreement shall remain unchanged. THE UNWERSITY OF IOWA Signature Debby Zumbach Name Director of Purchasing_ Title . 4X/61 Date CONTRACTOR /, 5 � JO: Richard Paul Buss Name President Title y l3 0 Date Second Amendment to Professional Services Agreement between The University of Iowa ( "University ") and OliverMcMillan LLC, 733 8th Avenue, San Diego, CA 92101 ( "Contractor ") dated January 12, 2009, as previously amended dated April 20, 2009 (as amended, the "Agreement "). The Parties mutually agree to revise the Agreement as follows: Section 2, Performance Period shall be revised to read: "The performance period of this Agreement shall begin on the effective date, October 30, 2008, and shall not extend beyond December 31, 2009, unless amended by written mutual agreement." The first sentence of Section 3, A, Fee shall be revised to read: "Fee: The University agrees to pay the Contractor for Services provided pursuant to this Agreement on the following terms, not to exceed $1,061,179.00 for the term of this Agreement." The following shall be added as Section 3, E, Aggregation of Budget: "Notwithstanding anything to the contrary contained in this Agreement, during the remainder of the performance period of this Agreement, the parties shall not be bound by the individual "line items" set forth in the MOB Pre -loan Budget such that any and all payments due and owing pursuant to this Section 3 shall be made by the University without regard to whether the original budgeted amount for an individual category has been exceeded." By way of example, and not limitation, if the University receives a request to reimburse Contractor for services provided by third -party consultants at a time when the aggregate amount provided for third -party consultants in the MOB Pre -loan Budget has been exceeded, the University shall nevertheless fund such request for reimbursement so long as such payment would not cause the aggregate of the University's expenditures made during the term of (and pursuant to) the Agreement to exceed the amount of $2,457,873.04. Except as amended herein, all of provisions of the Agreement shall remain unchanged. THE UNIVERSITY OF IOWA CONTRACTOR Debby Z a h, Richard Paul Buss Director of asing President 111(g(o U Ig a Date Date BOARD OF REGENTS STATE OF IOWA Attachment H AGENDA ITEM 2 APRIL 28 -29, 2010 Contact: Joan Racki IOWA RIVER LANDING Actions Reauested: Consider: 1. Authorizing the University of Iowa and Board of Regents, State of Iowa Executive Director, in consultation with the Office of the Attorney General, to approve the following documents related to Iowa River Landing, which will be used to develop a satellite medical facility for the University of Iowa Hospitals and Clinics, with the City of Coralville: a. Satellite Medical Facility Development and Purchase Agreement, including the purchase of 57,251 square feet of land at a price of $2,022,678 ($35.33 per square foot) from the City of Coralville; b. Memorandum of Satellite Medical Facility Development and Purchase Agreement; c. Parking Agreement for use of a parking deck the City will develop, d. Payment in lieu of taxes (PILOT) Agreement; and e. Common Area Maintenance Agreement. Subject to final approval of the documents outlined above, approve of the following actions for the Iowa River Landing Ambulatory Care Clinic Facility Development project, a major capital project as defined by Board policy. a. Acknowledge receipt of the University's initial submission of information to address the Board's capital project evaluation criteria (see Attachment A); b. Accept the Board Office recommendation that the projects meet the necessary criteria for Board consideration; and c. Authorize permission to proceed with project planning, including: 1. Waiver of the architectural selection process and the selection of Neumann Monson Architects for the project; and 2. Utilization of a construction manager for the project. (ROLL CALL VOTE) Executive Summary: The University of Iowa is requesting approval of a number of actions related to the Iowa River Landing (IRL) and the Iowa River Landing Ambulatory Care Clinic Facility Development (Ambulatory Care Clinic) project to be constructed at the IRL. As discussed with the University of Iowa Hospitals and Clinics Committee at its February 2010 meeting, UIHC's clinic visit volume has increased by over 50% in the last fourteen years. This growth in outpatient activity has resulted in increased traffic on roadways leading to UIHC, parking ramp capacity is frequently exceeded and the hospitals' public corridors and elevators are often congested. UIHC believes that these deficiencies can best be resolved through the relocation of a number of outpatient clinics to an off -site ambulatory care facility. Decompressing UIHC's core campus creates the needed space to expand other clinical and support services that are best suited to remain on campus, ensures that appropriate facilities are available to meet the demand for patient care services and offers opportunities for increased operational efficiency and revenue enhancement. A smaller, off -site facility devoted BOARD OF REGENTS STATE OF IOWA AGENDA ITEM 2 PAGE 2 to ambulatory care will simplify wayfinding for patients, which is a significant point of dissatisfaction within the UIHC despite continued efforts to improve signage and develop services designed to help patients easily reach their destinations. The IRL site, which is bordered on the north by Interstate 80 (exit 242), on the east by the Iowa River, on the west by Coralville's 1't Avenue and on the south by Coralville's 9`" Street, features excellent arterial roadway access given its adjacency to Interstate 80 and close proximity to Interstate 380 and UIHC. The IRL's projected development as a major shopping, hotel, dining and entertainment complex will also provide an inviting and supportive setting for an ambulatory patient care facility. UIHC believes that these features and the IRL's accessible location strongly argue for its selection as the site for the new ambulatory care facility. In addition, the new off -site ambulatory clinic will provide an opportunity to offer patient services in an environment that emphasizes an ideal experience and features: • timely services provided in a pleasant and friendly atmosphere; • patient and family centered care; • open access; • interdisciplinary collaboration; • the highest level of quality and service; and • standards that govern each segment of the patient care experience from initial contact to arrangements for follow -up appointments on referrals and final billing and collection. These same features will facilitate creation of a new model for outpatient care training for medical students and residents. Agreements with the City of Coralville Agreements under development with the City of Coralville for the Landing include: Satellite Medical Facility Development and Purchase Agreement, Parking Agreement, and Common Area Maintenance Agreement. The University requests that the Executive Director of the Board in consultation with the Office of Attorney General be authorized to approve these documents. The University has provided the following summary of the documents. • Satellite Medical Facility Development and Purchase Agreement ➢ Establishes: • the City will grade the Satellite Medical Facility (Ambulatory Care Facility) land, the parking land and the public infrastructure land; • the City will sell the graded Ambulatory Care Facility (ACF) land to the Board of Regents, State of Iowa (Regents); • the Regents will construct an ACF of approximately 150,000 gross square feet on this land for use by UIHC; • the City will construct a 3 -level parking ramp on the parking land (see Parking Agreement) and the public infrastructure on the public infrastructure land; and • the UIHC will make payments to the City in lieu of taxes (see PILOT Agreement) and for common area maintenance services (see CAM Agreement). • Memorandum of Satellite Medical Facility Development and Purchase Agreement BOARD OF REGENTS STATE OF IOWA AGENDA ITEM 2 PAGE 3 ➢ The Memorandum will be recorded to put third parties on inquiry notice that there is an arrangement between the City and the Regents relating to the property, eliminating the need to record the entire SMF Facility Development and Purchase Agreement. Parking Agreement ➢Establishes that the City will finance the cost to construct the Parking Improvements, Master Grading and Public Infrastructure and will be responsible for carrying each of these through to completion; ➢ Grants an easement to UIHC for access and use, in perpetuity, of a minimum of 569 parking stalls for patients, staff and visitors on the top two levels of a new 3 -level parking ramp to be constructed and operated by the City on a site immediately adjacent to the Ambulatory Care Facility (ACF) and up to 150 additional surface parking stalls at parking facilities near the ACF. A proportionate share of public infrastructure and site preparation would be applied to the cost structure for this parking facility; ➢ City to establish parking fees and charges on an annual basis with UIHC payments made in equal monthly installments; and ➢ Payments begin at completion of City's projects (Parking and Infrastructure). Payment in Lieu of Taxes (PILOT) Agreement ➢ Establishes a mechanism by which UI HC pays the City for police, fire and other services provided to the Ambulatory Care Facility (ACF) and for construction and maintenance of streets, sidewalks, storm water drainage and other improvements and facilities serving or benefitting the ACF; and ➢ City to be paid $1,000,000 for the first year of ACF operation and adjusted annually thereafter. This initial amount was derived by applying the prevailing tax rate to the value of the facility if it were to be developed as a commercial office building and subsequent annual adjustments will be based on changes in the tax rate. Common Area Maintenance (CAM) Agreement ➢ Establishes an annual payment to City for common area maintenance services within Iowa River Landing development, including maintaining, repairing and, as necessary, replacing common area driveways and parking areas, removing snow and ice, sweeping, striping and replacing pavement and lawn maintenance; ➢ Initial annual CAM payment to be $1 per square foot of total constructed clinic space, now estimated at 150,000 square feet, for a total of $150,000; ➢ Payments to be adjusted annually based on changes in the CPI; and ➢ Payments begin at completion of City's projects (Parking and Infrastructure). Included within the Satellite Medical Facility Development and Purchase Agreement is the purchase of a parcel of approximately 1.31 acres (57,251 square feet) in the IRL development at the price of $2,022,678 as the site for the Iowa River Landing Ambulatory Care Clinic Facility Development project to be constructed at the site. The purchase price was derived from an agreed upon price per square foot of $35.33 applied to 57,251 square feet (the estimated number of square feet of real estate contained in the land upon which the Ambulatory Care Facility is to be constructed). This land purchase price includes grading and public infrastructure needed for its development by UIHC. Two appraisals were obtained valuing the property at $1,759,000 ($30.61 BOARD OF REGENTS AGENDA ITEM 2 STATE OF IOWA PAGE 4 per square foot) and $2,100,000 ($36.68 per square foot). The proposed purchase price is consistent with Board policy which provides that property shall be purchased at no more than the high appraisal or not more than five percent over the average of two appraisals, whichever is the lower figure. Funds for the purchase of this property will be provided through University Hospitals Building Usage Funds acquired from depreciation allowances of third parties underwriting the cost of patient care, hospital net earnings from paying patients, and Hospital Revenue Bond proceeds. Attachment B includes the legal description of the property and Attachment C includes the location of the proposed clinic and other proposed facilities at the IRL. The property within the IRL that is planned as the site for this new ambulatory care facility is located in the southwest section of the initial IRL development and is adjacent to Coralville's 1st Avenue and 9th Street. This location is well above the Iowa River's 500 year flood plain and will afford direct and convenient vehicular access to the new clinic facility and the parking accommodations to be developed by the City of Coralville immediately to its north. Iowa River Landing Ambulatory Care Clinic Facility Development The University requests permission to proceed with project planning for the Iowa River Landing Ambulatory Care Clinic Facility Development project which would be located at IRL. The estimated total project cost is approximately $73 million, including the new building and its furniture and equipment. Cost figures will be further developed and refined as planning proceeds. The project would be funded by University Hospitals Building Usage Funds acquired from depreciation allowances of third parties underwriting the cost of patient care, hospital net earnings from paying patients, and Hospital Revenue Bond proceeds. UIHC estimates the internal rate of return over the life of this project at 16.6 %. UIHC requests approval to waive provisions of the Board's Policy Manual that require the selection of an architectural firm by an institutional Architectural Selection Committee for projects of $1 million or more, and requests approval of the selection of Neumann Monson Architects, Iowa City, Iowa, to provide design services for the project. UIHC has outlined the following reasons for this request: • Neumann Monson was chosen through an architectural selection process conducted by the Iowa River Landing developer, OliverMcMillan, for the design of the Medical Office Building (ambulatory care clinic building). OliverMcMillan began its process in the fall of 2008 when the form identified, in consultation with the City of Coralville, a short list of six architectural firms. The short listed firms were invited to a two day charette to design and present their solutions for development of the site. Attendees at the event included prospective and current tenants of Iowa River Landing, various consultants, City of Coralville staff and elected officials and representatives from UI Health Care and the University of Iowa, including Kenneth Fisher, Gordon Williams, William Hesson, Christine Miller, Jose Fernandez and Rod Lehnertz. Of the six presenting firms, OliverMcMillan recommended two for further consideration by the University of Iowa for design of the Medical Office Building. The University expressed a strong preference for Neumann Monson based on its long track record of successful projects at both the University and the UIHC. Based on the University of Iowa's preference OliverMcMillan selected Neumann Monson to design the building. BOARD OF REGENTS STATE OF IOWA AGENDA ITEM 2 PAGE 5 • Neumann Monson Architecture has extensive experience with the site, the City of Coralville, 011iverMcMillan and UIHC. Since 2003, the firm has been involved in the overall planning for various components of the Iowa River Landing District. In January 2009, the firm was engaged by OliverMcMillan to explore options for locating and orienting the Medical Office Building and its associated parking. Over the last year, the firm undertook multiple studies; looking at ways to make the facility both patient- centered and efficient for the delivery of care. Working closely with UIHC they have developed the current site plan and building concept for the Medical Office Building and its associated amenities, keeping efficiency, sustainability, flexibility and the budget in mind. The University of Iowa Hospitals and Clinics reports that it is pleased with the performance of Neumann Monson on this project and would like to move forward with the firm's creative work product. If a new search would be conducted it is unlikely a firm other than Neumann Monson would be selected. Due to the complex development requirements and compressed schedule for the Ambulatory Care Clinic, UIHC wishes to utilize a construction manager to provide preconstruction and construction management services for the project. During the preconstruction phase the construction manager (CM) would undertake feasibility analyses during design, identify and scope multiple bid packages to encourage bidding by Iowa contractors, and coordinate constructability issues with the overall IRL Development. During the construction phase the CM would serve as the UIHC's agent to coordinate and manage multiple prime construction contracts. BOARD OF REGENTS STATE OF IOWA AGENDA ITEM 2 ATTACHMENT A PAGE 6 RESPONSES TO BOARD EVALUATION CRITERIA FOR MAJOR CAPITAL PROJECTS Fulfillment of Mission and Strategic Plan: Completion of this project will contribute to UI Hospitals and Clinics' efforts in meeting all elements of its tripartite mission. It will greatly enhance the UI Hospitals' capabilities for fulfilling its patient care mission by providing the necessary space to accommodate the projected growth in outpatient volume and facilitate and generate future growth in patient admissions. The educational and research missions will also be enhanced through development of the necessary space to enable students, residents and fellows to gain necessary clinical experience in accord with accrediting body standards; and by providing the type of facilities required to conduct innovative research directed toward more clinically efficacious diagnosis and treatment of disease. The project also is supportive of each of the six major goals that have been established in UI Health Care's Strategic Plan for FY 2010 — 2012 by providing the facilities that are required to assist UI Health Care's efforts 1) to provide world class healthcare services to optimize health for everyone, 2) to advance world class discovery through excellence and innovation in biomedical and health services research, 3) to develop world class health professionals and scientists through excellent, innovative and humanistic educational curricula for learners at every stage, 4) to foster a culture of excellence that values, engages and enables our workforce, 5) to create an environment of inclusion where individual differences are respected and all feel welcome, and 6) to optimize a performance - driven business model that assures financial success. Alternatives Explored: Following completion of studies to identify UIHC's future facility requirements and determining that a major emphasis should be placed on developing off -site ambulatory care services, a number of potential sites were assessed. These are located in the greater Iowa City, Coralville and North Liberty area. The evaluation of these sites led to the conclusion that development of a new ambulatory care facility at Iowa River Landing (IRL) in Coralville would provide the best option. In particular, this site offers an unparalleled opportunity to establish a very visible and easily accessed location within which to provide a highly efficient, cost - effective and patient friendly model for delivering outpatient care. Abandoned / Transferred / Demolished Space: No space will be abandoned or demolished. The Iowa River Landing ambulatory care clinic facilities will make it possible to vacate some current UIHC facilities or use them less intensely. Those in the latter category will be consolidated to assure efficient use of space. All vacated space will ultimately be reallocated to services at the UIHC main campus and to meet new space needs. Specifically, the vacated space will be used to accommodate: • clinical and support services remaining on the UIHC campus that currently have space needs, • development of new clinical services and for expanding and new clinical education and research programs, • continued growth of services remaining at the UIHC main campus, and swing space required during planned renovations, expansion of new and existing services and development of the Children's Hospital. Available Financial Resources and Source of Funds: The project will be funded through University Hospitals Building Usage Funds acquired from depreciation allowances of third parties underwriting the cost of patient care plus hospital net earnings from paying patients, and hospital revenue bond proceeds. No state capital appropriated dollars will be involved. The estimated internal rate of return over the life of this project is 16.6 %. BOARD OF REGENTS AGENDA ITEM 2 STATE OF IOWA ATTACHMENT A PAGE 7 Available Operating and Maintenance Resources: The source of funds to cover the associated operating and maintenance costs of the new facilities will be University Hospital operating revenues derived from providing patient care services. External Forces Justifying Approval: The development of this off -site ambulatory care clinic is an important element in enabling the UIHC to be responsive to societal forces, standards and regulations impacting the provision of contemporary patient care services while meeting all components of its tri- partite mission. As previously noted, the UIHC continues to experience a significant growth in outpatient visits that have resulted in congested patient care and support facilities, parking and traffic flow problems and difficulties in meeting long -term main campus development plans. Patient care will be enhanced through expanded clinic examination and support facilities and the design of these facilities will be focused on providing a more comfortable and patient - friendly environment. As such, the demands and expectations of UIHC's existing and future patients will be better addressed, both in the new off -site facility and in the outpatient clinics that continue to be provided on the main campus. The design will meet Health Insurance Portability and Accountability Act (HIPAA) requirements for patient privacy and confidentiality. The proposed new facilities and future renovation of existing facilities will also make it possible for the UIHC to meet education and training program requirements for providing all trainees with more extensive clinical experiences. Additional space will also permit more research subjects to participate in clinical trials in proximity to their patient care, thereby enhancing opportunities to gain support for other funded clinical research studies. BOARD OF REGENTS AGENDA ITEM 2 STATE OF IOWA ATTACHMENT B PAGE 8 Iowa River Landing Ambulatory Care Facility Land Legal Description BUILDING PARCEL That part of the Northeast Quarter of Section 5, Township 79 North, Range 6 West of the 5`" P.M., Coralville, Johnson County, Iowa described as follows: Commencing as a point of reference at the intersection of First Avenue and East Ninth Street in Coralville, Iowa; Thence North 88 °03' East 642.9 feet along the centerline of said East Ninth Street (assumed bearing for this description only); thence North 1 °57' West 44.0 feet to the point of beginning; thence North 1'33' West 83.3 feet; thence North 15 °03' East 67.3 feet; thence North 74 °57' West 382.6 feet; thence South 1'52' West 17.1 feet; thence South 10 °37' East 54.3 feet; thence South 45 °00' East 43.6 feet; thence South 45 °13' East 45.8 feet; thence South 34 °03' East 57.0 feet; thence South 24 °48' East 29.0 feet; thence South 8 °00' East 48.5 feet; thence North 88 °03' East 220.3 feet to the point of beginning and containing 1.31 acres more or less. BOARD OF REGENTS STATE OF IOWA T , _ a 6 0 V n� 0 007 I ee �p O -. o� H: \BF\ 2010 \apr10 \0410_IT EM02i owariverlandi ngr.doc 1 AGENDA ITEM 2 ATTACHMENT C PAGE 9 by \ 9 Tp MOODY'S Attachment I Coralville Series 2011 C INVESTORS SERVICE Repaid with PILOT New Issue: MOODY'S ASSIGNS Al RATING TO CITY-OF CORALVILLE'S (IA) $13.4 MILLION GO ANNUAL APPROPRIATION BONDS, SERIES 2011 C AND $29.3 MILLION GO ANNUAL APPROPRIATION BONDS, SERIES 2011 E Global Credit Research - 28 Mar 2011 TOTAL $208.9 MILLION IN MOODY'S -RATED LONG -TERM DEBT OUTSTANDING Municipality IA MoocVs Rating ISSUE RATING General Obligation Annual Appropriation Urban Renewal Refunding Bonds, Series 2011E Al Sale Amount $29,285,000 Expected Sale Date 04/26/11 Rating Description General Obligation Annual Appropriation General Obligation Annual Appropration Urban Renewal Refunding Bonds, Series 2011C Al Sale Amount $13,355,000 Expected Sale Date 04/12/11 Rating Description General Obligation Annual Appropriation Opinion NEW YORK, Mar 28, 2011 -- Moody's Investors Service has assigned an Al rating to the city of Coralville's (IA) $13.4 million General Obligation Annual Appropriation Urban Renewal Refunding Bonds, Series 2011C and $29.3 million General Obligation Annual Appropriation Urban Renewal Refunding Bonds, Series 2011 E. Concurrently, Moody's has affirmed the Aa2 rating on the city's $51.2 million in outstanding general obligation unlimited tax debt and the Al rating on the city's $49.3 million in post -sale General Obligation annual appropriation debt and $54.5 million in certificates of participation. Moody's has also affirmed the A2 rating on the city's $48.9 million in Moody's- rated debt secured by tax increment revenues. SUMMARY RATINGS RATIONALE Debt service payments on the bonds are secured by the city's general obligation unlimited tax pledge, subject to annual appropriation. Proceeds of the Series 2011C bonds will be used to retire the city's Series 2009D Bond Anticipation Notes, maturing May 1, 2011, with the original proceeds used to fund improvements in the city's Iowa River Landing tax increment financing (TIF) district. While the Series 2011C bonds contain a general obligation pledge, subject to annual appropriation, the city expects to repay debt service out of a payment in lieu of taxes from the University of Iowa (revenue debt rated Aal /stable outlook) Hospital and from tax increment revenues . Proceeds of the Series 2011 E bonds will be used to current refund the city's Series 2001 B bonds, Series 20031 -2 bonds, and Series 2003H -1 bonds, and to advance refund the city's Series 20031 -1 and Series 2003J bonds for savings. Proceeds of the original bonds were used for improvements in the city's Coral Ridge Mall TIF, and the city expects to make debt service payments from tax increment revenues. The Al rating is notched twice off the city's Aa2 general obligation rating, reflecting the risk of non - appropriation as well as the non - essential nature of the financed projects (economic development). The city's Aa2 general obligation rating reflects the city's very high debt burden with additional borrowing plans; favorable economy and ongoing moderate tax base growth; and solid financial operations characterized by a long trend of operating surpluses. The two -notch rating distinction on the city's additional annual appropriation obligations, including the outstanding certificates of participation, also reflects the risk of non - appropriation as well as the non - essential nature of the financed projects, which are primarily for economic development projects located in the city's urban renewal areas. The Moody's- rated tax increment revenue bonds are backed by tax increment revenues from the city's Coral Ridge Mall /Highway 6 tax increment district. The A2 rating on the tax increment revenue bonds reflects the appropriation risk; adequate debt service coverage; debt service reserve fund; passive nature of the revenue stream; and concentration of taxpayers within the tax increment district. STRENGTHS *Stable economy benefitting from location adjacent to Iowa City (Aaa) and University of Iowa *Solid financial operations characterized by annual operating surpluses over last five years *Revenue- raising flexibility under the untapped 0.27 mill emergency levy CHALLENGES *Leveraged debt position with additional borrowing plans *Significant portion of debt supported by revenues from economically- sensitive economic development projects in tax increment districts and enterprise projects (including hotel and golf course) *Reduced near term liquidity in General Fund due to interfund loans to flood mitigation projects; expected to improve in fiscal 2012 DETAILED CREDIT DISCUSSION IOTA q:7_CeI:11Illlq: 112101111ll L[. 101AIXT1T1 Fills AIII MEN 1:1II:l'd►1111111►01111:L'[.Yllulil 42701 4I1 q .11 Ill 1T /5111 We expect the city's leveraged debt profile will continue to remain high over the long term due to the city's additional borrowing plans. Inclusive of the current offerings, the city's overall debt burden is a very high 13.5% of full value, while the direct debt ratio is 12.1 %. The city's debt burden is significantly higher than the median for Aa2 cities, which is at 2.3% of full value for overall debt and 0.8% for direct debt. A large portion of the debt service on the city's general obligation and annual appropriation debt is abated from tax increment revenues and net revenues of the city's enterprise funds, including the water and wastewater utilities, hotel and conference center fund, and golf course. In 2006, the city issued certificates of participation for its hotel and conference center, which is operated by Marriott (senior unsecured debt Baa2 /stable outlook). Prior to fiscal 2010, the city had paid debt service on the certificates out of revenues from the hotel and from tax increment revenues; however, in fiscal 2010, hotel revenues were insufficient to fully cover debt service. In response, the city issued $675,000 in bonds with a maturity date of 2030 to cover part of the fiscal 2010 debt service payment. In fiscal 2011, the hotel revenues again fell short of fully covering the debt service payment. The city expects to cover approximately $500,000 in debt service payments with cash on hand from the tax increment district fund (which had a balance of $7.8 million at the end of fiscal 2010). Going forward, the city is formulating a long -term strategy to fully cover debt service on the certificates, which may involve annually setting aside a portion of tax increment revenues to fund debt service. We note that continued reliance on cash reserves or the issuance of long -term bond to cover debt service payments could put pressure on the city's long -term credit quality. In fiscal 2010, only about 14% of debt service paid by the tax increment and debt service funds was supported by property taxes ($2.5 million in property taxes collected versus the total payment between the funds of approximately $17.6 million). The bulk of the city's outstanding debt has been issued for and is supported by the Coral Ridge Mall tax increment district, which will be closed out in 2018. Principal on all of the city's general obligation debt is retired at an average rate of 65.0% in ten years. The city maintains 4.8% of its debt in short-term notes, representing modest market access risk. The city's Series 2008J bond anticipation notes mature June 1, 2011, and the city plans to roll the notes into another series of notes for three more years. The city also plans to issue approximately $12 million in bonds in the summer 2011 to purchase a performing arts facility currently being constructed by a private developer, with expected completion date of the facility in summer 2011. The city received a Vision Iowa grant to assist in financing this purchase once the asset is built. All of the city's debt is fixed rate, and the city has no exposure to interest rate swap agreements. ECONOMY REMAINS STABLE DESPITE NATIONAL TRENDS; FAVORABLE GROWTH EXPECTED OVER LONG TERM Located in Johnson County (Aa2), Coralville benefits from its proximity to Iowa City, home to the University of Iowa (27,500 students) and its Hospital and Clinics. Together the University and Hospital employ in excess of 20,000 people, providing stability to both Iowa City and Coralville's economies and contributing to Johnson County's low unemployment of 4.3% in December 2010 compared to the state's 6.2% and nation's 9.1% rates for the same time period. Residential development within the city is nearly built out, with only a modest amount of land zoned for residential available for development. Commercial development remains solid with construction on the new University of Iowa medical office building underway and various other in -fill projects ongoing. Coral Ridge Mall is the top taxpayer, comprising 6.1 % of property tax revenues, and operations at the mall continue to remain strong, attracting visitors from across eastern Iowa due in part to the mall's location just off interstate 80, a major east -west thoroughfare across the state. Due to the June 2008 flood and the extent to which properties suffered damage in the city, we had anticipated slight devaluation in the city's full value for the 2009 levy year. However, the 2009 full value grew a modest 3.4% to nearly $1.9 billion due to increased reappraisal values for existing properties, coupled with flood damaged properties returning to full operations or having finished necessary renovations to re- occupy the commercial buildings. The tax base remained essentially flat in 2010. Population has seen strong growth, increasing 46.2% between 1990 and 2000 and 25% between 2000 and 2010 to nearly 19,000. Despite the nearby university presence, resident income indices exceed state figures, with median family and per capita income at 121 % and 118% of state levels, respectively. We expect the city's full value will experience ongoing solid growth as residential construction rebounds with an improved national economy and completion of the city's ongoing commercial projects. FINANCIAL POSITION CHARACTERIZED BY LONG TREND OF HEALTHY RESERVES The city has maintained a long trend of favorable financial operations, ending with General Fund surpluses seven out of the last eight years. In fiscal 2009, the General Fund balance grew to a healthy $7.2 million (41.2% of revenues) following a $1.7 million surplus. The surplus resulted primarily from reimbursement money received from FEMA for flood expenses. Fiscal 2010 continued on the same trend, with a more modest $300,000 operating surplus, and a General Fund balance of $7.5 million, or 50% of revenues. We note that cash comprised only $872,000 of the fiscal 2010 fund balance, or a limited 5.8% of revenues, primarily due to approximately $4 million in interfund receivables. The bulk of these interfund receivables are attributed to flood mitigation projects which are set to wrap up in the summer of 2011. Management expects the interfund receivables will remain high at the end of fiscal 2011 and subside thereafter. Officials balanced the fiscal 2011 budget through minor expenditure reductions and increasing the property tax rate by 0.8 %. Additionally, cities in Iowa have the statutory authority to levy up to a 5% franchise fee on electric and natural gas providers. Effective July 2010, the Council adopted a resolution implementing a 1% fee on these providers, generating $250,000 in new revenue. Officials indicate that the city's fiscal 2011 General Fund operations remain balanced year - to-date and expect to adopt a balanced budget for fiscal 2012 as well. Although the city levies the 8.10 mill cap for general operations, it continues to have access to the full 0.27 levy for the Emergency Fund. Further financial flexibility could be generated by moving additional employee benefit and insurance costs to the Trust and Agency Fund levy, of which 40% of these expenditures is financed under the 8.10 cap. We believe given the city's long history of conservative budgeting resulting in operating surpluses and favorable financial flexibility available to raise revenues, the city's financial position will remain solid over the medium term. What could change the rating - UP Strengthening of tax base and demographic profile Maintenance of positive fund balance growth and restored liquidity Substantial moderation of the debt position What could change the rating - DOWN - Material declines in fund balances and liquidity - Deterioration of the city's tax base and demographic profile - Further leveraging of the city's tax base with significant additional debt - Continued reliance on cash reserves and /or issuance of long -term debt to cover debt service obligations KEY STATISTICS Population (2010): 18,907 (25% growth since 2000 census) 2010 Full valuation: $1.9 billion (4.4% average annual increase since 2005) 2010 Full value per capita: $100,895 Johnson County unemployment rate (December 2010): 4.3% 2000 Median family income as % of state: 120.5% 2000 Per capita income as % of state: 118.3% Overall unadjusted debt burden: 13.5% (12.1% direct) Retirement of principal (10 years): 65.0% Fiscal 2010 General Fund Balance: $7.5 million (50% of General Fund revenues) Post -sale general obligation unlimited tax debt outstanding: $54.5 million Annual Appropriation debt outstanding: $49.3 million Certificates of Participation outstanding: $54.5 million Tax increment revenue debt outstanding: $60.3 million PRINCIPAL METHODOLOGY USED The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. 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W� O 4° Wa a Y Q 2 0 O ^�Qm F o O m O U 4 m 0 f� W r w I� r� l �l M--1 O U E E z" r* U � t N � E a U y d O Q d p Y 2 0 oaLL a x a a r D y p O F g 4 O y m N LL Q o ° Q LL m p r } C V N _o o S ecee�a�eeea §4�roSccOmCCS "M1S���° O S O p p Yi Ya' O O S S p °s�g�g0000 � osoo�.osg °sa000$oo 6 op YN O V e A \ \ \� � },,,e,. =, =E.,,, =_,,,,,,,., \\ E \}!\ ) \! ; .\ Attachment L From: Simon Andrew To: Simon Andrew Subject: FW: Coralville and Uof I Hospitals and Clinics PILOT Agreement at IRL Date: Friday, April 18, 2014 3:11:15 PM Note: Underlines added by Iowa City staff to indicate responses From: Kelly Hayworth [mailto:khayworth @ci.coralville.ia.us] Sent: Friday, April 04, 2014 3:19 PM To: Tom Markus Subject: RE: Coralville and Uof I Hospitals and Clinics PILOT Agreement at IRL I will have to do more research on that. From: Tom Markus [mailto : Tom- Markus(a�iowa- city. org] Sent: Friday, April 04, 2014 3:14 PM To: Kelly Hayworth Subject: RE: Coralville and Uof I Hospitals and Clinics PILOT Agreement at IRL Kelly: Thanks for your response. I am sorry to have caused you any trouble in responding to my questions. I might be a little slow but I cannot find the answer in the documents to the question I asked about how much the University paid Oliver McMillan. Was there a payment and how much was it? From: Kelly Hayworth [ mailto :khayworthAci.coralville.ia.us] Sent: Friday, April 04, 2014 2:20 PM To: Tom Markus Subject: FW: Coralville and Uof I Hospitals and Clinics PILOT Agreement at IRL Attached are all the documents I believe that you requested. If there are any additional documents I missed please let me know. Kelly From: Tom Markus [mailto :Tom- MarkusAiowa- city.org] Sent: Monday, March 31, 2014 9:36 AM To: Kelly Hayworth Cc: Simon Andrew Subject: Coralville and Uof I Hospitals and Clinics PILOT Agreement at IRL Kelly: As you know I have been tasked with preparing a report to council regarding PILOT agreements in general and more specifically the subject agreement. Some of my answers to the questions posed by council would benefit from information you have or could comment on. I have identified a few documents that would help me respond and add context to my report. I have also listed a few questions that I hope you can respond to. 1. Please provide a copy of any other PILOT agreements the City of Coralville has besides the subject agreement. I am aware of a pilot agreement regarding properties in the U of I Research Park. Please provide a copy of that agreement and any other PILOT agreements in the City of Coralville. Attached 2. Please provide a copy of any and all agreements between the City of Coralville and Oliver McMillan. Attached 3. I recall you mentioning when we spoke some time ago that an attorney (possibly from the Quad Cities area) was the architect /drafter of various agreements including the subject agreement? Is that correct? If so could you provide appropriate contact information? Was the construct (including the pilot formula) of the agreement something the City developed? Could you explain the rational ie why only use the shell/exterior multiplied times the total tax rate to determine the subject PILOT rate? Your press comments suggest that because this project is in a TIE that you needed to recover a certain amount of funding to replace the tax needed for the TIE district. The formula equates to roughly $1million. Is this the minimum number that you determined was necessary to make this site and development work as a part of this TIE district? Either way I would appreciate your explaining the rationale of the subject pilot agreement. The agreements were drafted by University of Iowa attorney's. City Counsel David Claypool and City Attorney Kevin Olson. The formula was based on what both the University of Iowa Hospital Staff and the City of Coralville believed would be the taxable value of the project. 4. Are there any other parts /provisions to the subject agreement other than a. Development and purchase agreement, b. Memorandum of Satellite Medical Facility Development and Purchase agreement, c. Parking agreement, d. PILOT agreement and e. Common area maintenance agreement? Additionally, I am aware that there is a development arrangement/fee that U of I was required to pay Oliver McMillan. Could you please provide the details ie. Purpose, dollar amount, terms, services provided by O/M etc.? Agreement Attached 5. It appears from your press comments that you intend for the PILOT proceeds to be reinvested in furthering the development and improvements in IRL? In reading the PILOT agreement I find no requirement that restricts the use of the funds to reinvestment in IRL and further my reading suggests you could use the funds for any lawful municipal purpose? Is this correct? Additionally, there doesn't appear to be any end date or separation provisions (unilateral or joint)? Is this correct? If correct why not? I do not believe there are any restrictions on the use of the funds. There is no end date to the agreement and it was intended to be a permanent agreement. 6. One of the specific questions posed by council is: It would seem that the PILOT, executed in June 2010, gave Coralville money to help pay the incentives for Von Maur, whose deal was completed in 2011. On one hand, Coralville says they are trying to increase tax revenues, and on the other they gave incentives, including capping Von Maur's taxes. This seems contradictory. Am I missing something? To further expand on this question is it possible that funds from the subject agreement end up substituting revenues that should have been provided by Von Maur? At least in terms of the amount Von Maur pay's in property taxes? There is no connection between the University of Iowa Hospital Agreement and Von Maur. 7. In addition to the questions posed above is there anything else you would care to share with me to explain this PILOT agreement in terms of why it appears to be so generous compared to other PILOT agreements both here in Iowa and across the country? Thanks in advance for your efforts in responding to this inquiry. 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C O -o C C E C E E E co N N N �p N N DD N N U U J J J J CD J O O O O 0 0 o on m on Y« m on o o v l0 l0 C l0 C C l0 U U V VI Q Q l0 l0 l0 l0 = = V l0 = m m m m m U1 U1 o Q N U1 U1 U1 O Ul Y t0 Vl Vl N N U � N N J CD N C OD U J J Ul Ul Ul Ul Ul Ul Ul Ul Ul � J J N N N N J J N U1 J J = VI VI — > > > > > > > > > O VI VI > > > > > > lO lO lO lO lO lO lO lO l0 J N N lO lO lO l0 O O l0 l0 O O O O O O O O O U U U U U U U U u m O $ Ul Ul O O O O O O U U U U U U m Q Q > > C O> O> O> O> O> O> O> O> O> � U O O O> O> O> O> > > O> O O> U U U U U U U U U O N U U Y N ,A N m N N N N N N m N N -A -A N m a M ID m N N O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O v m K K w 0 m m 0 0 m m m m 0 0 0 0 0 0 w w m tV 0 0 0 m m m w O 0 w 0 0 ti ti ti ti ti ti 0 0 M Z O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti Pages from Von Maur / Attachment N Coralville Agreement any other occupant and shall be higher than any other signage identifying any other occupant. There shall be no cost to Von Maur for being included on such signage nor shall Von Maur be required to contribute toward the maintenance, operation, upkeep or lighting of such signage in any respect. ARTICLE 10 OPENING AND OPERATING COVENANTS 10. Opening and Operating Covenants. 10.1. Public Improvement Covenant. The Public Improvements (as defined in the Anchor Retail Development Agreement between Master Developer and the City) shall be completed and open to the public no later than thirty (30) days prior to the Von Maur Scheduled Opening Date of the Von Maur Store (the "Public Improvement Covenant "). 10.2. Developer's Initial Operating Covenant. Developer covenants and agrees that, subject to the terms hereof, no later than the third (3rd) anniversary of the Von Maur Initial Opening Date, (1) the SMF shall be open and operating in accordance with the provisions of the SMF PSA, (ii) the Hotel Building shall be open and operating in accordance with the provisions of the MDA and the applicable development agreements between Developer and Hotel Owner, and (iii) at least fifteen thousand (15,000) square feet of Floor Area within the area depicted as "Initial Retail Area" on Exhibit "A -2" shall be occupied by Stores that are actually open for business to the public under leases having an initial term of at least two (2) years who are Acceptable Tenants ( "Acceptable Tenants" are those listed on Exhibit "C ") (the "Acceptable Tenants List ") The foregoing covenant is referred to herein as the "Developer's Initial Operating Covenant." Developer shall have the right to propose additions to the Acceptable Tenants List. Von Maur shall have the right to approve any additions to the Acceptable Tenants List proposed by Developer, which approval may be withheld in its sole discretion. For further certainty, the parties understand and agree that at no time shall any hospital, clinic or medical office be considered an Acceptable Tenant for the purposes of this Section. 10.3. Developer's Initial Operating Covenant Failure. If Developer's Initial Operating Covenant is not satisfied by the third (31d) anniversary of the Von Maur Initial Opening Date as required by Section 10.2, Von Maur may give written notice to Developer that Developer is not in compliance with Developer's Operating Covenant. Upon receipt of such written notice from Von Maur, Developer shall then be considered in default of Developer's Operating Covenant. Following a default in Developer's Ongoing Operating Covenant, Von Maur's share of Common Area Expenses (including the cost of snow removal) shall be reduced to zero (0) until such default is cured. If Von Maur has pre -paid any amount that, as a result of a default of Developer's Operating Covenant, Von Maur is not required to pay under this Section, then Developer shall promptly refund or reimburse Von Maur for such payments. If Developer's Operating Covenant has not been satisfied on or before the tenth (10`h) anniversary of the Von Maur Initial Opening Date, then Von Maur's Operating Covenant shall permanently terminate. 10.4. Von Maur Operating Covenant. Von Maur covenants and agrees that the Von Maur Store shall initially open for business to the general public (the "Initial SEPARATE AGREEMENT (v 8.7).docx DECLARATION OF EASEMENTS COVENANTS CONDITIONS AND RESTRICTIONS This Declaration of Easements, Covenants, Conditions and Restrictions (this "Declaration ") is made this day of 2011 ( "Effective Date "), by THE CITY OF CORALVILLE, IOWA, an Iowa municipal corporation (referred to herein, together with its successors and assigns, as "Declarant'). RECITALS: A. Declarant is the owner in fee of that certain real property located in the City of Coralville, Iowa (the "City ") and described in Exhibit "A -1" attached hereto (the "Land "), [The "Land" will encompass all Land upon which the Project will be built and on which the Common Areas will be located] B. The Board of Regents, State of Iowa, on behalf of the University of Iowa Hospitals and Clinics ( "UIHC ") and City have heretofore entered into a Satellite Medical Facility Development and Purchase Agreement (the "SMF PSA ") pursuant to the terms of which City has agreed to sell to UIHC, and UIHC has agreed to purchase from City, for the purpose of developing and occupyirig a satellite medical facility (the "SMF "), that certain real property located in the City and depicted on Exhibit "A -2" attached hereto (the "SMF Parcel'). The SMF Parcel is not a part of the Land and is not subject to this Declaration. C. OliverMcMillan, LLC, a California limited liability company ( "Master Developer ") and City have heretofore entered into a Master Development Agreement dated August 13, 2010, (the "MDA ") regarding the development of the "Project' (as defined below) upon the Land. D. The MDA contemplates the eventual construction upon and within the Land of (i) certain buildings and improvements on the Land so as to create, in conjunction with the development of the portion of the Land described on Exhibit "A -3" attached hereto (the "Von Maur Parcel') and the SMF Parcel, an integrated mixed use residential, retail, office, and entertainment center, and (ii) certain public improvements, including parking facilities, street improvements, sidewalks, curbs, gutters, parks, street lighting, landscaping, intersection signalization systems and storm water and sanitary sewer drainage systems (all such buildings and improvements, together with the Land, are referred to collectively herein as the "Project'). E. Declarant desires and intends that owners from time to time of "Parcels" (as defined below) in the Project be committed to operate their respective Parcels as an integrated mixed use hotel, retail, and office, and entertainment center for the mutual benefit of such Parcels, and, therefore, wish to declare and establish certain reciprocal easements, covenants, and conditions with respect to the Parcels comprising the Project. F. In furtherance of all of the foregoing, Declarant, recognizing that, for the optimum development and operation of the Project as a unified and coordinated project, it is necessary that the Owners of the various Parcels within the Project be bound by certain restrictions, covenants and agreements respecting certain matters relating to construction, maintenance and operation of the Project (including, but not limited to, matters relating to the construction and maintenance of facilities on, and the operation, use and restrictions on the use of, the respective Parcels), and recognizing further that establishment of such restrictions, covenants and agreements will afford successor Owners of Parcels within the Project further assurances as an inducement to undertake development and /or operation on the various Parcels within the REA (BLB 9 20 1 1).docx Maximum Floor Area; (iv) to use the Common Area while engaged in making additional improvements, repairs or alterations to the Project or to any adjacent property or any portion thereof, provided such use does not diminish the required parking ratios; and (v) to do and perform such other acts and make such other changes in, to or with respect to the Project and Common Area or the expansion thereof as, Declarant may, in the exercise of sound reasonable judgment, deem to be appropriate, provided such acts or changes are in conformity with the Site Plan, as amended or modified, and this Declaration. 4.6 Parking Ratio and Standards. During the entire Term of this Declaration, the Parking Areas, the Parking Facilities (subject to the provisions of Section 4.9 below), and the public streets delineated on Exhibit "B -1" shall be made available as depicted on the Site Plan and in accordance with the requirements of City applicable to the Project so that the Project contains the number of parking spaces sufficient to satisfy the requirements set forth in that certain shared parking study with respect to the Project entitled 'Revised Shared Use Parking Assessment' dated February 9, 2011 prepared by Rich and Associates Consulting, Inc., which study has been approved by City and Von Maur and shall be interpreted in conjunction with the then current edition of the ULI (Urban Land Institute) Shared Parking publication (collectively, the "Shared Parking Study'). Notwithstanding the foregoing or any other provision to the contrary contained in this Declaration (a) in no event shall the Von Maur Parcel contain fewer than five (5) parking spaces for each 1,000 square feet of Floor Area located within the Von Maur Store and (b) in all events every other Parcel shall have the right to the use of no less than four and one -half (4 -1/2) parking spaces for each 1,000 square feet of Floor Area on that Parcel. No Owner shall be permitted to construct any new improvements upon, alter the exterior footprint of any existing improvements upon, or change the use of such Owner's Parcel unless such improvements are shown on the Site Plan or Owner is otherwise able to establish, to the reasonable satisfaction of City and Von Maur, which shall be granted or withheld within fifteen (15) days after submittal by such Owner of reasonably necessary information required to make such determination, that the parking space requirements set forth in the Shared Parking Study and this Declaration will continue to be satisfied after such construction or alterations or change in use. In addition, the consent of Von Maur shall be required in the event the proposed location of the additional parking spaces is within the Von Maur Control Area. Any parking areas which are located beneath any Retail /Residential Buildings are not a part of either the Parking Areas or the Parking Facilities. 4.7 Employee Parking. (a) Prior to opening of the Von Maur Store, Von Maur shall designate a permitted area within the Von Maur Parcel to be used by Von Maur's employees for parking their cars. Von Maur shall use commercially reasonable efforts to cause its employees to park in such permitted employee parking area, but Von Maur shall not be responsible for violation of this parking restriction by other Permittees. Similarly, Declarant shall use commercially reasonably efforts to cause employees of the Permittees of its Parcels to have their respective employees park only in the permitted employee parking areas for such Permittee, but Declarant shall not be responsible for violation of this parking restriction by other Permittees. (b) At no time while the Von Maur Store is open shall the employees of any other Permittee, including the SMF and the Hotel, be permitted to park anywhere on the Von Maur Parcel (except while shopping at the Von Maur Store). In the event any person violates this provision, Von Maur may notify the Developer and the Permittee to request that such parking be discontinued. At any time, either Developer or Von Maur shall the right to move the 15 REA (BLB 9 20 11).docx offending vehicle(s) from the Von Maur Parcel at the vehicle owner's expense. Von Maur may also request that the police department ticket any vehicle(s) parked illegally under this provision. 4.8 Covenants for Automobile Parking in the Parking Areas. Declarant, for the benefit of itself and Von Maur, shall operate, or cause to be operated, the Parking Areas at all times as public parking available for vehicular parking by members of the general public on a first -come, first - served, nonexclusive, non - reserved basis, subject to any requirement under any of the UIHC Parking Agreement, the Hotel Parking Agreement or State law (except that with respect to any restaurants within the Project offering "carry -out" service, City may designate up to two (2) spaces per restaurant for carry-out parking). The hours of operation of the Parking Areas shall be as determined by Declarant, but shall not be less than required to serve the needs of the businesses located in the Project for one (1) hour before and after the hours that such businesses are open to the public. Declarant shall not take any action, or permit any action to be taken, other than as expressly permitted in this Declaration or as required by law, which would reduce or cause the reduction of the number of parking spaces in (a) the Parking Areas, and (b) the Parking Facilities (other than those which are the subject of the UIHC Parking Agreement or the Hotel Parking Agreement) to fall below the parking requirements set forth at Section 4.6 above. In no event shall any vehicles parked in any valet parking operation be parked on the Von Maur Parcel. 4.9 City's Covenants for Automobile Parking in the Parking Facilities. During the term of this Declaration, City hereby agrees for the benefit of the Owners that except as expressly provided to the contrary herein, it will operate, or cause to be operated, the Parking Facilities at all times as public parking available for vehicular parking by members of the general public on a first -come, first - served, nonexclusive, non - reserved basis, subject to: (i) any requirement under State law, (ii) the terms of the UIHC Parking Agreement, setting aside a portion of the Parking Facilities designated as "UIHC Parking" on Exhibit "B -3" for the use of the employees of and visitors to the SMF, (iii) City's right to set aside a portion of the Parking Facilities or Parking Areas (excluding the portion of the Parking Areas located on the Von Maur Parcel) for the use of a valet parking system serving the patrons of the hotel and businesses in the Project (including but not limited to the lease of 125 unreserved parking spaces for the use of the hotel pursuant to that certain Parking Lease Agreement dated , 2011 between City and Hotel Owner (the "Hotel Parking Agreement ")), and (iv) City's right to set aside so much of the Parking Facilities as it deems desirable within the area designated "Intermodal Parking" on Exhibit B4" for the use of the public as a commuter parking lot. City shall maintain, or cause to be maintained, the Parking Facilities at all times in a first -class condition. The hours of operation of the Parking Facilities shall be as determined by City, but shall not be less than the hours necessary to reasonably accommodate the users of the Parking Facilities from time to time with the objective of discouraging persons who are not Permittees of Von Maur from parking on the Von Maur Parcel. Declarant and Von Maur shall meet and confer on a periodic basis in order to attempt to coordinate the operation of the Parking Facilities and Parking Areas such that patrons and employees of the businesses in the Project are provided with adequate parking. Subject to the provisions of items (i), (ii), (iii) and (iv) above of this Section 4.9, patrons of Von Maur shall be provided unlimited free non -valet parking in the Parking Areas and Parking Facilities. Except for traffic control and directional signage and Von Maur signage, without the prior written consent of Von Maur (which may be withheld for any or no reason), no signs or placards shall be used or installed in the Parking Areas which are located on the Von Maur Parcel. Declarant shall not take any action, or permit any action to be taken, other than as expressly permitted in this Declaration or as required by law, which would 16 REA (BLB 9 20 1 l ).docx reduce or cause the reduction of the number of parking spaces in (y) the Parking Areas, and (z) the Parking Facilities (other than those which are the subject of the UIHC Parking Agreement) to fall below the parking requirements set forth at Section 4.6 above. 4.10 Parking Charges. Except with respect to valet parking, the Intermodal Parking and as permitted by the UIHC Parking Agreement or the Hotel Parking Agreement, no metered or other direct or indirect parking charge shall be made by any Owner on any of its land included in the Project or by their successors or assigns. City shall have the right to retain the parking charges generated from the Intermodal Parking. It is understood and agreed that the foregoing prohibition on parking charges in no way limits or abrogates the obligations of the Owners hereunder to pay Common Area Expenses as herein provided. 4.11 Roof Top Equipment; Trash Enclosures. Roof top mechanical and telecommunications equipment (including, without limitation, any antennae or satellite dishes) shall be reasonably screened from public view from adjacent public streets and highways and in a manner satisfactory to Declarant. Any trash facility shall be reasonably screened from public view from the Common Area and adjacent public streets and highways on all four sides or in a manner otherwise satisfactory to Declarant. The trash facility on the Von Maur Parcel shall comply with all applicable laws, ordinances and rules and regulations of all governmental agencies having jurisdiction over such matters. 4.12 Obstructions. Except as may be approved in writing by Declarant in its sole discretion, no fence, division, partition, rail or obstruction of any type or kind (excluding landscaping) shall ever be placed, kept, permitted, or maintained between the Parcels or between any subsequent division thereof or upon or along any of the common property lines of any portion thereof, except within the confines of the Building Area, and except as may be required at any time and from time to time in connection with the construction, maintenance, and repair of Common Area. 4.13 Signs. Except as set forth below, no exterior signs of any type shall be placed or maintained on any Parcel or building unless Declarant shall have first approved the same. In exercising its discretion, Declarant shall consider whether the proposed signage complies with such signage standards respecting design, type and location of signage as Declarant may have adopted from time to time with respect to the Project. Such signs, and their construction and installation, must also comply with any and all applicable government rules, laws, ordinances, regulations and statutes and any requirements of this Declaration. Declarant shall establish a Sign Criteria applicable to the Parcels and the buildings thereon as soon as reasonably possible, and such Sign Criteria shall be promptly distributed to all Owners. Any amendment to the Sign Criteria with respect to the Von Maur Control Area shall require the approval of both Von Maur (in its reasonable discretion) and Declarant (in its sole discretion). Any amendment to the Sign Criteria for Parcels not within the Von Maur Control Area may be made by Declarant in its sole discretion. Declarant shall provide each Owner with a copy of such amendment promptly upon its completion or adoption irrespective of whether a consent from the other Owners is required. Notwithstanding the foregoing, the Von Maur signage on the Von Maur Parcel is not subject to this Declaration or the Sign Criteria and shall be subject only to ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Project. ARTICLE V USE RESTRICTIONS AND COVENANTS 17 REA (BLB 9 20 11).docx � r CITY OF IOWA CITY Date: April 4, 2014 CITY O F IOWA C 1 TY MEMORANDUM To: Tom Markus, City Manager Attachment O From: Chris O'Brien, Director of Transportation Services Re: UIHC Parking Facility - IRL Introduction: This document was developed using several sources of information as well as assumptions regarding future operating costs and annual permit fees. It outlines the City of Iowa City parking arrangement with the University of Iowa Parking and Transportation Department and compares it to the parking agreement established between the UIHC and City of Coralville at the IRL West Parking Facility. University of IowalIowa City: The University of Iowa Parking and Transportation Department receives parking permits to utilize in Iowa City parking facilities. Holders of these permits are granted 24/7 access to the designated facility. The University pays for these permits annually at the same rate as the general public. The current annual rate for covered facilities is $912.00 for each permit and the annual rate for a parking lot is $684.00 for each permit. Currently, the University of Iowa pays for 615 permits spread throughout six of our facilities at an annual cost of $556,320.00. Permits are located at the following locations: Capital Street Dubuque Street Chauncey Swan Tower Place Court Street Recreation Center (78 permits for a fee of $71,136.00) (48 permits for a fee of $43,776.00) (38 permits for a fee of $34,656.00) (128 permits for a fee of $116,736.00) (303 permits for a fee of $276,336.00) (20 permits for a fee of $13,680.00) The University reissues the permits as they please at a rate that falls within their rate structure. We currently have no contract with the University of Iowa, meaning at any time, they could elect to return any or, while unlikely, all of their permits. This would result in a prorated reimbursement if this was done mid -year or removal from the number of permits billed if it occurred at the end of the fiscal year. This also means that they are not guaranteed these spaces in perpetuity and that should it be in the best interest of the City we could revoke a portion or all of the permits. UIHC /Coralville: The IRL West Parking Facility consists of three and a half levels of parking totaling 770 spaces. The City of Coralville financed the parking facility using parking revenue bonds which expire in 2031. The bond was issued for $22 million and maintains a coupon of 2.95% for the first 10 years and increases to 5.0% for the last 10 years. In June of 2010, the City of Coralville entered into a Parking Agreement and Easement with the Board of Regents, State of Iowa on behalf of the University of Iowa Hospitals and Clinics. This agreement resulted in a shared facility with the top two and a half levels, consisting of roughly 554 spaces, serving the University of Iowa Hospital and Clinics (UIHC). The UIHC maintains exclusive access to the top two and a half levels from 6:00 am — 6:00 pm, Monday — Friday and 6:00 am — 12:00 pm on Saturday. These levels are accessed via Ring Road and April 4, 2014 Page 2 consist of patient, employee and visitor parking. The lower level, accessible off of Iowa River Landing Road, consists of the remaining 216 spaces and is intended to serve the retail areas in Iowa River Landing. Currently, there is no plan to charge an hourly rate to users of this parking area. The financing section of the agreement outlines the fees and charges for the infrastructure and the parking improvements. The fees paid by UIHC are calculated by using the sum of the following: 120% of the amount due to all holders of any Parking Bonds in the aggregate for both the principal and interest on such Parking Bonds coming due during the fiscal year An amount necessary to restore the deposit in the debt service reserve fund established for the Parking Bonds in the Parking Bond Resolution to the level required by the Parking Bond Resolution; An amount necessary to fund major repairs or maintenance to the Parking Improvements allocable to the top two levels thereof, or to fund or restore the amount on deposit in the major repair and maintenance reserve fund established in the Parking Bond Resolution to the level required by the Parking Bond Resolution; An amount equal to its proportionate share necessary to pay the routine costs or operating and maintaining the Parking Improvements for such fiscal year, (not including major repairs or maintenance to the Parking Improvements) Any excess amount is transferred back to the University. The facility was funded with a $22 million parking revenue bond issued in 2012, and included the land, infrastructure, parking decks and soft costs associated with this project. The bond payment amount for FY2015 is $1,542,734 with an average annual payment to be made on that bond from FY2013 — FY2031 of $1,592,574. This results in a total estimate of bond payments of just over $30.2 million assuming that the bond is not refinanced. I have included the Debt Service payment schedule as an attachment to this memo. In discussions with the City of Coralville Finance Director, he stated that the University of Iowa pays for the bond payment, which covered all three and a half levels of the IRL West Parking Facility. In reviewing the minutes from the May 24, 2011 Coralville City Council Meeting, a construction contract for the Iowa River Landing West Parking Facility was awarded to Knutson Construction, with a base bid of just over $11 million. It was noted that this project will provide parking for a Medical Office Building and new retail and commercial development in the Iowa River Landing. In addition to the bond payment, the UIHC pays the operating costs associated with the top two and a half floors of this facility. In FY2015, that was budgeted at $171,456. This brings the projected FY2015 payment from the UIHC to the City of Coralville to just over $1.7 million. Using a 2% annual escalator for operating costs, the average annual payment over the life of the bond is $1.782 million with a total payment of $33.8 million. After the bond expires the UIHC would only pay the operating costs applicable to the top two and a half levels, assuming no changes in the parking agreement. After all of the bond payments are completed, the City of Coralville will continue to own and operate the structure. The parking agreement mentions that 120% of the bond payment is required from the UIHC. The Coralville Finance Director stated that as this would be considered excess payment and the 20% is returned to the UIHC. The agreement also states that additional spaces will be provided to bring the total amount of spaces to 750 at a cost structure similar to the adjacent parking structure. I was told that this has not transpired and that the bond payment and operating costs for the IRL West Parking Facility are the only payments being made at this time. I have included attachments at the end of this memo that I used in developing these summaries. Attachment #1: Parking Agreement and Easement between City of Coralville and UIHC Attachment #2: Invoice to U of I Parking & Transportation for annual parking permits Attachment #3: Debt Service payment schedule for 2012 Parking Revenue Bond April 4, 2014 Page 3 Attachment #4: May 24, 2011 City of Coralville City Council Meeting Minutes Summary: University of IowaiIowa City • The University of Iowa Parking and Transportation Department currently receives 615 permits divided amongst several Iowa City facilities. Current annual payment is $556,320 • U of I Parking & Transportation pays annually for permits at the same rate as general public. • There are no contracts in place and permits are not guaranteed. Permits not reissued by the University are still paid for. • The U of I Parking and Transportation is not required to pay for permits that they return to the City of Iowa City • With a 5% increase in permit fees every 5 years, total permit payments through FY2031 would be $11.5 million. • With a 5% increase in permit fees every 5 years, total permit payments through FY2050 would be $25.4 million. UIHC /Coralville • The UIHC has access to 554 of 770 spaces in the IRL West parking Facility. • Exclusive access is permitted from 6:00 am — 6:00 pm, Monday — Friday and 6:00 am — 12:00 pm on Saturday. • The UIHC is paying the City of Coralville the full bond payment for the $22 million parking revenue bond issued to finance this facility. • Parking Revenue Bond expires in FY2031 with payments totaling over $30 million. • The City of Coralville maintains ownership of facility after bond payments are completed. • The UIHC is paying operational costs for the top two levels of the IRL West Parking Facility as long as they are in this location. • FY2015 operating costs for UIHC portion budgeted at $171,456 • Total estimated combined bond and operating payments from UIHC to City of Coralville assuming 2% annual increase in operating costs through expiration of bonds in FY2031 would be $33.8 million • Total estimated combined bond and operating payments from UIHC to City of Coralville assuming 2% annual increase in operating costs through FY2050 would be $39.3 million • If payments exceed the amount needed to cover the costs outlined in the agreement, the excess is returned to the UIHC. (Page 1 of 17) Attachment O - 1 qL CP IIII I�IaI�IIIIIIIIIIIfBflllil�ll�lllllll��llll�ill�llll Doc 10: 021993340017 Types GEN Kind: EASEMENT Recorded: 10/19/2010 at 02 :39 :34 PM Eee Amt: $89.00 Paoe E Of 17 John,, n County Iowa Kim Painter County R0052Ldgr I'rcuarod by and Rehr rn Eon Dada Clanrool ➢orsev & VVliitnev LIP $pt Grand Spite }900 Des Moines lowa5 0309 (515) 2$3-1000 Taxpayer: City of Coralville, Iowa, 1512 7" Street, Coralville, Iowa 52241 Grantor: City of Coralville, Iowa, 1512 7' Sheet, Coralville, Iowa 52241 Grantees: Board of Regents, State of lowa, 11260 Aurora Avenue, Urbandale, Iowa 50322 Legal Description: See Exhibit A (Page A -1) PARKING AGREEMENT AND EASEMENT between CITY OF CORALVILLE, IOWA and BOARD OF REGENTS, STATE OF IOWA, ON BEHALF OF THE UNIVERSITY OF IOWA HOSPITALS AND CLINICS Dated as of June 1, 2010 NOTICE: In this document the City of Coralville, Iowa grants to the real estate described in Exhibit A as the SMF Land (and the owners and occupants thereof), an easement in perpetuity as described in Section 2.2 of this document. Book 4668 , Page 396, File Number (Page 2 of 17) PARKING AGREEMENT AND EASEMENT This Parking Agreement and Easement (the "Agreement ") is entered into as of the l" day of June, 2010 by and between the City of Coralville, Iowa (the "City ") and the Board of Regents, State of Iowa (the "Regents "), on behalf of the University of Iowa Hospitals and Clinics: RECITALS WHEREAS, the City is in the process of developing the area within the City (the "Iowa River Landing" or the "IRL ") bordered on the North by Interstate 80, on the West by I" Avenue and on the East and South by the Iowa River; and WHEREAS, the City is the owner of certain property located within the IRL and legally described on Exhibit A hereto as the SMF Land (the "SMF Land ") and certain other property located within the IRL and legally described on Exhibit A hereto as the Parking Land (the "Parking Land ") and certain other property located within the IRL (the "Public Infrastructure Land ") which is north of 9 °i Street and on which certain public streets and utilities, and a pond (the "Public Infrastructure ") will be constricted; and WHEREAS, the City and Regents will enter into a Satellite Medical Facility Development and Purchase Agreement (the "Development Agreement ") setting forth certain development particulars, including, among others (a) the grading by the City of the SMF Land, the Parking Land and the Public Infrastructure Land, (b) the sale by the City of the graded SMF Land to Regents, (c) the construction of an approximately 150,000 square feet medical office building (the "SMF" or the `Building ") on the SMF Land by Regents for use by the University of .Iowa Hospitals and Clinics ( "UIHC "), (d) the construction by the City of a three level structured parking facility (the "Parking Improvements ") on the Parking Land and the Public Infrastructure on the Public Infrastructure Land and (e) the agreement by Regents to pay for its proportionate share of the costs of grading the land in the development area of the IRL north of 9th Street (the "Grading Costs ") and the costs of constructing the public infrastructure improvements in the development area of the IRL north of 9h Street (the "Public Infrastructure Costs "); and WHEREAS, Regents desires for the City to grade the SMF Land, the Parking Land and the Public Infrastructure Land, to construct the Public Infrastructure on the Public Infrastructure Land, to construct the Parking Improvements on the Parking Land to provide parking for the Building in the top two levels of the Parking Improvements and to provide Additional Parking Spaces (herein defined) for the Building and the City desires for Regents to acquire the SMF Land and to construct the Building thereon and the City and Regents have entered into this Agreement to provide for the construction of the Parking Improvements by the City, the granting of an easement for the use and occupancy of the top two levels of the Parking Improvements by the City to the SMF Land and the owners and occupants thereof, the providing of Additional Parking Spaces by the City for the Building and the payment of annual fees and charges by the Regents to the City for the use and occupancy of the top two levels of the Parking Improvements and the Additional Parking Spaces by the Regents; -1- 4831 - 7297- 4595U4 6/3/2010 Book 6668, Page 396, File Number (Page 3 of 17) NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto recite and agree as follows: _Z_ 4831- 7297 - 4595114 6/3/2010 Book 4663, Page 396, File Number (Page 4 of 17) ARTICLE I FINANCING Section 1.1 Financing of the Parking Improvements, the Master Grarfia Share and the Public Infrastructure Share. The City will finance the cost of construction of the second and third levels of the Parking Improvements (the "Regents Parking Levels'), the Parking Agreement Grading and Infrastructure Costs and the cost of the Parking Land attributable to the Regents Parking Levels (the "Regents Parking Land Share ") through the issuance of its bonds, notes or other obligations (the "Parking Bonds ") which are payable from the net revenues of the Parking Improvements or from other sources which may be legally available for such purposes which Bonds will be issued in an amount sufficient (i) to pay the Cost of the Regents Parking Levels, (ii) to pay the costs of issuance of the Parking Bonds (including underwriting costs), (iii) to establish a debt service reserve fund for the Parking Bonds, (iv) to pay capitalized interest on the Parking Bonds during the construction period for the Parking Improvements, (v) to pay the Parking Agreement Grading and Infrastructure Costs, (vi) to pay the Regents Parking Land Share, and (vii) to pay all other costs associated with the cost of contracting the Regents Parking Levels, the issuance of the Parking Bonds and the entering into of the documents authorizing the issuance of the Parking Bonds (the "Parking Bond Resolution ") and all other documents relating thereto. The Parking Agreement Grading and Infrastructure Costs shall be an amount equal to $I,384,960 which is 12.3% of the estimated Grading Costs and the Public Infrastructure Costs. The Regents Parking Land Share shall be an amount equal to $2,610,257 which is 68.23% [determined by dividing the number of parking spaces on the Regents Parking Level (569) by the total number of parking spaces in the Parking Improvements (834)] of the cost of !he Parking Land. The Cost of the Regents Parking Levels shall be determined by subtracting the Cost of the City Parking Level from the Total Cost of the Parking Improvement. The Total Cost of the Parking Improvement shall be an amount equal to the cost of constructing the Parking Improvements including soft costs and developer fees. The Cost of the City Parking Level shall be an amount equal to the sum of (i) the Cost per Space of constructing the ground level of the Parking Improvement times the number of spaces on the ground level and (ii) the soft costs and development fee attributable to the ground level of the Parking Improvement, The Cost per Space shall be established by the City based upon written estimates provided by the contractor. Section 1.2 Establishment of Fees and Charges for use of the Parking Improvements; Agreement of Regents to Pte. The City shall establish fees and charges (the "Fees and Charges ") to be paid by Regents for the Easement (hereinafter defined) and the use and enjoyment of the top two levels of the Parking Improvements by the Users (hereinafter defined) for each fiscal year (ending June 30 of each year) during the term of this Agreement beginning with the fiscal year ending on the June 30 immediately following the date of completion of construction of the Parking Improvements (the "Parking Improvements Completion Date "). The Fees and Charges for each fiscal year shall be established by the City and reported to the Regents on or before the March 1 immediately -3- 4831 - 7297 - 4595114 6/312010 Book 4668, Page 396, File Number (Page 5 of 17) preceding the start of such fiscal year (except that the Fees and Charges for the initial fiscal year shall be established by the City and reported to the Regents within ten days of the Parking Improvements Completion Date) and shall be equal to the sum of the following: (a) 120% of the amount due to all holders of any Parking Bonds in the aggregate for both the principal of and interest on such Parking Bonds coming due during such fiscal year; (b) An amount equal to the amount, if any, necessary to restore the amount on deposit in the debt service reserve fiord established for the Parking Bonds in the Parking Bond Resolution to the level required by the Parking Bond Resolution; (c) An amount equal to the amount, if any, necessary to find major repairs or maintenance to the Parking Improvements allocable to the top two levels thereof, or to fund or restore the amount on deposit in the major repair and maintenance reserve fund established in the Parking Bond Resolution to the level required by the Parking Bond Resolution; and (d) An amount equal to its proportionate share of the amount necessary to pay the routine costs of operating and maintaining the Parking Improvements for such fiscal year (not including major repairs or maintenance to the Parking Improvements). The Regents agrees to pay the Fees and Charges thus established by the City for each fiscal year in equal monthly installments payable in advance commencing on the first day of the first month of each fiscal year (the first day of the first month immediately following the date of issuance of the Parking Bonds in the case of the initial fiscal year) such payments to be made in immediately available funds at the address of the City set forth in Section 3.11 hereof or at such other place or to such other person as the City may designate from time to time. The City agrees to keep proper books and records relating to the operation of the Parking Improvements, the Fees and Charges received from the Regents and other revenues received from the operation of the Parking Improvements. The City further agrees that for each fiscal year for which there is an amount (the "Excess Amount") of Fees and Charges paid by the Regents which exceeds the amount necessary to pay the sum of (i) the amount due to all holders of the Parking Bonds in the aggregate for both the principal of and interest on the Parking Bonds coming due during such fiscal year, (ii) the amount, if any, necessary to restore the amount on deposit in the debt service reserve fund established for the Parking Bonds in the Parking Bond Resolution to the level required by the Parking Bond Resolution, (iii) the amount, if any, necessary to fund the amount on deposit in the major repair and maintenance reserve fund established in the Parking Bond Resolution to the level required by the Parking Bond Resolution or to restore any amounts withdrawn from such fiord to fund major repairs or maintenance to the Parking Improvements allocable to the top two levels thereof; and (iv) the amount necessary to pay the Regents' proportionate share of the routine costs of operating and maintaining the Parking Improvements for such fiscal year, such Excess Amount shall be applied to reduce the monthly installments due during the remainder of such fiscal year and during the next succeeding fiscal year. _4_ 4831- 7297 - 4595\14 6/3/2010 Book 4668, Page 396, File N�mib.z (Page 6 of 17) Section 1.3 Es_tablishalent of Fees and Char es for use of Additional Parking S ap ees Agreement of Regents to Pay. The City shall establish fees and charges (the "APS Fees and Charges ") to be paid by Regents for the use and enjoyment of the Additional Parking Spaces (hereinafter defined) by the Additional Users (hereinafter defined). APS Fees and Charges (the "Intermodal Fees and Charges ") for the Additional Parking Spaces which are Iocated in the Intermodal (hereinafter defined) shall be established by the City and shall be consistent with the fees and charges established for use of other parking spaces at the Intermodal by the general public. Such Intermodal Fees and Charges for each fiscal year shall be established by the City acrd reported to the Regents by the City on or before the March 1 immediately preceding such fiscal year (except that such Intermodal Fees and Charges for the initial fiscal year shall be reported to the Regents within two days of the establishment thereof by the City). The Regents agrees to pay the Intermodal Fees and Charges thus established by the City for each fiscal year in equal monthly installments payable in advance commencing on the first day of the first month of each fiscal year (the first day of the first month following the establishment of the Intermodal Fees and Charges in the case of the initial fiscal year), such payments to be made in immediately available funds, without right of offset, at the address of the City set forth in Section 3.11 hereof or at such other place or to such other person as the City may designate from time to time. In the event that the City constructs the Surface Parking Improvements (hereinafter defined) as required by Section 2.8 hereof, the APS Fees and Charges for the Surface Parking Improvements (the "Surface Parking Fees and Charges ") shall be established by the City for each fiscal year (ending June 30 of each year) during the term of this Agreement beginning with the fiscal year ending on the June 30 immediately following the date of completion of construction of the Surface Parking Improvements (the "Surface Parking Improvements Completion Date "). The Surface Parking Fees and Charges for each fiscal year shall be established by the City and reported to the Regents on or before the March 1 immediately preceding the start of such fiscal year (except that the Surface Parking Fees and Charges for the initial fiscal year shall be established by the City and reported to the Regents within ten days of the Surface Parking Improvements Completion Date) and shall be equal to the sum of the following: (a) In the event that the City has financed the acquisition and construction of the Surface Parking Improvements through the issuance of bonds, notes, or other obligations (the "Surface Parking Bonds' ), 120% of the amount due to all of the holders of all of the Surface Parking Bonds in the aggregate for both the principal of and interest on such Surface Parking Bonds coming due during such fiscal year; (b) An amount equal to the amount, if any, necessary to restore the amount on deposit in the debt service reserve fund, if any, established for the Surface Parking Bonds in the resolution, indenture, trust agreement or other document authorizing the issuance of the Surface Parking Bonds (the "Surface Parking Bond Resolution ") to the level required by the Surface Parking Bond Resolution; (c) An amount equal to the amount, if any, necessary to fund or restore the amount on deposit in the major repair and maintenance reserve fund established in the Surface Parking Bond Resolution to the level required by the Surface Parking Bond Resolution; and -5- 4871- 7297- 459S \14 6/3/2010 Book 4668, Page 396, File Nu ., (Page 7 of 17) (d) An amount equal to the amount necessary to pay the routine costs of operating and maintaining the Surface Parking Improvements for such fiscal year. The Regents agrees to pay the Surface Parking Fees and Charges thus established by the City for each fiscal year in equal monthly installments payable in advance commencing on the first day of the first month of each fiscal year (the first day of the first month immediately following the Surface Parking Improvements Completion Date in the case of the initial fiscal year) such payments to be made in immediately available funds at the address of the City set forth in Section 3.11 hereof or at such other place or to such other person as the City may designate from time to time. The City agrees to keep proper books and records relating to the operation of the Surface Parking Improvements, the Surface Parking Pees and Charges received from the Regents and other revenues received from the operation of the Surface Parking Improvements. The City further agrees that for each fiscal year for which there is an amount (the "Surface Parking Excess Amount ") of Surface Parking Fees and Charges paid by the Regents which exceeds the amount necessary to pay the sum of (i) the amount due to all of the holders of the Surface Parking Bonds in the aggregate for both the principal of and interest on the Surface Parking Bonds coming due during such fiscal year, (ii) the amount, if any, necessary to restore the amount on deposit in the debt service reserve fund established for the Surface Parking Bonds in the Surface Parking Bond Resolution to the level required by the Surface Parking Bond Resolution, (iii) the amount, if any, necessary to fund or restore the amount on deposit in the major repair and maintenance reserve fund established in the Surface Parking Bond Resolution to the level required by the Surface Parking Bond Resolution; and (iv) the amount necessary to pay the routine costs of operating and maintaining the Surface Parking Improvements for such fiscal year, such Surface Parking Excess Amount shall be applied to reduce the monthly installments due during the remainder of such fiscal year and during the next succeeding fiscal year. M 4831 - 7297459514 6/32610 Book 4668, Page 396, File Number (Page a of 17) ARTICLE II PARK -ING Section 2.1 Design and Construction of the Parkiag Improvements. As soon hereafter as reasonably possible the City shall proceed in the preparation and finalization of plans and specifications (the "Parking Improvements Plans ") for the Parking Improvements sufficient to provide parking spaces for the physicians and employees of UIHC (the "Employee Parking Spaces ") and additional parking spaces for the clients and customers of UMC (the "Patient Parking Spaces ") at the Building which such Parking Improvements shall include a three level structural parking facility providing a minimum of 569 aggregate parking spaces on the second and third levels thereof and related drive and pedestrian accessways. The City shall have the Parking Improvements Plans approved by any governmental agency or body having jurisdiction over the same and to obtain all governmental permits and approvals necessary to develop and construct the Parking Improvements. Section 2.2 Grant of Easement. The City hereby grants to the SMF Land and the owners and occupants thereof in perpetuity (unless terminated pursuant to the provisions hereof) and upon the terms and conditions set forth in this Agreement, the following nonexclusive easement (the `Basement')., (a) Access and Parking Easement. Subject to imposition of the Fees and Charges therefor in accordance with Section 1.2 hereof, and subject to the time limitations stated in Section 2.2(d) hereof, an easement over that portion of the Parking Land improved with the Parking Improvements for the purpose of providing passenger vehicle parking (including, without limitation, automobiles, passenger vans and buses), and for providing vehicular and pedestrian ingress and egress between the Parking Land and any adjacent public streets for the owners and occupants of the SMF Land and their respective guests, agents, employees, physicians, clients, patients and invitees (the "Users ") solely in connection with their use of the second and third levels of the Parking Improvements. (b) Number of Parking Spaces. The Users shall have the right at the times specified in Section 2.2(d) hereof to use, in the aggregate, on the second and third levels of the Parking Improvements a designated number of Employee Parking Spaces for use by physicians and employees of UIHC and a designated number of Patient Parking Spaces for use by clients, patients, customers, guests, agents and invitees. Regents shall notify the City of the number of Employee Parking Spaces and Patient Parking Spaces. (c) Location of Parking Spaces. The City and Regents shall agree on the location of the Employee Parking Spaces and the Patient Parking Spaces on the second and third levels of the Parking Improvements and the City shall include signage at the Parking Improvements as it may deem necessary to direct Users to different areas of the second and third levels of the Parking Improvements as necessary. (d) Hours of Access, Ingress and Egress. The Users shall have the exclusive right of access to, ingress and egress from and use of the second and third levels of the Parking 7- 4831 - 72974595114 6/312010 Hook 4668, Page 396, File Number (Page 9 of 17) Improvements from 6 :00 a.m. to 6:00 p.m. on Mondays through Fridays and from 6:00 a.m. to noon on Saturdays, upon and subject to the terms and provisions of this Agreement. Section 2.3 Compliance with Rules and Regulations. The Users shall comply with such reasonable rules and regulations regarding the use of the Parking Improvements as the City imposes on all users of the Parking Improvements, provided, that no such rule or regulation shall detract in any way from the rights granted in Section 2.2 of this Agreement, nor impose any monetary obligation upon any of the Regents Parties, other than the requirement to pay the Fees and Charges pursuant to Section 1.2 hereof. Section 2.4 Maintenance and Repair. The City shall maintain the Parking Improvements in good order, condition and repair (subject to casualty, condemnation and reasonable wear and tear) and in a manner that is consistent with the maintenance practices prevailing with respect to the other parking facilities in the IRL. The City shall have the right to close all or any portion of the Parking Improvements, at reasonable times and for reasonable periods, if and to the extent reasonably required for the purpose of performing necessary repairs to and necessary maintenance of the Parking Improvements. Section 2.5 Compliance with Law. The City shall at all times comply with all applicable ordinances, rules, regulations, codes, laws, statutes and requirements of all federal, state, county and municipal governmental bodies or their subdivisions with respect to the Parking Improvements. The City represents and warrants that nothing in this Agreement or otherwise violates the provisions of any applicable agreement with, or regulation by, any governmental authority. Section 2.6 Insurance. The City shall maintain in full force and effect at all times while this Agreement is effective a policy or policies of commercial general liability insurance insuring the City against any liability arising out of the use of the Parking Improvements. Such insurance may be a part of other general liability coverage insurance maintained by the City and shall be in an amount not less than $1,000,000 minimum combined single limit for bodily injury (including death) and property damage, on a per occurrence basis. If the operation of the Parking improvements is contracted to a third party ( "Garage Operator"), the City shall cause the Garage Operator to carry the same type and amount of insurance with respect to the operation of the Parking Improvements. Section 2.7 Termination of the Easement, The Easement, shall terminate upon the occurrence of any of the following: (a) Condemnation. In the event any governmental entity (other than the City) acquires by condemnation or right of eminent domain all of the Parking Improvements or such portion of the Parking Land as shall result either in access to the Parking Improvements being 4831- 7297 - 4595 \14 6/3/2010 Book 4668, Page 396, File Number (Page 10 of 17) closed or there remain fewer than 300 parking spaces on the second and third floors of the Parking Improvements and provision for the payment in full of the Parking Bonds shall have been made in accordance with the provisions of the Parking Bond Resolution, this Agreement shall without further action by either party hereto terminate as of the date of such acquisition and the parties shall have the right to pursue any claim or award from such governmental entity with respect to their respective interests in the Parking Improvements. (b) Mutual Agreement. This Agreement and the Easement may be terminated by the mutual written agreement of the owner of the Parking Land and the owner of the SMF Land provided that prior to such termination provision for the payment in full of the Parking Bonds shall have been made in accordance with the provisions of the Parking Bond Resolution. In the event of the termination of this Agreement pursuant to the terms hereof, the parties shall cooperate in good faith to execute any required documentation, including without limitation a quitclaim deed, to release the Easement and terminate all of the Easement rights in the Parking Land and the Parking Improvements. Section 2.8 Additional Parking Spaces, The City agrees that during the term of the Easement, in addition to the parking spaces provided on the second and third level of the Parking Improvements, the City will provide additional parking spaces (the "Additional Parking Spaces ") for physicians, employees, clients and customers of the Building (the "Additional Users ") at parking facilities located near or adjacent to the SMF Land, the amount of such Additional Parking Spaces to be equal to the difference between 750 and the number of parking spaces provided on the second and third level of the Parking Improvements (currently estimated to be 569). It is anticipated that the Additional Parking Spaces will be located in the intermodal transportation facility (the "Intermodal ") which the City intends to have constructed in the M in the vicinity of the Building. If the Intermodal is not constructed or the City decides that the Intermodal can not accommodate any or all of the Additional Parking Spaces, the City will construct a surface parking facility (the "Surface Parking Improvements ") that can accommodate the remaining Additional Parking Spaces in the vicinity of the Building. The City will provide and display appropriate signage and other markings in and around any of the Additional Parking Spaces that are reserved spaces signifying their reserve status. 21 4831-7297-4595114 6/3/2010 Hook 4666, Page 396, File Nw er (Page 11 of 17) ARTICLE III MISCELLANEOUS Section 3,1 Estoppel Certificates. Each party shall, upon at least ten (10) days' written notice, execute and deliver to any other party, and to any other person having or about to have a bona fide interest in this Agreement as such other party may designate in writing, a statement certifying that this Agreement is unmodified and in full force and effect, or if not, stating the details of any modification and stating that as modified it is in full force and effect, and whether or not, to the knowledge of the certifying party, there is any existing default on the part of any other party. Section 3.2 Recordation. Promptly following the execution of this Agreement, the parties shall cooperate to cause this Agreement to be recorded in the office of the Johnson County, Iowa Recorder. Section 33 Covenants Running With the Land; Successors and Assigns. The provisions of this Agreement and the benefit and burden of the Easements granted herein are covenants running with the land, shall run with the title to the SMF Land as the dominant estate and the Parking Land as the servient estate, and shall be binding upon all persons having or acquiring any right, title or interest in and to the SMF Land or the Parking Land. This Agreement shall be binding upon the City and the Regents and their successors and assigns. The rights and obligations of the City hereunder shall be the rights and obligations of the City of Coralville, Iowa and any other person who may at any time own the Parking Land and all references to the City herein shall mean the City of Coralville, Iowa and any such owner of the Parking Land, The rights and obligations of the Regents hereunder shall be the rights and obligations of the Board of Regents, State of Iowa and any other person who may at any time own the SMF Land and all references to the Regents herein shall mean the Board of Regents, State of Iowa and any such owner of the SMF Land. Section 3.4 CWtions. The section and paragraph headings that appear in this Agreement are only for the convenience of the reader, are not intended to be a part of the substance of this Agreement, and shall not be considered in interpreting this Agreement. Section 3.5 Entire Agreement: Modification, This Agreement (including the exhibits attached hereto) constitutes the complete agreement between the parties hereto and supersedes any prior oral or written agreements or understandings between the parties hereto regarding the subject matter of this Agreement. Any amendment or modification to this Agreement shall be effective only in writing and executed by all of the parties hereto. 10- 4831- 7297 -059514 6/3/2010 Book 4668, Paga 396, File Number (Page 12 of 17) Section 3.6 Controlling Law: Jurisdiction. This Agreement is made under and shall be governed by and interpreted by applying the laws of the State of Iowa without regard to Iowa's conflict of interest laws. Section 3.7 Waivers. Any failure of any party hereto to insist upon the prompt and punctual performance of any term or provision of this Agreement shall not constitute a waiver of such terra or provision, and no waiver of any provision of this Agreement shall be effective unless in writing and signed by the waiving party. Any effective waiver of any term or provision of this Agreement on any specific occasion shall not be deemed a waiver of such tern or provision in any other or later occasion. Section 3.8 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by facsimile, or e -mail of a PDF copy, of a counterpart of this Agreement executed by a party shall constitute delivery by such party of such party's executed counterpart of this Agreement. Section 19 Provisions Severable. Each provision of this Agreement is independent of and severable from the other provisions of this Agreement, and no provision of this Agreement shall be affected or rendered invalid or unenforceable by the invalidity or unenforecability of any other provision of this Agreement. Section 3.10 lnteroretation. This Agreement has been negotiated at arm's length and between parties sophisticated and knowledgeable in the matters dealt with herein and, in addition, each party has been represented by experienced and knowledgeable legal counsel. This Agreement shall be interpreted in accordance with its fair meaning, and no provision of this Agreement shall be interpreted for or against any party hereto because that party or that party's counsel drafted such provision. Section 3.11 Notices. Except as may otherwise be provided in this Agreement, all notices, demands, statements, requests, consents, approvals and other communications which a party is required or may desire to give any other party shall be in writing and may be delivered (a) personally, (b) by United States registered or certified mail, postage prepaid, (c) by Federal Express or other reputable courier service regularly providing evidence of delivery (with charges paid by the party sending the notice), or (d) by facsimile transmission, provided that such facsimile transmission copy shall be immediately followed by delivery of such notice pursuant to clause (a), (b) or (c) above. Any such notice shall be addressed as follows (subject to the right of a party to designate a different address for itself by notice similarly given); 4931- 7297-0595 \14 6/3/2010 Hook 4668, Page 396, File Nu ab (Page 13 cf 17) (a) If to the Regents: Board of Regents, State of Iowa Attention: Executive Director 11260 Aurora Avenue Urbandale, Iowa 50322 Facsimile: 515- 281 -6420 (b) If to the City: City of Coralville, Iowa 1512 7'h Street Coralville, Iowa 52241 Attn: City Administrator Facsimile: 319 -248 -1894 Any notice so given by mail shall be deemed to have been given as of the date of delivery (whether accepted or refused) established by a U S. Post Office return receipt or the overnight carrier's proof of delivery, as the case may be. Any notice not so given (including a notice given by telecopy in accordance with the above provisions) shall be deemed to be given upon receipt of the same by the party to whom the same is to be given. -12- 4831.7297-459514 6/3/2010 Sook 6668, Page 396, File Number (Page 14 of 17) IN WITNESS WHEREOF, Regents has executed this Parking Agreement and Easement all as of the date first above written, BOARD OF REGENTS, STATE OF IOWA By. — Name: STATE OF IOWA ) SS: COUNTY OC _ ) he foregoin instument was acknowledged before me tl *s e � y of June, 2010, by as the of Board of Regents, State of Iowa, on its behalf. Notary Public i F1U7ii (t.ENE •f� <fl� (Seal/Stamp] Commisslon N umber 731886 my Commlwlon EVIM D1 ber B, 2010 [Execution Page for Parking Agreement and Easement] Book 4668, Page 396, File Number (Page 15 of 17) Dorsey & Whitney LLP Draft Dated 6/3/10 IN WITNESS WHEREOF, the City has executed this Parking Agreement and Easement all as of the date first above written. CITY OF CORALVILLE, IOWA By: C Jim , Fausett, a By: Thorsten Jo n, Jerk STATE OF IOWA ) )as COUNTY OF JOHNSON ) (Seal) The foregoing instrument was acknowledged before me this A4 day of 3414 2010, by Jim L. Fausett and Thorsten Johnson, as the Mayor and City Clerk of the City of Coralville, Iowa, respectively, on its behalf. o`er KEVIN D. OL$0 V Notary Public Cammfssion Number 727324 My rommiuiw Expun [Execution Page for Parking Agreement and Easement] [Seal/Stamp] Hook 6668, Fage 396, File Number (Page 16 of 17) Description of the SMF Land BUYLDING PARCEL That part of the Northeast Quarter of Section 5, Township 79 North, Range 6 West of the 5t" P.M., Coralville, Johnson County, Iowa described as follows: Commencing as a point of reference at the intersection of First Avenue and East Ninth Street in Coralville, Iowa; Thence North 88 °03' East 642.9 feet along the centerline of said East Ninth Street (assumed bearing for this description only); thence North 1 °57' West 44.0 feet to the point of beginning; thence North 1 °33' West 83.3 feet; thence North 15 103' East 67.3 feet; thence North 74 057' West 382.6 feet; thence South 1 °52' West 17.1 feet; thence South 10 037' East 54.3 feet; thence South 45 °00' East 43.6 feet; thence South 45 °13' East 45.8 feet; thence South 34 °03' East 57.0 feet; thence South 24 °48' East 29.0 feet; thence South 8 000' East 48.5 feet; thence North 88 °03' East 220.3 feet to the point of beginning and containing 1.31 acres more or less. Hook 8668, Page 396, Fill Number (Page 17 of 17) Description of the Parking Land PARKING PARCEL That part of the Northeast Quarter of Section 5, Township 79 North, Range 6 West of the 5'h P.M., Coralville, Johnson County, Iowa described as follows: Commencing as a point of reference at the intersection of First Avenue and East Ninth Street in Coralville, Iowa; Thence North 88103' East 642.9 feet along the centerline of said East Ninth Street (assumed bearing for this description only); thence North 1 °57' West 44.0 feet; thence North 1 033' West 83.3 feet; thence North 15 °03' East 67.3 feet; thence North 74 057' West 31.0 feet to the point of beginning; thence continuing North 74.57' West 351.6 feet; thence North 3 °26' East 18.9 feet; thence North 6 °31' East 69.1 feet; thence North 12 °20' East 90.7 feet; thence North 19 °12' East 98.3 feet; thence North 26 020' East 97.8 feet; thence North 36 013' East 53.3 feet; thence North 52 °35' East 14.7 feet; thence South 14 °23' East 107.6 feet; thence South 74157' East 262.7 feet; thence South 15 003' West 339.0 feet to the point of beginning and containing 2.93 acres more or less. A -2 Book 4668, Page 396, File Number Attachment O - 2 Miscellaneous Accounts Receivable Invoice PLEASE REMIT TO: City of Iowa. City 410 E. Washington St. Iowa City, Iowa 52240 -1826 (319) 356 -5083 Amount Paid $ U OF I PARKING & TRANS. ATTN: ANN GREENZWEIG 100 WCTC IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII IOWA CITY, IA 52242 Please Return This Portion With Your Payment Billing Date: June 06, 2013 Charges for goods and /or services as follows: FY14 PARKING PERMITS Description Amount City of Iowa City 38 SWAN PERMITS 34,656.00 20 REC LOT PERMITS 13,680.00 303 COURT PERMITS 276,336.00 78 CAPITAL PERMITS 71,136.00 48 DUBUQUE PERMITS 43,776.00 128 TOWER PERMITS 116,736.00 TOTAL CHARGES: $556,32D.00 Please make check payable to City of Iowa City, Questions may he directed to Parking Department at (319) 356 -5096. Please Retain Tnis Portion Nor Your Necoras PLEASE REMIT TO: City of Iowa City 410 E. Washington St. Iowa City, Iowa 52240 -1826 (319) 356 -5063 An A r- A At �'T A3 Attachment O- 3 -ter From: Tony Roetlin <troetlin @ci.coralville.ia.us> Sent: Tuesday, April 01, 2014 12:57 PM To: Chris O'Brien Subject: RE: Debt schedule Below is the payment schedule on those Parking Revenue Bonds. uun• t rI'a"paal C411{A611 nse Payrne TotalO &I I scolI,Oaf Paymenr` S J..,,. K1 112CI127---- - .. 12119 0121 1,H,292 1 .92 169 292 6111W013 : T000 2.05010. 574501" 1 119 :O 191154'.) ir71 2701a� �1 3i 31A 3237 . Ji : did 4U3 '?,9':aCac;:a i yaa7 1 8,'2:.7 1.54,734 12 1 !;r11 ha x`84 3Jfl,$8E- k ri 0 boo 2 jA,88 r 1,241,9!2.E 1,E42,770 12 6 201 P,6101 28TK& " c 2 I ;1 771" 0 6G 29rC1% 2s7 003" 1,256,06 1,542 +112 i 2v15 2TZ7%-� 272713 I 2017 038.0o0 2.950% 272713 1.270713 'I.'v- ". °.e.211 1 72415 2 +2' 257'97 Y rg418 4;.171 }i0 24 50% t7 9da 1284 4K 1 4 '3a _rc dl l 39571 +1"Q 2'.951$8 " 2644 1,299 8:4 1 :.925`3$ 1 1`-20jft: 217,25-,, 127202 S�2J.2'3 d,J,9 1102 245PRa �'r72��:i 1 1.�2 _ 1,543.546 1 I�r2i12:3 211 1271 211..193 r 1.12')21 1121 Ci{i!5 2.9`0ci 211.11a1 1 ;12.19' 1.543,332 1 i ^9 14�F.M 9�.a raC iF ary7� :1'�.1 OS14 ?t }ti {s' 19 .':i i sd {�;6 15A331'} 1 11�i2,D2$. �Di 1"75 311 P'5. x15/1023 ' U8,00C 5.6100% 1U1,075 1 118-1,C,79 1,M,I - -�J 12P15i2023 271375 271.275 6M 5020251 +2230-7'0 500095 271,375 1,494 37PI 1,7G57 =.0 1ZI =,202+0 247801+0 240 GOO _y 11`+21:1.2.5. ',254 731+0 5.000 2f40 3'00 1,t49y9. 00 1.740'i' 7U 121E,272F, 24�'L•_ 249 „'2f r F 202 €x 11 "M000 5,0N4 I7 299.32=1 1 105.'2= 1,7 4:6`. 1 1 ;tti2.02'S 17£'x,52::' 1'x4,4 5 r1 Y.'027 1,534 Goo 5,904 " -:'i 175 32.?, 1 11" }r5 9,x87,$53 12 1 252, i 1 3.17 c: 148 575 . 1 ?028 ' 3'.: 50;23 5:(}06'6 143.67' 1 517,c,7 : 1,6651,1531 12.3 r13 c 1131” 2; 109,224 h 1� ti 7,414 iCob 5.400'0 104 22_� 1 3 2c 1 532,450 12; 73,875 7337` i .2fl'aa6 . +5& DOD abIJG°v , 3377: 1 _20.675 1 rv113,750 7 2t�s0� 37'r 77 t ikr7;a 31k '4d9.60c) a.00O'„ 3r .,. 1 I., Tony Roetlin 1 ATVkc, A b °T `' Attachment O - 4 PROCEEDINGS OF THE CITY COUNCIL OF THE CITY OF CORALVILLE, JOHNSON COUNTY, IOWA SUBJECT TO THE APPROVAL BY THE CORALVILLE CITY COUNCIL AT A SUBSEQUENT MEETING A Regular Meeting of the City Council of the City of Coralville, Johnson County, IA was held at City Hall, 1512 7�h Street on Tuesday, May 24, 2011 with Mayor Jim L. Fausett presiding and was called to order at 7:00 P.M. The following Council Members were present: Hoeft, Gross, Gill, Lundell. Absent: Weihe. The following staff was present: City Attorney Don Diehl, City Attorney Kevin Olson; Asst. City Administrator Ellen Habel; Building & Zoning Official Jim Kessler; Police Chief Barry Bedford; City Engineer Dan Holderness; Finance Officer Terry Kaeding; Telecommunications Production Coordinator Eric Dickerson; Telecommunications Assistant Alex Edge; City Clerk Thorsten J. Johnson. Motion by Gill, seconded by Lundell to approve the agenda. Motion carried. Ayes: 4. Absent: 1. Votes are 4 Ayes and 1 Absent for Motions, Resolutions and Ordinances unless otherwise noted. David Sheff addressed the Council during citizen comments about his concerns about the high cost to purchase of property from Diana Pratt and Moon Dance, LLC. Jennifer H. Anderson addressed the Council during citizen comments about lack of parking for trucks and semis in Coralville. Her partner was told by the two property owners that allowed them to park that the City will not allow them to park there anymore. The closest place to legally park is West Branch or Cedar Rapids. City Attorney Kevin Olson commented the City does not allow parking on City Property because of liability issues. Mayor Jim L. Fausett asked City staff to look into the issue. Mike McCue addressed the Council during citizen comment about his concern over the lack of public input into the purchase of property from Diane Pratt and Moon Dance, LLC. And he asked the Council to delay action on those properties to give people an opportunity to come to the next meeting and voice their concerns and comments. FISCAL YEAR 2011 BUDGET AMENDMENT — PUBLIC HEARING Mayor Jim L. Fausett declared this the time for a public hearing on the Fiscal Year 2011 Budget Amendment. Finance Officer Terry Kaeding reported this is the second amendment for the Fiscal Year 2o11 Budget. This amendment includes revenue increases from FEMA, other grant money and the recent refinancing of bond issues. The expenditures are being adjusted for the bonds being paid off with the refinancing and adjustments for the expenses on capital projects. There were no public or written comments. Fausett closed the public hearing. It was noted this amends the Fiscal Year toll Budget for revenues and expenditures. Detailed information can be found at Coralville City Hall or www corandlle.orQ. RESOLUTION NO. 2011 -107 RESOLUTION APPROVING THE FISCAL YEAR 2011 BUDGET AMENDMENT was introduced by Hoeft, seconded by Gill. A roll call vote was taken. Resolution declared adopted. BONDS — PUBLIC HEARING Mayor Jim L. Fausett declared this the time for a public hearing on a Loan Agreement in the principal amount of $570,000. Finance Officer Terry Kaeding reported these previously issued bonds need to be repurposed so they can be spent by the three year deadline. They will be applied for the funding needs in the Iowa River Landing for infrastructure improvements. There were no public or written comments. Fausett closed the public hearing. RESOLUTION NO. 2011 -108 RESOLUTION AMENDING THE CITY'S RESOLUTION NO. 2oo8 -196 PROVIDING FOR THE AWARD OF $570,000 GENERAL OBLIGATION CAPITAL LOAN NOTES AND PROVIDING FOR THE ISSUANCE OF SUCH NOTES AND THE LEVY OF TAXES TO PAY THE SAME was introduced by Gross, seconded by Hoeft. A roll call vote was taken. Resolution declared adopted. IOWA RIVER LANDING PUBLIC IMPROVEMENTS 2011 — PUBLIC HEARING Mayor Jim L. Fausett declared this the time for a public hearing on plans, specifications, estimate of cost and form of contract for the Iowa River Landing Public Improvements Project 2o11. There were no public or written comments. Fausett closed the public hearing. It was noted this project will provide the public infrastructure for the first phase of the Iowa River Landing development north of East 9th Street. The bid opening will be o6/02/2011. RESOLUTION NO. 2011 -109 RESOLUTION APPROVING THE PLANS, SPECIFICATIONS, ESTIMATE OF COST AND FORM OF CONTRACT; ORDERING BIDS; SETTING A DATE FOR THE RECEIVING OF SAID BIDS; AND DIRECTING PUBLISHED NOTICE OF THE BID LETTING, ALL FOR THE IOWA RIVER LANDING PUBLIC IMPROVEMENTS PROJECT 2011 was introduced by Gill, seconded by Lundell. A roll call vote was taken. Resolution declared adopted. WESTCOR BUSINESS PARK, PART EIGHT, LOT 2 — PUBLIC HEARING Building & Zoning Official Jim Kessler reported this PUD -B Site Plan is for a 2.78 acre lot located on WestCor Drive between Just Dogs Day Care and Protek Medical Products, Inc. The proposed building is 19,000 sq. ft. and will be a storage facility for boats, motor homes and larger items that cannot be stored at their home. The parking requires one space per 1,000 sq. ft. Kessler showed the site plan and pointed out the emergency access and landscaping. There is enough land for another building on the site. The Planning & Zoning Commission voted 6 -o to recommend approval of the site plan to the Council. Mayor Jim L. Fausett declared this the time for a public hearing on the PUD -B Site Plan for WestCor Business Park, Part Eight, Lot 2, Developer Gary Werle showed the Council plans of the storage building he wishes to build on the lot and described the materials he planned to use. The materials meet the development standards for the area. Councilperson John Lundell asked what the hours would be to access the facility. Werle explained there were no set hours and each unit would have its own entrance. Councilperson Tom Gill asked if the building met City code and Building & Zoning Official Jim Kessler responded it did. There was one written comment received against the PUD -B Site Plan from Vice President and General Manager Becky Sedlacek of Protek Medical Products, Inc. There were no further public comments. Fausett closed the public hearing. RESOLUTION NO. 2011 -110 RESOLUTION APPROVING A C -PUD B SITE PLAN FOR WESTCOR PARK, PART EIGHT, LOT 2, CORALVILLE, IOWA was introduced by Lundell, seconded by Gill. A roll call vote was taken. Resolution declared adopted. REZONING REOUEST — COUNTY Building & Zoning Official Jim Kessler reported this is a County re- zoning request by River Products Company to rezone property west of Deer Creek Road from R residential to A agricultural for purposes of expanding existing Quarry. Kessler showed a location map of the proposed rezoning to expand their mining operations. Kessler showed the proposed future alignment of Highway 965. The Planning & Zoning Commission voted 6 -o to recommend the Council give their approval to the County Board of Supervisors. City Attorney Kevin Olson explained the rezoning needs to be approve by the City because it is within 2 miles of the corporate limits. Olson reported he worked with River Products Company and Johnson County to reduce the area to be rezoned and annex property into the City of Coralville so it cannot be used for mining or storage of product. River Products Company agreed to protect the future corridor for U.S. Highway 965. They did not agree to dedicate the road right of way at this point, but want to wait until the road is closer to being built. Olson recommended approving the rezoning and the conditional zoning agreement. RESOLUTION NO. 2011 -111 RESOLUTION APPROVING A CONDITIONAL ZONING AGREEMENT BY AND BETWEEN THE CITY OF CORALVILLE; JOHNSON COUNTY AND RIVER PRODUCTS COMPANY was introduced by Hoeft, seconded by Gross. A roll call vote was taken. Resolution declared adopted. RESOLUTION NO. 2011 -112 RESOLUTION RECOMENDING THAT THE JOHNSON COUNTY BOARD OF SUPERVISORS GRANT THE REQUEST TO REZONE THAT CERTAIN REAL PROPERTY GENERALLY WEST OF DEER CREEK ROAD, JOHNSON COUNTY, IOWA FROM R DISTRICT (RESIDENTIAL) TO A DISTRICT (AGRICULTURAL) was introduced by Gross, seconded by Gill. A roll call vote was taken. Resolution declared adopted. TAXICABS It was noted this proposed ordinance will have changes similar to Iowa City's Taxicab Ordinance. This includes increasing the minimum number of taxis per company to 4, requiring 24 hour dispatching from a business office location, requiring manifest logs and taximeters. There will also be a requirement to provide service to Coralville at all times. ORDINANCE NO. 2011 -1om1 AN ORDINANCE AMENDING CHAPTER 127 OF THE CODE OF ORDINANCES OF THE CITY OF CORALVILLE (2001), AS PREVIOUSLY AMENDED, REGARDING TAXI REGULATIONS was introduced by Gill, seconded by Hoeft for 3�a and final consideration. A roll call vote was taken. Ordinance declared adopted after its publication as required by law. IOWA RIVER LANDING WEST PARKING FACILITY City Engineer Dan Holderness reported 4 bids were received May 19, 2011. The lowest most responsive bid was from Knutson Construction Services for $11,o69,000.00 with Alternate #2 for $60,500.00 and Alternate #3 for $335,000.00 for a total of $11,231,500.00. The engineers estimate for the base bid and two alternates was $13,970,293.00. Staff recommended accepting the low bid. It was noted this project will provide parking for the Medical Office Building and new retail and commercial development in the Iowa River Landing. After the resolution was read, Councilperson Mitch Gross asked if they had expected more bids. City Engineer Dan Holderness responded they did and 9 contractors had plans, but the bids received were close in price, under the engineer's estimate and they were glad to have a local contractor as the low bid. RESOLUTION NO. 2011 -113 RESOLUTION ACCEPTING BIDS AND AWARDING THE CONSTRUCTION CONTRACT FOR THE IOWA RIVER LANDING WEST PARKING FACILITY was introduced by Lundell, seconded by Gross. A roll call vote was taken, Resolution declared adopted. RESOLUTION NO. 2011 -114 RESOLUTION APPROVING THE CONTRACT AND BOND DOCUMENTS FOR THE IOWA RIVER LANDING WEST PARKING FACILITY was introduced by Hoeft, seconded by Gill. A roll call vote was taken. Resolution declared adopted. It was noted this subdivision is located south of Holiday Road, east of Ozark Ridge and west of Palisades Drive. RESOLUTION NO. 2011 -115 RESOLUTION ACCEPTING MUNICIPAL IMPROVEMENTS CONSTRUCTED IN PALISADES PRAIRIE, PART TWO, CORALVILLE, IOWA was introduced by Gross, seconded by Hoeft. A roll call vote was taken. Resolution declared adopted. IOWA DEPARTMENT OF TRANSPORTATION FIVE YEAR AGREEMENT It was noted this agreement details the Iowa Department of Transportation's and the City of Coralville's responsibilities for the maintenance of freeways, primary highways and City streets crossing freeway rights of way for the next 5 years. RESOLUTION NO. 2011 -116 RESOLUTION APPROVING AN AGREEMENT FOR THE MAINTENANCE AND REPAIR OF PRIMARY ROADS BETWEEN TIIE CITY OF CORALVILLE AND THE IOWA DEPARTMENT OF TRANSPORTATION FOR THE PERIOD OF JULY t, 2otr THROUGH JUNE 30, 2016 was introduced by Gill, seconded by Lundell. A roll call vote was taken. Resolution declared adopted. PROPERTY PURCHASES City Attorney Don Diehl reported Mark Brown received an offer for $220,000.00 for 723 Edgewater Drive and Brown felt he should give the City the first opportunity to purchase the property at that price. Diehl recommended amending the resolution to change the price from $200,000.00 to $220,000.00. After the Motion was made, Councilperson Bill Hoeft asked Mark Brown if he had agreed to sell his property to the City for $200,000.00. Brown responded he had not and that he received a call from The Gazette asking about the sale of his property and an article was published. The next day Mr. Sales offered him $220,000.00 to buy the property. Brown said the offer was unsolicited. Councilperson Mitch Gross asked about the offer. It was explained some details regarding the date to be out of the house and removal of dirt from the property with Brown's offer was changed by the City and no documents were signed or offers accepted. Councilpersons Bill Hoeft and Mitch Gross expressed concerns of raising the price at the last minute and they felt the $200,000.00 was a fair offer. Councilpersons Tom Gill and John Lundell were concerned the price would be even higher if they went to condemnation and there is a need for the property by the City. Mayor Jim L. Fausett asked if oral agreements were binding in this case. Diehl responded not in land deals. Fausett noted the City does not usually condemn property if there are other options. Fausett asked Building and Zoning Official Jim Kessler what the Iowa Department of Natural Resources had to say about the property being in a floodway. Kessler responded the City had to provide services to the residence, but there was some question if they would be allowed to repair those services in a floodway if they failed. Gross will vote no because he would like more time and discussion on the issue. Diehl suggested delaying action until next meeting, but Brown indicated he would not wait until next meeting. Motion by Gill, seconded by Lundell to amend resolution to change the purchase price to $220,000.00. Roll call vote: Ayes: Gill, Lundell. Nays: Hoeft, Gross. Absent: Weihe. Motion failed. RESOLUTION NO. 2011 -117 It was noted the purchase price is $200,000.00. .0 RESOLUTION RATIFYING AND APPROVING A PURCHASE AGREEMENT WITH MARK BROWN FOR 723 EDGEWATER DRIVE was introduced by Lundell, seconded by Gross. A roll call vote was taken. Resolution declared adopted. After Resolution No. 2o11 -118 was read, Councilperson Tom Gill explained some of the reasons why he would vote for the purchase of this property. Gill noted the sewer lift station at Oakdale Boulevard failed a few months ago and he wanted to rebuild it to for future growth and this property purchase would allow for that growth. Gill noted if the purchase is delayed the property will be split immediately and property owners who desire to be annexed by Coralville will not to be able to. Gill noted there is a need for an east west arterial road north of Coralville and this property can be used to put Forevergreen Road through and alleviate congestion on Highway 965 and 12th Avenue. This will allow Forevergreen Road to be routed away from property owners. Councilperson Bill Hoeft noted this would allow for the voluntary annexation of interested property owners into the City. Mayor Jim L. Fausett interjected this is not about annexation at this point. They are purchasing this property for future roadway and sewer system right of ways. Fausett and Gill explained how the City purchased the farm for Oakdale Road for more than it was worth, but ended up increasing the general fund when they sold the excess property after building the road. Fausett and City Attorney Kevin Olson noted if this property was not purchased future right of way costs could make expanding Forevergreen Road and the sewer line more expensive and might be cost prohibitive in the future. Hoeft asked if the City could handle expanding utilities in this area. Olson responded a study had been done and the City can extend utility services to this area. Police and Fire Departments should also be able to service the area. Fausett asked City Engineer Dan Holderness if a sewer trunk line was extended close to the property and Holderness responded it was. County Supervisor Rob Sullivan expressed concern about the lack of County knowledge and public discussion about this property purchase in the County in an area with a history of controversy. Fausett responded the City does not discuss the buying of property publicly, because prices would go up and he noted the City has been working with North Liberty on an annexation agreement. Lundell noted there will be a lot of discussions of the future of this area and the City Council is asked to be visionary and take advantage of opportunities when they happen. Gross thought the County wanted Coralville and North Liberty to solve the annexation issue in this area. Margaret Colony owns a farm in the area asked why the City is discussing expanding Forevergreen Road when Oakdale Boulevard has not been completed. Holderness gave an update on the Oakdale Boulevard Extension and noted environmental studies and reports had been completed and bids are expected to be received later this year or early in 2012. Colony asked the City to allow public input when they do extend Forevergreen Road and Fausett responded they would. RESOLUTION NO. 2ou -n18 It was noted the purchase price is $2,450,000.00. RESOLUTION RATIFYING AND APPROVING A PURCHASE AGREEMENT WITH DIANA PRATT FOR PROPERTY LOCATED AT 2873 NORTH LIBERTY ROAD was introduced by Hoeft, seconded by Gill. A roll call vote was taken. Resolution declared adopted. RESOLUTION NO. 201s -sag It was noted the purchase price is $1,050,000.00. RESOLUTION RATIFYING AND APPROVING A PURCHASE AGREEMENT WITH MOON DANCE, LLC FOR PROPERTY LOCATED WEST OF NORTH LIBERTY ROAD was introduced by Gross, seconded by Hoeft. A roll call vote was taken. Resolution declared adopted. MOTION BY Gill TO APPROVE CONSENT CALENDAR items a -kk inclusive: a) Approve minutes for May 10, 2011 Council Meeting. b) Approve New 5 day Class B Beer Permit with Outdoor Service for RAGBRA.I: Effective for 07/29/2011. c) Approve Class C Beer Permit with Carryout Wine and Sunday Sales for Walgreens #5977: Eff. o6/11. d) Approve Class C Beer Permit with Carryout Wine and Sunday Sales for Walgreens #1o985:Eff.o6 /u. e) Approve Class C Beer Permit with Sunday Sales for Cantebnry BPAmoco: Eff, 06/15. f) Approve payment to Terracon Consultants, Inc. for: i) Transit and Parks Facility ( #T205554) $1,524-50 ii) Iowa River Flood Control on the west bank ( #T207712): $13,277.75 g) Approve payment to Howard R. Green Company for: i) vt Ave. Reconstruction — Clear Creek to 6th St ( #74180) $13,196.58 ii) I -8o /1st Ave IJR and Streamline EA ( #74210) $2,484.82 h) Approve payment to MidAmerican Energy Company for an underground electrical extension to Pump Station #3: $11,703.00. i) Approve payment to Veenstra & Kimm, Inc. for Water Well 13 & 14 Siting Study ( #1): $330.00. j) Approve payment to Neumann Monson Architects for North Fire Station ( #17): $5,574.09. k) Approve payment to Hall & Hall Engineers, Inc. for the Transit & Parks Facilities Final Plat: $2,090.49. 1) Approve payment of Iowa River Landing Development Invoice as approved by OliverMeMillan, LLC to Shive- Hattery, Inc. for: i) IRL North of 901 Topographic Survey ( #1102370 -2) $23,44418 ii) IRL North of 9n, ( #1102360 -2) $93,031.37 m) Approve payment of Iowa River Landing Development Invoice as approved by OliverMcMillan, LLC to Terracon Consultants, Inc. for: i) Geotechnical Engineering Services for Brewery ( #T207752) $6,700.00 ii) Impacted Soils — IRL MOB ( #T191893) $9,457.63 n) Approve payment of Iowa River Landing Development Invoice as approved by OliverMcMillan, LLC to RDG Planning & Design for: i) IRL Streetseape ( #33341) $4,57540 ii) IRL Parking Ramp ( #33348) $1,80329 o) Approve payment of Iowa River Landing Development Invoice as approved by OliverMcMillan, LLC to Neumann Monson Architects for: i) IRL Parking Structure for MOB & Retail ( #10) $72,969.54 ii) IRL Parking Structure for MOB & Retail ( #11) $22,135.37 p) Approve payment to OliverMcMillan, LLC for IRL reimbursable invoices ( #012RQS051111): $19,015.79 q) Approve payment to Iowa City Excavating & Grading, Inc. for dozer time leveling soil stockpile for 1st Avenue Reconstruction Project ( #4563): $900.00. r) Approve payment to Hawkeye International Trucks for repairs to the Streets Department's International 4200 ( #138756): $19,292.04. s) Approve payment to CDW Government for parts to install fiber from I -8o to the JECC and to Storm Water Pump Stations in the Iowa River Landing: i) Invoice #XDK9280 $336.68 ii) Invoice #XFW4579 $290.26 t) Approve payment to the Iowa Department of Transportation for the fiber installation I -80 and U.S. Highway 218: $20,000.00. u) Approve payment to Wallace Chappell for Corahille Center for the Performing Arts Consulting Services: $4,000.00. v) Approve Change Order #4, +$20,222.39, Partial Payment #1o, $2o9,620.16, to WRH Inc. /Wendler Construction, Inc. for the I -Jobs Flood Recovery & Protection and Iowa River Landing Wetland Park Improvements. w) Approve Change Order #9 to Tricon General Construction for 1s1 Avenue Corridor Flood Protection Project 2010: +$11,208.10. x) Approve Pay Estimate #1 to Bockenstedt Excavating, Inc. for Camp Cardinal Boulevard Water System Improvements: $149,021.75. y) Approve Pay Estimate #3 to Maxwell Construction, Inc. for Camp Cardinal Boulevard Sanitary Sewer Improvements: $83,362.05. z) Approve Partial Payment #12 to Metro Pavers Inc. for 1't Avenue Reconstruction: $311,453.44• aa) Approve Partial Payment #13 to Peterson Contractors, Inc. for 1st Avenue Clear Creek Bridge Reconstruction: $317,082.50. bb) Approve an Interagency Agreement with the Iowa City Community School District for the Northwest Junior High Prep Program. cc) Approve an Interagency Agreement with the Iowa City Community School District for the Corahille /Sylvan Summer Learning Connection Program. dd) Approve an Interagency Agreement with the Iowa City Community School District for the Coralville Summer Enrichment Program. cc) Approve a two year extension with Cedar Graphics for printing of the city's publications (Parks &Recreation's Leisure Line and the Coralville Connection.) ff) Approve the state bid and payment to Pyramid Equipment of Iowa City for a John Deere XUV all terrain type utility vehicle for the Parks Department; $11,992.29• gg) Approve attendance of Kelly Hayworth and John Weihe to RECon The Global Retail Real Estate Convention in Las Vegas, NV from 05/22- 25/2011: $2,696.00. hh) Approve attendance of Barry Bedford to IACP Annual Conference in Chicago, IL form 10/21 - 26/2011: $2,208.35. ii) Approve attendance of Shane Kron and Bruce Freeman to IACP Annual Conference in Chicago, IL form 10/22 - 26/2011: $2,917.20. jj) Approve April 2011 Treasurer's Report kk) Approve Bill List for 05- 24 -11. Seconded by Hoeft. A roll call vote was taken. Motion carried Asst. City Administrator Ellen Habel reported the City was doing a dry run and training on putting up and taking down flood walls at the 1st Avenue Clear Creek Bridge tonight from 8:0o p.m. to 5: oo a.m. The website signup for RAGBRAI volunteers is now live and can be accessed at coralvilleragbrai.org and volunteers can sign up for the exact shift they want. Shifts are available for July 28 through July 30. It is a great way to spend time with friends and a chance to make new friends. Mayor Jim L. Fausett has nothing to report City Attorney Don Diehl had nothing to report. City Attorney Kevin Olson noted the passing of former County Attorney Ralph Neuzil and gave his condolences to the family. Councilperson John Lundell expressed his sympathy to the Neuzil family. Lundell congratulated West High graduates including his son. Mayor Jim L. Fausett congratulated Northwest Junior High on winning the State Debate Tournament and his grandson from West Des Moines on winning the individual debate. Councilperson Mitch Gross expressed sympathy for the passing of Ralph Neuzil. Gross promised there will be public input on where the City goes after this land purchase. Councilperson Bill Hoeft agreed there should be citizen input on what happens next with the properties purchased tonight and asked citizens to contact him by phone or e -mail. Hoeft noted he is on the Center for the Performing Arts Opening Committee and they are looking at August 26th as the opening night with events going on all weekend. Hoeft noted there are still seats available for donations with balcony seats going for $500.0o and a floor seats going for $750.00. Motion by Gill, seconded by Hoeft to adjourn at 8:30 p.m. Motion carried Jim L. Fausett, Mayor Thorsten J. Johnson, City Clerk FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 FY2034 FY2035 FY2036 FY2037 FY2038 FY2039 FY2040 FY2041 FY2042 FY2043 FY2044 FY2045 FY2046 FY2047 FY2048 FY2049 FY2050 Attachment P Difference Iowa City $ 644,472 Coralville $ 1,154,573 Permit Fees Bond Payment Operations Total 7 556,320 $ 1,200,792 $ 1,140,798 $ 6,369,183 $ 1,200,792 $ 556,320 $ 1,542,734 $ 168,159 $ 1,710,893 $ 556,320 $ 1,542,770 $ 171,456 $ 1,714,226 $ 584,136 $ 1,543,012 $ 174,885 $ 1,717,897 $ 584,136 $ 1,543,426 $ 178,383 $ 1,721,809 $ 584,136 $ 1,542,984 $ 181,950 $ 1,724,934 $ 584,136 $ 1,542,688 $ 185,589 $ 1,728,277 $ 584,136 $ 1,543,506 $ 189,301 $ 1,732,807 $ 613,343 $ 1,543,382 $ 193,087 $ 1,736,469 $ 613,343 $ 1,543,312 $ 196,949 $ 1,740,261 $ 613,343 $ 1,790,150 $ 200,888 $ 1,991,038 $ 613,343 $ 1,765,750 $ 204,906 $ 1,970,656 $ 613,343 $ 1,740,600 $ 209,004 $ 1,949,604 $ 644,010 $ 1,714,650 $ 213,184 $ 1,927,834 $ 644,010 $ 1,687,850 $ 217,448 $ 1,905,298 $ 644,010 $ 1,661,150 $ 221,797 $ 1,882,947 $ 644,010 $ 1,632,450 $ 226,233 $ 1,858,683 $ 644,010 $ 1,603,750 $ 230,757 $ 1,834,507 $ 676,210 $ 1,573,950 $ 235,372 $ 1,809,322 $ 676,210 $ 240,080 $ 240,080 $ 676,210 $ 244,881 $ 244,881 $ 676,210 $ 249,779 $ 249,779 $ 676,210 $ 254,775 $ 254,775 $ 710,021 $ 259,870 $ 259,870 $ 710,021 $ 265,067 $ 265,067 $ 710,021 $ 270,369 $ 270,369 $ 710,021 $ 275,776 $ 275,776 $ 710,021 $ 281,292 $ 281,292 $ 745,522 $ 286,918 $ 286,918 $ 745,522 $ 292,656 $ 292,656 $ 745,522 $ 298,509 $ 298,509 $ 745,522 $ 304,479 $ 304,479 $ 745,522 $ 310,569 $ 310,569 $ 782,798 $ 316,780 $ 316,780 $ 782,798 $ 323,116 $ 323,116 $ 782,798 $ 329,578 $ 329,578 $ 782,798 $ 336,170 $ 336,170 $ 782,798 $ 342,893 $ 342,893 Difference Cummulative Difference $ 644,472 $ 644,472 $ 1,154,573 $ 1,799,045 $ 1,157,906 $ 2,956,951 $ 1,133,761 $ 4,090,712 $ 1,137,673 $ 5,228,385 $ 1,140,798 $ 6,369,183 $ 1,144,141 $ 7,513,325 $ 1,148,671 $ 8,661,996 $ 1,123,126 $ 9,785,122 $ 1,126,918 $10,912,041 $ 1,377,695 $12,289,736 $ 1,357,313 $13,647,048 $ 1,336,261 $14,983,309 $ 1,283,824 $16,267,133 $ 1,261,288 $17,528,421 $ 1,238,937 $18,767,358 $ 1,214,673 $19,982,030 $ 1,190,497 $ 21,172,527 $ 1,133,112 $ 22,305,640 $ (436,130) $ 21,869,509 $ (431,329) $ 21,438,181 $ (426,431) $ 21,011,750 $ (421,435) $ 20,590,314 $ (450,151) $ 20,140,164 $ (444,954) $19,695,210 $ (439,652) $19,255,558 $ (434,245) $18,821,313 $ (428,729) $18,392,584 $ (458,604) $17,933,979 $ (452,866) $17,481,113 $ (447,013) $17,034,100 $ (441,043) $16,593,058 $ (434,953) $16,158,104 $ (466,018) $15,692,087 $ (459,682) $15,232,404 $ (453,220) $14,779,184 $ (446,628)1 $14,332,556 $ (439,905)1 $13,892,651 From: Tom Markus To: Simon Andrew Subject: FW: IRL Clinic Questions Date: Tuesday, April 15, 2014 12:38:24 PM attachment From: Moore, Tom [mailto:thomas -moore @uiowa.edu] Sent: Friday, April 11, 2014 1:57 PM To: Tom Markus Cc: Kieft, David W; True, Douglas K Subject: RE: IRL Clinic Questions Attachment Q Tom, I'm sorry, but I'll have to defer to others, such as David, Doug, and Ken Fisher, to answer your questions below, with one exception. I do not recall mentioning mass transit to the reporter. You may need to address that topic with him. Regards, Tom From: Tom Markus [mailto: Tom- Markus(?�iowa- city. org] Sent: Friday, April 11, 2014 1:33 PM To: Moore, Tom Cc: Kieft, David W; True, Douglas K Subject: IRL Clinic Questions Tom, I read with interest your comments in today's Daily Iowan article regarding the University's various agreements with the City of Coralville related to the clinic facility. As you know, I am currently trying to gain a better understanding of these various agreements and how they are similar or different from other types of arrangements in Iowa City and other communities in Iowa. I was a bit confused by some of the information reported and by some of your comments and am hoping that you can clarify them for me so I can provide accurate information to the City Council. The author of the article referenced additional municipal services that the PILOT agreement in part compensates the City of Coralville for providing. Specifically it mentions access to mass transit and service from the Fire Department. Can you clarify if the PILOT agreement with Coralville is in part based on providing access to mass transit? If so, could you please describe the City provided mass transit access that is accessible to the clinic? In the article it was stated that you agreed with Coralville Councilman Hoeft there were other aspects of the agreement (referring to the PILOT agreement). The examples you provided included parking, police and maintenance of the building. It is our understanding there is a separate agreement from the PILOT that deals with the parking arrangement for the facility. We understand the parking agreement to include payment for capital and operations beyond what is provided in the PILOT agreement. Is the PILOT agreement intended to compensate for parking beyond what the parking agreement provides? Secondly, can you describe the police and building maintenance services that the UI receives from Coralville through the PILOT agreement? Does the UI Department of Public Safety and your Facilities Management Department have any responsibility in the building? Understanding the balance in services and responsibility for police and building maintenance will help me tremendously. You mention that there are many agreements in addition to the fire service agreement between Iowa City and the University. You include in this list, utility user fees paid to the City of Iowa City for water, sewer and landfill. Does this imply that the PILOT agreement for the IRL clinic includes compensation for water, sewer and other municipal utilities? Or does the University pay those utilities in addition to the PILOT agreement and various other agreements related to this facility? I appreciate your help in gaining a complete understanding of the complex relationship between the University and Coralville. Thank you for your assistance. Tom Notice: This UI Health Care e -mail (including attachments) is covered by the Electronic Communications Privacy Act, 18 U.S.C. 2510 -2521, is confidential and may be legally privileged. If you are not the intended recipient, you are hereby notified that any retention, dissemination, distribution, or copying of this communication is strictly prohibited. Please reply to the sender that you have received the message in error, then delete it. Thank you. From: Tom Marks Attachment R To: Simon Andrew Subject: FW: Date: Tuesday, April 15, 2014 1:00:07 PM Attach From: Wendy Ford Sent: Wednesday, March 26, 2014 3:54 PM To: Tom Markus; Jeff Davidson Subject: RE: Hodge owns the old Menards and leases to the U. The new music building is included in the Urban Renewal Area downtown /Riverfront Crossings. Vena!y't From: Tom Markus Sent: Wednesday, March 26, 2014 3:40 PM To: Jeff Davidson Cc: Wendy Ford Subject: RE: How about the music building and the old Menards (art building) . Do you know if they own the menards building? From: Jeff Davidson Sent: Wednesday, March 26, 2014 2:45 PM To: Tom Markus Cc: Wendy Ford Subject: RE: From: Tom Markus Sent: Wednesday, March 26, 2014 2:37 PM To: Jeff Davidson Cc: Wendy Ford Subject: Does the University of Iowa have property in any Iowa City TIF districts? Yes, downtown and Riverfront Crossings If so, what properties? Jefferson Bldg, Engineering annex, Rec and Wellness Center, CAM BUS, Admin Bldg, Lot 11, Old Capitol Town Center, several minor properties. They have leased space at Sycamore Mall Do we have Pilot agreements with those properties? No Do you know further if when creating and or expanding our urban renewal areas did we exclude certain University properties from the Urban renewal area even when they were surrounded? No Please name any University properties you can think of that are not specifically contiguous to the university campus property. The ones above are not physically contiguous to main campus. They are on City streets. From: Tom Markus To: Simon Andrew; Dennis Bockenstedt; Geoff Fruin Subject: Fwd: CV minutes Date: Thursday, April 17, 2014 5:26:52 AM Sent from my Pad Begin forwarded message: From: "Kieft, David W" <david- kieft(Quiowa.edu> Date: April 16, 2014 at 4:45:23 PM CDT To: 'Tom Markus' <Tom- MarkusCabiowa- city.org> Subject: RE: CV minutes Attachment S Tom .... there was no separate money paid to OM for development fees for the parking garage. The $1.4M was for all development fees the U has paid to OM for anything in any way connected to IRL. The $3M mentioned in the contract included all project costs, including the pass - thru architect, engineering, permitting and legal fee subcontractors, which OM retained. Remember the first attempt at this project had OM building the clinic with UI leasing the facility. That caused some issues with financing and bond counsel, so after many variations it was ultimately determined that UIHC would buy the parcels from Coralville and build the clinic as a standard UIHC project. Those separate subcontractor fees were $822,471. UIHC pays the full debt service on the parking ramp. David From: Tom Markus [mailto :Tom- MarkusCabiowa- city.ora] Sent: Wednesday, April 16, 2014 7:29 AM To: Kieft, David W Subject: Fwd: CV minutes David: Thanks for your efforts in providing information regarding the developers fee paid by the U of I to Oliver McMillan. Did the University also pay a developers fee to Oliver McMillan for the parking deck over and above the fee paid for the clinic building? There appears to be a few references to such a fee and the contract you sent previously describes a fee schedule amounting to $3 million? On a related matter the materials suggest that the U of I paid for the entire parking facility debt payment. I thought the U of I was only supposed to pay their proportionate share which would have been 2 /3rds of the total? Please clear up the confusion. Sent from my iPad Begin forwarded message: From: Geoff Fruin < Geoff- FruinCabiowa- city.org> Date: April 15, 2014 at 4:16:33 PM CDT To: Tom Markus <Tom- MarkusCabiowa- city.org> Subject: FW: CV minutes From: Chris O'Brien Sent: Tuesday, April 15, 2014 3:23 PM To: Geoff Fruin Subject: CV minutes IOWA RIVER LANDING BONDS After the resolution was read, Finance Officer Terry Kaeding stated she would explain all the items under this heading. The first two items approve agreements with Piper Jaffray to place the bonds privately with financial institutions and providing the underwriting services. The not to exceed $22 million parking bond is for construction of a parking ramp to be owned by the City and used primarily by the University of Iowa Hospitals and Clinics. This is temporary bond or BAN (Bond Anticipation Note) will be placed locally with a lead bank and have two or three other banks participate in the financing which will come due June 1, 2012. The bond will be set up as a draw account for the City to make payments for the construction, consulting, and other expenses as they occur. Interest will be charged on the drawn balance only. At the time of completion or on June 1, 2012 the City will finance the drawn amount permanently, pay off the BAN and the University will start paying the principal and interest for the permanent financing. The next item is for a public hearing on a not to exceed $30 million loan agreement with intent to sell $5.8 million immediately. Sales will be made at different intervals throughout the development process in the Iowa River Landing (IRL). This will finance the initial grading; payments to the developer, consultants, architects and engineers; some additional infrastructure work in the IRL and includes work for the University of Iowa Medical Office Building. A drawing of about $50,000 needs to be made before the end of December to activate the loan and have it included in the amount of bank qualified loans for 2010. There will be an interest savings as we sell the bonds. The public hearings for both bond items will be December 14th and the closings will be December 22nd. Johnson County joins the fray over UI- Coralville tax deal - TheGazette Page 3 of 6 Lamberti on Cedar I_aPids casino: 'It was clearly the right decision' F'AC'T CHEC& R3athie claims 17 eercent of Americans on food stamps Johnson County joins the fray over UI- Coralville tax deal Board wants to understand work county does for local governments, UI Gregg Hennigan Published: April 2 2014 1 3:30 pm - Updated: 7 April 2014 13:06 pm in i o o! Print Johnson County's supervisors want to review the services the county provides the University of Iowa and cities in light of the recent revelation of a tax deal between the UI and Coralville. The supervisors, meeting in a work session Wednesday, said local governments and the UT seem to be looking out for themselves and their own bottom lines, and the county needs to better understand what work it does for them for which it is not fully reimbursed. "It's an unfortunate road that every government seems to be going down these days," Board of Supervisors Chairman Terrence Neuzil said. "Again, Johnson County cannot continue to subsidize services for all of government if other governments are going to hold onto all of the tax base and not share it with us." He asked county departments to determine what services they provide area cities and the UI, and the cost, and for more information on payments made of lieu in taxes. The discussion occurred in part because of a Gazette story last month detailing a payment in lieu of taxes, or PILOT, agreement between the UI and Coralville for a medical clinic in the city -run Iowa River landing district. The UI does not have to pay property taxes, but it gives Coralville more than $1 million a year in lieu of taxes for the UI Health Care clinic. The deal is based on a formula that includes not just Coralville's tax rate but also the county's and the Iowa City Community School District's. Coralville, however, keeps the full amount. If the payment was distributed like a normal property tax, Johnson County would get more than $190,000 this year for its share. The $1 million payment for the 150,000- square -foot medical clinic is high compared with other PILOT agreements in the United States, The Gazette reported. The Board of Supervisors' interest in the issue comes just a few days after the City Council in Iowa City asked for more http: / /thegazette.com/ 2014 /04/02 /Johnson- county- joins- the - fray- over- ui- coralville- tax -deal/ 4/18/2014 Johnson County joins the fray over UI- Coralville tax deal - TheGazette Page 4 of 6 information on the UI- Coralville PILOT. The UI's only similar deal with Iowa City is for fire service — the city received $1.76 million in fiscal 2013 for covering 16.8 million square feet of campus. Supervisor Janelle Rettig said with Iowa City inquiring about the fairness of the PILOT, Johnson County needs to be at the table asking questions too. "And then at the end everybody will see how stupid this is and they'll knock it off," she said. The supervisors' displeasure is not just over the UI- Coralville PILOT. It also stems from frustrations in recent years over the use of tax increment financing by cities, with Iowa City on cost - sharing for the city's animal shelter and with Iowa City, Coralville and North Liberty over the paratransit bus service called SEATS. Ambulance service was another one mentioned as the supervisors received an update Wednesday on the UI switching from Johnson County Ambulance Service to another provider for mobile critical care services. Since 1998, the ambulance service has provided staff to assist UI Hospitals and Clinics in transporting critically ill infants from other hospitals to UIHC. Johnson County recently lost that contract to a lower bidder, said Steve Spenler, director of Johnson County Ambulance Service. I-!e said he wasn't surprised because of what his agency pays its staff but that he was disappointed the 17 -year relationship between the two organizations was not a factor and that the county learned of the change only a few days before its contract expired. Rettig said area legislators were upset, contacted hospital administrators and she spoke yesterday with hospital CEO Ken Kates. UI spokesman Tom Moore said Kates apologized to Rettig for how the process was handled but did not express regret for bidding out the contract. He also said no state lawmakers contacted UI or hospital officials about the matter. Moore said the UI would discuss any concerns representatives of Johnson County or Iowa City have with the PILOT agreement directly with those officials. The supervisors tied the ambulance contract to the PILOT discussion by noting the ambulance service does not receive full payment for its work, with county taxpayers subsidizing it with several hundred thousand dollars every year. County ambulances respond to UI facilities about 300 times a year, Spenler said "If the university is going to determine our relationships in dollars and cents, we can't possibly compete," Rettig said. I Have you found an error or omission in our reporting? Is there other feedback and /or ideas you want to share with us? Tell us here. Featured Jobs from corridoreareers.com Vendor Relationship Manager IA -Cedar Rapids GreatAmerica Financial Services Corporation Program Director, Bariatrics IA -Iowa City I Mercy Iowa City Documentation Specialist I IA -Cedar Rapids GreatAmerica Financial Services Corporation Support Administrator - Systems Tier I IA -Cedar Rapids GreatAmerica Financial Services Corporation http: / /thegazette.com/ 2014 /04/02 /Johnson- county- joins- the - fray- over- ui- coralville -tax -deal/ 4/18/2014 Iowa City seeks answers on tax deal between University of Iowa and Coralville I TheGaz... Page 3 of 8 • Tweet • Thksm imoflhe 110 ii . IOWA CITY — Iowa City Council members want information on a tax deal between the University of Iowa and the city of Coralville, and the types of questions being asked make clear they have concerns about it. Council members have asked City Manager Tom Markus to get answers to about 15 questions on the payment in lieu of taxes agreement for a tax- exempt UI Health Care medical clinic in Coralville's Iowa River Landing district. The Gazette reported early this month that the more than $1 million a year the Ul pays the city was unusually high for the size of the property, at 150,000 square feet, compared with other so- called PILOT agreements nationwide. Also, the payment is calculated using the full tax rate for the taxing district, which includes not just city levies but also Johnson County and the Iowa City Community School District, but the city keeps the full $1 million. "I think the reason (we are asking questions) is there appears to be a very unique PILOT agreement that is very different than anything Iowa City has ever done with the university, and we want to understand why it is so different and should we be approaching our PILOT agreements differently with the university than we have in the past," council member Susan Mums said Thursday. The issue is no small matter to Iowa City, which is home to the Ul and has most of the campus and the main hospital within its borders. The UI had $2 billion worth of tax- exempt property in Iowa City in fiscal 2012, according to the city. Iowa City received $1.76 million from the Ul in fiscal 2013 for providing fire service to 16.8 million square feet of campus. There are no other PILOT agreements between the two. One of the questions from the Iowa City Council asks how much revenue Iowa City would get for UI property in its boundaries if it received the same amount per square foot that the Ul pays to Coralville for the Iowa River Landing medical clinic. Other questions deal with the UI- Coralville PILOT formula being based on the full tax rate for that district and the city keeping all of the money. Coralville City Administrator Kelly Hayworth told The Gazette for the story earlier this month and again Thursday that the city keeps the full amount because the property is in a tax increment financing district. In a TIF district, the increased taxes resulting from a redeveloped property go back into the district. Hayworth also reiterated that the site where the clinic was built was the best piece of land in the city-owned Iowa River Landing and city officials made clear that if they sold it, they would want a PILOT agreement. "It was very clear, it was out in the open and it was an agreement that everybody understood when it was adopted," he said. The PILOT agreement was reached in 2010, and the city received its first payment last year after the clinic opened in fall 2012 Some of the questions, which were in the weeklv packet of information for City Council members that is publicly available, would need to be answered by the Ul or Coralville. Iayworth said he would speak to Iowa City officials about it if asked. http: / /thegazette.com/2014 /03/27 /iowa- city- seeks - answers -on- tax - deal - between - university -,.. 3/31/2014 Iowa City seeks answers on tax deal between University of Iowa and Coralville I TheGaz... Page 4 of 8 Ul spokesman Tom Moore said university officials would "be glad to discuss the agreement with the city manager." He declined to comment further. Markus, the city manager in Iowa City, said he has always thought Iowa City's agreement with the UI for fire service was fair, but council members read about the university's PILOT deal with Coralville and wondered why it was so high for a 150,000- square -foot property. "So when you see one that is as generous as the one they've negotiated with Coralville, the council is trying just to understand the significant difference in why it's that way" compared with Iowa City's, he said. The Gazette could find no other PILOT agreement in the U.S. comparable to the one between the UI and Coralville. It's rare for payments to be more than $1 million a year, and when they are they usually involve entire university campuses or large hospitals rather than individual properties. Daphne Kenyon, an economist at the think tank Lincoln Institute of Land Policy and an expert on PILOTS, said she had not heard of payment as high as $1 million for a single property. • Tweet ... .... ......... ................ ... • :This mrtionofthe _ • � "t01 Att j! Li' Have you found an error or omission in our reporting? Is there other feedback and /or ideas you want to share with us? Tell us here. You Might Also Like Homeowners Are In For A Big Surprise Life9tyle Journal Are You a Social Security Double- Dipper? Perhaps Not... 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(HARP) • Living in a Cabin From the Future: One Designer's Journey (domino) http:/ /thegazette.eom/2014 /03 /27 /iowa -city- seeks - answers -on -tax- deal - between - university -... 3/31/2014 4 1 r = Ott CITY OF IOWA CITY MEMORANDUM Date: April 22, 2014 To: City Council From: Tracy Hightshoe, Neighborhood Services Re: FY14 Annual Action Plan Amendment #2 n The draft FY14 Annual Action Plan Amendment #2 is attached for your review. The City Council will consider approval of the amendment at their May 6, 2014 meeting. Amendment #2 reduces the number of properties to be purchased by Charm Homes LLC from two to one with FY14 HOME funds received from the U.S. Department of Housing and Urban Development. AMENDMENT #2 - April, 2014 Iowa City FY14 ANNUAL ACTION PLAN PLANNING AND COMMUNITY DEVELOPMENT CDBG HOME COMMUNITY DEVELOPMENT HOME INVESTMENT BLOCK GRANT PARTNERSHIPS FUNDS Substantial Amendment #2 FYI Annual Action Plan Amendment #2: Charm Homes L.L.C. was allocated $61,650 to purchase two four - bedroom homes for permanent supportive housing for frail seniors or persons with disabilities. Charm Homes requests to reduce the number of homes purchased to one with four beneficiaries due to difficulty in locating accessible homes to accommodate their client's needs. The number of total beneficiaries is reduced from eight to four, a 50% reduction, requiring an annual action plan amendment per the Citizen Participation Plan. The City Council will consider this recommendation following a 30 -day public comment period and an amendment will be submitted to the U.S. Department of Housing and Urban Development (HUD) subject to City Council approval. Jurisdiction: City of Iowa City, Iowa Contact Person Jurisdiction Web Address: Steve Long http: / /www.icgov.org /actionplan Community Development Coordinator 410 E. Washington Street Iowa City, IA 52240 319.356.5230 319.356.5217 (fax) steve - long @iowa - city.org E Applicant's Name: Charm Homes L.L.C. Priority Need: High — Non Student Renters Under 50% MI Project Title: Charm Homes LLC — Rental Housing Project Description: Acquisition of one four - bedroom accessible home to provide permanent supportive housing to frail elders or persons with disabilities to avoid premature placement into institutional settings. Local Objective: Develop affordable housing options for frail elders with low incomes (CITY STEPS p. 84) Location: 909 Sandusky Drive, Iowa City Objective Number Project ID See above 001 HUD Matrix Code CDBG Citation 01 Type of Recipient CDBG National Objective Subrecipient Private Start Date Completion Date 7/1/2013 6/30/2014 Performance Indicator Annual Units Housing Units (10) 4 Local ID Units Upon Completion 2014.001 4 The primary purpose of the project is to help: ❑the Homeless ❑ Persons with HIV /AIDS ®Persons with Disabilities ❑Public Housing Needs Funding Sources: CDBG HOME $61,650 Private Funds $106,250 Total. • $167,900 3 C C V C � � E ro a .E N 0 C O d Y d - o m Y 0 D T N a 0 a0 � T ac d � a` E E 0 U n 73 N Rid 0 _ a N _ *k O V � a� E� ;� Publication Notice April 4, 2014 Iowa City Press Citizen PUBLIC COMMENT PERIOD FYI Annual Action Plan Amendment #2 The City of Iowa City is soliciting public comments on the proposed Federal Fiscal Year 2013 (City FY14) Annual Action Plan Amendment #2. The Annual Action Plan is a portion of Iowa City's 2011 -2015 Consolidated Plan (a.k.a. CITY STEPS). The FY14 Annual Action Plan Amendment #2 will include information on the proposed use of $61,650 in HOME Investment Partnerships Program Funds to acquire one four - bedroom accessible home for frail elders and persons with disabilities at 909 Sandusky Drive. A 30 -day public comment period will start on April 4, 2014. Copies of the FY14 Action Plan Amendment #2 are available from Neighborhood and Development Services, City Hall, 410 East Washington Street, Iowa City, 52240, the Iowa City Public Library, 123 S. Linn Street, Iowa City and online at www.icgov.org /actionplan. Written comments may be submitted to Neighborhood Services at the address above. A 30 -day public comment period will begin on April 4, 2014 and end on May 6, 2014. 5 Public Comments Received with Staff Response A 30 -day public comment period regarding the FY14 Annual Action Plan Amendment #2 ran from April 4, 2014 to May 6, 2014. The City Council held a public meeting on May 6, 2014. Comments Received: Staff Response: 2 CITY OF IOWA CITY MEMORANDUM Date: April 22, 2014 To: City Council From: Tracy Hightshoe, Neighborhood Services Re: FY15 Annual Action Plan Lij The draft FY15 Annual Action Plan is attached for your review. The City Council will consider approval of the plan at their May 6, 2014 meeting. The FY15 Annual Action Plan includes information on the proposed use of Community Development Block Grant (CDBG) and HOME Investment Partnerships Program (HOME) funds for housing, jobs and services for low- moderate income persons. &I w r A CITY OF IOWA CITY Neighborhood Services 410 E. Washington St., Iowa City, IA 52240 Phone: 319.356.5230 www.icgov.org /commdev MAY 2014 IOWB City ' FY15 ANNUAL ACTION Neighborhood and Development Services CDBG - Community Development Block Grant HOME - HOME Investment Partnerships Funds ..! �dm let-, Fifth Program pG �1�111�4�w Year - Action Plan Ream, GEVE`� GENERAL The Annual Action Plan (Action Plan) is submitted to the U.S. Department of Housing and Urban Development (HUD) and serves as the formal application for the use of entitlement funds that are received by Iowa City. The Action Plan defines the one -year activities in relationship to the five -year goals and objectives of CITY STEPS, Iowa City's Consolidated Plan for Housing, Jobs and Services for Low - Income Residents, covering City Fiscal Years 2011-2015. The Action Plan provides a brief description of the programs and projects of Iowa City for FY15 (July i, 2014 to June 30, 2015), the final year of CITY STEPS 2011 -2015, as well as funding announcements for the CDBG, HOME, ESG and other state and federal programs. Table of Contents Standard Form 424: CDBG & HOME Program ................................... ............................... i ExecutiveSummary 91. 220( b) ....................................................... ............................... 1 Objectives and Outcomes Evaluation of Past Performance Citizen Participation 91.200 & 91. 220( b) ........................................ ..............................3 Resourcesand Objectives 91.220 ( c) .............................................. ..............................4 Federal Resources Other Resources & Leverage Annual Objectives (Table 3A) Activities to be Undertaken & Outcome Measures 91.220 (d)(e) ... ..............................7 Table 3C - Consolidated Plan Listing of Projects .......................... ............................... 8 Geographic Distribution 91.220 (f) ................................................ .............................22 Comparison of LMI Block Groups and Minority Concentration Map ............................... 24 FY14 Project Locations .......................................................... ............................... 28 Affordable Housing Goals 91.220 (g) ........................................... ............................... 29 Table 3B - Annual Housing Completion Goals PublicHousing 91.220 (h) ............................................................. .............................30 Homeless & Other Special Needs Activities 91.220 (i) ................... .............................30 Barriers to Affordable Housing 91.220 ( j) ...................................... .............................32 OtherActions 91.220 (k) ............................................................... .............................34 HOME Program Specific Requirements 91.220 (1) .......................... .............................37 Recapture /Resale Provisions Fair Housing Affirmative Marketing Monitoring91. 230 .......................................................................... .............................45 Certifications91. 225 ...................................................................... .............................48 Appendix A - Comments Received & Staff Response .................... ............................... 58 e g$'VN OEV�LD SF 424 The SF 424 is part of the CPMP Annual Acti on Plan. SF 424 form fields are included in this document. Grantee information is linked from the 1 MAP. xls document of the Mv2 tool. Complete the Tillable fields (blue cells) in the table below. The other items are pre - filled with values from the Grantee Information Worksheet. Date Submitted May 7,2013 Applicant Identifier 2- 6004805 Type of Submission Date Received by state State Identifier kpplication Pre-application Date Received by HUD Federal Identifier 2- 6004805 Z Construction ❑ Construction ® Non Construction ❑ Non Construction Applicant Information Jurisdiction: City of Iowa City, Iowa LOG Code Street Address Line 1: 410 E. Washington St. Organizational DUNS: 145409996 Street Address Line 2 Organizational Unit: Municipality City: Iowa City Ilowa Department: Neighborhood Services & Com. Dev. ZIP: 52240 ICountry U.S.A. Division: Neighborhood Services Employer Identification Number (EIN): Johnson —County: 42- 6004805 Pro ram Year Start Date (MM/DD): 07/01/2014 Applicant Type: Municipality Specify Other Type if necessary: Local Government: Township SpecifV Other Tvpe Program Funding U.S. Department o Housing and Urban Development Catalogue of Federal Domestic Assistance Numbers, Descriptive Title of Applicant Project(s), Areas Affected by Project(s) (cities, Counties, localities etc.), Estimated Funding Community Development Block Grant 14.218 Entitlement Grant CDBG Project Titles Description of Areas Affected by CDBG Project(s) $600,387 CDBG Grant Amount $456,857 Additional HUD Grant(s) Levera ed Describe HUD — STAR Program $0 Additional Federal Funds Leveraged $0 Additional State Funds Leveraged $923,004 Locally Leveraged Funds $35,000 Grantee Funds Leveraged $Anticipated Program Income $75,588 Other (Describe) Total Funds Leveraged for CDBG -based Project(s) $1,414,861 Home Investment Partnerships Program 14.239 HOME HOME Project Titles Description of Areas Affected by HOME Project(s) $366,620 HOME Grant Amount $540,000 Additional HUD Grant(s) Levera ecl Describe HUD — Rapid �Rehousing & State HOME $3,970,657 Additional Federal Funds Leveraged $0 Additional State Funds Leveraged $1,254,707 Locally Leveraged Funds $0 Grantee Funds Leveraged $67,383 Anticipated Program Income Other (Describe) Total Funds Leveraged for HOME -based Project(s) $5,765,364 Housing Opportunities for People with AIDS - NA 14.241 HOPWA HOPWA Project Titles Description of Areas Affected by HOPWA Project(s) $ HOPWA Grant Amount $Additional HUD Grant(s) Leveraged Describe $Additional Federal Funds Leveraged $Additional State Funds Leveraged $Locally Leveraged Funds $Grantee Funds Leveraged $Anticipated Program Income Other (Describe) Total Funds Leveraged for HOPWA -based Project(s) Emergency Shelter Grants Program - NA 14.231 ESG ESG Project Titles Description of Areas Affected by ESG Project(s) $ESG Grant Amount $Additional HUD Grant(s) Leveraged Describe $Additional Federal Funds Leveraged $Additional State Funds Leveraged $Locally Leveraged Funds $Grantee Funds Leveraged $Anticipated Program Income Other (Describe) Total Funds Leveraged for ESG -based Project(s) Congressional Districts of Is application subject to review by state Executive Order 12372 Process? Applicant Districts: 2nd Project Districts: 2nd Is the applicant delinquent on any federal debt? If "Yes" please include an additional document explaining the situation. ❑ Yes This application was made available to the state ED 12372 process for review on DATE M No Program is not covered by ED 12372 ❑ Yes ®No ❑ N/A Program has not been selected by the state for review Person to be contacted regarding this application First Name: Thomas Middle Initial: M. Last Name: Markus Title: City Manager Phone: 319.356.5010 Fax 319.356.5217 eMail: homas- markus Iowa -ci .or Grantee Website: www.icgov.org Other Contact: Tracy Hightshoe Signature of Authorized Representative Date Signed May 7, 2014 91.220 (B) EXECUTIVE SUMMARY Objectives & Outcomes The Annual Plan articulates funding decisions for the next year of Community Development Block Grant and HOME Investment Partnerships Program funds according to the long -term goals established in CITY STEPS, the city's 2011 -2015 Consolidated Plan. The CP was guided by three overarching goals that are applied according to community needs. These goals are: • To provide decent housing by preserving the affordable housing stock, increasing the availability of affordable housing, reducing discriminatory barriers, increasing the supply of supportive housing for those with special needs and transitioning homeless persons and families into housing. To provide a suitable living environment through safer, more livable neighborhoods, greater integration of low and moderate income residents throughout the city, increased housing opportunities and reinvestment in deteriorating neighborhoods. To expand economic opportunities through more jobs paying self- sufficient wages, homeownership opportunities, development activities that promote long -term community viability and the empowerment of low- and moderate - income persons to achieve self - sufficiency. Focus of the Plan As required by the federal government, the identification of needs and the adoption of strategies to address those needs must focus primarily on low- and moderate - income (LMI) individuals and households. The Consolidated Plan must also address the needs of persons with "special needs` such as the elderly, persons with disabilities, large families, single parents and homeless individuals and families. Priorities Iowa City is committed to allocating funds that serve the needs of low -to- moderate income residents. Households with incomes less than 50% of the area median income, particularly those with extremely low incomes (less than 30% of area median income), are particular priorities. The city has also identified special needs individuals as among those who face the greatest challenges and who should receive high priority in the expenditure of federal funds, including at -risk children and youth, low income families, the homeless and persons threatened with homelessness, the elderly, and persons with disabilities. The Consolidated Plan planning process requires the city to specifically address needs and proposed strategies in the following three areas: housing, homelessness and community development. Based upon outreach efforts, the following community development and housing needs were determined to have a high priority and will continue to be an emphasis of CDBG funding: • Housing • Non - student renter households up to 50% of MFI • Persons and families at -risk for homelessness • Owner - occupied housing units (elderly, small family, special needs) • Public Services • Crime prevention • Child care services • Youth programming • Life skills • Financial literacy • Substance prevention and care • Mental health • Transportation • Public Facilities and Improvements • Facility improvements to the structures housing the public service providers • Economic Development • Micro - enterprise development Outcome Performance Measures Based on guidance provided by HUD, the following performance measurement system is utilized by the City of Iowa City. Simply stated, performance measurement is an organized process for gathering information to determine how well programs and activities are meeting established needs and goals. HUD needs this information in a common format to summarize program outcomes at the national level. For each activity that the city funds, it must determine the goal of the activity based on local intent, identify one objective and one outcome for each activity, indicate the objective and outcome in IDIS and report on applicable indicators in IDIS and the Consolidated Annual Performance and Evaluation Report (CAPER). Each activity must have an outcome statement. This outcome statement in its most basicform is the activity's objective plus outcome. Three specific objectives are relative to each activity funded. These include: • Creating (or Enhancing) Suitable Living Environments. Applicable to activities that are designed to benefit communities, families, or individuals by addressing issues in their living environment. This objective relates to activities that are intended to address a wide range of issues faced by low and moderate income persons, from physical problems with their environment to social issues such as crime prevention, literacy, or elderly health services. • Providing Decent Housing. Applicable to housing programs where the purpose is to meet individual family or community needs, and not programs where housing is an element of a larger effort (such as would otherwise be applied under the "Suitable Living Environment" Objective). • Creating Economic Development Opportunities. Applicable to activities that are related to economic development, commercial revitalization, orjob creation. Three specific outcomes are relative to stated objectives. These include: • Availability /Accessibility. Applicable to activities that make services, infrastructure, public services, public facilities, housing or shelter available or accessible to low- and moderate income people, including persons with disabilities. In this category, accessibility does not refer only to physical barriers, but also to making the affordable basics of daily living available and accessible to low- and moderate - income people. • Affordability. Applicable to activities that provide affordability in a variety of ways to low- and moderate - income people. It can include the creation or maintenance or affordable housing, basic infrastructure hook -ups, or services such as transportation or day care. Affordability is an appropriate objective whenever an activity is lowering the cost, improving the quality, or increasing the affordability of a product or service to benefit a low- income household. Sustainability. Applicable to activities or services that are aimed at improving communities or neighborhoods, helping to make them livable or viable by providing benefit to low- and moderate - income persons or by removing or eliminating slums or blighted areas. Evaluation of Past Performance The City of Iowa City's past performance in the administration and implementation of the CDBG and HOME programs has fulfilled the spirit and intent of the federal legislation creating these programs. The city has facilitated affordability for decent housing, availability and accessibility to a suitable living environment, sustainability of a suitable living environment and accessibility to economic opportunities. The following is a summary of Iowa City's past performance as reported to HUD in the FY2013 Consolidated Annual Performance and Evaluation Report (CAPER), the most recent report filed. During FY2013, the City of Iowa City expended s1,778,290 in CDBG funds and $746,224 in HOME funds and leveraged 85334,124 in private and public funds. Leverage and beneficiary information for CDBG and HOME projects are realized when the project is closed. In administering its CDBG and HOME programs, the city continued to implement the priorities established in CITY STEPS, the 2011- 2015 Consolidated Plan. The plan's three major priorities and the FY13 projects to address these priorities are identified below: 2 1) Provide decent housing by preserving the affordable housing stock, increasing the availability of affordable housing, reducing discriminatory barriers, increasing the supply of supportive housing for those with special needs and transition ing homeless persons and families into housing; By the end of the fiscal year, 26 owner - occupied rehabilitation projects were completed, 64 rental units rehabilitated, 12 new affordable rental homes constructed, zz existing homes for affordable rental or permanent supportive housing acquired, and z homes built and sold to income eligible households. z) Provide a suitable living environment through safer, more livable neighborhoods, greater integration of low and moderate income residents throughout the city, increased housing opportunities and reinvestment in deteriorating neighborhoods; FY13 funding provided needed additions and or rehabilitation to seven public facilities: Community Mental Health Center, HACAP, MECCA, Domestic Violence Intervention Program, Crisis Center, Iowa Valley Habitat for Humanity and Iowa City Parks and Recreation (Fairmeadows Park). These organizations serve the following clienteles: persons with alcohol and drug addiction, persons with mental health issues, families in crisis, homeless or at risk of being homeless and those needing employment training. A splash pad was installed at Fairmeadows Park that is in a low- moderate income census tract. FY13 operational funding was provided to Neighborhood Centers of Johnson County and Domestic Violence Intervention Program. CDBG funds were used for operational funding to non - profit organizations that assisted 1,457 persons. Program beneficiaries are counted in the fiscal year the project is completed. 3) Expand economic opportunities through morejobs paying self-sufficient wages, homeownership opportunities, development activities that promote long -term community viability and the empowerment of low -and moderate - income persons to achieve self - sufficiency. The CDBG Economic Development Fund was created to stimulate private sector investment that results in the creation of permanent, private sector jobs with living wages for low -to- moderate income persons in Iowa City. All CDBG economic development activities must meet the National Objective of benefiting lowto moderate income persons. The program rule requires that 51°x6 ofthejobs created or retained must be held or made available to low -to- moderate income persons based on family size or the business must qualify as a micro - enterprise. The City approved funding for three businesses in FY12: Trumpet Blossom Cafe, Molly's Cupcakes and (Blitz Boxing and Fitness. The businesses opened in FY13 and created 20.5 FTEs. CITIZEN PARTICIPATION Throughout the year the Housing and Community Development Commission (HCDC) holds public hearings to oversee the operation of Neighborhood Services (formerly the Community Development Division), the Iowa City Housing Authority, monitor CDBG and HOME projects, and listen to public input into these and other programs. The City of Iowa City's current 5 -year Consolidated Plan (2011 -2015 CITY STEPS) was adopted in December zoog. Numerous public meetings and hearings were held to solicit public comment regarding the development of the CITY STEPS plan in accordance with the City's Citizen Participation Plan. The city ensured broad public participation in the development of CITY STEPS. The stakeholders invited to participate in the Plan are identified on Page 12 of CITY STEPS as well as the comments and staff responses received (p. 14 & 16). HCDC and the City Council have held a number of meetings for the preparation of the FY15 Annual Action Plan and other HUD related documents. The public has been invited to participate in all of the meetings and efforts were made to encourage and increase citizen participation. The following is a chronology of the events, meetings, public hearings and actions taken in relation to the FY15 Annual Action Plan and Iowa City's 2011 -2015 Consolidated Plan (a.k.a. CITY STEPS). Dec. 5, 2013 Public notice that CDBG and HOME applications are available Dec. 18, 2013 CDBG /HOME Applicant Workshop Jan. 6, 2014 CDBG /HOME Applicant Workshop Jan. 17, zo14 Applications due to City of Iowa City by 12 noon Feb. zo, zo14 HCDC meeting question /answer discussion with applicants March 6, 2014 HCDC meeting review of rankings & average funding; recommendation on funding awards April 4, 2014 Draft Annual Action Plan -3o -day comment period begins 3 April 17, 2014 HCDC meeting — recommendation on the Annual Action Plan to Council April 23, 2014 Public Meeting Notice Appears in Press - Citizen May 6, 2014 Expiration 3o -day comment period on the FY15 Annual Action Plan May 6, 2014 City Council: public meeting on the FY15 Annual Action Plan May 6, 2014 City Council: resolution - approving the FY15 Annual Action Plan Anticipated Dates May 15, 2014 FY15 Annual Action Plan submitted to HUD May 30, 2014 Submission of Environmental Review Record and FONSI (as applicable) June 16, 2014 Submission of Request for Release of Funds JUly 1, 2014 Start FY15 CDBG and HOME projects In accordance with Iowa City's Citizen Participation Plan, the draft Annual Action Plan was available during the public comment period at the Iowa City Library, Neighborhood Services and on the city'swebsite atwww.icgov.org /actionplan. Special accommodations were available for persons with physical disabilities if the request was made at least seven days prior to the scheduled meeting date. In FY15 no special requests were made. PUBLIC COMMENTS RECEIVED A 3o -day public comment period regarding the FY15 Annual Action Plan ran from April 4, 2014 to May 6, 2014. A public meeting was held on May 6, 2014. Comments received and staff response can be found in Appendix A. RESOURCES & OBJECTIVES Federal Resources The city anticipates receiving the following funds during FY2015 to help support affordable housing projects, housing rehabilitation programs, and homeless outreach and prevention activities, along with its other CDBG /HOME initiatives. Funding Sources, FY2015 Entitlement Revenue $1,109,978 CDBG CDBG Annual Entitlement $600,387 Anticipated CDBG Program Income $75588 Uncommitted /Returned Projects $0 TotaICDBG $675,975 HOME HOME Annual Entitlement $366,620 Anticipated HOME Program Income $67,383 Uncommitted /Returned Projects $0 Total HOME $434,003 Non - Entitlement Revenue (Federal & Other) $12,325,437 City General Obligation Bonds (GRIP) $200,000 City Funds (UniverCity Project) $500,000 Housing Choice Vouchers, Public Housing and Family Self- Sufficiency Contracts (All sources) - ICHA 67,654,780 LIHTC — TheHousin Fellowship $3,97o,657 Total Resources Anticipated $13,435,415 Other Resources and Leverage 0 Iowa City is fortunate to have active and vital organizations that provide housing and supportive services within the community. As such, multiple resources (federal, state, local and private) are available for activities including housing, jobs and human services. In addition to these funds, other resources like donations and volunteers are utilized. According to the applications, we have been able to estimate that $7,180,225 in other funds will be leveraged. This amounts to $7.43 leveraged for each dollar of local CDBG and HOME funds allocated by the City of Iowa City. In addition, other municipal resources such as general fund expenditures, infrastructure improvements and tax exemptions may be used to meet the City's HOME match liability. Actual leverage and HOME match figures will depend on the outcomes of the projects proposed in this annual action plan. Upon completion of the FY15 projects the exact amount of other resources leveraged by these projects will be known and included within the Consolidated Annual Performance and Evaluation Report. The City currently has $3,007,671 in excess HOME match carried over from previous years. Private banks and lending institutions often provide significant capital to both Community Development Block Grant (CDBG) and HOME Investment Partnerships Program (HOME) projects. Both the City and local organizations recognize this mutually beneficial relationship. To promote the goals and objectives of the Consolidated Plan (a.k.a. CITY STEPS) both parties have taken steps to strengthen and expand our partnerships. As stated above, other resources include in -kind donations, volunteers, foundations and businesses. The following is a list of organizations or groups identified as contributing to FY15 CDBG and HOME projects: Private (donations) Private (loans) Public funds (federal and state) United Way Johnson County In -kind Donations (skilled labor, goods, materials, waived fees) Volunteers City of Iowa City Iowa Finance Authority (Low Income Housing Tax Credits) 5 Table 3A Summary of Specific Annual Objectives — Program Year 4 Obj Specific Objectives Sources of Performance Expected Actual Outcome/ # Suitable Uving Environment Funds Indicators Number Number Objective* EO -2 Rental Housing Objectives 1. Increase the capacity of nonprofit HOME Organizations 1 DH -2 organizations that develop affordable housing 2. Increase affordability of decent housing HOME Housing Units 10 DH -2 by acquiring or building new units for rental housing. Owner Housing Objectives 3. Increase affordability of decent housing CDBG Housing Units 2 DH -2 by providing direct homeownership assistance to acquire a home. 4. Increase affordability of decent housing HOME/ Housing Units 22 DH -2 by rehabilitating owner - occupied CDBG housing. Homeless Objectives 5. Increase affordability of decent housing HOME Housing Units 25 DH -2 for special needs populations (Rental Assistance) Special Needs Objectives 6. Increase affordability of decent housing HOME Housing Units 0 DH -2 for special needs populations 7. Provide rental assistance to special HOME Housing Units 0 DH -2 needs populations. Community Development Objectives Infrastructure Objectives Public Facilities Objectives 7. Assist with the renovation of a variety of CDBG Public Facility 2 SL -1 facilities that provide benefits to LW persons. Public Services Objectives 8. Address the greatest needs of the City's CDBG Persons 1,675 SL -1 LMI and special needs populations with needed services. Economic Development Objectives 9. Provide working capital, job training CDBG Businesses 1 EO -2 funds to micro - enterprises or small businesses to create jobs for LMI persons 10. Provide financial assistance to private CDBG Businesses 4 EO -2 business for facade improvements in an URA Other Objectives *Outcome /Obj ectiveCodes 0 Availability/Accessibility Availability/Accessibility Affordability Sustainabilil Decent Housing DH -1 DH -2 DH -3 Suitable Uving Environment SL -1 SL -2 SL -3 Economic Opportunity EO -1 EO -2 EO -3 0 ACTIVITIES TO BE UNDERTAKEN & OUTCOME MEASURES The following table summarizes the FY2015 CDBG /HOME budget for the City of Iowa City. The city's FY2015 program activities are anticipated to specifically benefit 59 housing units /households, z public facilities, 1,675 persons receiving public services, one micro - enterprise and /or business creating jobs for low- moderate persons and benefit four businesses completing a facade renovation to prevent slum and blight. The City anticipates that 93°x6 of the CDBG funds will be used for activities that benefit persons of low and moderate income. CDBG & HOME Activities, FY2015 * Council Earmark Category Activity Requested Allocated Units /HHAssisted Source Combined Total The Housing Fellowship - CHDOOperating $ 20,000 $ 15,000 NA HOME The Housing Fellowship - RentalHousing $ 300,000 $ 200,000 10 HOME Shelter House - Rapid Rehousing $ 75,000 $ 75,000 25 HOME Iowa City Housing Rehabilitation Program* $ 200,000 16 CDBG Housing Iowa City - TargetedDownpayment Assistance $ 25,000 $ 15,000 2 CDBG Iowa City Housing Rehabilitation - Targeted $ 225,000 $ 25,659 2 CDBG $ 99,341 4 HOME Total Housing: 1 $ 645,000 1 $ 630,000 1 59 Facilities Assisted Public Arc of Southeast Iowa $ 100,000 $ 75,000 1 CDBG Facilities United Action for Youth $ 122,620 $ 25,000 1 CDBG Total Public Facilities $ 222,620 $ 100,000 2 Persons Served Aid to Agencies *: Crisis Center $ 38,000 800 CDBG Public Neighborhood Centers of Johnson County $ 32,000 400 CDBG Services Shelter House $ 30,000 475 CDBG Total Public Services $ 100,000 1,675 Entities Assisted Iowa City Economic Development Fund *: Micro - Enterprise /For Prof it Assistance $ 24,239 1 CDBG Econ.Dev Building Change - FagadeImprovements $ 75,000 4 CDBG Total Economic Development $ 99,239 5 HOME Program Administration* $ 44,662 NA HOME Admin. JCDBG Program Administration* $ 136,077 NA CDBG Total Administration $ 180,739 NA Total CDBG $ 675,975 Total HOME $ 434,003 Combined Total $ 1,109,978 TABLE 3C Consolidated Plan Listing of Projects 0 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: The Housing Fellowship — Rental Housing Priority Need: Non - Student Renter Households up to 50% MI - High Activity: Acquisition and New Construction of Units for Rental Housing Project Description: Land acquisition and new construction of 28 new affordable rental units, 10 HOME assisted, as part of a LIHTC application. Local Objective: Production of new, affordable rental units Location /Target Area: To be determined, Iowa City Objective category: ❑ Suitable Living Environment ® Decent Housing ❑ Economic Opportunity Outcome category: ❑ Availability /Accessibility ® Affordability ❑ Sustainability Objective Number Project ID See above 001 HUD Matrix Code CDBG Citation 12 $500,000 Type of Recipient CDBG National Objective Subreci lent Private $1,075,000 Start Date Completion Date 07/01/2014 04/01/2017 Performance Indicator Annual Units Housing Units 10 5 Local ID Units Upon Completion 2015.001 10 Staff Recommended Financial Terms: To be determined after underwriting analysis. Period of Affordability: 10 Years Funding Sources: CDBG HOME $200,000 Federal Funds other $500,000 IFA — LIHTCFunds $3,970,657 Local Funds (private) $1,075,000 Applicant Equity $104,707 Total $5,850,364 The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs .0 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: The Housing Fellowship — CHDO Operating Expenses Priority Need: Other Public Services - High Activity: CHDO Operating Expenses Project Description: As a Community Housing Development Organization (CHDO), applicant is eligible to receive funds for operational expenses. Applicant owns and manages over 147 affordable rental units and has placed 17 owner - occupied homes in a community land trust. Local Objective: Utilize local CHDOs to provide financial and technical assistance in developing /maintaining housing for low income households. (See CITY STEPS p. 48) Location /Target Area: 322 E. 2nd St., Iowa City Objective category: ❑ Suitable Living Environment ® Decent Housing ❑ Economic Opportunity Outcome category: ❑ Availability /Accessibility ® Affordability ❑ Sustainability Objective Number Project ID See above 002 HUD Matrix Code CDBG Citation 19B NA Type of Recipient CDBG National Objective CHDO NA Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units Or anizations 9 1 Local ID Units Upon Completion 2015.002 1 Financial Terms: Grant Period of Affordability: NA Funding Sources: CDBG HOME $15,000 Federal Funds other State Funds Local Funds (private) $50,000 Grantee Funds Total $65,000 The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs 10 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: Shelter House — Rapid Rehousing Priority Need: Persons and Families At -Risk for Homelessness - High Activity: Tenant Based Rental Assistance Project Description: Up to six months of rental assistance, plus security deposit, for homeless persons /families transitioning to permanent housing. Supportive services provided for up to six months on issues related to housing and employment retention, money management and preparation for when assistance ends. Local Objective: Rent and utility deposit assistance encouraged to maintain housing Location /Target Area: Citywide Objective category: ❑ Suitable Living Environment ® Decent Housing ❑ Economic Opportunity Outcome category: ❑ Availability /Accessibility ® Affordability ❑ Sustainability Objective Number Project ID See above 003 HUD Matrix Code CDBG Citation 05S NA Type of Recipient CDBG National Objective Subreci lent Private NA Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units Households 04 25 Local ID Units Upon Completion 2015.003 25 Financial Terms: Grant Period of Affordability: NA Funding Sources: CDBG HOME $75,000 Federal Funds other $40,000 State Funds Local Funds (private) $25,000 Grantee Funds Total $140,000 The primary purpose of the project is to help: Zthe Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs 11 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: Iowa City Housing Rehabilitation Program Priority Need: High — Owner Occupied Housing Rehab. Activity: Rehab; Single Unit Residential Project Description: Provide rehabilitation services to low -to- moderate income homeowners. Services include comprehensive rehabilitation, exterior rehabilitation, emergency repair, accessibility, mobile home repairs and energy efficiency. Local Objective: Weatherization, emergency rehabilitation, rehabilitation and handicap accessibility for elderly and small family owner households. (See CITY STEPS p. 92) Location /Target Area: Citywide Objective category: ❑ Suitable Living Environment ® Decent Housing ❑ Economic Opportunity Outcome category: ❑ Availability /Accessibility ® Affordability ❑ Sustainability Objective Number Project ID See above 004 HUD Matrix Code CDBG Citation 14A 570.202 Type of Recipient CDBG National Objective Local Government LMH Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units Housing Units 10 24 Local ID Units Upon Completion 2015.004 24 Funding Sources: CDBG $225,659 HOME $99,341 Federal Funds other State Funds Local Funds (private) Grantee Funds Total $325,000 Financial Terms: Various terms based on homeowner's ability to repay the loan under main rehabilitation program ($200,000 CDBG). HOME ($99,341) and CDBG ($25,659) targeted to specific neighborhoods. Within these targeted neighborhoods, 50% of loan to homebuyer shall be forgiven in 5 -10 years based on amount of funding. The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs 12 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: Iowa City Targeted Downpayment Assistance Priority Need: Medium — Homeownership Assistance Activity: Downpayment Assistance Project Description: Provide acquisition assistance for homes in targeted neighborhoods and offer CDBG /HOME rehabilitation if needed after acquisition. Local Objective: Elderly and small family owner households experience high degree of cost burden. Acquisition assistance to low- moderate income homebuyers to acquire home. CDBG /HOME owner - occupied housing rehabilitation will be offered after acquisition to maintain and preserve affordable housing stock in targeted neighborhoods. (See CITY STEPS p. 92) Location /Target Area: UniverCity program boundaries, Towncrest, Twain and Grant Wood neighborhoods, Iowa City Objective category: ❑ Suitable Living Environment ® Decent Housing ❑ Economic Opportunity Outcome category: ❑ Availability /Accessibility ® Affordability ❑ Sustainability Objective Number Project ID See above 005 HUD Matrix Code CDBG Citation 13 570.201 n Type of Recipient CDBG National Local Government Objective Grantee Funds LMH Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units Housing Units 10 2 Local ID Units Upon Completion 2015.005 2 Financial Terms: Conditional Occupancy Loan, forgiven after five years. Funding Sources: CDBG $15,000 HOME Federal Funds other State Funds Local Funds (private) $355,000 Grantee Funds Total $370,000 The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs 13 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: Are of Southeast Iowa - Playground Priority Need: Child Care Facility - High Activity: Public Facility Project Description: Acquisition and installation of a playground for afterschool program for children with disabilities. Local Objective: Support affordable child care for children with disabilities (See CITY STEPS p. 78) Location /Target Area: 2620 Muscatine Ave., Iowa City Objective category: M Suitable Living Environment ❑ Decent Housing ❑ Economic Opportunity Outcome category: M Availability /Accessibility ❑ Affordability ❑ Sustainability Objective Number Project ID See above 006 HUD Matrix Code CDBG Citation 03M 570.201 (c) Type of Recipient CDBG National Objective Subreci lent Private LMC Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units Public Facility 11 1 Local ID Units Upon Completion 2015.006 1 Funding Sources: CDBG $75,000 HOME Federal Funds other State Funds Local Funds (private) $25,000 Grantee Funds Total $100,000 The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ®Persons with Disabilities ❑Public Housing Needs 14 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: United Action for Youth — Facility Rehabilitation Priority Need: Youth Center - High Activity: Public Facility Project Description: Rehabilitation of lower level and foundation at the Youth Counseling and Therapy building due to water issues. Agency provides services to homeless youth, children and families seeking mental health counseling. Local Objective: Improve public facilities that house youth and mental health services (CITY STEPS p. 92) Location /Target Area: 410 Iowa Avenue, Iowa City Objective category: ® Suitable Living Environment ❑ Decent Housing ❑ Economic Opportunity Outcome category: ® Availability /Accessibility ❑ Affordability ❑ Sustainability Objective Number Project ID See above 007 HUD Matrix Code CDBG Citation 03D 570.201 c Type of Recipient CDBG National Objective Subrecipient Private LMC Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units Public Facility 11 1 Local ID Units Upon Completion 2015.007 1 Funding Sources: CDBG $25,000 HOME Federal Funds other State Funds Local Funds (private) Grantee Funds Total $25,000 The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs 15 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: Crisis Center — Emergency Assistance Program Priority Need: Other Public Services - High Activity: Operations Project Description: Provide operational funding (staff salaries) to operate the Emergency Assistance Program for those in crisis. Clients can receive limited financial assistance to maintain or obtain housing, utilities, birth certificates, prescriptions or other emergency services. Local Objective: Promote programs that provide services or support to homeless or at risk populations. (See CITY STEPS p. 70) Location /Target Area: 1121 Gilbert Court, Iowa City Objective category: ® Suitable Living Environment ❑ Decent Housing ❑ Economic Opportunity Outcome category: ® Availability /Accessibility ❑ Affordability ❑ Sustainability Objective Number Project ID See above 008 HUD Matrix Code CDBG Citation 05 570.201 e Type of Recipient CDBG National Objective Subrecipient Private LMC Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units People 01 800 Local ID Units Upon Completion 2015.008 800 Funding Sources: CDBG $38,000 HOME Federal Funds other State Funds Local Funds (private) $78,000 Grantee Funds $2,000 Total $118,000 The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs 16 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: Neighborhood Centers of Johnson County — Aid to Agencies Priority Need: Youth Services - High Activity: Operations Project Description: Agency provides licensed child care to approximately 400 low income children at their Broadway and Pheasant Ridge Centers. Local Objective: Promote programs that provide youth services /childcare. (See CITY STEPS p. 92) Location /Target Area: 2105 Broadway St., 2651 Roberts Rd., Iowa City Objective category: M Suitable Living Environment ❑ Decent Housing ❑ Economic Opportunity Outcome category: M Availability /Accessibility ❑ Affordability ❑ Sustainability Objective Number Project ID See above 009 HUD Matrix Code CDBG Citation 05D 570.201 e Type of Recipient CDBG National Objective Subreci lent Private LMC Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units People 01 400 Local ID Units Upon Completion 2015.009 400 Funding Sources: CDBG $32,000 HOME Federal Funds other State Funds Local Funds (private) $170,000 Grantee Funds $18,000 Total $220,000 The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs 17 City of Iowa City Table 3C See above Consolidated Plan Listing of Projects Project: Shelter House — Aid to Agencies Priority Need: Homeless Services, Employment Training - High Activity: Operations Project Description: Provide operational funding for the STAR program. Shelter House clients Start Date intending more than a two -week stay at the shelter are required to 07/01/2014 participate in STAR. The STAR program addresses barriers to Performance Indicator employment and works with the client on housing and vocational issues, People 01 mental health, substance abuse, transportation and related needs. Local Objective: Expand availability of case workers for persons who are homeless. 2015.010 Support Training and Access to Resources (STAR) Program (CITY STEPS p. 93). Location /Target Area: 430 Southgate Ave. Iowa City Objective category: M Suitable Living Environment ❑ Decent Housing ❑ Economic Opportunity Outcome category: M Availability /Accessibility ❑ Affordability ❑ Sustainability Objective Number Project ID See above 010 HUD Matrix Code CDBG Citation 05 570.201(e) Type of Recipient CDBG National Objective Subreci lent Private LMC Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units People 01 475 Local ID Units Upon Completion 2015.010 475 Funding Sources: CDBG $30,000 HOME Federal Funds other $456,857 State Funds Local Funds (private) $69,243 Grantee Funds $15,000 Total $571,100 The primary purpose of the project is to help: Mthe Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs RN City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: City of Iowa City — Economic Development Fund Priority Need: High — Micro - enterprise Assistance, For Profit Financial Assistance Activity: Economic Development Project Description: These funds will be primarily used for assisting micro - enterprise businesses and for small businesses creating jobs for primarily low to moderate income persons. (HUD matrix codes 18A or 18C) Local Objective: Increase employment opportunities and assist micro - enterprise development for low- moderate income persons. (See CITY STEPS p. 79 & 92) Location /Target Area: Citywide, Iowa City Objective category: ❑ Suitable Living Environment ❑ Decent Housing ® Economic Opportunity Outcome category: ❑ Availability /Accessibility ® Affordability ❑ Sustainability Objective Number Project ID See above 011 HUD Matrix Code CDBG Citation 18C 570.203(b) Type of Recipient CDBG National Objective Local Government LMJ Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units Businesses 08 1 Local ID Units Upon Completion 2015.011 1 Funding Sources: CDBG $24,239 HOME Federal Funds other State Funds Local Funds (private) $50,761 Grantee Funds Total $75,000 The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs 19 City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: City of Iowa City — Economic Development, Building Change Priority Need: Low— Rehab. of Commercial Buildings Activity: Economic Development Project Description: Assist privately owned commercial buildings renovate exterior facades in an urban renewal area or buildings designated as slum and blight. Local Objective: City will fund its Economic Development Fund annually. Undertake urban renewal activities that promote new economic, commercial and housing development such as rehabilitation and conservation of properties (p. 59) Location /Target Area: City- University Urban Renewal Area, Iowa City Objective category: ❑ Suitable Living Environment ❑ Decent Housing ® Economic Opportunity Outcome category: ❑ Availability /Accessibility ❑ Affordability ® Sustainability Objective Number Project ID See above 012 HUD Matrix Code CDBG Citation 14E 570.202 (a)(3)(commercial State Funds buildings) Type of Recipient CDBG National Objective Local Government SBA/SBS Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units Businesses 08 4 Local ID Units Upon Completion 2015.012 4 Funding Sources: CDBG $75,000 HOME Federal Funds other State Funds Local Funds (private) $175,000 Grantee Funds Total $250,000 The primary purpose of the project is to help: ❑the Homeless ❑Persons with HIV /AIDS ❑Persons with Disabilities ❑Public Housing Needs City of Iowa City Table 3C Consolidated Plan Listing of Projects Project: City of Iowa City — Planning & Administration Priority Need: NA Activity: Planning & Administration Project Description: Successfully administer the CDBG & HOME programs. Research and plan for projects and activities designed to meet the needs of low and moderate income households. Local Objective: Administration of the CDBG and HOME programs. Location /Target Area: 410 E. Washington St., Iowa City Objective Number Project ID See above 013 HUD Matrix Code CDBG Citation 21A 570.206 Type of Recipient CDBG National Objective Local Government NA Start Date Completion Date 07/01/2014 06/30/2015 Performance Indicator Annual Units Organizations 09 1 Local ID Units Upon Completion 2015.013 1 Funding Sources: CDBG $136,077 HOME $44,662 Federal Funds other State Funds Local Funds (private) Grantee Funds Total $180,739 GEOGRAPHIC DISTRIBUTION Description of the Geographic Area Priority CDBG funding areas in Iowa City include those areas where there is a high rate of low and moderate income (LMI) persons. The following narrative describes the characteristics of these areas. Between 2000 and 2010, Iowa City's population increased by 5,642 residents, a g.i% increase. The racial minority share of Iowa City's population rose from 12.7% to 17.5% or 7,886 to 11,858. The largest increase was in the number of Hispanics (of any race), with an increase of 1,794 persons, followed by white persons with an increase of 1,67o and black persons by 1,579. The largest minority in Iowa City remains Asian /Pacific Islanders with 6.9% of Iowa City's population. Population by Race and Hispanic Origin, 1990 - 2010 Total White Black Indian /Alaskan Native Asian /Pacific Islander Other Persons of Hispanic Origin Location Population # % # % # % # % # % # % Iowa City 59,738 54,410 91.1 1990 1,516 2.5 116 3,341 5.6 355 0.6 1,018 1.7 Johnson Co. 96,119 89,649 93.3 1,979 2.1 176 H 0.2 3,837 4 478 0.5 1,435 1.5 Iowa 2,776,755 2,683,090 96.6 48,090 1.7 7,349 1 03 25,476 0.9 12,570 0.5 32,647 L2 2000 Iowa City 62,220 54,334 873 2,333 33 191 03 3,536 5.7 1,826 2.9 1,833 2.9 Johnson Co. 111,006 100,051 90.1 3,223 2.9 313 0.3 4,626 4.2 2,793 2.5 2,781 2.5 Iowa 2,926,324 2,784,670 93.9 61,853 2.1 8,989 0.3 37,644 1.3 69,198 2.4 82,473 2.8 Iowa City 67,862 56,004 82.5 3,912 5.8 144 0.2 4,708 6.9 3,094 4.6 3,627 5.3 Johnson Co. 130,882 112,083 85.6 6305 4.8 287 0.2 6870 5.2 5,337 4.0 6200 4.7 Iowa 3,046,355 2,781561 91.3 89,148 2.9 11884 0.4 55,097 1.8 109,465 3.6 151544 5.0 Sources: U.S. Census 1990, 20002010 Concentrations of Minority and Hispanic Persons The following table presents population by race and Hispanic origin at the census tract level. CITY STEPS defines areas of racial or ethnic concentration as census tracts or block groups where the percentage of a specific minority group is 10 percentage points or higher than the City overall (for that group). Based on the CITY STEPS definition for racial or ethnic concentration, there are three census tracts that meet this criterion based on the 2010 Census. Census Tract 4 with 21.2% Asian /Pacific Islander residents. The overall percentage of Asian /Pacific Islander is 6.9°x6. Census Tract 18, Block Group 1 and 2 with 16.o% and 16.7°x6 Black residents, City overall is 5.8°x6, as well as Block 2 with 16.7°x6 Hispanic origin, City overall is 5.3°x6. Census Tract 104 with 25.3% Hispanic origin, City overall is 5.3°x. 22 Population by Race, Hispanic Origin by Census Tract, 2010 Persons of One Race Am. Indian /Alaskan Asian /Pacific Persons of Two Persons of Census Total White Black Native Islander Other or More Races Hispanic Orie 1(part) 5,816 4,846 83.3% 172 3.0% 12 0.2% 358 6.2% 262 4.5% 166 2.9% 526 9.0% 4(part) 6,566 4,167 63.5% 704 10.7% 14 0.2% 1,394 21.2% 82 1.2% 205 3.1% 208 3.2% 5(part) 6,134 4,929 80.4% 307 5.0% 15 0.2% 657 10.7% 70 1.1% 156 2.5% 249 4.1% 6 3,001 2,322 77.4% 171 5.7% 7 0.2% 402 13.4% 29 1.0% 70 2.3% 109 3.6% 11 3,934 3,577 90.9% 77 2.0% 9 0.2% 155 3.9% 28 0.7% 88 2.2% 140 3.6% 12 1,928 1,830 94.9% 26 1.3% 4 0.2% 39 2.0% 10 0.5% 19 1.0% 59 3.1% 13 3,006 2,753 91.6% 74 2.5% 6 0.2% 73 2.4% 31 1.0% 69 2.3% 76 2.5% 14(part) 4,587 3,988 86.9% 329 7.2% 18 0.4% 103 2.2% 44 1.0% 105 2.3% 146 3.2% 15 2,553 2,304 90.2% 126 4.9% 9 0.4% 35 1.4% 17 0.7% 62 2.4% 73 2.9% 16 7,267 6,631 91.2% 139 1.9% 14 0.2% 288 4.0% 51 0.7% 144 2.0% 221 3.0% 17(part) 2,814 2,480 88.1% 153 5.4% 1 0.0% 35 1.2% 57 2.0% 88 3.1% 144 5.1% 18 Block 4,601 3,216 69.9% 736 16.0% 6 0.1% 218 4.7% 281 6.1% 144 3.1% 529 11.5% 18 Block 3,790 2,490 65.7% 634 16.7% 12 0.3% 210 5.5% 291 7.7% 153 4.0% 632 16.7% 21 3,784 3,299 87.2% 102 2.7% 4 0.1% 271 7.2% 24 0.6% 84 2.2% 159 4.2% 23 4,510 3,943 87.4% 92 2.0% 7 0.2% 330 7.3% 48 1.1% 90 2.0% 176 3.9% 104(part) 475 376 79.2% 28 5.9% 1 0.2% 3 0.6% 51 10.7% 16 3.4% 120 25.3% 105 (part) 3,096 2,853 92.2% 42 1.4% 5 0.2% 137 4.4% 19 0.6% 40 1.3% 60 1.9% Iowa Gtv 67.862 56.004 82.5% 3.912 5.8% 144 0.2% 4.708 6.9% L395 LS% 1,699 2.5% 3.627 5.3% Source: U.S. Census 2010 Summary Low and Moderate Income Areas The following table presents information regarding low and moderate income (LMI) persons in Iowa City. LMI persons, as determined by HUD, have incomes at or below 8o% of the median family income (MFI). In its 2009 estimates, HUD determined that there were 29,895 LMI persons in Iowa City, equivalent to 53.2% of the population for whom this rate is determined. HUD reported that the FY 2009 MFI in Iowa City was 876,000. In Iowa City, the number of LMI persons includes university students who are living away from home while attending college (i.e., living in Iowa City for the purpose of attending college). The census counts these individuals in the location of their "usual residence." Usual residence is the place where a person lives and sleeps most of the time. This place is not necessarily the same as the person's voting residence or legal residence. Also, non - citizens who are living in the U.S. are included, regardless of their immigration status. HUD defines an LMI census tract or block group as one in which 51% or more of the population have incomes of 8o% or less of the MFI. According to these criteria, 13 of the city's populated census block groups qualify as LMI areas. Details on the LMI status of each census block group appear in the following table. 23 Low /Moderate Income Persons by Block Group, 2009 Census Tract Block Group Number of LMl Persons Percent LMl Persons Census Tract Block Group Number of LMl Persons Percent LMl Persons 1 (part) 1 684 28.0% 15 2 448 38.8% 1 (part) 2 916 46.0% 16 1 2,874 81.6% 4 (part) 1 2,886 54.3% 16 2 2,747 96.7% 5 (part) 1 0 0.0% 17 (part) 1 340 35.0% 5 (part) 2 2,449 42.2% 17 (part) 2 279 38.4% 6 1 2,163 71.1% 17 (part) 3 6911 56.2% 11 1 1,191 74.0% 18 (part) 1 2,184 57.0% 21 1,534 84.1% 18 (part) 2 1,866 57.4% 12 1 241 28.3% 21 1 27 100.0% 12 2 326 32.5% 21 2 1,091 90.3% 13 1 315 17.7% 23 1 354 40.1% 13 2 284 20.5% 23 2 796 50.7% 14 (part) 1 177 26.5% 23 3 0 0.0% 14 (part) 2 519 31.7% 104 (part) 41 6991 60.5% 14 (part) 3 8661 39.0% 105 (part) 1 188 23.4% 15 1 7601 52.0% Iowa City 29,895 53.2% Note: Data includes all city residents. Source. U S. Department of Housing and Urban Development Concentrations of LMI Persons and Minority Persons Census tracts q, 18 and 104 were previously identified as areas of racial concentrations, they area lso considered LMl areas with a percentage ofLMl persons above 5 1%. The following map illustrates this area. 24 Basis for Allocating Investments The federal CDBG and HOME funds are intended to provide low and moderate income households with viable communities, including decent housing, a suitable living environment, and expanded economic opportunities. Eligible activities include community facilities and improvements, housing rehabilitation and preservation, affordable housing development activities, public services, economic development, planning, and administration. The system for establishing the priority for the selection of these projects is predicated upon the following criteria: • Meeting the statutory requirements of the CDBG and HOME Programs • Meeting the needs of low and moderate income residents • Focusing on low and moderate income areas or neighborhoods • Coordination and leveraging of resources • Response to expressed needs • Sustainabilityand /or long -term impact, and • The ability to demonstrate measurable progress and success. Iowa City will invest its CDBG funds in areas primarily impacted by non - student LMI persons. CDBG and HOME funds will be focused in areas that are home to families, the elderly, the disabled and the homeless. Several of the city's LMI census areas are located in the downtown area and include the University of Iowa and a significant rental housing stock that is predominantly occupied by students. In zoio, the City working in collaboration with the University of Iowa and several community partners, initiated the UniverCity project. The project's goal is to create a healthy balance of owner occupied and renter households within downtown /university neighborhoods. Although funds will not be used for student housing, funding will be available for housing in these neighborhoods forfamilies (non- student households). The City Council encourages the development of affordable housing throughout the city. With the goals of avoiding placing new rental housing in areas with a concentration of poverty and to have diverse neighborhoods in terms of a range of income levels, the City Council adopted a site location model on February 15, 2011 where city funding would be available for the acquisition or construction of new affordable rental housing. This policy does not apply to rental housing projects forthe elderly or persons with disabilities as well as the rehabilitation of existing rental properties. This allows the city to improve and stabilize rental housing in low income neighborhoods and provide decent, safe and affordable housing throughout the city. The Affordable Housing Location Model identifies where the city will provide funding for applicable rental housing sites. 25 Document Path: S: \Iowa City GIS \PCD_Maps \_Comm_Dev \Location Criteria \Data Analysis_ 10 _ 18_13.mxd Obstacles to Meeting Underserved Needs The primary obstacle to meeting underserved needs is the limited resources available to address identified priorities. Iowa City will partner with other public agencies and non - profit organizations, when feasible, to leverage resources and maximize outcomes in housing and community development. 27 C C V C � � E ro a .E N 0 C O d Y d - o m Y 0 D T N a 0 aO � T ac d � a` E E 0 U � N 4- i 0 CW G 0 MV W U � � L Na C� 13. LL AFFORDABLE HOUSING GOALS TABLE 3B ANNUAL HOUSING COMPLETION GOALS ANNUAL AFFORDABLE RENTAL HOUSING GOALS (SEC. 215) Annual Expected Number Completed Resources used during the period CDBG HOME ESG HOPWA Acquisition of existing units 0 r 1 L Production of new units 10 F F r Rehabilitation of existing units 0 1 1 L L Rental Assistance 25 F F r Total Sec. 215 Rental Goals 35 r F r ANNUAL AFFORDABLE OWNER HOUSING GOALS (SEC. 215) Acquisition of existing units 0 F F Production of new units 0 F F Rehabilitation of existing units 22 r Homebuyer Assistance 2 r F L Total Sec. 215 Owner Goals 24 F r F r ANNUAL AFFORDABLE HOUSING GOALS (SEC. 215) Homeless 25 F r F F Non - Homeless 34 F F/_ F F Special Needs 0 F L F F Total Sec. 215 Affordable Housing 59 ANNUAL HOUSING GOALS Annual Rental Housing Goal 35 7 F L F Annual Owner Housing Goal 24 r r L F Total Annual Housing Goal 59 F F F F For the purpose of identification of annual goals, an assisted household is one that will receive benefits through the investment of Federal funds, either alone or in conjunction with the investment of other public or private funds. 29 PUBLIC HOUSING Public Housing Activities The Iowa City Housing Authority is a division of the City of Iowa City established in 1969 to administer housing assistance programs throughout its jurisdiction, including all of Johnson County, Iowa County and part of Washington County. In calendar year 2013, the Housing Authority received $7.1 million for Public Housing, Housing Choice Voucher and Family Self- Sufficiency Programs. Of the total number of vouchers available to the Housing Authority, approximately 68°x6 are utilized in Iowa City. The City of Iowa City owns and operates a public housing program. Public housing was established to provide affordable, decent and safe rental housing for eligible low- income families, the elderly and persons with disabilities. HUD distributes federal subsidies to the Iowa City Housing Authority (ICHA) to operate and manage the properties. The City of Iowa City owns 81 units of public housing, while the ICHA serves as the landlord for the units. In CY13, the Housing Authority paid approximately $285,000 to private sector contractors for the capital improvement, general maintenance and repair of the Public Housing properties. The ICHA offers several programs to public housing residents to encourage and promote access to homeownership. Programs include the Affordable Dream Home Ownership Program (ADHOP), HCV Homeownership Program and the Family Self Sufficiency Program. The Affordable Dream Home Ownership Program is operated, managed and funded solely by the ICHA. It offers opportunities for income eligible families to purchase newly constructed or newer homes. The families may currently be assisted through the Public Housing or Section 8 Rental Assistance programs. The HCV Homeownership program permits eligible participants, the option of purchasing a home with HCV assistance rather than renting. Public Housing tenants are eligible for a Special Admission to the HCV Homeownership program if they have lived in a Public Housing unit longer than 1 year and their total tenant payment (TTP) is higherthan $499. The Family Self- Sufficiency (FSS) Program promotes self - sufficiency and asset development by providing supportive services to participants to increase their employability, to increase the number of employed participants, and to encourage increased savings through an escrow savings program. This program is designed to work with households on a five -year plan to attain financial self - sufficiency as well as provide rental assistance. Addressing "troubled" designation The Iowa City Housing Authority is not designated as a troubled agency by HUD. HOMELESS AND SPECIAL NEEDS ACTIVITIES In light of the limited amount of CDBG and HOME funds available to the City of Iowa City, not all of the area's homeless needs can be addressed using federal funds. The city does not receive Emergency Shelter Grant (ESG) or HOPWA entitlement funds to assist with homeless needs, and it relies on a variety of community agencies to provide basic needs assistance and other support forthe local homeless population. During FY15, CDBG and HOME funding for Iowa City will support programs to provide decent and safe living environments for homeless and those at risk of becoming homeless. The City will fund operations at the Crisis Centerforthose in crisis. Limited financial assistance for rent, utilities, birth certificates, prescriptions, etc. will be provided for homeless or at -risk persons or families. HOME funds will be used to transition persons who are homeless to permanent housing through the Rapid Re- Housing program offered through Shelter House. CDBG funds will also provide operational funds forthe STAR program at Shelter House, a general use shelter. The city maintains support for the Johnson County Local Homeless Coordinating Board, the region's Continuum of Care (CoC) organization. Several of the nonprofit social and human service agencies that provide services to the homeless and those at risk of becoming homeless receive public and private funds that are used to operate 30 emergency shelters, transitional housing facilities and permanent supportive housing facilities throughout the area. These funds are also used to provide supportive services such as case management, counseling, job training and life skills classes. The City also contributes and supports various agencies that provide services to the homeless and special needs population through Aid to Agencies. The City contributes CDBG, general fund and utility revenues to help assist local service agencies provide services. Non - profit agencies apply through the United Way Joint Funding process to access these funds. Applicants can apply for United Way, Johnson County, Iowa City and Coralville funds under one application. Each funding entity determines how they will allocate the funds they contributed. Iowa City will fund 18 agencies through this fund in FY15. The Continuum of Care (CoQ addresses the housing and supportive services needs in each stage of the Continuum of Care process to help homeless persons make the transition to permanent housing and independent living. The city will continue to support the CoC strategy to meet the needs of homeless persons and those at risk of becoming homeless. Additionally, the city has identified strategies designed to address the needs of homeless persons: Advocate human services coordination. • Pursue a single application for service system entry. • Pursue the formation of a local computerized system that connect clients with services, serves as a database, and provides inter - agency referrals. • Support continued funding of Johnson County Council of Governments ( JCCOG) Human Services Coordinator. • Support the Local Homeless Coordinating Board (LHCB) Increase understanding of issues surrounding Johnson County homelessness. • Conduct a study of rural homelessness coordinated with JCCOG to determine the level of unmet need, formulate outreach efforts and support requests for additional funding. • Conduct a survey to determine community attitudes surrounding affordable housing and homeless organizations and participants. Expand /Rehabilitate Emergency Shelter. • Improve and maintain existing shelter facilities. • Support expansion oraddition offacilitiesto meet increased demand. • Expand staff within existing systemto provide improved service. Support plans for improving day shelter opportunities. • Expand available services such as sociallcase worker availability, facilities, childcare opportunities, improved public and private transportation access, showers. Supported Training and Access to Resources (STAR) program continuation. Improve transitional housing programs forfamilies. • Continue to develop scattered site, transitional housing programs requiring participation in supportive services. • Provide transitional housing for single individuals. • Continue to develop Single Room Occupancy (SRO) type housing for persons living alone with access to supportive services. • Continue support of transitional housing for unaccompanied youth. Provide special needs transitional housing. • Continue to support the development of transitional housing for persons with mental illness. • Provide services to support special needs populations in non - facility based care environments (i.e. Compeer, Buddy System, Coaches). 31 As the needs of these groups are vast and numerous, Iowa City has allocated the maximum amount of CDBG funding possible to public services to assist human service organizations. To the extent possible, the City provides support to the system of facilities and service providers described in the homeless inventory above. The Iowa City Housing Authority locally administers efforts that assist in homelessness prevention, including the Section 8 voucher program and administration of 81 units of public housing for residents who are low income, very low income and extremely low income. The Authority also administers a Tenant -Based Rental Assistance program using HOME funds. Assistance with rent and utility deposits is available for eligible households through Shelter House, Successful Living, Inc. and the Hawkeye Area Community Action Program (HACAP). In addition, some private entities provide small amounts of emergency assistance to those in need. However, access to such programs is extremely limited and often for one -time assistance only. The city's strategy to serve the needs of persons threatened with homelessness is as follows Assist low- income households in maintaining and retaining their existing housing. • Establish /Improve emergency rent, mortgage and utility assistance. • Expand in -home support systems such as: living skills training; check in /on service; "buddy system" supports /mentor program. • Increase accessibility to physical /mental health care. • Facilitate the development of countywide housing rehab programs. BARRIERS TO AFFORDABLE HOUSING The following public policy barriers were identified in the city's 2oo8 Affordable Housing Study Zoning There is an absence of developable land zoned for multi - family housing and available for purchase in Iowa City. Undeveloped land that is already zoned for multi - family housing is largely controlled by developers that bring the land to market on a gradual basis. Consequently, if a non - profit developer wishes to build multi - family units, he must apply for a rezoning and endure the public hearing process, where NIMBYism (Not in My Back Yard) can defeat the project. Other State and federal funding resources have continuously declined over the past several years with fewer resources made available to finance affordable housing projects. The following recommendations were identified in the 2oo8 Affordable Housing Study: Change Public Perception There is a perception amongst some that higher density, multi - family housing proposals consisting of affordable housing opportunities are not appropriate for single family neighborhoods. While this rationale maybe justified in some instances, multi - family housing fronting along major thoroughfares, located at street intersections, and in transition areas between residential and non - residential uses are appropriate. And, contrary to public belief, well- designed and well- managed affordable housing developments do not decrease surrounding property values. Public Policy Recommendations • Increase the amount of land zoned for multi - family housing. Most, if not all, of the land currently zoned for multi - family housing in Iowa City is either developed or not on the market. Affordable housing developers are unable to make projects work financially on the few parcels that may be available because (i) the land is too expensive, or (z) it is not zoned to an adequate density. Proactive, selective rezoning of land within Iowa City by elected officials to expand the location of zoning districts that permit multi- 32 family housing by right will eliminate the opportunity for NIMBYists to object to development proposals on a case -by -case basis. • Zone concurrently with all annexation actions. Iowa City should continue to enforce its policy of zoning land upon annexation into the city, and Coralville, North Liberty and Tiffin should be encouraged to do the same. Multi- family housing should be given a high priority during these procedures. • Adopt a mandatory inclusionary zoning ordinance. The Iowa City area is fortunate to have several highly motivated non - profit and for - profit affordable housing developers. While these organizations are highly capable, they lack the resources required to put a major dent in the region's unmet affordable housing need. Clearly, additional mechanisms are needed to expand the production of affordable housing. One way of expanding production is to capitalize on the region's dynamic real estate market by using market -rate development to create the supply of affordable housing. Inclusionary zoning is a "carrot and stick" approach to expanding affordable housing. • Identify potential redevelopment areas. Chapter 403 of Title IX of the Code of Iowa allows a city to establish urban renewal areas to assist in the removal and redevelopment of blighted and substandard properties. Cities can also undertake urban renewal activities that promote new economic, commercial, and housing developments. These initiatives typically include the acquisition and demolition of structures, utility and infrastructure installation, new infill housing, rehabilitation or conservation of properties, and other development assistance utilizing tax increment financing (TIF). Obtaining the designation of a Neighborhood Revitalization Strategy Area (NRSA) from HUD may be appropriate also. • The redevelopment of residential areas near employment centers and public transportation access can help families decrease housing and transportation costs and their commuting time to work. Increasing higher density housing in these areas can increase publictransit ridership as well. • Preserve existing affordable housing units. Work with local non - profits that own and operate privately subsidized housing that is at risk for conversion to market rate units. The potential for market rate apartments occurs when HUD rental assistance contracts lapse. In a dynamic rental real estate market such as Iowa City, owners of older rental developments may be anxious to reap the rewards of higher rents. In many cases, these older affordable housing units are in need of rehabilitation. Iowa City and other local units of government should establish a preservation dialogue with the owners of these older properties in an effort to rehabilitate the units and maintain affordable rents. In many cases, these projects may require an infusion of housing tax credits and HOME financial assistance. • Preserve existing manufactured home communities. Another affordable housing resource in Iowa City that is worthy of preservation is the existing supply of mobile home parks. As a matter of public policy, Iowa City has historically placed emphasis on the rehabilitation of existing mobile homes. The City requested and received special permission from HUD to rehabilitate mobile home units with CDBG and HOME funds. A strategy is needed to protect this public investment in mobile homes and mobile home parks. • Encourage the development of new housing tax credit projects. New production is needed to expand the supply of affordable housing. Local units of government should play a proactive role in identifying sites for new affordable housing, including surplus property that is municipally- owned. Development teams would then be encouraged to prepare and submit proposals. Local government should be prepared to work with the development team to define an appropriate blend of expectations and incentives that will result in a high quality project. • Treat non -profit organizations that specialize in affordable housing as a special class of developer. Non - profit housing developers cannot compete on a level playing field with for - profit developers in the absence of incentives. Non - profits typically do not have ready access to capital and are dependent upon highly competitive public resources to finance their affordable housing projects. Incentives provided by a 33 municipality can foster a higher level of commitment from and a stronger desire to produce more affordable housing units by local non - profits. • Streamline the permitting process for projects involving affordable housing. • Participate in the cost of financing infrastructure improvements for projects involving affordable housing. • Waive loca I fees for non- profit organizations that develop affordable housing. FY15 Actions The city is actively involved in presenting to organizations in the region to educate persons about what is affordable housing and who needs it. Presentations will continue during FY15. The city will also support the Local Homeless Coordinating Board's efforts to develop a campaign to educate the community on affordable housing and put a face on who needs affordable housing. The city will continue to review housing to be constructed with City or CDBG /HOME assistance to ensure it meets the city's Affordable Housing Design Guidelines. Quality design and neighborhood compatibility will assist with neighborhood and community acceptance of affordable housing. The city will support the rehabilitation of existing rental units in low income neighborhoods and work with private property owners to preserve affordable housing throughout neighborhoods in Iowa City. The City will also work with the Human Rights Coordinator to provide Fair Housing updates to educate our local commissions and boards. The City hired a consultant to prepare the 2014 Analysis of Impediments to Fair Housing Choice (approved in March zoiq). The City will report its progress addressing the identified impediments in the Fyiy CAPER. OTHER ACTIONS Address obstacles to meeting underserved needs, foster and maintain affordable housing Evaluate and Reduce Lead Based Paint Hazards Historically, very few children in Iowa City have been found to have elevated blood lead levels. The Iowa Department of Public Health estimates there were 147 children with elevated blood lead levels in Johnson County in zoog. When requested by parents or others, testing can be done by the Johnson County Health Department or private hospitals and clinics. Iowa City's current primary initiative is public education on the potential hazards of lead based paint. The City's rental inspectors distribute pamphlets and brochures concerning lead based paint hazards to landlords when rental inspections are conducted. ICHA will continue to ensure that all its public housing and Housing Choice Voucher rental units are lead safe. The Housing Rehabilitation Office will continue to implement all aspects of the lead -based paint regulations. In its efforts to evaluate and reduce lead -based paint hazards in all of its CDBG and HOME funded rehabilitation projects, they provide information and outreach on the dangers of lead -based paint, as well as, guidance in the identification and reduction of lead -based paint hazards to all program participants. Blood level tests may be paid through the Housing Rehabilitation program fortargeted populations such as children under7when needed. Two rehabilitation staff members are certified lead inspector /risk assessors and conduct visual risk assessments and clearance tests on all applicable projects. Because the City does not own an XRF device, XRF testing is done by a third party. All rehabilitation staff continued to receive lead education and training that they pass on to all contractors, sub - contractors and others affiliated or working with the rehabilitation program. The staff continued to place an emphasis on training new contractors in lead safe work practices, and forwarded these workers and companies to a third party entity for training. Because of City- sponsored training in the past, the Rehabilitation Program has access to ioo+ workers representing a multitude of different companies that provide all of the necessary contractor services (i.e. electrical, plumbing, painting, roofing, general contracting, cleaning companies, etc.) which enable all rehabilitation projects to be completed in a safe and responsible manner. In addition, the City now provides forgivable loans for portions of the lead costs on CDBG and HOME funded projects. 34 Institutional Structure & Enhanced Coordination Form of Government - The City of Iowa City is organized under the Council - Manager form of government. Iowa City citizens elect seven Iowa City residents to the City Council for overlapping four -year terms. Four of the Council Members, known as the Council Members At- large, are nominated and elected by the eligible electors of the City at large. The other three are known as District Council Members and are nominated by the eligible electors of their respective districts and elected by the qualified voters of the City at large. The Council, in turn, selects one of its members to serve as mayor for a two -year term. The Mayor presides at the City Council meetings and has one vote on the Council - the same as the other six members. Departments of the City —The City recently reorganized and combined the Planning and Community Development Department and Housing Inspection Services under one new department named Neighborhood and Development Services. Housing and community development programs will be administered by Neighborhood Services (formerly known as the Community Development Division) and the Iowa City Housing Authority. Neighborhood Services will coordinate all Consolidated Planning initiatives of the City, including plan preparation with citizen and community participation and directly manage all housing and non - housing activities funded with either CDBG or HOME funds. The City Council is authorized to administer housing vouchers awarded by the U.S. Department of Housing and Urban Development from the Section 8 Housing Choice Voucher (HCV) Program. The Iowa City Housing Authority provides staff to administer this assistance. In addition to the HCV Program, the Housing Authority also administers a public housing program and homeownership assistance programs. Citizen participation is integral to the ongoing management and oversight of the housing and community development programs the City provides. The Council appoints a nine member citizen commission to assess Iowa City's community development needs for housing, jobs and services for low -to- moderate income residents and to promote public and private efforts to meet such needs. The Housing and Community Development Commission's by -laws, when possible, require representation from persons with expertise in construction and finance and one memberthat receives rental assistance. With respect to the consolidated plan's homeless strategy, the City undertakes extensive consultation as part of its consolidated planning effort; particularly in association with the Johnson County Local Homeless Coordinating Board (LHCB) Continuum of Care's planning process. The LHCB represents over 25 agencies in Iowa City providing services to the homeless and low- income persons in Johnson County. The City works closely with the LHCB to increase coordination between housing providers, health, and service agencies in addressing the needs of personsthat are chronically homeless. Reduce the Number of Poverty -Level families The City, Housing Authority, and the Johnson County Local Homeless Coordinating Board, work together to address homeless and poverty issues. In addition to the activities outlined in the Annual Action Plan, the Housing Authority provides supportive services and coordination with the agencies making up the Local Homeless Coordinating Board to support families and individuals achieve their highest level of self- sufficiency. With respect to economic development, the City has had a long -term partnership with the Iowa City Area Development Group (ICAD) and the Iowa City Area Chamber of Commerce. ICAD is a private non - profit organization whose mission is to position the region as a quality place to work. ICAD works as a confidential advocate for expanding businesses and new industries. ICAD helps businesses pursue state and local financial assistance and serves as a liaison between the City of Iowa City, the Iowa Economic Development Authority, the University of Iowa and other entities. The Chamber of Commerce works to enhance the business climate in Johnson County and provides educational programs on customer service, human resources, and other issues relevant to small businesses. Starting in FY03, the City of Iowa City set aside CDBG funds to promote economic development. Funds primarily support gap financing or start-up capital to micro - enterprises or small business creating jobs for low- moderate incomepersons. These funds are available throughout the year, instead of a once a year funding cycle to allow 35 greater flexibility and attract a greater number of applicants. Since the Economic Development Fund started in July 2002, it has been successful in attracting 51 applicants. To date, the City has funded 25 economic development projects for over $946,805. As of May 2014, the Economic Development fund has $47,738 available. In 2013, the City Council expanded the use of the Economic Development Fund to be used forfa�ade improvements in the City - University Urban Renewal Area as part of the Building Change program. The program meets the objectives of the Urban Renewal Plan by i) eliminating substandard buildings blighting influence and environmental deficiencies; z) improving the appearance of buildings and encouraging high standards of design; and 3) encouraging the restoration and rehabilitation of structures in downtown Iowa City which are of architectural and /or historic significance. The City received 16 applications in FY14. Four received CDBG funds to complete facade renovations. Minority Outreach Neighborhood Services requires that each CDBG and HOME recipient attend a City sponsored workshop just prior to the beginning of each year to go over the CDBG and HOME regulations and reporting requirements. Atthat workshop minority outreach is explained. In addition, staff sits down with the applicant afterthe agreement has been signed, but priorto the letting of bids orthe signing of contracts between the applicant and a contractor, to go over each applicable regulation requirement. Staff provides a list of the minority plan rooms and provides the website to search Iowa targeted small businesses by trade and county. Other actions planned during the year to address obstacles to meeting underserved needs. The City created a citizen advisory group, the Housing and Community Development Commission (HCDC), in 1995, to assess Iowa City's community development needs for housing, jobs and services for low and moderate income residents, and to promote public and private efforts to meet such needs. HCDC leads the CDBG /HOME allocation process to determine what projects will be awarded funds based on priorities established in CITY STEPS, Iowa City's Consolidated Plan for Housing, Jobs and Services for Low - Income Residents. Each year the City and HCDC reviews applications on a competitive basis. The fact that a program or agency was funded in a prior year does not ensure funding in subsequent years. The lack of adequate financial resources, in relation to need, is the greatest obstacle facing the community. Housing and non - housing needs and services simply exceed available resources. If additional funding were available, existing services could be expanded to better address the needs of the community. Due to limited funding and the prospect of reduced funding in subsequent years, the following considerations will be made when determining to fund a project: 1) The project must be an identified CITY STEPS priority. Applicant must document the ability of the project to address the specific need. z) The project budget is justified and leverages other financial resources, including human resources. Applicant must document efforts to obtain outside funding as well. 3) The project has a measurable impact in the community. The project primarily targets low- income persons, utilizes community partnerships, and provides adequate benefits in relation to costs. 4) The applicant can maintain regulatory compliance. Applicant must demonstrate it has strong financial skills, administrative capacity to complete a federal grant, and the ability to complete the project within the required time period. Iowa City has a long history of successfully implementing HUD funded programs. Serving the needs of the city's various special needs population drives the city's consolidated planning efforts. Addressing the needs of the homeless and special needs populations are high priorities for use of resources within Iowa City. Fragmentation and duplication of services in Iowa City is a minor obstacle due to the communication and coordination of existing service providers. Service providers are members of the Johnson County Local Homeless Coordinating Board and participate in the local Continuum of Care planning. 36 HOME PROGRAM SPECIFIC REQUIREMENTS Iowa City has elected to adopt the following recapture or resale provisions when HOME funds are used to create affordable housing. Recapture guidelines are used for any homebuyer activity where the client receives direct financial assistance (including any assistance that reduces the purchase price from the fair market value to an affordable price) and resale is used when the homeowner does not receive direct financial assistance. Recapture Provision A recapture provision of the HOME regulations pursuant to CFR Part 24 92.254 (a)(5)(11) will be used when HOME funded assistance is provided to reduce the selling price of a home from appraised value to one of affordability (affordability subsidy) for people at income levels of 8o% or less of Iowa City's median income. This will include an affordability period based on the amount of HOME funds used for that purpose as indicated in the following table. If downpayment assistance will be provided, that amount will be added to the total amount to determine the affordability period. < $15,000 5 years 815,000 - 840,000 10 years > $40,000 15 years Upon the sale of the home, the net proceeds (sale price, minus superior loan repayment and closing costs) shall be distributed proportionately between the City, up to the Principal Amount, and the Buyer (Shared Net Proceeds). The City and /or HUD are not responsible for covering negative net proceeds. The Principal Amount shall be forgiven after the affordability period identified in the Recapture Agreement ends if the homeowner remains in compliance with their written agreement. Example: How the money from the sale of the house will be distributed among the City, Recipient, and the Buyer. The house is being sold for $150,000 before the end of the affordability period. The City is paid $19,585.5o. The Buyer receives $53,414-50 from the sale of the home. The private lender will get $75,000. (The remaining $2,000 is "closing costs," such as abstract update, attorney fees, and recording costs). When the City receives $19,585.50, the City will consider the promissory note fully paid and will release the mortgage. The Buyer will not have to pay the City the difference between the principal amount of $36,667 and $19,585.50. Appraised Value of the Property at Acquisition: $136,667 HOME Investment (Principal Amount): $36,667 ($36,6671$136,667) = 27% Buyer Investment (First Mortgage) $100,000 ($100,000/$136,667) =73°x6 Homebuyer Principal Payments at time of sale $25,000 Sales Price (Upon Resale): $150,000 Superior Loan Repayment $75,000 ($100,000 - $25,000) Closing Costs $2,000 NET PROCEEDS: $73,000 HOME Recapture Amount to City: $19,585.50 (36,667/(36,667 +100,000))x $73,000 = 19,585.50 Buyer Allocation: $53414.50 (100,000/(100,000 +36,667))x $73,000 = 53,414.50 37 Resale Provision A resale provision deed restriction will be used with an affordability period based on the amount of HOME funds provided perthe following table when HOME funds are used for a construction subsidy. < $15,000 5 years 815,000 - 840,000 10 years > $40,000 15 years The affordability period shall begin with the original HOME assisted owners closing date. If the home does not continue to be the principal residence of the buyer during the duration of the period of affordability, then the housing will be sold only to a buyerwhose family's income does not exceed 8o% of Iowa City's area median income as determined annually by HUD. The City will target homeowners between 6o to 8o% of Iowa City's area median income. The buyer shall use the home as their principal residence. The purchase price may not exceed 95 percent of the median area purchase price for single family housing in the Iowa City MSA as determined annually by HUD for new or existing housing. The original HOME - assisted owner is entitled to a fair return on investment (homebuyers downpayment plus capital improvements made to the house). The City will determine the original homebuyers return on investment by using the percentage change in the Consumer Price Index (CPI) over the period of ownership. The value of capital improvements will be based on the actual costs of the improvements as documented by the homeowners receipts. The City will determine whether the sale price meets said requirements and must approve the price before Buyers accept a purchase offer. Example: Iowa City provides funds for the construction of a single family home. The homebuyer provides $5,000 for a downpayment. The CPI is 3.5°x6 over the period of ownership. The original homebuyer sells the home at a price that permits the homebuyerto realize a full return on his /her investment. The original homebuyer completed a sg,000 kitchen remodel as evidenced by receipts. The original homebuyers initial downpayment investment of $5,000 plus the sg,000 kitchen remodel would result in a fair return of $490. Total return at sale, assuming price of sale permits a full return, would be $14,490. ($5,000 + $9,000) x 3.5% _ $490 fair return on initial and capital investments $5,000 + $9,000 +490 = $14,490 total return to the original homebuyer at sale There may be a declining housing market where home values are depreciating. If the home is sold for less or the same price as the original price, the original homebuyer may not receive a fair return or any return on their investment. The City and /or HUD are not responsible for covering a loss on the original homebuyers investment. HOME regulations allow revocation of HOME's affordability restrictions if an ownership interest is terminated prematurely by foreclosure, transfer in lieu of foreclosure, or assignment of an FHA - insured mortgage to HUD. A recipient may propose a different resale or recapture provision for a proposed project, however the City of Iowa City must submit the proposed provision to HUD (either in the Annual Action Plan or later in the year) for review and approval before a recipient enters an agreement with the City for the proposed project. Under the HOME program, certain requirements must be placed on properties by means of deed restrictions or a recorded note and mortgage. In FY2015, there are no projects involving homeownership assistance with HOME funds. HOME projects involving homeownership assistance funded since zoo7 were based on the recapture provision. IN Justification of use of HOME funds for TBRA The City allocated TBRA funds for Rapid Rehousing (HOME TBRA) through Shelter House for homeless persons transitioning to permanent housing. The Housing Authority will also be utilizing HOME funds from prior years until the funding is depleted. There are three primary reasons for using HOME funds for tenant -based rental assistance in Iowa City. These include: High demand for affordable rental housing for non - student households. Much, if not most, of the rental housing stock located within the downtown area and within close proximity to the University of Iowa is marketed to student households. As a result, rental rates are based on a per- bedroom lease. For example, a three - bedroom apartment targeted toward students might rent for $45o /month per bedroom resulting in a total apartment rent of $1,350 1month. This rent is out of reach for a lower income family of four searching for a three - bedroom unit. In order to make the local rental market more affordable to lower income non - student households, the city uses HOME funds to subsidize the cost of monthly rent for eligible renters. • The waiting list for Section 8 Housing Choice Vouchers include 268 households (elderly, disabled and families with children under 18 who are residents) and an additional 6,068 applicants in lower preference categories (2014 Annual Report). The use of HOME funds to supplement the Section 8 rental assistance program enables to city to make more rental units affordable to lower- income households. • Federal funding for the federal Section 8 Housing Choice Voucher program has been severely decreased in the recent past with no indication of increased budget authority in the near future. Consequently, the City has capitalized on the use of HOME funds for tenant -based rental assistance to complement other on- going affordable housing initiatives in Iowa City. Due to the nature and extent of homelessness in Iowa City and the surrounding area, the Consolidated Plan has the following identified strategy: increase the percentage of homeless persons moving from shelter /transitional housing to permanent housing. Rapid Rehousing (HOME TBRA) will be utilized to assist homeless persons locate and maintain housing for up to six months. Tenants will also receive supportive services that include housing /employment retention, money management and preparation for when rental assistance ends. Affirmatively Furthering Fair Housing The City of Iowa City finalized an Analysis of Impediments to Fair Housing Choice in March 2014. The following impediments were identified, along with recommendations to address the impediments: I. Impediment: Racial and ethnic concentrations exist in Iowa City Recommendationto overcomethis impediment: Iowa City should adopt a land development policy that would make housing options available at diverse locations across the city. To this end, we recommend that Iowa City consider adopting a mandatory inclusionary zoning policy that would apply to all new ownership and rental housing development. While the generally understood benefit of a mandatory inclusionary zoning policy is an increase in the number of reasonably - priced owner and rental units that families with incomes below 8o%AMl can afford, an equally important but less well-recognized benefit is the scattered locations at which these new housing units get built. This would create housing units for low and moderate income minority families at diverse locations in the City without using any public subsidies or taxes. 2014 Update: As the Analysis was recently completed; the City will report its progress addressing the identified impediments in the Fy14 CAPER. II. Impediment: The Affordable Housing Location Model is a well- constructed effort to disperse certain types of assisted housing; howeverthe model may significantly reduce the parcels of land where new assisted rental housing may be built or acquired. Recommendation to addressthis impediment: 39 For projects that require compliance with the Affordable Housing Location Model, the City should provide land and locations permitted by this model at prices comparable to land at locations not permitted by this model. Alternatively, the City could provide cash supplements from non -CDBG /HOME sources that offset land cost differentials to such projects. 203.4 Update: As the Analysis was recently completed; the City will report its progress addressing the identified impediments in the Fy3.4 CAPER. III. Impediment: African Americans and Hispanic may experience unfair treatment in home mortgage loan denials and high cost loans. Recommendationto address this impediment: a) Further research is warranted to determine what standard measures should be reviewed to determine if there are unfair lending practices. Based on the outcome of this research, the City should adopt a linked- deposit policy wherein only those banks that clearly provide fair access in residential lending to protected classes are considered as potential recipients of the City's banking business. b) The City should encourage lenders to attend and participate in yearly trainings sponsored by the Human Rights Commission that educate on discrimination and fair lending practices. 203.4 Update: As the Analysis was recently completed; the City will report its progress addressing the identified impediments in the Fy3.4 CAPER. IV. Impediment: There are barriers to mobility and free housing choice for protected classes and persons of low income. Recommendationsto overcomethis impediment: a) To address landlord -side problems regarding HCV recipients search for housing, the City should expand existing landlord education programs aimed at busting the myths about HCV tenants and the HCV program. b) To address tenant -side problems that result in failed searches, the City should encourage local- nonprofits involved in the provision of housing and related servicesfor low- income persons to help HCV recipients in their search for housing. c) Consider the legality of adding Housing Choice Voucher status as a protected class under the City's Human Rights ordinance. 203.4 Update: As the Analysis was recently completed; the City will report its progress addressing the identified impediments in the Fy3.4 CAPER. V. Impediment: Fair housing violations go unreported because of opinions /attitudes that things will never change and /or lack of knowledge of available resources to address fair housing forthose in protected classes. Recommendationsto address this impediment: a) Increase level of public awareness concerning fair housing to improve knowledge of fair housing laws. Expanding awareness to include more prominence on City webpage, social media sites, increased distribution of materials to nonprofits, educational institutions and agencies that work with diverse consumers, through electronic media, advertisements, trainings to the general public, and training to specialized groups and key market actors. Respondents of the survey conducted as part of the Analysis of Impediments to Fair Housing Choice cited "didn't know what good it would do` when asked why they chose not to file a complaint of housing discrimination. Increase level of public awareness must include pointing out what good it does to file a complaint of discrimination versus doing nothing. Additionally ON more information about possible remedies and outcomes to a fair housing violation will be beneficial to the public and may encourage more complaints to be filed. ii) The survey conducted as part of the Analysis of Impediments to Fair Housing Choice should be repeated in the next few years to survey whether the expansion of public awareness on fair housing has an effect on the knowledge of available resources and an increase in fair housing complaints filed. b) Perform yearly tests /audits on protected characteristics to collect additional information on the extent and nature of discrimination in Iowa City. i) Tests /audits serve as opportunities to require compliance and educate landlords, management companies and those who rent or sale homes on fair housing laws. ii) Tests /audits allow identifiable information as to what specific populations disproportionately receive unfairtreatment leading to bettertargeted education and outreach to those specific populations as well as agencies, organizations and businesses that have contact with those populations. c) Continue to explore the feasibility of HUD determining that the City's ordinance is substantially equivalent to the Fair Housing Act. Funding maybe available to further knowledge and educational pursuits. 203.4 Update: As the Analysis was recently completed; the City will report its progress addressing the identified impediments in the Fy14 CAPER. Affirmative Marketing for Housing Containing 5 or More HOME - Assisted Units As required by HUD, the City of Iowa City and its subrecipients (public and private) follow affirmative marketing rules. The City's Affirmative Marketing Plan is below. Both public and private recipients of HOME funds are also required to follow the affirmative marketing requirements in 24 CFR 92.353.. City staff reviews these efforts during annual monitoring visits. AFFIRMATIVE MARKETING PLAN (Revised 5/3.3) CITY OF IOWA CITY, IOWA 3.. Purpose This Affirmative Marketing Plan is designed to conform to the requirements of the U.S. Department of Housing and Urban Development (HUD) published at 24 CFR 570 (Community Development Block Grant) and 24 CFR 92 (HOME Investment Partnerships— HOME). The plan sets forth the City of Iowa City's procedures and requirements for affirmatively marketing housing units assisted with federal funds. 2. General Policy It is the City's policy to make available housing options to eligible persons from all socio- economic, racial, ethnic and gender groups in the Iowa City housing market area and affirmatively market housing that is assisted through programs administered by the City. To this end, the City will make efforts to affirmatively market housing units to assure that individuals who normally might not apply because of age, race, color, religion, creed, national origin, gender identity, sex, marital status, disability, sexual orientation, the presence or absence of dependents, familial status or public assistance source of income for housing: • Know about rental vacancies and opportunities to purchase homes • Feel welcome to apply orfunds or receive housing assistance. • Have the opportunity to live in units assisted with public funds. 41 The City will work with subrecipients to ensure that housing units assisted with federal funds are made available to persons on an equal basis. 3. Outreach to the Public, Owners and Potential Tenants— City Procedures a. Media. The City may utilize media to advertise (i) the availability of assistance and (z) the availability of vacant housing units. Press releases will contain the Equal Housing Opportunity slogan and a statement of affirmative marketing policy. Display ads, posters and other published materials will contain the Equal Housing Opportunity logo and slogan. The following media may be used for display advertising: Iowa City Press - Citizen and /or Iowa City Gazette- newspapers Local government access channel- cable TV Press releases from the City are received by all area print and electronic media and may also be found on the City's website. b. Other Means. The City will utilize other appropriate methods to inform the public. This may include personal and written contact with organizations, such as those listed below, encouraging them to make information on the vacant units available to all persons on an equal basis. • Business organizations- Iowa City Board of Realtors, Iowa City Apartment Owners and Managers Association and local lending institutions. • University organizations such as the Iowa Memorial Union and other University of Iowa web -based applications. • Other Organizations- Crisis Center, The Housing Fellowship, HACAP, and the Iowa City Housing Authority The Iowa City Housing Authority will be of particular value in that it serves as the local Public Housing Authority, receives referrals through a network of local human service agencies and maintains a current waiting list of Section 8 eligible rentals. Community Development staff will update the Iowa City Housing Authority annually concerning newCDBG /HOME assisted rental properties. Meetings of the Housing and Community Development Commission are open to the public and will serve as anotherforum for announcing the availability of federal assistance and discussing the City's affirmative marketing policy for the program. Other public meetings, as needed, will be scheduled to explain the City's HUD funded programs to local organizations, property owners and tenants and discuss the affirmative marketing policy and requirements of local and federal fair housing laws. The staff of the Iowa City Human Rights Commission may be called upon to assist in explaining fair housing laws and to review potential housing discrimination practices. In addition, the Iowa City Human Rights office has added a full -time investigatorwho works with discrimination complaints. y. Requirements and Procedures for Subrecipients Property owners who participate in the CDBG and /or HOME programs will be required to comply with the following affirmative marketing practices: a. Include the Equal Housing Opportunity logo and slogan or statement in all advertisements forvacant units in local media and printed material. b. If a rental office is utilized or operated by the owner, whether on or off premises, display fair housing posters in a conspicuous place. c. Provide written assurance to the City that units will be made available to prospective tenants on a non - discriminatory basis. d. Maintain records of all efforts to affirmatively market vacant units. For example, copies of newspaper ads and documentation of the owners' contacts with the local business, University and community service organizations and other efforts to publicize the 42 availability of the vacant units. All HOME agreements shall contain language as required by zq CFR 92.351. 5. Special Outreach Efforts If, during the course of administering the CDBG and HOME programs, it is determined that special outreach efforts are needed to attract persons of particular racial, ethnic or gender groups to vacant units, the City may: • Conduct outreach and contact service organizations, churches and University clubs. • Notify the business, University and community service organizations listed in Section 3b above of the special outreach needed. • Assist owners to locate prospective tenants by making referrals from the Iowa City Housing Authority's waiting list and target advertising as needed to expand the list. The City can require that subrecipients begin their special outreach efforts immediately upon learning that a vacancy will occur. Owners typically request a 30-day notice from current tenants planning to terminate their tenancy so that the outreach efforts can begin before advertising to the general public. 6. Record - keeping Requirements All records pertaining to affirmative marketing efforts of the City will be maintained by the City in accordance with HUD Regulations. The City will ensure the subrecipients also maintain records to document their affirmative marketing efforts. The City will maintain records of the following: • Press releases and newspaper ads. • Copies of notices and documentation of contacts with the business, University and community service organizations. • Documentation of monitoring visits with subrecipients 7. Assessment of Affirmative Marketing Efforts The City will conduct an annual assessment of the effectiveness of its affirmative marketing efforts for the inclusion in the Consolidated Annual Performance and Evaluation Report to HUD. At a minimum, the assessment will include: a. A summary of good faith efforts by the City and participating subrecipients to affirmatively market units. To determine if good faith efforts have been made, the City will compare information contained on the records to be kept with actions that were taken to carry out affirmative marketing. (See Affirmative Marketing Reporting form). b. The results of the affirmative marketing efforts may include age, race, color, religion, creed, national origin, gender identity, sex, marital status, disability, sexual orientation, the presence or absence of dependents, familial status or public assistance source of income occupying assisted housing units. To determine results, the City will examine whether or not persons from a variety of groups and persons with disabilities in the area applied for or became tenants, homebuyers, or received rehab assistance. If it is found that a variety is represented, particularly the targeted groups determined to be in need of outreach, the City would assume the procedures were effective. If it is determined that a participating subrecipient is not making good faith efforts to affirmatively market housing units, the City will take the following corrective actions: a. The City will issue a written notice to the subrecipient stating reasons of non - compliance with the terms of the CDBG and /or HOME agreement and corrective actions (e.g. advertising) which must be taken by the ownerwithin a specified period of time, not to exceed 6o days. 43 b. Continued non - compliance within the specified time period and, thereafter, during the term of the CDBG and /or HOME agreement, will result in the City taking legal action to recover i00% of the assistance for the subrecipient's project. All cases of apparent discriminatory practices by subrecipients will be referred to the Iowa City Human Rights Commission for review and remedial action under the housing provision of the Iowa City Human Rights Ordinance. 8. Public Notice and Review Copies of this Affirmative Marketing Plan will be made public and available for citizen review, upon request, in Neighborhood and Development Services. Use of HOME Funds to Refinance Existing Debt (Multi- Family Housing) Not Applicable —The City of Iowa City does not use HOME funds for this purpose. Use of ADDI Funds Not Applicable —The City of Iowa City does not receive ADDI funds. .. MONITORING Reporting The city requires each organization receiving CDBG and /or HOME funds to submit quarterly reports until project close -out. The quarterly reports include information on the number of clients served, income level and race /ethnicity. The reports also include a brief narrative providing an update of the activity. Each organization must also submit a year -end report summarizing all required data as needed for entry into IDIS and for inclusion in the city's CAPER. Neighborhood Services performs on -site monitoring visits for each activity at least once after the project is funded. The City monitors projects on an annual basis until project close -out. All housing providers, during a stated period of affordability or as required by agreement, must also submit an annual tenant rental housing report to document compliance with all applicable regulations, specifically household income and program rents. In addition, members of the City Council appointed citizen commission, Housing and Community Development Commission, choose CDBG and /or HOME funded projects to visit and monitor. The members meet with the project stakeholders to discuss the project, ensure that the project is proceeding properly by serving the intended clientele and that it will be completed on time. The commission members then report back to the full commission at a regularly scheduled meeting. Timeliness of Expenditures Neighborhood Services staff require that each CDBG and HOME recipient attend a city- sponsored workshop just prior to the beginning of each year to review the CDBG and HOME regulations and reporting requirements. The timeliness of expending the funds is one of the topics discussed at the workshop. In addition, each recipient of CDBG and /or HOME funds signs a formal agreement after the funds have been released that includes a copy of the City's policy, as stated below: From time to time there may be Community Development Block Grant (CDBG) and /or HOME Investment Partnership Program (HOME) projects that do not meet the anticipated schedule for implementation as presented to the Housing and Community Development Commission (HCDQ. These circumstances may be due to unforeseen events (e.g. unfunded applications for other financing). HCDC recognizes the need to utilize CDBG, HOME and other funding as effectively and efficiently as possible to meet the needs of low- moderate income household for housing, jobs and services within Iowa City. To assist HCDC in evaluating a project's status and ability to proceed, the following policy is hereby adopted to begin with Fiscal Year'oq projects beginning July 1, 2003: 1. All CDBG projects will have entered into a formal agreement with the City of Iowa City forthe utilization of federal funds by September 3o each year. Should a recipient fail to meet this threshold, the project will be reviewed by HCDC to evaluate if extenuating circumstances exist. If extenuating circumstances exist and it is anticipated the project will proceed, a new timeline will be established for the completion of the project. If circumstances do not warrant an extension of time, HCDC may recommend the recapture and re -use of the funds to the City Council. 2. All CDBG projects (except applicants for LIHTCs) will have expended a minimum of fifty percent (50°x6) of the assistance provided for the proposed project by March 15 each year. This provides the recipient with approximately 255 days following the start of the fiscal yearto reach this threshold for CDBG projects. All HOME projects will expend their funds on a timely basis per the applicable HOME regulation. Should a recipient fail to meet these thresholds, all unexpended CDBG /HOME funding will be recaptured by the City of Iowa City and recommendations be made by the HCDC for re -use of the funds or HCDC may allow the recipient to retain the funds forthe previously approved project. 3. If housing projects are applying for other funds through various state or federal agencies, the recipient must apply forthose funds in the first available application period offered. Should a recipient fail to meet 45 this application threshold, all CDBG /HOME funding will be recaptured by the City of Iowa City and recommendations be made by the HCDC for re -use of the funds. q. Should a recipient be unsuccessful in obtaining the funds listed in the application in the application round immediately following the allocation of local CDBG /HOME funds, and the project will not be able to proceed without the aforementioned funds, all CDBG /HOME funds will be recaptured by the City of Iowa City and recommendations be made by the HCDC for re -use of the funds or HCDC may allow the recipient to retain the funds forthe previously approved project. Ifthe project is unsuccessful in obtaining the required funds listed in the application after two consecutive funding rounds following the allocation of local CDBG /HOME funds, the City of Iowa City will recapture all CDBG /HOME funds. Housing Code Compliance Each agreement between the CDBG /HOME recipient and the City states the following: "The project shall be completed in compliance with all applicable state and local building codes; and upon completion, shall be operated in compliance with all applicable state and local laws." Neighborhood Services staff verify that the appropriate permits are taken out and that Neighborhood and Development Services have inspected the structure for compliance with local building codes and local rental inspection housing codes (if the project is a rental project). Neighborhood and Development Services annually inspect each HOME funded rental unit where the tenant receives Section 8 funds to ensure compliance with housing codes. In addition, the City inspects all rental units every two years to ensure compliance with rental housing codes. EMERGENCY SHELTER GRANTS (ESG) Not Applicable —The City of Iowa City does not receive ESG funds. HOUSING OPPORTUNITIES FOR PEOPLE WITH AIDS Not Applicable —The City of Iowa City does not receive HOPWA funds. FY1S Action Plan - Specific Homeless Prevention: The City of Iowa City does not receive entitlement funds to assist with homeless needs. Various social services agencies in Iowa City apply to the State of Iowa and receive a small allocation of funds for homelessness through the State. Iowa City continues to directly help low- income families avoid homelessness using CDBG and HOME funds. During FY15, CDBG and HOME funding will support programs to provide decent and safe living environments for homeless and those at risk of becoming homeless. The City will fund operations at Shelter House as well as provide Rapid Rehousing (TBRA) for persons transitioning from homelessness to permanent housing. The City will use funding to support the Emergency Assistance Program at the Crisis Centerthat helps families and persons in crisis to maintain their housing, employment and /or health. The City will continue to maintain our owner-occupied rehabilitation program as this assistance helps in providing a decent and safe living environment while avoiding the deterioration of the City's affordable housing stock. The City will also provide continued funding for operations at Neighborhood Centers of Johnson County. The City's Neighborhood Services (formerly Community Development Division) is an active member of the Johnson County Local Homeless Coordinating Board and assists in whateverways we can to facilitate services for homeless or near homeless persons. am The City also administers the Section 8 Housing Choice Voucher Program through the Iowa City Housing Authority. As part of the Section 8 program, families may volunteerto participate in the Family Self- Sufficiency program. This program is designed to work with households on a five -year plan to attain financial self - sufficiency as well as provide rental assistance. The Housing Choice Voucher Homeownership program permits eligible participants in the Section 8 Voucher Program, including participants with portable vouchers, the option of purchasing a home with their Section 8 assistance rather than renting. The City will continue efforts to assist those households at risk of homelessness. The community's current network that provides homeless shelters, transitional housing, outreach, and services is extensive. Numerous social service agencies assist with homelessness prevention. Some of those agencies include Shelter House, HACAP, NAMI, DVIP, Successful Living, Home Ties, Crisis Center of Johnson County, Iowa City Housing Authority, DVIP, MECCA, Systems Unlimited, Goodwill Industries, Neighborhood Centers of Johnson County, Salvation Army and the Community Mental Health Center. These organizations provide many services including but not limited to counseling, case management, life skills training, financial literacy classes, and victim advocacy. Our goal is to assist households with the result of self - sufficiency. The Local Homeless Coordinating Board follows the State of Iowa's Discharge Coordination Policy. This Policy was adopted by the Iowa Council on Homelessness in 2005. The Policy represents a coordinated discharge policy for children aging out of foster homes, people with disabilities and health conditions leaving nursing homes and hospitals, and people with mental health issues leaving hospitals. 47 Non -State Government Certifications QPPtSAENYpR.�O *III�II "� CPMP Non -State Grantee p4G,9 II�II�o4� Certifications D Many elements of this document may be completed electronically, however a signature must be manually applied and the document must be submitted in paper form to the Field Office. ❑ This certification does not apply. ® This certification is applicable. NON -STATE GOVERNMENT CERTIFICATIONS In accordance with the applicable statutes and the regulations governing the consolidated plan regulations, the jurisdiction certifies that: Affirmatively Further Fair Housing -- The jurisdiction will affirmatively further fair housing, which means it will conduct an analysis of impediments to fair housing choice within the jurisdiction, take appropriate actions to overcome the effects of any impediments identified through that analysis, and maintain records reflecting that analysis and actions in this regard. Anti - displacement and Relocation Plan -- It will comply with the acquisition and relocation requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended, and implementing regulations at 49 CFR 24; and it has in effect and is following a residential antidisplacement and relocation assistance plan required under section 104(d) of the Housing and Community Development Act of 1974, as amended, in connection with any activity assisted with funding under the CDBG or HOME programs. Drug Free Workplace -- It will or will continue to provide a drug -free workplace by: 1. Publishing a statement notifying employees that the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance is prohibited in the grantee's workplace and specifying the actions that will be taken against employees for violation of such prohibition; 2. Establishing an ongoing drug -free awareness program to inform employees about — a. The dangers of drug abuse in the workplace; b. The grantee's policy of maintaining a drug -free workplace; c. Any available drug counseling, rehabilitation, and employee assistance programs; and d. The penalties that may be imposed upon employees for drug abuse violations occurring in the workplace; 3. Making it a requirement that each employee to be engaged in the performance of the grant be given a copy of the statement required by paragraph 1; 4. Notifying the employee in the statement required by paragraph 1 that, as a condition of employment under the grant, the employee will — a. Abide by the terms of the statement; and b. Notify the employer in writing of his or her conviction for a violation of a criminal drug statute occurring in the workplace no later than five calendar days after such conviction; 5. Notifying the agency in writing, within ten calendar days after receiving notice under subparagraph 4(b) from an employee or otherwise receiving actual notice of such conviction. Employers of convicted employees must provide notice, including position title, to every grant officer or other designee on whose grant activity the convicted employee was working, unless the Federal agency has designated a central point for the receipt of such notices. Notice shall include the identification number(s) of each affected grant; 6. Taking one of the following actions, within 30 calendar days of receiving notice under subparagraph 4(b), with respect to any employee who is so convicted — a. Taking appropriate personnel action against such an employee, up to and including termination, consistent with the requirements of the Rehabilitation Act of 1973, as amended; or b. Requiring such employee to participate satisfactorily in a drug abuse assistance or rehabilitation program approved for such purposes by a Federal, State, or local health, law enforcement, or other appropriate agency; 7. Making a good faith effort to continue to maintain a drug -free workplace through implementation of paragraphs 1, 2, 3, 4, 5 and 6. CPMP Non -State Grantee Certifications 1 Version 1.3 Jurisdiction Anti - Lobbying -- To the best of the jurisdiction's knowledge and belief: 8. No Federal appropriated funds have been paid or will be paid, by or on behalf of it, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement; 9. If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan, or cooperative agreement, it will complete and submit Standard Form -LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions; and 10. It will require that the language of paragraph 1 and 2 of this anti - lobbying certification be included in the award documents for all subawards at all tiers (including subcontracts, subgrants, and contracts under grants, loans, and cooperative agreements) and that all subrecipients shall certify and disclose accordingly. Authority of Jurisdiction -- The consolidated plan is authorized under State and local law (as applicable) and the jurisdiction possesses the legal authority to carry out the programs for which it is seeking funding, in accordance with applicable HUD regulations. Consistency with plan -- The housing activities to be undertaken with CDBG, HOME, ESG, and HOPWA funds are consistent with the strategic plan. Section 3 -- It will comply with section 3 of the Housing and Urban Development Act of 1968, and implementing regulations at 24 CFR Part 135. Signature /Authorized Official Thomas M. Markus Name City Manager Title 410 E. Washington St. Address Iowa City, IA 52240 City /State /Zip 319.356.5010 Telephone Number 5/7/2014 Date CPMP Non -State Grantee Certifications 2 Version 1.3 Jurisdiction ❑ This certification does not apply. ® This certification is applicable. Specific CDBG Certifications The Entitlement Community certifies that: Citizen Participation -- It is in full compliance and following a detailed citizen participation plan that satisfies the requirements of 24 CFR 91.105. Community Development Plan -- Its consolidated housing and community development plan identifies community development and housing needs and specifies both short -term and long -term community development objectives that provide decent housing, expand economic opportunities primarily for persons of low and moderate income. (See CFR 24 570.2 and CFR 24 part 570) Following a Plan -- It is following a current consolidated plan (or Comprehensive Housing Affordability Strategy) that has been approved by HUD. Use of Funds -- It has complied with the following criteria: 11. Maximum Feasible Priority - With respect to activities expected to be assisted with CDBG funds, it certifies that it has developed its Action Plan so as to give maximum feasible priority to activities which benefit low and moderate income families or aid in the prevention or elimination of slums or blight. The Action Plan may also include activities which the grantee certifies are designed to meet other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community, and other financial resources are not available); 12. Overall Benefit - The aggregate use of CDBG funds including section 108 guaranteed loans during program year(s) 2 2 2_, (a period specified by the grantee consisting of one, two, or three specific consecutive program years), shall principally benefit persons of low and moderate income in a manner that ensures that at least 70 percent of the amount is expended for activities that benefit such persons during the designated period; 13. Special Assessments - It will not attempt to recover any capital costs of public improvements assisted with CDBG funds including Section 108 loan guaranteed funds by assessing any amount against properties owned and occupied by persons of low and moderate income, including any fee charged or assessment made as a condition of obtaining access to such public improvements. However, if CDBG funds are used to pay the proportion of a fee or assessment that relates to the capital costs of public improvements (assisted in part with CDBG funds) financed from other revenue sources, an assessment or charge may be made against the property with respect to the public improvements financed by a source other than CDBG funds. The jurisdiction will not attempt to recover any capital costs of public improvements assisted with CDBG funds, including Section 108, unless CDBG funds are used to pay the proportion of fee or assessment attributable to the capital costs of public improvements financed from other revenue sources. In this case, an assessment or charge may be made against the property with respect to the public improvements financed by a source other than CDBG funds. Also, in the case of properties owned and occupied by moderate - income (not low- income) families, an assessment or charge may be made against the property for public improvements financed by a source other than CDBG funds if the jurisdiction certifies that it lacks CDBG funds to cover the assessment. Excessive Force -- It has adopted and is enforcing: 14. A policy prohibiting the use of excessive force by law enforcement agencies within its jurisdiction against any individuals engaged in non - violent civil rights demonstrations; and 15. A policy of enforcing applicable State and local laws against physically barring entrance to or exit from a facility or location which is the subject of such non - violent civil rights demonstrations within its jurisdiction; CPMP Non -State Grantee Certifications 3 Version 1.3 Jurisdiction Compliance With Anti - discrimination laws -- The grant will be conducted and administered in conformity with title VI of the Civil Rights Act of 1964 (42 USC 2000d), the Fair Housing Act (42 USC 3601 - 3619), and implementing regulations. Lead -Based Paint -- Its activities concerning lead -based paint will comply with the requirements of part 35, subparts A, B, 1, K and R, of title 24; Compliance with Laws -- It will comply with applicable laws. Signature /Authorized Official Thomas M. Markus Name City Manager Title 410 E. Washington St. Address Iowa City, IA 52240 City /State /Zip 319.356.5010 Telephone Number 5/7/2014 Date CPMP Non -State Grantee Certifications 4 Version 1.3 Jurisdiction ® This certification does not apply. ❑ This certification is applicable. OPTIONAL CERTIFICATION CDBG Submit the following certification only when one or more of the activities in the action plan are designed to meet other community development needs having particular urgency as specified in 24 CFR 570.208(c): The grantee hereby certifies that the Annual Plan includes one or more specifically identified CDBG- assisted activities, which are designed to meet other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community and other financial resources are not available to meet such needs. Signature /Authorized Official Name Title Address City /State /Zip Telephone Number Date CPMP Non -State Grantee Certifications 5 Version 1.3 Jurisdiction ❑ This certification does not apply. ® This certification is applicable. mmm Specific HOME Certifications The HOME participating jurisdiction certifies that: Tenant Based Rental Assistance -- If the participating jurisdiction intends to provide tenant -based rental assistance: The use of HOME funds for tenant -based rental assistance is an essential element of the participating jurisdiction's consolidated plan for expanding the supply, affordability, and availability of decent, safe, sanitary, and affordable housing. Eligible Activities and Costs -- it is using and will use HOME funds for eligible activities and costs, as described in 24 CFR § 92.205 through 92.209 and that it is not using and will not use HOME funds for prohibited activities, as described in § 92.214. Appropriate Financial Assistance -- before committing any funds to a project, it will evaluate the project in accordance with the guidelines that it adopts for this purpose and will not invest any more HOME funds in combination with other Federal assistance than is necessary to provide affordable housing; Signature /Authorized Official Thomas M. Markus Name City Manager Title 410 E. Washington St. Address Iowa City, IA 52240 City /State /Zip 319.356.5010 Telephone Number 5/7/2014 Date CPMP Non -State Grantee Certifications 6 Version 1.3 Jurisdiction ® This certification does not apply. ❑ This certification is applicable. HOPWA Certifications The HOPWA grantee certifies that Activities -- Activities funded under the program will meet urgent needs that are not being met by available public and private sources. Building -- Any building or structure assisted under that program shall be operated for the purpose specified in the plan: 1. For at least 10 years in the case of assistance involving new construction, substantial rehabilitation, or acquisition of a facility, 2. For at least 3 years in the case of assistance involving non - substantial rehabilitation or repair of a building or structure. Signature /Authorized Official Name Title Address City /State /Zip Telephone Number Date CPMP Non -State Grantee Certifications 7 Version 1.3 Jurisdiction ® This certification does not apply. ❑ This certification is applicable. ESG Certifications I, , Chief Executive Officer of Error! Not a valid link., certify that the local government will ensure the provision of the matching supplemental funds required by the regulation at 24 CFR 576.51. I have attached to this certification a description of the sources and amounts of such supplemental funds. I further certify that the local government will comply with: 1. The requirements of 24 CFR 576.53 concerning the continued use of buildings for which Emergency Shelter Grants are used for rehabilitation or conversion of buildings for use as emergency shelters for the homeless; or when funds are used solely for operating costs or essential services. 2. The building standards requirement of 24 CFR 576.55. 3. The requirements of 24 CFR 576.56, concerning assurances on services and other assistance to the homeless. 4. The requirements of 24 CFR 576.57, other appropriate provisions of 24 CFR Part 576, and other applicable federal laws concerning nondiscrimination and equal opportunity. 5. The requirements of 24 CFR 576.59(b) concerning the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. 6. The requirement of 24 CFR 576.59 concerning minimizing the displacement of persons as a result of a project assisted with these funds. 7. The requirements of 24 CFR Part 24 concerning the Drug Free Workplace Act of 1988. 8. The requirements of 24 CFR 576.56(a) and 576.65(b) that grantees develop and implement procedures to ensure the confidentiality of records pertaining to any individual provided family violence prevention or treatment services under any project assisted with ESG funds and that the address or location of any family violence shelter project will not be made public, except with written authorization of the person or persons responsible for the operation of such shelter. 9. The requirement that recipients involve themselves, to the maximum extent practicable and where appropriate, homeless individuals and families in policymaking, renovating, maintaining, and operating facilities assisted under the ESG program, and in providing services for occupants of these facilities as provided by 24 CFR 76.56. 10. The requirements of 24 CFR 576.57(e) dealing with the provisions of, and regulations and procedures applicable with respect to the environmental review responsibilities under the National Environmental Policy Act of 1969 and related CPMP Non -State Grantee Certifications 8 Version 1.3 Jurisdiction authorities as specified in 24 CFR Part 58. 11. The requirements of 24 CFR 576.21(a)(4) providing that the funding of homeless prevention activities for families that have received eviction notices or notices of termination of utility services will meet the requirements that: (A) the inability of the family to make the required payments must be the result of a sudden reduction in income; (B) the assistance must be necessary to avoid eviction of the family or termination of the services to the family; (C) there must be a reasonable prospect that the family will be able to resume payments within a reasonable period of time; and (D) the assistance must not supplant funding for preexisting homeless prevention activities from any other source. 12. The new requirement of the McKinney -Vento Act (42 USC 11362) to develop and implement, to the maximum extent practicable and where appropriate, policies and protocols for the discharge of persons from publicly funded institutions or systems of care (such as health care facilities, foster care or other youth facilities, or correction programs and institutions) in order to prevent such discharge from immediately resulting in homelessness for such persons. I further understand that state and local governments are primarily responsible for the care of these individuals, and that ESG funds are not to be used to assist such persons in place of state and local resources. 13. HUD's standards for participation in a local Homeless Management Information System (HMIS) and the collection and reporting of client -level information. I further certify that the submission of a completed and approved Consolidated Plan with its certifications, which act as the application for an Emergency Shelter Grant, is authorized under state and /or local law, and that the local government possesses legal authority to carry out grant activities in accordance with the applicable laws and regulations of the U. S. Department of Housing and Urban Development. I Signature /Authorized Official Date Name Title Address City /State /Zip Telephone Number CPMP Non -State Grantee Certifications 9 Version 1.3 Jurisdiction ❑ This certification does not apply. ® This certification is applicable. APPENDIX TO CERTIFICATIONS Instructions Concerning Lobbying and Drug -Free Workplace Requirements Lobbying Certification This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making or entering into this transaction imposed by section 1352, title 31, U.S. Code. Any person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such failure. Drug -Free Workplace Certification 1. By signing and /or submitting this application or grant agreement, the grantee is providing the certification. 2. The certification is a material representation of fact upon which reliance is placed when the agency awards the grant. If it is later determined that the grantee knowingly rendered a false certification, or otherwise violates the requirements of the Drug -Free Workplace Act, HUD, in addition to any other remedies available to the Federal Government, may take action authorized under the Drug -Free Workplace Act. 3. Workplaces under grants, for grantees other than individuals, need not be identified on the certification. If known, they may be identified in the grant application. If the grantee does not identify the workplaces at the time of application, or upon award, if there is no application, the grantee must keep the identity of the workplace(s) on file in its office and make the information available for Federal inspection. Failure to identify all known workplaces constitutes a violation of the grantee's drug -free workplace requirements. 4. Workplace identifications must include the actual address of buildings (or parts of buildings) or other sites where work under the grant takes place. Categorical descriptions may be used (e.g., all vehicles of a mass transit authority or State highway department while in operation, State employees in each local unemployment office, performers in concert halls or radio stations). 5. If the workplace identified to the agency changes during the performance of the grant, the grantee shall inform the agency of the change(s), if it previously identified the workplaces in question (see paragraph three). 6. The grantee may insert in the space provided below the site(s) for the performance of work done in connection with the specific grant: Place of Performance (Street address, city, county, state, zip code) Check if there are workplaces on file that are not identified here. The certification with regard to the drug -free workplace is required by 24 CFR part 21. Place Name Street City County state Zip Definitions of terms in the Nonprocurement Suspension and Debarment common rule and Drug -Free Workplace common rule apply to this certification. Grantees' attention is called, in particular, to the following definitions from these rules: "Controlled substance" means a controlled substance in Schedules I through V of the Controlled Substances Act (21 U.S.C. 812) and as further defined by regulation (21 CFR 1308.11 through 1308.15); "Conviction" means a finding of guilt (including a plea of no /o contendere) or imposition of sentence, or both, by any judicial body charged with the responsibility to determine violations of the Federal or State criminal drug statutes; "Criminal drug statute" means a Federal or non - Federal criminal statute involving the manufacture, distribution, dispensing, use, or possession of any CPMP Non -State Grantee Certifications 10 Version 1.3 Jurisdiction controlled substance; "Employee" means the employee of a grantee directly engaged in the performance of work under a grant, including: a. All "direct charge" employees; b. all "indirect charge" employees unless their impact or involvement is insignificant to the performance of the grant; and c. temporary personnel and consultants who are directly engaged in the performance of work under the grant and who are on the grantee's payroll. This definition does not include workers not on the payroll of the grantee (e.g., volunteers, even if used to meet a matching requirement; consultants or independent contractors not on the grantee's payroll; or employees of subrecipients or subcontractors in covered workplaces). Note that by signing these certifications, certain documents must completed, in use, and on file for verification. These documents include: 1. Analysis of Impediments to Fair Housing 2. Citizen Participation Plan 3. Anti - displacement and Relocation Plan Signature /Authorized Official Thomas M. Markus Name City Manager Title 410 E. Washington St. Address Iowa City, IA 52240 City /State /Zip 319.356.5010 Telephone Number 5/7/2014 Date CPMP Non -State Grantee Certifications 11 Version 1.3 Appendix A Comments Received Regarding Annual Plan & Staff Responses M Marian Karr From: Kristopher Ackerson Sent: Tuesday, April 22, 2014 11:07 AM To: Marian Karr Subject: FW: Annual Bike / Bus / Car Race Marian, Thank you in advance for inviting a councilperson to participate in this annual event. Regards, Kris Kristopher Ackerson 319.356.5247 (w). 319.621.5882 (c). 0 From: Kristopher Ackerson Sent: Tuesday, March 25, 2014 11:31 AM To: Tom Markus; "Ryan Heiar'; "Kelly Hayworth'; "Louise From'; "Andy Johnson' (ajohnson @co.johnson.ia.us)'; 'Michon Jackson' Cc: John Yapp; 'Brian Loring'; Mary Bryant; 'Anne Duggan'; ' edickerson @ci.coralville.ia.us' Subject: Annual Bike / Bus / Car Race, May Hello all, A sure sign of spring is the annual Bike /Bus /Car Event for Bike to Work Week. This is a popular event that is typically covered by the local media and kicks -off events throughout the week. The Johnson County Bicycle Coalition website - www.ThinkBicycles.ora - has info about other events planned this year. Given how schedules can get booked, I'd like to begin confirming our participants this year. Please forward this invitation to your elected officials and let me know who would like to participate. We need three volunteers, each from different entities, who will drive, take the bus, or ride their bike from Coralville to Iowa City. The event will be on Monday, May 12th. We'll start at the Coralville Public Library (bus arrives at 11:33am but we can adjust the start -time to fit your schedules as needed) and end at the Iowa City Public Library. We would like participants to arrive at 11:15am. I look forward to hearing from you, Kris Kristopher Ackerson, AICP Assistant Transportation Planner 410 E. Washington St. Iowa City. IA 52240 319.356.5247 (w). 319.621.5882 (c). Marian Karr From: Tom Markus Sent: Thursday, April 24, 2014 8:42 AM To: 'Peter Bixler' Cc: *City Council & All Dept Heads; Stephen Murley (Murley .Stephen @iowacityschools.org); Steve Long; Karen Howard Subject: RE: Redistricting Concerns Dear Peter: I have shared your concerns with School superintendent Murley and have asked city staff to be present tonight to participate in the re- districting plan discussion with the community and school board. I encourage you to participate in these discussions and to express your point of view as well. The city is interested in making our close in neighborhoods walkable and that includes our their walkable access to our schools. Tom From: Peter Bixler [mailto:bixlpe @yahoo.com) Sent: Wednesday, April 23, 2014 10:23 PM To: Tom Markus Subject: Redistricting Concerns Dear City Manager Markus, My wife and I recently became aware of the school re- districting plan and neither of us can make sense of it. We live on Governor Street, two blocks from Longfellow school. Our neighborhood is perhaps a bit unique because when we moved here, most of the houses around us were college rentals and only recently, partly due to the UniverCity program, have families with children been making a comeback to this area. This has been a very good and very stabilizing influence (one of the goals of the program I believe). One of the attractions of living in this neighborhood is the close proximity to Longfellow which enables to the kids here to easily and safely walk to school. This is also one of the trade -offs of taking the risk of raising a family in a neighborhood with a high percentage of college students. As I understand it, under the proposed plan, the kids on Governor St. and part of Summit Street will now be going to Twain school. This makes no sense. Not only will the kids in my neighborhood not be able to walk 1 to 2 block to their neighborhood school, they cannot be bused because they are within 2 miles of Twain. This means that either parents will be forced to drive their kids to and from school every day, which is a waste of time and bad for the environment, or kids will have to make a longer and more dangerous journey to walk or bike to school. Walking or biking to Twain means crossing Kirkwood Ave. which is very busy and difficult to cross (is the district willing to hire crossing guards to make it safer ?). We understand the goal of diversifying the schools and we support that but there should be careful consideration about how the changes will affect the number of kids that can safely walk to school. It is very common for families to move to specific locations to have the benefit of walkability and that is certainly the case in our neighborhood. We are very much afraid that families with kids will begin to move away if the re- districting plan is passed, their houses will again be re- claimed by landlords and we will lose the neighborhood diversity we've worked hard to achieve. The question I would like to ask is, why are walkable neighborhoods being undermined before areas that already bus their children? Could diversity not be achieved by changing the schools to which some children are bused? Thank your for giving these concerns and questions your consideration. Sincerely, Peter Bixler & Dana Noble I � 1 Vii► �,4 ► , �t CITY OF IOWA CITY MEMORANDUM Date: April 24, 2014 To: Tom Markus, City Manager From: Steve Long, Neighborhood Services Coordinator Re: Iowa City Community School District Attendance Area Development Proposal As you are aware, the Iowa City Community School District ( ICCSD) is conducting a community engagement process to gain input related to school attendance areas. The District is approaching the attendance areas evaluation from a cluster standpoint rather than viewing the attendance area district wide. Two community workshops regarding Cluster Two (which includes Hills, Lemme, Longfellow, Twain, Weber, Wood and the new South Elementary school) have occurred in the past month with a final workshop this evening, Thursday, April 24. Of primary interest to the ICCSD is to balance the economic diversity of the student population within each elementary school. There has been significant public concern expressed with the most recent proposal impacting the attendance area of Longfellow School. This proposal includes the re- distribution of students living on a portion of the west side of Summit, Lucas and Governor from Longfellow Elementary to Mark Twain Elementary. (See attached map.) City Staff have expressed concerns to the ICCSD Administration regarding this proposal specifically related to the impact and lack of consideration of both the Iowa City 2014 -2015 Strategic Plan and subsequent Council Priorities related to Healthy Neighborhoods and a Strong Urban Core and the UniverCity Neighborhood Partnership. Iowa City Strategic Plan One of the five Strategic Planning focus' developed by the City Council for 2014 -15 was "Fostering a more INCLUSIVE and SUSTAINABLE Iowa City through a commitment to Healthy Neighborhoods ". A goal developed to address this focus states, "The City aims to invest in and deliver core services to neighborhoods in a manner that enhances overall stability and maintains the intended character while facilitating new opportunities to improve the quality of life." Specific emphasis was given to: Evaluate programs and methods to promote affordable housing including city specific and regional actions. Partner with the ICCSD regarding planned improvements to older schools and the development of new elementary schools that collectively contribute to strong neighborhoods designed for long -term sustainability. One of the challenges to ensuring affordable housing along with stable and sustainable neighborhoods in areas in close proximity to downtown is the strong market for college student rentals. The City Council has committed to working with the school district to ensure that our policies align to ensure the long term viability of the City's older neighborhoods as attractive places for families that will in turn ensure stable enrollment in area elementary schools for which the school district is investing money in upgrading facilities. IP8 April 24, 2014 Page 2 UniverCity Neighborhood Partnership One of the important policy initiatives in response to affordability issues and the imbalance between student renters and long term residents is the UniverCity Neighborhood Partnership Program. The City, the University, and local lenders have all partnered together to ensure that our close -in neighborhoods remain healthy places for families to raise their children in locations that are within walking distance of schools, employment, and commercial services. The UniverCity Neighborhood Partnership is a cooperative effort to preserve the unique character of residential neighborhoods adjacent to the UI campus by ensuring these areas remain vital, safe and attractive places to live and work. Over the past four years, approximately $11.6 million has been invested by the City, the University of Iowa and local lenders to purchase, rehab and sell homes throughout neighborhoods near downtown and the University of Iowa. To date, 47 homes have been acquired, 35 have been rehabilitated and sold and the remaining homes will be rehabilitated and sold over the summer. The program will acquire seven additional homes by August 1 to bring the total to 54 homes in the program and a total investment of over $12.7 million. Within the area impacted by the ICCSD redistricting proposal which includes the area along S. Governor Street and S. Lucas Street between Burlington Street and the Iowa Interstate RR tracks of the Longfellow neighborhood, there have been 15 UniverCity Neighborhood Partnership homes purchased, rehabbed and sold to low /moderate income families many of whom purchased these properties planning to have their children attend Longfellow Elementary school which is located 2 -4 blocks away. The program has been very successful in attracting families back into areas near Longfellow that previously were largely dominated by student rentals. One of the significant benefits of living in this area and a selling point for many families is that there is an elementary school within walking distance. The total investment made in the 15 homes in the Governor, Lucas area has been over $3.4 million. City staff will be attending the school district forum tonight to participate in the school district redistricting discussion. M S MOKC 4/24/14 Following map was missing from original distribution and provided to Council on May 7, 2014. I JO 0 iii ca 0 co 04 to A I t IN 'tq f7l 48 Is 9 r E E E E E E 2 L . 2 E 2 0 �zo t Ah. 2 z I m =I 0 1 I-If I t IN 'tq f7l 48 Is 9 r E E E E E E 2 L . 2 E 2 0 �zo t Ah. 2 z I m =I 0 1 CITY OF IOWA CITY www.icgov.org CITY COUNCIL Matthew J. Hayek Mayor Susan Mims Mayor Pro Tem Kingsley Botchway II Terry Dickens Rick Dobyns Michelle Payne Jim Throgmorton council @iowa - city.org 410 E. Washington Street Iowa City, IA 52240 Phone: (319) 356 -5041 Fax: (319) 356 -5497 April 23, 2014 Terrance Neuzil, Chairperson Johnson County Board of Supervisors 913 South Dubuque Street, Suite 201 Iowa City, Iowa 52240 -4207 Dear Chairperson Neuzil and members of the Board of Supervisors, I am writing to follow up on the proposal for a joint meeting between the City and the County. The City Council would be pleased to meet with the Board of Supervisors and we suggest that our staffs coordinate a date in early 2015. The logistics — length, agenda setting, etc. — outlined in your recent letter make sense and our staffs can coordinate those details. Please have Executive Assistant Andy Johnson contact City Clerk Marian Karr to start the process. We look forward to our discussion. Sincerely, Matthew J. Hayek Mayor IiF�f1 New data shows city growth outpaces suburbs I Better! Cities & Towns Online FROM THE CITY MANAGER for�*w"Wam f CITIES&TOWNS °"`M New data shows city growth outpaces suburbs Bloe post by Kaid Benfield on 17 Apr 2014 research market trends Kaid Benfield, Better! Cities & Towns New data confirm that central cities continue to grow faster than their suburbs. This still relatively new trend reverses a century of just the opposite, when city dwellers fled to suburbs and sprawl ate up the countryside. Not that suburbs aren't also growing, mind you, but we — and, significantly, the environment — can take some comfort in the knowledge that cities are back. In an article ( "See Ira. suburbs ") published last month in USA Today, Greg Toppo and Paul Overberg summarize data from a new census report: "Population growth has been shifting to the core counties of the USA's 381 metro areas, especially since the economic recovery began gaining steam in 201o. Basically, the USA's urban core is getting denser, while far -flung suburbs watch their growth dwindle. "Driven by young professionals and retiring Baby Boomers who like living in cities, the trend is 18o degrees'from the last decade's rush to the exurbs, says William Frey, a demographer at Washington's Brookings Institution, a research and policy group." Even as late as last decade, growth in outlying counties outpaced growth in core counties, when national data were aggregated. (In some metro areas, the shift had already begun.) But, most recently, "core counties in the US grew approximately 2.7% and outlying counties grew approximately 1.9% from 2o10- 2013. Most of the growth came from net migration, as opposed to higher birth rates," writes Brandon Donnelly on the blog of the Sustainable Cities Collective. I first summarized the new data on central -city growth in a 2012 article, and earlier this year analyzed a range of data that lead me to believe the new trend will be lasting. This is great news for the environment: few things have been as damaging on so many fronts as the rampant suburban sprawl of the late 20th century. Concentrating more growth in existing communities, by contrast, significantly reduces overall driving rates, because central locations shorten travel distances and concurrent emissions of carbon and toxic air pollutants. Urban densities also facilitate public transit use, walking and bicycling. Moreover, development in central areas recycles land, buildings and infrastructure while reducing growth pressure on outer watersheds and farm and forest land. http: //bettercities. net / news - opinion lblogslkaid- benfleldl2l038 /new -data- shows - city - growt... 4/23/2014 New data shows city growth outpaces suburbs I Better! Cities & Towns Online If you care about the environment, you're rooting for cities (or should be), although we need to make them more beautiful and lovable as great people habitat. The even better news is that it's not just people moving back into urban cores. It's investment, too. In q March ,.�i article on The Atlantic Cities Richard Florida breaks down the data from eleven large metro areas (and two combined metropolitan statistical areas), and finds that, in most, an equivalent amount or even a majority of venture capital investment is now going to zip codes in central cities and walkable suburbs, not sprawling outer areas. (Philadelphia, Dallas and San Jose were the only significant outliers.) In seven of the eleven metro areas, center -city start-ups alone took in more than half of all venture capital investment. Remarkably, the city of San Francisco now attracts more start-up capital than does Silicon Valley. Florida believes that the advantages of urban areas are fueling the new trend: "Firms want access to talent, and talented people like to cluster in dense urban areas with thick labor markets, abundant amenities and services, and a vibrant social life. Density is also much more efficient for young companies who want to rent cheap office space and offer employees access to the amenities like gyms, restaurants, and coffee shops that they'd have to provide for themselves on a suburban campus. And these companies can now thrive in smaller urban spaces, as much of tech is increasingly focused on software, apps, and social media, which do not require large campuses." As Florida concedes, though, this does not mean that all is well in central cities. New demand means higher prices, bringing risks of rising unaffordability and displacement of longstanding, lower- income families who toughed out the hard years. While I tend to think that's a better problem to have than disinvestment and overall decline in city services — the misfortune of many inner cities in the not -too- distant past — these problems are real and need to be addressed. Cities must not only be environmentally and economically sustainable; they also must be just and equitable. Top 10 reasons for a new American Dream I Better! Cities & Towns Online FROM THE CITY MANAGER knmtyNewLkbmAhrorat CITIES &TOWNS ONLINE Top io reasons for a new American Dream )3 pl g post by Robert Steuteville on 21 Apr 2014 feature bicycling building wmmunity market trends vehicle miles traveled Robert Steuteville, Better! Cities & Towns Page 1 For three generations, the American Dream was largely defined by continual suburban expansion. The dream was based on exclusivity and "keeping up with the Joneses." Driving was so essential that all other means of getting around became practically impossible. Privacy was everything. A new America Dream has emerged in recent years. It is based on social and cultural diversity and the idea of community. This dream is more about great streets than highways. You can drive if you want, but you can also walk, ride a bike, take transit, or join carshare. In this dream, the things you are connected to are more important than who you are separated from. The old American Dream has not gone away, but it has been eclipsed. Here are to reasons why the new dream is here to stay, in a countdown list: io) Driving has been declining for io years. "Our national flower is the concrete cloverleaf," wrote Lewis Mumford in 1961. Driving per person continued to rise steadily for 43 years after that, and then it stopped. Automobile miles per capita have declined every year since 2004. Also, those concrete cloverleafs have become expensive maintenance problems. One could say the national flower has begun to Wilt. 3.2 3.0 _ 2.8 2.8 2.4 2.2 2.0 1.8 1.8 1985 11,000 10,500 10,000 9,500 > m 9,000 8,500 a 8,000 7,500 7,000 1990 1995 2000 2005 2010 2015 http: //bettercities.net /news- opinion /blogs /robert- steuteville /21041 /top - 1 0- reasons - new- ame... 4/23/2014 Top 10 reasons for a new American Dream I Better! Cities & Towns Online Page 2 9) Millennials want urban place. Today's young adults — the Millennials — were the first generation to be born and raised mostly in communities where the indoor mall was the main street and the parking lot was the town square. As adults, this generation rejected the isolation and generic character of drive - only suburbs. Millennials aren't the only people today embracing compact, mixed -use neighborhoods — but a dramatic shift in youth preference points to a long -term trend. E 8) Walkable places help you climb the ladder of success. The story of ambitious young people going to the city to make something of their lives appears again and again in our literature, movies, and theater. This story is not just a literary device, according to a 201'q study. Social mobility is higher in compact urban places, Arizona State University researchers found. The more walkable the census block — as measured by Walk Score — the more likely someone from the bottom fifth of income will reach the top fifth in their lives. It is no wonder then that New York City — America's most walkable city — is a magnet for immigrants and other folks pursuing the American Dream. 7) Productivity and innovation thrive as density rises. Studies in recent years have shown that in compact places with good transit, economic activity rises due to more face-to -face contact with knowledgeable people CLink, Link). 6) You are more likely to be famous if you are born in an urban place. Tiger moms take note! If you want your children to be successful enough to be profiled in Wikipedia, the odds rise substantially if you raise them in a big city — or small city anchored by a university. The New York Times came to that conclusion in a geographical analysis of Wikipedia biographies. Ironically, for several generations, parents have moved to distant suburbs to give children a better chance of success. Notes the Times, "growing up near ideas is better than growing up near backyards." 5) You are less likely to die in a pool of blood if you are raised in an urban place. Parents have long moved to quiet suburbs for safety. Some are questioning whether this quest for safety has gone too far. The entire culture of childhood has changed, according to a recent article in The Atlantic. Children no longer have their own places to roam and explore. Moreover, a 2013 University of Pennsylvania /Children's Hospital of Philadelphia (CHOP) studv challenges the entire notion that suburbs are safer. The study examines, for the first time comprehensively, all kinds of accidental and violent deaths in America. Contrary to conventional wisdom, urban streets are significantly safer than leafy suburbs and rural areas. While counterintuitive at first glance, the finding is not hard to fathom if you http: //bettercities. net / news- opinion/blogs /robert- steuteville /21041 /top - 1 0- reasons - new- ame... 4/23/2014 Top 10 reasons for a new American Dream I Better! Cities & Towns Online Page 3 think about it. The number one US cause of death from ages 5 to 34 is automobile crashes, according to the Centers for Disease Control. Deadly automobile crashes are far less likely on lower -speed urban streets. 4) Bicycles: The new status symbol. A generation ago, bicycles were considered to be a child's toy. Now they are a status symbol for communities. As Jeff Speck writes in Walkable Citu, "A bold green stripe down the side of a street — or many streets — tells residents and potential residents that a city supports alternative transportation, healthy lifestyles and cycling culture, and that it welcomes the sort of people who get around on bikes. For the most part, those people are the millennials and creatives who will help a city thrive." 3) McMansions are losing their luster. In the 199os, a McMansion was the ultimate symbol that the homeowner had "made it." Inside, the house was luxurious. But the chief selling point was the message it sent from the curb: The owners, and all of their neighbors, have enough money that they can afford to be wasteful on lawn and landscaping, excessive architectural details, pointless variety in rooflines and materials, and general bloat. Today, we have endured a Great Recession and climate change is an ongoing concern. The McMansion's underlying message of wasteful spending, poor taste, and big carbon footprint projects a less flattering image on homeowners. As Billy Joel once said, "Is that all you get for your money ?" http: /ibettercities.net/news- opinion /blogs /robert- steuteville /21041 /top -l0- reasons - new- ame... 4/23/2014 Top 10 reasons for a new American Dream I Better! Cities & Towns Online Page 4 Photo by Lee Sobel 2) Downtown and in -town neighborhoods are home to the "creative class." Coming up with this term has made the career of author, academic, and researcher Richard Florida. Whether urban or suburban, big city or small, communities want the educated people that provide the economic spark — known as the "creative class." Seeking the creative class, businesses have begun moving back into town from suburban campuses. And the number one reason why we have a new American Dream: Would you rather have this? http: //bettercities. net / news - opinion /blogs /robert - steuteville /21041 /top - 1 0- reasons- new- ame... 4/23/2014 Top 10 reasons for a new American Dream I Better! Cities & Towns Online Page 5 Van Buren Street, Phoenix, today. Image courtesy of Duany Plater- 7yberk. Or this? Van Buren transformed, by Steve Price of Urban Advantage, for Reinvent Phoenix. Concepts for the street retrofit were via Duany Plater- Zuberk and Crabtree Group. The first image, a commercial strip arterial, has one big advantage: It is legal. The second image is not technically difficult to achieve. Most zoning codes and the automobile- oriented practices of departments of transportation stand in the way. This new American Dream has the market on its side, but will require coalitions in local communities to muster the political will for reform. I could come up with io or 20 more reasons for the new American Dream. Could you? http: //bettercities. net / news - opinion/blogs /robert- steuteville /21041 /top - 1 0- reasons- new- ame... 4/23/2014 IP12 Kellie Tuttle From: City of Iowa City <webmaster @iowa - city.org> Sent: Monday, April 21, 2014 9:00 AM To: Kellie Tuttle Subject: Citizens Police Review Board Community Forum Contact: Kellie Tuttle Contact Phone: (319) 356 -5043 Citizens Police Review Board Community Forum Issued by: City Clerk Mailing List(s): General City News Originally Posted 4/2112014 8:59:25 AM The Citizens Police Review Board will be holding its Annual Community Forum for the purpose of hearing Citizens' views on the policies, practices and procedures of the Iowa City Police Department. WHEN: Tuesday, May 13, 2014 TIME: 6:00 PM WHERE: Iowa City Public Library, Rm A 123 South Linn Street, IC Questions & Comments: Send your questions or comments you'd like addressed at the forum to the following by Monday, April 28th: Please include full name and address. (All correspondence is public) CPRB City of Iowa City 410 E Washington St Iowa City, IA 52240 Or e -mail to CPRB staff: kel li a -tuttle Ca) i owa -city. org The Board will attempt to address all correspondence received. The forum will be taped and rebroadcast on the Interactive City Channel 4. The agenda is available at: hftp://www.icqov.org/defauIt/apps/boards/boardList.as p View this article on the ICGov Web Site: http: / /www.icoov.org /apps /news / ?newslD =9566 This media release was sent to: kellie4uttle(a)iowa- citv.org Do not reply directly to this a -mail) It is produced from an automated system, and is not monitored for replies. If you have a question or comment about this information, please contact the individual(s) listed in the release. • Unsubscribe or edit your subscription details. • Visit our lobs page for employment opportunities. • View more news from the City of Iowa City. IP13 Marian Karr From: City of Iowa City <webmaster @iowa - city.org> Sent: Thursday, April 17, 2014 4:12 PM To: Marian Karr Subject: Charter Review Commission beginning deliberations, seeks public input Contact: Marian Karr Contact Phone: (319) 356 -5041 Charter Review Commission beginning deliberations, seeks public input Issued by: City Clerk Mailing List(s): General City News Originally Posted 4/17/2014 4:12:08 PM Iowa law allows cities to choose from among eight possible forms of municipal government, one of which is a Home Rule Charter. The Charter itself is an ordinance that sets forth how the city government is structured. On Nov. 15, 1973, the citizens of Iowa City chose to be governed by a Home Rule Charter and the first Charter was adopted on Jan. 2, 1976. The Iowa City Charter provides that the City Council establish a Charter Review Commission at least once every ten years for the purpose of reviewing the Charter and reporting to the City Council. A new Commission was recently established and must report to the City Council no later than April 1, 2015. Members of the Commission are: Andy Chappell (Chair), Steve Atkins, Karrie Craig, Karen Kubby, Mark Schantz, Melvin Shaw, Anna Moyers Stone, Adam Sullivan and Dee Vanderhoef. The Commission is beginning its deliberations on the review and possible amendments of the Iowa City Charter and is requesting public input. Electronic comments may be submitted to: citvcha rte rid. iowa -city. oro. Written comments can be addressed to: Marian K. Karr, City Clerk 410 East Washington Street Iowa City, IA 52240 Marian- karraiowa -city. org All written and electronic correspondence is a public record, will be distributed to the Charter Review Commission at their next meeting and permanently archived as a public record. All Charter Review Commission meetings are open to the public, and posted on the City website http: / /www.icgov.org /apps /boards /. Individuals may subscribe to receive all meeting information by using E- subscriptions on the City website at the http: / /www. iowa- city.org /icgov /apps /subscribe /. Information about the Charter and the Commission is available at www.icgov.org /citycharter. View this article on the ICGov Web Site: http: / /www.icgov.org /apps /news / ?newslD =9558 This media release was sent to: marian- karrd)iowa- citv.org Do not reply directly to this e-mail! It is produced from an automated system, and is not monitored for replies. If you have a question or comment about this information, please contact the individual(s) listed in the release. • Unsubscribe or edit your subscription details. • Visit our jobs page for employment opportunities. • View more news from the City of Iowa Citv. Charter Review Commission IP14 April 22, 2014 Page 1 MINUTES DRAFT CHARTER REVIEW COMMISSION APRIL 22, 2014 — 7:30 A.M. HARVAT HALL, CITY HALL Members Present: Steve Atkins, Andy Chappell, Karrie Craig, Karen Kubby, Mark Schantz, Melvin Shaw, Anna Moyers Stone, Adam Sullivan, Dee Vanderhoef Staff Present: Eleanor Dilkes, Marian Karr RECOMMENDATIONS TO COUNCIL: (to become effective only after separate Council action): None CALL TO ORDER AND ROLL CALL: Chairperson Chappell called the meeting to order at 7:30 A.M. Roll call was then taken. CONSIDER MOTION ADOPTING CONSENT CALENDAR AS PRESENTED OR AMENDED: Chappell asked how Members would like to handle the approval of the Consent Calendar. The options are to vote on the minutes and correspondence items separately, or to adopt the consent calendar as presented. Majority agreed to adopt as one unit and allow discussion as necessary of individual items. Atkins asked what the rules are going to be with regard to correspondence. Chappell stated that it would be best to send correspondence to the group's email address — citycharter(o-)-iowa- city.org. He added that if Members do receive individual correspondence, they should forward this on to the other Members, or ideally send to Karr for inclusion and acceptance on the next Consent Calendar. Kubby asked if the attendance record will be part of the minutes, and Karr noted that it is. Kubby stated that she was shown as `excused' at the April 8 meeting and that it should actually be 'unexcused.' Karr stated that she would correct this. Kubby stated that she also has questions about items in the minutes. She noted on page 3, in the middle, where it talks about the limit for contributions to political campaigns locally. She questioned the $50 shown here, asking if it shouldn't be $100. Dilkes replied that it had been lowered to $50, but that they did raise it up to $100 again. Karr will make the correction. Kubby also noted the comment about what can be talked about at meetings and if someone comes to public discussion, whether the Commission could engage in conversation with them. She stated that this seems discourteous to her, that if the person comes to the meetings and has questions, they should answer them or have a discussion at least. Atkins suggested they add wording to the agenda, such as, "If time allows, further items will be discussed." Members continued to discuss this issue, noting that they want the public to feel they can come to any meeting and ask questions or share their concerns. Sullivan moved to adopt the Consent Calendar as amended per discussion; seconded by Atkins. Motion carried 9 -0. Charter Review Commission April 22, 2014 Page 2 REVIEW CHARTER: ➢ Preamble Chairperson Chappell asked if a Member would volunteer to read the Charter's Preamble aloud before they begin their review. Shaw offered to do this. Chappell asked if anyone had any questions regarding the Preamble, as they began their discussion. Sullivan asked if this section is basically intact from the original Charter. Karr noted that by looking at the ordinance number, you can tell that this section was passed in 1976, and therefore has not been amended since the original Charter. Kubby began the discussion by looking at the word `citizens,' noting that there are some residents of the city who are not citizens. She added that the word citizen is in the Preamble at least four times, which she believes feels a bit exclusive. Atkins asked Kubby what she meant by this, and Kubby stated that people who live here may be residents but not citizens of the United States, for example. The Charter covers all people, and she wants that to be clear in the wording. She did question the changing of this word, but noted that it is something they should think about. Schantz noted that residents is used in #5. Craig added that she wondered if it shouldn't say "persons" or something along those lines in order to include everybody. Chappell stated that it appears they have two options here — they can either change "citizens" to something else, or they can add a definition of the word "citizen" in the definition section. Kubby stated that she believes the Preamble should be clear right away, not lead people to look up definitions. Shaw added that under the definitions section, under #10, it defines a person but not a citizen. He asked if both need defining. Dilkes noted that there has been some discussion in other commissions about the use of the term 'citizens'. She added that if you look up the word citizen it says 'a resident of...' Chappell asked if using 'resident' would be a problem then, and Dilkes stated that she does not believe it would be. Atkins stated that he reads the Preamble as sort of a grand statement, noting that it states, "That the government of Iowa City belongs to all its citizens and all share the responsibility to it." He doesn't believe that the wording 'to it' at the end of that statement is very fitting here. He reworded it to say, "...and all share in that responsibility." Atkins then questioned #5, "That the City should perform all acts," questioning if this shouldn't say, "...shall perform..." in keeping with the style of the Preamble. He added that these small changes would help to polish and make stronger the statement of the Preamble. Chappell questioned this, noting that 'shall' imposes a duty. Members briefly discussed this issue. Karr noted for Members that as they go through this process, staff will begin to make note of these proposed changes so that the Commission can go back to review and finalize any of these suggested changes. Atkins noted that #3 also has 'should,' and he questioned the use of 'shall' here, as well. Shaw questioned this, noting that if these things are not carried out, as is inferred with the use of 'shall', then who is responsible for failing to do so. Kubby stated that she is more inclined to change 'should' to 'shall' in #3, than she is on #5. Stone stated that she sees these as five principles, like goals, not rules. She believes a wording change, such as 'should' to 'shall,' would mean changing the basic feel of the Preamble, which is setting forth the principles adopted by the citizens of Iowa City. Members continued to discuss the Preamble and possible wording changes, with Vanderhoef noting that she reads a change in #3 as meaning that the public officials are to be perfect and that the expectation from citizens would be this perfection. Dilkes added to the conversation at this point, noting that she believes there is a conflict between use of the word 'shall' and what the Preamble is intended to be. Sullivan added that he believes they should stay away from using words that they then have to specifically define as this tends to give them more weight, something that the Preamble is not intending to do. Chappell noted that one word Charter Review Commission April 22, 2014 Page 3 that is specifically defined, and used in the Preamble, is 'measure.' He added that he believes it is broadly enough defined, but he asked if anyone had any concerns with this. Members briefly discussed this. Karr then noted that the way this document is laid out is the Preamble is first, followed by Definitions. This typically means that you use those definitions as you read forward into the document. Craig asked for clarification on #3. She asked what an 'affirmative obligation' is versus an 'obligation.' Schantz noted that basically you're expected to get out in front rather than react to a request from a citizen. Chappell agreed, stating that he sees it as an 'obligation' can be related to doing or not doing thing, and 'affirmative obligation' means you are directed to make an effort to further that obligation. Schantz then commented on #2, where it talks about the government being a 'service institution.' He stated that he's not really sure what that term means. Sullivan, at this point, stated that in his view, Preambles are typically full of statements like this, that could be picked apart. He stated that they need to decide what they want the Preamble to actually do — something that is full of things to be aspired to or specific things that the citizens want the government to do. Chappell asked the staff what their opinion is of the term `service institution.' Dilkes responded that they talk about customer service a lot at the City, and to her this is just redundant to responsive and accountable to its citizens. Members continued to discuss the use of the word `service' and what they see this to mean here. Shaw stated that if they are broadly saying the Preamble is aspirational in nature, then they should move on to the other parts. However, if they believe it has more meaning in how they review each of the different articles, then it is time well spent to review it this closely now. Chappell stated that this is a good point. He suggested they keep these initial principles in mind as they review the rest of the Charter. Atkins stated that he would like to see some more discussion on some of the issues they've brought up so far, such as the 'citizen' and `resident' definitions. Chappell shared how this process took place ten years ago at the previous Charter Review Commission meetings, and what he is familiar with. He suggested that they make tentative changes along the way, and then at the end of the process they come back and consider all of the changes together. This will allow the Commission to see how the various changes may or may not affect one another. Schantz asked if there is a current model Charter that they can use as a guide. He noted that there was mention of one in the minutes, but that he hadn't seen it. Dilkes stated that staff can look into this, but that she is not aware of one. ➢ Definitions Chappell asked Craig to read the section. Chappell asked Dilkes which definitions, if any, would make her uncomfortable for them to discuss, as they closely match the current State law. Dilkes responded that it would really depend on what change the Commission were proposing. She added that if they do discuss any changes that she is uncomfortable with, she will definitely let them know. Members briefly discussed this issue. Sullivan stated that he will be interested in discussing `eligible' and `qualified elector' and hearing some input on this, as well. Vanderhoef brought up the use of `councilors' versus 'council members'. Schantz spoke to the definition of 'person' now, in reference to the Constitution issues. He suggested they flag this to perhaps discuss further. Atkins then asked about the use of 'eligible elector' standards to the issue and /or another issue where you would use 'qualified.' Sullivan stated that he does not see much distinction between the two, that everyone is a voter as they are eligible to vote and can show up at the polls to vote. Chappell stated that both terms are used in the Charter, such as where it states, "...only qualified electors can sign initiative and referendum petitions." Sullivan Charter Review Commission April 22, 2014 Page 4 continued to discuss this distinction, noting that he believes there is no real distinction. Chappell also spoke to this issue, noting that there is a distinction, because people need to actually register to vote to be considered 'qualified.' Stone then made the suggestion that 'measure' be alphabetized within the rest of the definitions, instead of being out of order. Karr noted that the definitions are not in alpha order, but rather in the order of where they fall in the Charter. ➢ Article I — Powers of the City Sullivan volunteered to read Article I. Atkins asked if 'invalidity' is a word. Sullivan asked Dilkes if these are things that should not be changed, that they are straightforward things that should be in the Charter. Dilkes agreed that these are in reference to State law about charters. Chappell asked if everyone agrees to then tentatively approve this section. Schantz agreed that they would need all of this included, but he questioned a few word changes. He stated that if he still thinks this after reviewing the Iowa Code, he will bring up the issue again. ➢ Commission discussion of other sections (if time allows) None 211:1 R N l 1 f ,4 i � 1 *111 101 J None TENTATIVE THREE MONTH MEETING SCHEDULE (2nd and 4th Tuesdav of month): May 13 — Chappell noted the next meeting date and stated that they would be reviewing the Preamble and Definitions again, if Members so decide. They will then move on to reviewing Article II and adding the general wording of other sections as time allows. Discussion turned to the meeting schedule, with Karr noting that she picked a three - month cycle, rather than a full year, for inclusion on the agenda tentative schedule and distribution of calendars. Chappell reviewed the dates quickly, and Atkins noted that he will be absent the 5/27 meeting. It was also noted that this is shown incorrectly as May 20 on the agenda. Chappell asked the group's preference for how to handle meetings when one Member is going to be absent. Members agreed to keep the schedule in tact with only one absent and the May 27 meeting date was confirmed. Kubby asked if they are going to have a discussion about public input. Chappell stated that they will definitely add this back in to an upcoming agenda. Karr asked what Kubby means by this — public input at meetings or a general session. Kubby stated that she would like to discuss the 'public process' in general. Others agreed that this should be on an upcoming agenda. Shaw stated that he noted in past minutes that they had public input early on, with a lot of advertising and a push for public comment. Chappell suggested they put this topic on an upcoming agenda as well. It was also suggested they add a section on the agenda for "Committee Member Reports," where Members could share information that they have received from the public. Karr will make those additions. ADJOURNMENT: Atkins moved to adjourn the meeting at 8:45 A.M., seconded by Vanderhoef. Motion carried 9 -0. Charter Review Commission April 22, 2014 Page 5 Charter Review Commission ATTENDANCE RECORD 2014 Key. X = Present O = Absent O/E = Absent/Excused NM = No meeting - -- = Not a Member at this time TERM o 0 NAME EXP. 00 N 4/1115 X X Steve Atkins Andy 4/1/15 X X Chappell Karrie 411/15 X X Craig Karen 4/1/15 O X Kubby Mark 4/1/15 X X Schantz Melvin 4/1/15 X X Shaw Anna 411/15 X X Moyer Stone Adam 411115 X X Sullivan Dee 411/15 X X Vanderhoef Key. X = Present O = Absent O/E = Absent/Excused NM = No meeting - -- = Not a Member at this time IP15 Minutes Preliminary Human Rights Commission March 18, 2014 — 6 P.M. Helling Conference Room Members Present: Harry Olmstead, Orville Townsend Sr., Joe Coulter, Kim Hanrahan, Shams Ghoneim. Member Excused: Paul Retish, Andrea Cohen, Jewell Amos, Ali Ahmed. Staff Present: Stefanie Bowers. Others Present: Rockne Cole, Stella Burch Elias, Diane Finnerty, Charlie Eastham, Bram Elias, Eren Fleck. Recommendations to Council: Yes 1) The City of Iowa City support the adoption and implementation of the Municipal Identification Card (referred to as the Community Identification Card) by Johnson County; 2) Upon adoption of the Community Identification Card the City of Iowa City formally recognizes the validity of the card. Call to Order: Olmstead called the meeting to order at 18:00. Consideration of the Minutes from the February 18, 2014 Meetine: Motion: Moved by Hanrahan, seconded by Coulter. Motion passed 5 -0. Meeting Business: Funding Request Juneteenth 2014 Juneteenth celebrates the end of slavery. This is the third annual event being held in Johnson County. The celebration will be held on 06/14/14 at Mercer Park. Motion: Moved by Coulter to be a Silver Sponsor of Juneteenth 2014 in the amount of $350.00, seconded by Townsend. Motion passed 5 -0. Funding Request Night of 1000 Dinners This event which celebrates International Women's Month was held 03/06/14. Any contribution the Commission makes for this event would help defray the cost of the event and any remaining funding will go to the UN Trust Fund To End Violence Against Women and Girls. Commissioners discussed concerns with setting a precedent for retroactive sponsorships of community events. This funding request was sent by UNA -IOWA after the February Commission meeting date. Motion: Moved by Coulter to contribute $100, seconded by Ghoneim. Motion defeated 2 -3 (Nays- Townsend, Hanrahan, Olmstead). Pride 2014 Several members volunteered to participate in this annual event celebrating the LGBT community. The event will be held on 06/21/14. Motion: Moved by Coulter to participate, seconded by Ghoneim. Motion passed 5 -0. Municipal Identification Cards Finnerty reported that the proposal at this time is that Johnson County would be the issuer of the card. The card has received great support from the County including the Auditor's Office, Supervisors and County Attorney. Municipal identification cards are now being referenced as community identification cards to support community accessibility. Eastham added that the Board of Directors for the Center for Worker Justice recommends that the County issue the cards and administer the program. Equipment costs, non -profit versus for - profit models, security of personal information, the risks to undocumented persons, and other counties in the country that have implemented similar programs was also part of the discussion. Commissioners thanked the Center for Worker Justice for all their hard work. Motion: Moved by Coulter for the Human Rights Commission to recommend to the Council that: The City of Iowa City support the adoption and implementation of the Municipal Identification Card ( now referred to as the Community Identification Card) by Johnson County; Upon adoption of the Community Identification Card the City of Iowa City formally recognizes the validity of the card. Seconded by Olmstead. Motion passed 5 -0. Youth Awards 2014 The 11`h annual awards program sponsored by the Commission will be held on 05/14/14. Staff will begin advertising for the youth award and the youth ally award after spring break. Olmstead will do the opening, Townsend the closing, and Ghoneim will introduce the honorees at the program. Subcommittee Reports: International Students No report. Racial/Ethnic Equity Roundtable No report. Education No report at this time. Bowers will send an email to Retish asking him to convene a meeting of the subcommittee. Building Communities (Housing) Townsend has been communicating with Steve Rackis, Director of the Housing Authority, requesting that the Housing Authority add language in its brochure (Who We Are & What We Do) that explains that the Housing Authority has its own investigative process for allegations of criminal misconduct for participants of the program. Townsend provided Rackis with a written suggestion for what to write in the brochure: There may be situations where questionable actions may occur and it is necessary for the Housing Authority to initiate actions that will have a negative impact on the consumer maintaining their housing benefits. When such situations occur the individual has the right to appeal Housing Authority's decision to terminate, or take other actions related to their benefits. It is important that individuals be aware that in such situations Housing Authority conducts it's own investigation and any decision such as termination of housing benefits, or other actions is based on the outcome of Housing Authority's investigation and not the outcome of the individual's involvement with the legal system. Rackis responded that the Housing & Urban Development regulations are very specific and will not fit in the remaining space in the brochure. Rackis stated the following language will be inserted in the brochure: HEARING PROCEDURES (Termination of Assistance) The Federal Regulations regarding Hearing Procedures for Housing Authorities is in Title 24 Federal Code of Regulations (CFR) 982.555. The Iowa City Housing Authority Informal Hearing procedures are in the HCV Administrative Plan: Section 15.4 C. Hearing Procedures, Page 71. A copy of our Hearing Procedures is available upon request or viewed online at: http://www.icgov.or gl?id= 1213 Townsend believes that most people are going to get lost in this wording and that assumption and misinformation can be very dangerous. Townsend feels that when you have an opportunity to put the information out there -- that would clearly address the issue it is a plus. When it is in the brochure it is out there in plain language that anyone can understand and now it becomes accessible. Bowers will do some follow up. UI Center for Human Rights Ghoneim attended a workshop sponsored by the Center on 03/07/14. Commissioners Ghoneim will be a presenter in two upcoming University events in April. Olmstead was recently appointed Vice Chair on the University of Iowa Center for Human Rights Board. Coulter will be a presenter at Building An Inclusive Community One Neighborhood At A Time Seminar on April 23rd in Cedar Rapids. Staff Bowers mentioned the official Council policy regarding abstentions in voting that could be instituted to apply to all Boards and Commissions. Bowers noted that abstentions should only be used when a Commissioner has a conflict. The conflict should be stated as the reason for the abstention when voting. Motion to Adjourn: Townsend moves to adjourn, Hanrahan seconds. Motion passed 5-- 0. Adjournment: 19:15 Next Regular Meeting — April 15, 2014 at 6 pm. Human Rights Commission ATTENDANCE RECORD YEAR 2013/2014 (Meeting Date) NAME TERM EXP. 3/19/ 13 4/16 113 5/21 113 6/18/ 13 7/16/ 13 8/20/ 13 9/17/ 13 10/15/ 13 11/19/ 13 12/17/ 13 1/21/ 14 2/18/ 14 3/18/ 14 Diane Finnerty 1/1/14 X O/E X X X X X O/E X X - - - Ali Ahmed 1/1/17 - - - - - - - - - - X X O/E Orville Townsend, Sr. 1/1/17 x X X X X X X X X X X X X Paul Retish 1/1/17 - - - - - - - X X X X X O/E Dan Tallon 1/1/14 O/E X X X O/E R R R R R R R R Kim Hanrahan 1/1/15 X O/E X X X X X X O/E X X X X Shams Ghoneim 111115 X X O/E X O/E X X X X X O/E X X Jessie Harper 111115 X R R R R R R R R R R R R Jewell Amos 111115 - - - - X X X X O/E X X X O/E Katie Anthony 1/1/16 X X R R R R R R R R R R R Joe D. Coulter 1/1/16 X X X X O/E X X X X X X X X Harry._ Olmstead 1/1/16 X X X X X X X X X X X X ,? Andrea Cohen 1/1/16 - - - - - O/E X X X X X X O/E Connie Goeb 1/1/13 - - - - - - - - - - - - - Howard Cowen 1/1/13 - - - - - - - - - - - - - David B. Brown 1/1/14 R R R R R R R R R R R R Henri Harper 1/1/14 R R R R R R R R R R R R R KEY: X = Present O = Absent O/E = Absent/Excused NM = No meeting - -- = No longer a member R = Resignation 4