Community Incentives for TIF and Economic Development: Formal Policies

1. Community Incentives for TIF and Economic Development: Formal Policies Larry Kirch, AICP Planning and Development Director City of La Crosse March 1, 2012 WAPA Spring Conference

2. Presentation Overview March 1, 2012 WAPA Spring Conference Background - National View of Incentives Rationale for Proposed Policy La Crosse - Business Assistance Efforts Features of Proposed Policy Feedback Next Steps

3. National View of Incentives • Businesses seek incentives • Governmental Response • Federal, State, Local, Economic Development Corporations/Authorities • Federal = Tax Credits (e.g. Work Opportunity Tax Credit), low cost financing and targeted grants • State = Tax Credits, Job Creation Tax Credits, Sales and Property Tax Abatement, Development Zones, Authorization for TIF, Job Training Grants, Loan programs, loan guarantees

4. National View of Incentives • Businesses seek incentives – it’s a given – very pervasive • Governmental Response • Boeing to Chicago - $100,000,000 in State and Local incentives for 400 jobs = $250,000 per job • Daimler Chrysler move to Georgia – Proposal included planting tulips for German Executives, having state economic development officials dressed in lederhosen at plant entrances to welcome employees • Wisconsin example - $87,000 per job incentive • Fort Collins Colorado Model – NO INCENTIVES, come for our educated work force, quality of life, but we will not pay you to come here

5. National View of Incentives • Film Industry incentives now in 40 states, up from five states in 2002. • Some states up to 30 percent tax credits. • $1.8 billion in incentives given between 2006-08. • State budget shortfalls are causing reexamining the credits, including Wisconsin. Governing.com

6. Rationale For Proposed Policy - Incentives can be good • Why are we discussing this issue? • Incentives locally have escalated similar to national examples – given incentives when not needed • Research indicates not all incentives are worthwhile • La Crosse has evolving but rudimentary system • Little, if any, financial analysis of need for City participation • Decisions should be fact based – level playing field needed for all businesses/developers

7. Rationale For Proposed Policy – What other Wisconsin Cities are doing • La Crosse surveyed Wisconsin Communities -2009 • Eau Claire, Wausau, Racine, Kenosha, Fond du Lac, Sheboygan, Janesville, Oshkosh, Appleton, Waukesha, Green Bay, Madison and Milwaukee • Most cities surveyed in Wisconsin have no incentive policy (4 of 13) • Not surprisingly Milwaukee and Madison have most sophisticated policies/programs

8. Rationale For Proposed Policy – What other Wisconsin Cities are doing • 15 Survey Questions • Do you have a written TIF policy regarding developer incentives? • Are the following types of projects eligible for TIF consideration? • Which type of projects hold priority during the consideration process? • Do you have a preference to TIF loans vs. grants? • If you prefer loans do you collect interest? If yes, how do you determine interest rate?

9. Rationale For Proposed Policy – What other Wisconsin Cities are doing • 15 Survey Questions • Does your TIF policy include job creation incentives? If yes, what incentives do you offer? • What other types of developer incentives does your TIF policy include? • Do you have a written TIF application? • Do you charge an application fee? If yes, how much do you charge?

10. Rationale For Proposed Policy – What other Wisconsin Cities are doing • 15 Survey Questions • Do you charge a processing fee? If yes, how much do you charge? • Do you use TIF proceeds to pay city staff and/or reimburse the operating budget? (Finance, Clerk, Assessor, Legal, Mayor, Planning) • Do you have any type of annual review strategy? • Do TIF projects compete with projects in a 5 year/annual capital improvement program?

11. Rationale For Proposed Policy – What other Wisconsin Cities are doing • 15 Survey Questions • Have you ever issued TIF revenue bonds? • Do you have a maximum percentage of project cost that you will provide to a developer based on taxable value increase? • Survey Results – See Handout

12. History – Rationale • The City has been involved in economic development for decades • Incentives primarily consisted of Industrial Development (reduced land price) • City infrastructure surrounding site • TIF – Downtown TIF #1, Valley View Mall TIF #3, and Airport Industrial Park-Terminal TIF #4 • There is a need to balance redevelopment objectives with incentives • Development Projects can severely impact the City’s Capital Budget, borrowing limits, debt service

13. Rationale for Policy Fix • Businesses seek incentives – it’s now a given • FROM : Incentives have escalated from: • Reduced land price (industrial) • City infrastructure surrounding site • TO: • Grant$ of Land ($1.00) • Grant$ for construction of new buildings • Cash Grant$ (upfront/reverse) for developer costs (fill, demolition, contamination, building construction) • Job creation Cash Grant$ • Tax Base Cash Grant$

14. City-Business Assistance • Business loan and tax credit programs: • Small business development loans/Commercial Rehabilitation loans • Upper floor renovation loans • Architectural & Engineering Analysis 80/20 funding program • Assist with State tax credits for job creation, job training • Industrial Park administration (Airport, International Bus Park) • Business communication and outreach • Marketing and business recruitment • Tax Increment Financing (TIF)

15. City-Business Assistance • Business assistance & redevelopment projects: • Riverside Center buildings • Doerflinger Building • Michaels Engineering & Authenticom, Inc. • Kwik Trip expansion • Trane Plant 6 • Park Plaza • 4th & Jackson Streets • Future: Exxon-Mobil Oil • Future: Xcel Energy

16. City-Business Assistance • Provided over $4.8 million in loans (for example: People’s Food Coop) • RLF Program has assisted over 30 businesses to create over 450 new jobs • Former Rowley’s Office Supply now home to Kick Shoes and City Wear clothing stores • Lynn Tower • Upstairs Jule’s Coffee Shop Grand River Station

17. City-Business Assistance • Business communication and outreach: • City-Business roundtable meetings • Nearly 35 roundtables have been held • #1 Conduct City organizational assessment • #2 Establish a long-range plan for the riverfront • #3 Exit 3 area development • City-Business e-newsletter • One-on-one meetings

18. City-Business Assistance • Marketing and business recruitment: • Grand River Great City marketing effort • Marketing/recruitment tools • DVD • Folder/inserts • Profile & media packet • Future: Improve and coordinate marketing efforts • Public-private working group to focus on recruitment

19. City-Business Assistance • North La Crosse Business Association: • Highway 53 Corridor Study • First Impressions study & ad hoc committee • Future: Zoning study • Future: Exit 3 visioning • Future: Old Towne North Master Plan

20. Rationale for Policy Fix • Current Policy is ad hoc from project to project • Not all developer’s treated the same • City has gotten away from need-based incentives • 2006 “fix” was superficial • Did not address: application fee, need-based approach, ceiling on assistance, loans vs. grants, job quality, types of projects obtaining assistance • 2006 fix didn’t address regional aspects of incentive policies • Compact of Job Piracy by City Rejected – New Compact by 7 Rivers Region Alliance now has 100 organizations signed on

21. Features of Proposed Policy • Standard Application Form/fees • Only Gap financing • Ceiling on assistance • Requirements, but no incentives for job creation (State/Federal role) • Specific guidance on project eligibility • No cash grants, instead favorable loans

22. Features of Proposed Policy • Unresolved Issue • Process - Who negotiates? • How is Underwriting going to be done and who should pay for it • Key Provision - Project Evaluation – Proforma Determines Gap

23. Financing Approaches

24. New Conventional Approach

25. Feedback so far… • Need Formal Policy • Need better follow-up on developer agreements • Some want super-majority vote on development agreements • Proposed fees are counterproductive and extreme • Application deadlines will force projects elsewhere • Why does the City need outside financial or legal help?

26. Feedback so far… • 10% project cap is too low • Why should City get part of ROI over 15% • If no free money (cash grants), program will not get used • List of eligible projects is limited and unjustified • Raise bar even further – Personal Guarantees, clawbacks good, conduct post mortum on all projects to determine if need was there (unjust enrichment) and evaluation of the TIF as a whole • Streamline initial evaluation of project

27. Bottom Line - Continue Incentives • City has a different bottom line than developers, who wouldn’t take cash grants?- free money is not free • Critical to conduct real due diligence on financial evaluation of projects to determine gap, city has no expertise – must have outside help • Eliminate over subsidizing (fund real gap) so the City can assist even more projects • Eliminate GRANT$, let the state fund job creation through tax credits

28. Our Next Steps • Review comments/questions • Introduce Resolution to Council • Public Hearings at Finance and Personal Committee, Committee of the Whole • Possible Workshops with F&P Committee • Final Action by Common Council • Policy Implementation

29. City Policy on the provision of incentives for economic development/TIF • Thank You! • Larry Kirch, AICP Director • City of La Crosse Planning & Development • 400 La Crosse Street • La Crosse, WI 54601 • 789-7512 • kirchl@cityoflacrosse.org