Small Project Incentives Program Copyrighted
February 5, 2018
City of Dubuque Consent Items # 7.
ITEM TITLE: Small Project Incentives Program
SUMMARY: City Manager recommending approval of a proposal for
drafting economic development agreements with
developers of small projects to incentivize their downtown
investment and make the projects more financially feasible.
RESOLUTION Approving an Incentive Program for Small
Projects using Tax Increments Financing
SUGGESTED DISPOSITION: Suggested Disposition: Receive and File; Adopt
Resolution(s)
ATTACHMENTS:
Description Type
Small Project Incentives Program-NNM Memo City Manager Memo
Staff Memo Staff Memo
Program Proposal Supporting Documentation
Resolution of Approval Supporting Documentation
THE CITY OF Dubuque
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TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Proposal for Urban Renewal Agreements on Small Project
DATE: February 1 , 2018
Economic Development Director Maurice Jones recommends City Council approval of a
proposal for drafting economic development agreements with developers of small
projects to incentivize their downtown investment and make the projects more
financially feasible.
The City has traditionally offered a standard 10 years of tax increment rebates to
developers who create a large number of residential units or jobs. The Economic
Development Department believes this would be too rich of an offer for a Small Project.
The Economic Development Department believes a tailored offering of tax increment
incentives would allow staff to negotiate appropriate agreements with developers who
are adding quality amenities to the downtown. The following proposal is recommended:
If a commercial project will increase the assessed value of the property by at least 15°k,
then offer either 10 years of descending tax increment rebates of actual increased value
on a sliding scale (this mirrors the abatement schedule of Urban Revitalization, steadily
declining from 80°k to 20°k over 10 years) or 3 years of TIF rebates at 100°k, as
negotiated with the developer.
This funding structure aligns with the Urban Revitalization program, but gives the City
control over the terms of the agreement, as well as the total funding level. This program
design also gives the City the ability to negotiate a higher offer, if staff find that the
project adds jobs and/or other benefits. Urban revitalization cannot offer more incentive
dollars, only fewer.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
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il��el C. Van Milligen
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Attachment
cc: Crenna Brumwell, City Attorney
Teri Goodmann, Assistant City Manager
Cori Burbach, Assistant City Manager
Maurice Jones, Economic Development Director
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Dubuque Economic Development Department
THE CITY OF 50 West 13t"Street
All-AmericaCitY Dubuque,lowa 52001-4864
1 ' Office(563)589-4393
TTY(563)690-6678
° http://www.cityofdubuque.org
Masterpiece on the Mississippi 200,.2012•2013
TO: Michael Van Milligen, City Manager
FROM: Maurice Jones, Economic Development Director
SUBJECT: Proposal for Urban Renewal Agreements on Small Projects
DATE: January 29, 2018
INTRODUCTION
The purpose of this memorandum is to present a proposal for drafting Economic
Development agreements with developers of small projects to incentivize their
downtown investment and make the projects more financially feasible.
BAC KG RO U N D
Having been approached by several developers of small projects in the downtown area,
we have had internal discussions on the best approach for incentivizing their
investment. Both Urban Revitalization and Urban Renewal were discussed, each
presenting pros and cons for the City and the developer.
DISCUSSION
For the purposes of this proposed program, Small Project is defined as a rehabilitation
of less than a $750,000 investment of an existing structure with no residential unit or
guaranteed job creation component. The State of lowa currently uses $750,000 as the
cap for defining small projects under its Historic Tax Credit program. If/When the State
modifies this level, the City's program would adjust to align with the State's cap.
We are proposing the utilization of the City's Urban Renewal authority in such a way
that it would mirror the Urban Revitalization program in certain aspects but still allow the
City to maintain better control of the incentives it awards to projects.
The advantage of Urban Revitalization is its ease of use for both City staff and for
developers, since it requires very few touch points over the course of the agreement —
once an agreement is in place, the property is simply eligible for tax abatement for a
specified period of time, with no staff time required beyond the drafting of the initial
agreement.
The disadvantage of Urban Revitalization is the lack of control the City has on which
developments receive incentives. Once a district is created, the City relinquishes
control, and all eligible properties receive the tax abatements for which they qualify. In
fact, as advised by special counsel, when the City Council determined to put a large
portion of the downtown into the Greater powntown Urban Renewal District, it basically
concluded as a matter of policy that it wanted to use the Urban Renewal law to facilitate
development in the area.
The advantage of using Urban Renewal as an incentive is the control that the City has
in negotiating desired outcomes for our Urban Renewal areas. This has allowed, for
instance, for the internal "Good Neighbor Inquiry" process developed by Economic
Development Project Coordinator Jill Connors and now utilized by several departments,
in order to ensure City incentives are being awarded to property owners that are
complying with state and local ordinances.
The City has traditionally offered a standard 10 years of tax increment rebates to
developers who create a large number of residential units or jobs. In our estimation,
this would be too rich of an offer for a Small Project.
The Economic Development Department believes a tailored offering of tax increment
incentives would allow staff to negotiate appropriate agreements with developers who
are adding quality amenities to our downtown. We propose the following:
If a commercial project will increase the assessed value of the property by at least 15°k,
then we offer either 10 years of descendinq tax increment rebates of actual increased
value on a sliding scale (this mirrors the abatement schedule of Urban Revitalization,
steadily declining from 80°k to 20°k over 10 years) or 3 years of TIF rebates at 100°k,
as negotiated with the developer.
This funding structure aligns with the Urban Revitalization program, but gives the City
control over the terms of the agreement, thus allowing for the "Good Neighbor"
requirements mentioned above as well as the total funding level. This program design
also gives the City the ability to negotiate a higher offer, if staff find that the project adds
jobs and/or other benefits. Urban revitalization cannot offer more incentive dollars, only
fewer.
See attached example from a fictional project with a 25°k increase in building value, to
see the accompanying tax increment commitment of a 10-year declining vs. a 3-year
100°k incentive.
RECOMMENDATION/ ACTION STEP
I recommend adopting the above proposed process of tailoring tax increment incentives
in our Greater powntown Urban Renewal District to allow the City Manager and
Economic Development Department to enter into tax increment financing agreements
with smaller developers of quality projects.
Urban Renewal for Small Proiects — Proposal
If commercial or multi-residential project will increase assessed value of property at
least 15°k, then we offer up to 10 years of TIF rebates of actual increased value on a
sliding scale or 3 years of TIF rebates at 100°k.
This aligns with the urban revitalization offer, but gives the City control over the
agreement, providing the opportunity to add "good neighbor" or other stipulations. This
program also gives the City the ability to better the offer, if the project adds jobs and/or
other benefits. Urban revitalization cannot offer higher incentives, only lower.
Fictional example:
2016 assessed value $200,000
2017 assessed value $250,000
A 15°k increase would have been $230,000
Actual increase of 25°k or $50,000
10 Year Sliding Scale would rebate $6,072.38 over 10 years
3 Year 100°k would rebate $4,140.26 over 3 years
URBAN RENE WAL-30 VEARS SLIDING SCALE
Actual
Atljustetl
Builtling Assessmen[ Tax Ra[e
Vear Increase Rollback TaxableValue fVll 100Yallowable % TIFReba[e
1 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 80% $ 1,104.07
2 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 70% $ 966.06
3 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 60% $ 828.05
4 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 50% $ 690.04
5 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 40% $ 552.03
6 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 40% $ 552.03
) $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 30% $ 414.03
e $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 30% $ 414.03
9 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 20% $ 276.02
10 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 20% $ 276.02
To[al S 6,OR38
URBAN RENEWAL-3 VEARS @ 100Ye
Actual
Atljustetl
Builtling Assessmen[ Tax Ra[e
Vear Increase Rollback TaxableValue fVll 100Yallowable % TIFReba[e
1 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 100% $ 1,380.09
2 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 100% $ 1,380.09
3 $ 50,000 90% $ 45,000 0.03066861 $ 1,380.09 100% $ 1,380.09
To[al S 4,14016
Prepared by Crenna Brumwell. Esq.. 300 Main St.. Ste. 330. Dubuaue IA 52001-6944. 563-583-4113
Return to Kevin Firnstahl, City Clerk, 50 W. 13th St., Dubuque, IA 52001, 563-589-4100
RESOLUTION 21-18
A REOLUTION APPROVING AN INCENTIVE PROGRAM FOR SMALL PROJECTS
USING TAX INCREMENT FINANCING
WHEREAS, tax increment provides funding to the City of Dubuque on an annual
basis, and
WHEREAS, the City Council of the City of Dubuque has identified the revitalization
of several portions of the Greater Downtown area as a top priority, and
WHEREAS, the State of Iowa allows for the establishment of programs utilizing
tax increment for economic development purposes such as the Downtown Rehabilitation
programs, and
WHEREAS, the City Council of the City of Dubuque has previously approved
several economic development programs identified as Downtown Rehabilitation
programs, and
WHEREAS, a proposed Small Project Program has been reviewed and is
recommended for approval by the Economic Development Director and the City Manager.
NOW, THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF DUBUQUE, IOWA:
1. The City of Dubuque hereby approves and adopts the attached Small Project
Program for economic development purposes in the Greater Downtown Urban
Renewal Area.
Passed and approved this 5th day of February 2018.
g' Roy D. Buol, Mayor
Attest:
K S. Firnstahl, City Clerk
Kevin Firnstahl
From:Jill Connors
Sent:Tuesday, February 06, 2018 1:25 PM
To:Kevin Firnstahl
Subject:FW: Susan Price of Smokestack about tonight's agenda item
Importance:High
Jill M. Connors, MPA
Economic Development Project Coordinator
City of Dubuque, Iowa
50 W. 13th Street
Dubuque, IA 52001
563-589-4213 (direct)
563-589-4393 (main)
jilconno@cityofdubuque.org
From: Mike Van Milligen
Sent: Monday, February 05, 2018 5:21 PM
To: Maurice Jones <Mjones@cityofdubuque.org>; Jill Connors <Jilconno@cityofdubuque.org>
Subject: Susan Price of Smokestack about tonight's agenda item
Importance: High
From: Roy D. Buol
Sent: Monday, February 05, 2018 4:17 PM
To: Mike Van Milligen <ctymgr@cityofdubuque.org>
Subject: Fwd:
FYI
Sent from my iPad
Begin forwarded message:
From: Susan Price <susanprice1986@gmail.com>
Date: February 5, 2018 at 2:52:15 PM CST
To: Ric Jones <rjones@cityofdubuque.org>, dresnick@cityofdubuque.org, bshaw@cityofdubuque.org,
ldeltoro@cityofdubuque.org, kmlarson@cityofdubuque.org, Jake Rios <jrios@cityofdubuque.org>,
rdbuol@cityofdubuque.org
Dear City Council:
We have some concerns about Consent Item #7 of tonight's City Council agenda. It's a new
program from the Economic Development Office, the Small Projects Incentive Program. Here is
the link to this agenda item's cover sheet, memos, etc. Small Project Incentives Program. We
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cannot attend tonight’s Council meeting, so we are writing you directly about this proposed
program.
The Small Project Incentives Program is a TIF program that will likely benefit our project at the
historic property of 653 White Street - two buildings including the one now known as
Smokestack. You may know that our only State financial incentive was $75K from the State of
Iowa, the competitive matching grant, IEDA, Main Street Iowa Challenge Grant X. Our only
incentives from the City of Dubuque are the following matching grants totaling $18,851.25:
$2.5K competitive Imagine Dubuque grant for our public pocket park (green space), and
"allowed" non-competitive grants of $2K Stormwater BMP for the pocket park's rain garden, $5K
ADA grant for our platform lift to our 2nd level, and $9351.25 thanks to the City's Economic
Development's Design Services grant. We are truly grateful for any and all assistance to our
project.
The proposal from the City's Economic Development Office describes the standard 10 years of
TIF given to large projects as "too rich" for a small project. This seems to ignore the fact that a
small project will generate less dollars of TIF than a large project - a possible $2K per year TIF
for a small project like ours vs. $20K-plus-plus-plus per year TIF for large projects. "Too rich"
also ignores the fact that the potential impact of 10 years is very significant for a smaller project,
and it encourages long-term commitment to Dubuque. We understand the City's reasoning for
the difference, yet we disagree with it. This sounds like "separate but equal" - this proposed
program treats small business, especially small developers, inequitably.
Our gain from this proposed program may wind up being a grand total of perhaps $6000 in tax
increment financing, distributed over three years in 6 payments of $1000, because this program
is allowing 3 years of 100% TIF to small projects (the only option we've been allowed) as
opposed to 10 years of 100% TIF for larger developers.
This Small Incentive Program would not have developed without our project and our persistence
- and the same from other developers with "small projects" by the City's present definition. For
four years, we've asked for TIF and/or property tax abatement and guidance toward financial
incentives through other incentives, yet were denied forward movement until the Summer of
2016, despite exceptions being made for similar projects all along. It is to the very real credit of
Dan McDonald of Greater Dubuque Development Corporation that we've gotten to this point for
TIF for smaller development projects, including this one. Yet it's ironic that Rick Dickinson of
GDDC asked me recently when I mentioned we seemed to finally be getting somewhere with
TIF and/or tax abatement with the City of Dubuque on our project, "Why did this take four
years?" The real answer to his question - and to other questions about incentives not allowed
and/or used for this project - is very complex.
As it has taken four years, and our property taxes have already doubled with the January, 2016
assessment, we have asked for retroactive TIF and/or abatement in our case, to our building's
purchase in March, 2014, which more or less coincides with our first days of trying to get the
City of Dubuque interested and involved with our project. The City states it will only allow us to
go back to January, 2016 and has only offered a 3-year term. We have increased our assessed
valuation by almost 100% since March, 2014, and we have now increased our assessed
valuation by almost 30% since January, 2016. These assessment numbers have little relation to
the actual cost of improvements because our re-sale value is not yet comparable to actual
improvement costs in our case. If we were allowed retroactive to March, 2014, we would receive
approximately $3500 in TIF per year for three years. With the January, 2016 start date, we
stand to receive approximately $2000 in TIF per year for three years. We have, and will likely
ask again, for a retroactive start date of March, 2014 as that is when we began our efforts with
the City - and we know retroactive can be difficult for many reasons. We are still grateful for this
program and any assistance we may receive because it is still needed in our case.
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As of September, 2017, we have fulfilled our vision for our property, by ourselves for the most
part. With the exception of the grants mentioned above, it's been self-funded. Without the
opportunities allowed for larger developers and businesses, we funded our project - taking a
derelict property in the heart of Downtown and turning it into a three-level arts & culture venue
similar to those found in major cities. We liquidated all of our assets and borrowed from friends
and family to do this in Dubuque. Our investment in Dubuque runs to approximately $1.5M and
we’ve created two new businesses here, Smokestack and our property development company
653 White Properties. That number of $1.5M includes our personal unpaid labor of about
$350K, so we can say that we’ve invested $1.15M in cash in Dubuque in four years, when it’s all
said and done. Why would we do all this? Because we believe in this property and we believe in
Dubuque.
We understand that on March 5, the Council will decide whether to allow our project to be an
early participant in this Small Project Incentive. In the meantime, we respectfully ask our City
Council to extend this proposed Small Project Incentive to 10 years of tax increment
financing, as is done right now for larger development projects, instead of the 3 years currently
proposed.
Our concerns are not about us and our project at this late point of being done with our
development project. We have been and continue to be grateful for all financial assistance this
project has received. Our concern is now for those who come after us. We know our experience
and the experience of some of our colleagues. We want to ensure that the experience of future
small businesses is one in which Dubuque understands that small business is the backbone of
our community, that the small things connect the big things, and so make our community
attractive for big business, tourism, workforce, and more. We want the future experience for
small businesses to be easier than ours, to be more comparable with big business, to be
equitable.
Thank you very much,
Scott Cornwell & Susan Price
653 White Properties, LLC
---
Susan Price
Yes, I am on LinkedIn
917-474-3055
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