Enterprise Zone Legisl Ltr supp
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MEMORANDUM
January 10, 2005
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Letter of Support for Changes in Enterprise Zone Legislation
Acting Economic Development Director Pam Myhre is recommending City Council
approval of a letter of support for changes in current Enterprise Zone legislation. The
legislation change would allow the sale of Enterprise Zone tax credits that are not linked
to low-income housing tax credits, which could be advantageous in providing additional
incentives for the development of market-rate housing in brownfield Enterprise Zone
sites like the Port of Dubuque.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
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Micháel C. Van Milligen '- .
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Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
Pamela Myhre, Acting Economic Development Director
c.
CITY OF DUBUQUE, IOWA
MEMORANDUM
January 6, 2005
TO:
Michael Van Milligen, City Manager
FROM:
Pamela Myhre, Acting Economic evelopment D' ctor
SUBJECT: Letter of Support for Changes in Enterprise Zone Legislation
INTRODUCTION
This memorandum presents for City Council review and approval a letter of support for
changes in current Enterprise Zone legislation. The letter is attached to this memo.
DISCUSSION
The City of Des Moines and the Greater Des Moines Partnership have asked other Iowa
communities to support a change in legislation that would allow the sale of Enterprise Zone
tax credits that are not linked to low-income housing tax credits. Attached find the
Proposed Amendment information sheet. If the sale of these credits were allowed for
market-rate housing developments in brownfield locations within Enterprise Zones,
additional equity could be raised to assist in the financing of these housing developments.
Des Moines is promoting this legislative change to encourage both new construction and
rehabilitation of market-rate housing especially in their downtown. Dubuque could take
advantage of this change for housing developments in the Port of Dubuque. The letter of
support discusses the need for public financial assistance to projects located in costly,
environmentally distressed locations where new -- and creative -- financial assistance could
be very beneficial.
RECOMMENDATION
I recommend that the City Council authorize the letter of support from the City Manager.
The proposed changes being advocated by the City of Des Moines and the Greater Des
Moines Partnership could be very advantageous in providing additional incentives for the
development of market-rate housing in brownfield Enterprise Zone sites like the Port of
Dubuque.
attachments
F: \U SERS \P myh re \WPDOCSIEZ\elleEZltr .mvm .doc
PROPOSED AMENDMENT TO STA TE OF IOWA ENTERPRISE ZONE PROGRAM
REGARDING TAX CREDITS FOR HOUSING
(DECEMBER 2004)
BACKGROUND
Current State law does not allow for the transfer of Enterprise Zone tax credits for housing to
non owner-investors unless the project uses Federal low income housing tax credits, as
authorized under Section 42 of the Intemal Revenue Code. Many owner-investors cannot use
the EZ tax credits because their State income tax liability is less than the amount generated.
This limitation acts to curtail investment in distressed areas, which results in continued blight
and a lack of sufficient housing stock to meet community needs.
PROPOSED AMENDMENT
The City of Des Moines and the Greater Des Moines Partnership advocate policies that
encourage development of a full range of new and renovated housing stock in areas designated
as Enterprise Zones (Section 15E.193B).
It is recommended that the State Legislature allow for the award and transfer of State Enterprise
Zone tax credits for housing developments whose primary purpose is the redevelopment of
brownfields and blighted areas within designated Enterprise Zones, regardless if the project
uses Federal low income housing tax credits, as authorized under Section 42 of the Intemal
Revenue Code.
EFFECT
The City of Des Moines and other communities across Iowa that are involved in brownfields
redevelopment, such as Sioux City, Ft. Dodge, Cedar Rapids, Marion, Waterloo, Coralville,
Davenport, Dubuque and Clinton, could potentially attract substantial investment in housing
through this amended legislation.
Brownfield redevelopment areas have many challenges that significantly increase the cost of
development-including environmental contamination, geotechnical constraints, multiple
ownerships, lack of infrastructure and other issues. These developments often are upside down
transactions and cannot proceed without public incentives. Enterprise Zone tax credits will
assist in bridging the financing gap.
THE CITY OF
DUB
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City Manager's Office
50 West 13th Street
Dubuque, Iowa 52001.4864
(563) 589-4110 phone
(563) 589-4149 fax
ctymg'-@cityofdubuque.org
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January 6, 2005
Ellen Walkowiak
Economic Development Coordinator
City of Des Moines
Office of Economic Development
400 Robert D. Ray Drive
Des Moines, IA 50309
RE:
Support for Sale of Enterprise Zone Tax Credits for Market-Rate Housing
Dear Ms. Walkowiak:
The City of Dubuque supports the efforts of the City of Des Moines and the Greater Des
Moines Partnership in advocating for legislative changes to allow the award and transfer
of State Enterprise Zone tax credits for housing development whose primary purpose is
the redevelopment of brownfields and blighted areas within designated Enterprise
Zones regardless of whether the project uses Federal low income housing tax credits.
The sale of tax credits to provide project equity is often a very important piece of the
financial package for redevelopment projects. The City is very familiar with the use of
Federal historic tax credits and low income housing tax credits to support
redevelopment and new housing opportunities. However, the ability to support market-
rate housing, either new construction or rehabilitation, in urban brownfields is a worthy
objective,
The City of Dubuque's Port of Dubuque redevelopment area is an urban riverfront
brownfield located in an Enterprise Zone. Our master plan for the area suggests
housing as a potential reuse for the area. The cost of land in this prime location,
coupled with the added costs associated with environmental remediation, may require
substantial -- and creative -- public financial assistance. The use of Enterprise Zone tax
credits to raise equity for market-rate housing projects in the Port of Dubuque, and the
community generally, would be very beneficial.
We appreciate your advocacy for legislative changes to support the development of new
housing and reinvestment in our changing urban neighborhoods. Please keep us
informed of your progress and let us know if there is anything else we might do to
support this effort to change the Enterprise Zone program legislation.
Sincerely,
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Michael C. Van Milligen
City Manager
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