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Enterprise Zone Legisl Ltr supp Dii~@UE ~ck~ 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. } JL'(/¡ / (¡ /, /lí 1/' , L ./,- .. . l,r., Micháel C. Van Milligen '- . MCVM/jh 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 :-" --. ..-- - , l)UI City Manager's Office 50 West 13th Street Dubuque, Iowa 52001.4864 (563) 589-4110 phone (563) 589-4149 fax ctymg'-@cityofdubuque.org ~<k~ 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, /12ùLI {~¡{}J¡{y-- Michael C. Van Milligen City Manager s,,'v;c, People Integ,.;ty R"poo,,;b; ;ty Innov,t;on Teomwo,k