PPEL TIF Discontinuation RecommendationTHE CITY OF
DuB E MEMORANDUM
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May 2, 2007
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: School Physical Plant and Equipment Levy (PPEL)/Tax Increment
Financing
On April 6, 2000, Senate File 2089 was signed into law by Governor Vilsack. SF
2089 relates to the collection of K-12 school districts' Physical Plant and
Equipment Levy (PPEL) within urban renewal areas. It requires the PPEL
imposed on the incremental values in a TIF area to be paid to the school district.
The PPEL revenues will remain with the school district unless the controlling TIF
municipality (county, city, or community college) certifies to the K-12 school
district by July 1 that such revenue as generated by the PPEL in the TIF is
needed by the municipality to pay their existing principal and interest on TIF
indebtedness that was incurred before July 1, 2000.
On June 7, 2001, the City certified with the Dubuque County Auditor to receive
the PPEL generated in the Tech Park South and Kerper Boulevard Industrial
Parks. Dubuque Industrial Tech Park had issued TIF Revenue Bonds for
Advanced Data Com and Horizon Ducarte in FY 1999 and Kerper Boulevard
Industrial Park had issued TIF Revenue Bonds for Eagle Window in FY 2000.
These are the only TIF Districts that qualified to collect the PPEL to pay existing
principal and interest on the debt incurred before July 1, 2000.
The City has filed with the County Auditor every fiscal year to retain the PPEL in
these two TIF Districts. The annual PPEL collected by the City is $7,728 in Tech
Park Industrial Center and $17,541 in Kerper Boulevard Industrial Park in FY
2008. Since FY 2001, the City has collected $137,805 in PPEL from the
Dubuque Community School District.
The annual debt payment in Dubuque Industrial Tech Park South is $186,087
with the debt to be paid off in FY 2011. The annual debt payment in Kerper
Boulevard Industrial Park is $489,285 with the debt to be paid off in FY 2012.
It has been determined that the TIF revenue received annually without the PPEL
levy is sufficient to pay the debt service costs in both Dubuque Industrial Tech
Park South and Kerper Boulevard Industrial Park. The future TIF revenue
received by the City would be reduced by approximately $25,000 annually if the
PPEL levy is not collected. This reduction of TIF revenues would reduce the
amount of money available in the districts to repay other funds for on site and off
site improvements that were previously made.
The City of Dubuque has made significant strides in forming partnerships with
other organizations such as Dubuque Community School District. The City has
invested $430,000 in Dubuque Community School District elementary school
playgrounds as well as $48,000 for basketball goals and a scoreboard. The
Dubuque Community School District receives a 50% discount on their
stormwater utility charge from the City amounting to approximately $11,000
annually. The City also rebates the 2% electric franchise fee back to the School
District, which is estimated at $18,000 per year. In addition, the School District is
not charged the 2% gas franchise fee by Aquila which would amount to
approximately $12,000 per year. The City also spends approximately $27,000
annually on after school programming.
This is not cone-way street. The Dubuque Community School District allows
City recreational programs in some of their facilities and not only invested in the
revitalization of downtown with the new Prescott School, but allowed the City to
add a Neighborhood Resource Center to the new school. In exchange for the
City installation of playground equipment at schools, the playgrounds are open
for public use after school hours providing neighborhood parks.
There are many arguments pro and con for the use of TIF, but in Dubuque the
results tell the story. Dubuque is a community that had unemployment over 14%
in 1983 and averaged 8.9% unemployment during the entire decade of the
1980's, while losing 7.8% of its population between 1980 and 1990. The average
value of a home fell 9% in 1986. In 1987 the City portion of the property tax rate
reached $14.58 per thousand dollars of assessed valuation, 41 % higher than the
2008 rate of $10.32 per thousand.
Today Dubuque is designated as 2"d best in the country for retaining existing
business and is ranked 22"d for its job growth rate; the only city in the Midwest in
the top 25, with the nearest city in Iowa, Des Moines, ranked #115 and Cedar
Rapids ranked #308. Forbes Magazine has ranked Dubuque 15th in the nation
for "Best Places for Small Business." From February 2006 through February
2007, Dubuque County created 19.1 % of the net new jobs in the entire State of
Iowa (3,500 jobs), with only 3% of the State's population.
There are many reasons for Dubuque's success, highlighted by the quality of life,
made stronger by the dedicated not-for-profits, and the strong work ethic and
reliability of the workforce. The foresight of the citizens passing a referendum to
fund the construction of the Dubuque Greyhound Park in the mid-1980's certainly
showed tremendous foresight and has paid huge dividends. Having the 7th best
school district in the country is an important factor. However, the contribution of
TIF cannot be denied. TIF is the only local economic development financial tool
available that can make Dubuque competitive when companies are making
economic comparisons to determine a location for their investment. It is no
coincidence that the City started using TIF in earnest in 1991 and the economic
resurgence of Dubuque began shortly thereafter.
It is important to understand the benefits of TIF in the City of Dubuque and the
growth that this funding tool has provided. Since the City of Dubuque began
using Tax Increment Financing in earnest in 1991 there have been a total of 32
corporate projects using $27,249,900 in direct TIF incentives, leveraging
$147,650,000 in private investment. Just the 25 projects since 1999 have
retained in excess of 2,833 jobs in Dubuque and created 973 jobs. This does not
include many of the 1,999 jobs added to the downtown employment base that did
not include a direct TIF agreement with the company, but were facilitated by loan
pools and other methods benefiting from the Downtown TIF District.
These approximately 5,000 employees own homes that contribute to the property
tax base and they frequent retail businesses and restaurants that pay property
taxes and sales taxes. They also send their children to local schools contributing
to increased enrollment at Dubuque Community School District and increased
State aid.
This all works because of responsible elected officials who, while acting in an
entrepreneurial fashion to encourage community growth, use TIF, the City's only
local meaningful economic incentive, in a strategic fashion. This is done while
preserving the character of the community as demonstrated by the City Council's
focus on sustainability and recent designations as one of the 100 Best
Communities for Young People, and being named as a finalist for the prestigious
National Civic League All-America City designation.
I respectfully recommend Mayor and City Council approval that beginning in FY
2009, the City of Dubuque ceases to collect the PPEL levy from the Dubuque
Community School District for Dubuque Industrial Tech Park South and Kerper
Boulevard Industrial Park.
`~ :~~
Michael C. Van Milligen
MCVM/JML
cc: John Burgart, Superintendent, Dubuque Community School District
Barry Lindahl, City Attorney
Teri Goodmann, Assistant City Manager
Cindy Steinhauser, Assistant City Manager
Jennifer Larson, Budget Director
David Heiar, Economic Development
Ken TeKippe, Finance Director