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Legislators ltrs, TIF restrictCity Manager's Office 50 West 13th Street Dubuque, Iowa 520014864 (319) 5894110 (319) 589-4149 FAX March 6, 2002 VIA E-Mail and 1st Class Mail mike_connolly@legis.state.ia.us The Honorable Mike Connolly Iowa State Senator 3458 Daniels Dubuque, tA 52001 Dear Senator Connolly: I know there are discussions in the State Legislature to further restrict the use of Tax Increment Financing (TIF). This would be disastrous for Dubuque. Tax Increment Financing was designed to clear up slum and blight and create jobs. The most important principle to recognize is that TIF is used as an incentive for projects that would not have happened without this important financing tool. When you use TIF, the existing base level assessed valuation continues to generate taxes for the city, schools and county. Only taxes from the newly created incremental assessed value are captured for use as a financial incentive, or to do public improvements to help with the project. This new incremental assessed value would not exist if the incentive was not used. This new incremental value is usually captured for a fixed number of years, and then that incremental value also starts flowing to the taxing bodies. Dubuque has used TIF very successfully, but we were late in taking advantage of TIF, and in the 1980's we paid the price. Dubuque did not start using TIF until the mid- 1980's, and not extensively until the 1990's. From 1980-1989 the average annual unemployment rate in Dubuque was 8.9%, compared with the state-wide average of 6.6%, and the national average of 7.3%. In 1982 the Dubuque unemployment rate was 14.2%. Then Dubuque became more aggressive in the area of job creation, forming economic development organizations and beginning to use financial incentive tools, the most important of which was TIF. Service People Integrity RespormJbiHty Innovation Teamwork Senator Mike Connolly March 6, 2002 Page 2 From 1995-2001 the average annual unemployment rate was 3.8%, down from 8.9% in the 1980's. If you compare the number of jobs in Dubuque County in 1980 (43,700) with 1990 (46,000) with 2001 (52,700), you can see that the efforts being put forth are successful. You might recall that the Greater Dubuque area was selected last year through the "Metro Business Retention Index" as 2nd in the nation for business retention for the nation's 324 metro areas. Also, the Greater Dubuque area was ranked 18th by the Milken Institute for their "Top 50 Metros/High Tech Output Growth 1996-2001 ." The job creation numbers and unemployment numbers I have given you are very favorable, but no more so than the construction numbers. From 1990-1998 the City of Dubuque averaged 350,000 square feet of non-residential construction each year. The three-year period from 1999-2001, the City of Dubuque averaged almost 1,3 million square feet of non-residential construction each year, and 2002 is shaping up to be another banner year. The total community assessed valuation has increased 55% over the last ten years, to $1.5 billion. Much of this valuation is the direct result of projects that were assisted with TIF. Partnerships and the use of TIF were instrumental in the $188 million America's River project. The City was required to issue $12.5 million in debt to get the $40 million Vision Iowa grant. This $12.5 million is being partially repaid with TIF. What kind of impact will the America's River project have on Dubuque? Besides the 1,000's of jobs and the 500,000 new visitors, the $188 million represents an amount equal to 12.5% of our existing $1.5 billion assessed valuation. The consultant's analysis show that after this initial investment, the City can expect over $150 million in additional private development, an amount equal to 10% of the City's assessed valuation. Partnerships and the use of TIF have been key in the redevelopment of downtown. Since 1985, the following has occurred in downtown: Facade Building New Real Estate Public Net New Renovation RehabilitationConstruction Sales Improvements Jobs $3,214,156 $40,308,648 $34,088,597 $56,834,749 $11,337,041 +1,340 (+19%) While we can be proud of the level of recent investment in our downtown, much work is yet to be done, and TIF will be an important tool. Recognizing the long-term nature of Senator Mike Connolly March 6,2002 Page 3 this project, the City Council has adopted a policy that generally 75% of the TIF revenues will be claimed, with the remaining 25% going to the city, schools and county. TIF projects are useful for other purposes. First, this tool allows the City to leverage Federal and State resources for projects, as those programs require a local match. But more importantly to the schools, is that job creation creates other assessed property that does pay taxes immediately to the taxing bodies. The 6,700 jobs created in the 1990% are held by people who own homes and rent apartments. The 600,000 square foot Asbury Plaza retail development on the Northwest Arterial is under construction and will open Phase II late this summer. Retail development pays sales taxes and real estate taxes. The creation of all this new value, among other things, has allowed the City of Dubuque to avoid a property tax increase for the average homeowner for the last eight years, with six of those years seeing a property tax decrease, including this year's 5% reduction. The City of Dubuque's portion of the property tax bill is the second lowest rate of the nine largest cities in Iowa. This takes some of the pressure off of the schools and the county as they consider their budgets. Adopting a plan, being inclusive, courageous political leadership and developing partnerships to build on our assets is the key to our community's success, but TIF is an important tool that is needed in its current form to assist in growth. TIF is used across the country. If Iowa puts more limitations on its use, it will be more difficult for us to compete. Please resist any efforts to further erode the use of TIF in the State of Iowa. Sincerely, Michael C. Van Milligen City Manager MCVM:jh cc: Mayor Terry Duggan Dubuque City Council Tom Bredeweg, Executive Director, Iowa League of Cities Rick Dickinson, Executive Director, Greater Dubuque Development Corp. Steve Horman, President, Dubuque Area Chamber of Commerce Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Pauline Joyce, Administrative Services Manager Bill Baum, Economic Development Director The Honorable Mike Connolly Iowa State Senator 3458 Daniels Dubuque, IA 52001 The Honorable Pam Jochum Iowa State Representative 2368 Jackson Dubuque, IA 52001 The Honorable Robert Osterhaus Iowa State Representative 216 Austin Maquoketa, IA 52060 The Honorable Thomas Flynn Iowa State Senator 21367 Girl Scout Road Epworth, IA 52045 The Honorable Pat Murphy Iowa State Representative 155 N. Grandview Avenue Dubuque, IA 52001 The Honorable Paul Scherrman Iowa State Representative P.O. Box 309 Farley, IA 52046