City of La Crosse Business Roundtable

Report
COMMUNITY INCENTIVES FOR TIF AND
ECONOMIC DEVELOPMENT: FORMAL
POLICIES
Larry Kirch, AICP
Planning and Development Director
City of La Crosse
March 1, 2012
WAPA Spring Conference
PRESENTATION OVERVIEW
Background - National View of Incentives
Rationale for Proposed Policy
La Crosse - Business Assistance Efforts
Features of Proposed Policy
Feedback
Next Steps

March 1, 2012
WAPA Spring Conference
National View of Incentives

Businesses seek incentives

Governmental Response



Federal, State, Local, Economic Development
Corporations/Authorities
Federal = Tax Credits (e.g. Work Opportunity Tax Credit), low cost
financing and targeted grants
State = Tax Credits, Job Creation Tax Credits, Sales and Property
Tax Abatement, Development Zones, Authorization for TIF, Job
Training Grants, Loan programs, loan guarantees
National View of Incentives

Businesses seek incentives – it’s a given – very pervasive

Governmental Response

Boeing to Chicago - $100,000,000 in State and Local incentives for 400
jobs = $250,000 per job

Daimler Chrysler move to Georgia – Proposal included planting tulips for
German Executives, having state economic development officials dressed in
lederhosen at plant entrances to welcome employees

Wisconsin example - $87,000 per job incentive

Fort Collins Colorado Model – NO INCENTIVES, come for our educated work
force, quality of life, but we will not pay you to come here
National View of Incentives




Governing.com
Film Industry incentives
now in 40 states, up from
five states in 2002.
Some states up to 30
percent tax credits.
$1.8 billion in incentives
given between 2006-08.
State budget shortfalls
are causing reexamining
the credits, including
Wisconsin.
Rationale For Proposed Policy Incentives can be good

Why are we discussing this issue?
 Incentives
locally have escalated similar to national
examples – given incentives when not needed
 Research indicates not all incentives are worthwhile
 La Crosse has evolving but rudimentary system
 Little, if any, financial analysis of need for City
participation
 Decisions should be fact based – level playing field
needed for all businesses/developers
Rationale For Proposed Policy – What
other Wisconsin Cities are doing

La Crosse surveyed Wisconsin Communities -2009
 Eau
Claire, Wausau, Racine, Kenosha, Fond du Lac,
Sheboygan, Janesville, Oshkosh, Appleton, Waukesha,
Green Bay, Madison and Milwaukee
 Most cities surveyed in Wisconsin have no incentive
policy (4 of 13)
 Not surprisingly Milwaukee and Madison have most
sophisticated policies/programs
Rationale For Proposed Policy – What
other Wisconsin Cities are doing

15 Survey Questions
 Do
you have a written TIF policy regarding developer
incentives?
 Are the following types of projects eligible for TIF
consideration?
 Which type of projects hold priority during the
consideration process?
 Do you have a preference to TIF loans vs. grants?
 If you prefer loans do you collect interest? If yes,
how do you determine interest rate?
Rationale For Proposed Policy – What
other Wisconsin Cities are doing

15 Survey Questions
 Does
your TIF policy include job creation incentives?
If yes, what incentives do you offer?
 What other types of developer incentives does your
TIF policy include?
 Do you have a written TIF application?
 Do you charge an application fee? If yes, how much
do you charge?
Rationale For Proposed Policy – What
other Wisconsin Cities are doing

15 Survey Questions
 Do
you charge a processing fee? If yes, how much do
you charge?
 Do you use TIF proceeds to pay city staff and/or
reimburse the operating budget? (Finance, Clerk,
Assessor, Legal, Mayor, Planning)
 Do you have any type of annual review strategy?
 Do TIF projects compete with projects in a 5
year/annual capital improvement program?
Rationale For Proposed Policy – What
other Wisconsin Cities are doing

15 Survey Questions
 Have
you ever issued TIF revenue bonds?
 Do you have a maximum percentage of project cost
that you will provide to a developer based on taxable
value increase?

Survey Results – See Handout
History – Rationale



The City has been involved in economic development for
decades
 Incentives primarily consisted of Industrial Development
(reduced land price)
 City infrastructure surrounding site
 TIF – Downtown TIF #1, Valley View Mall TIF #3, and Airport
Industrial Park-Terminal TIF #4
There is a need to balance redevelopment objectives with
incentives
Development Projects can severely impact the City’s Capital
Budget, borrowing limits, debt service
Rationale for Policy Fix

Businesses seek incentives – it’s now a given

FROM :
Incentives have escalated from:
 Reduced land price (industrial)
 City infrastructure surrounding site

TO:





Grant$ of Land ($1.00)
Grant$ for construction of new buildings
Cash Grant$ (upfront/reverse) for developer costs (fill, demolition,
contamination, building construction)
Job creation Cash Grant$
Tax Base Cash Grant$
City-Business Assistance

Business loan and tax credit programs:








Small business development loans/Commercial Rehabilitation loans
Upper floor renovation loans
Architectural & Engineering Analysis 80/20 funding program
Assist with State tax credits for job creation, job training
Industrial Park administration (Airport, International Bus Park)
Business communication and outreach
Marketing and business recruitment
Tax Increment Financing (TIF)
City-Business Assistance

Business assistance & redevelopment projects:


Riverside Center buildings
Doerflinger Building





Michaels Engineering & Authenticom, Inc.
Kwik Trip expansion
Trane Plant 6
Park Plaza
4th & Jackson Streets


Future: Exxon-Mobil Oil
Future: Xcel Energy
City-Business Assistance





Provided over $4.8 million in loans (for example:
People’s Food Coop)
RLF Program has assisted over 30 businesses to create
over 450 new jobs
Former Rowley’s Office Supply now home to Kick Shoes
and City Wear clothing stores
Grand River Station
Lynn Tower
Upstairs Jule’s Coffee Shop
City-Business Assistance

Business communication and
outreach:

City-Business roundtable meetings






Nearly 35 roundtables have been held
#1 Conduct City organizational
assessment
#2 Establish a long-range plan for the
riverfront
#3 Exit 3 area development
City-Business e-newsletter
One-on-one meetings
City-Business Assistance

Marketing and business recruitment:

Grand River Great City marketing
effort





Marketing/recruitment tools
DVD
Folder/inserts
Profile & media packet
Future: Improve and coordinate
marketing efforts

Public-private working group to focus on
recruitment
City-Business Assistance

North La Crosse Business Association:





Highway 53 Corridor Study
First Impressions study & ad hoc committee
Future: Zoning study
Future: Exit 3 visioning
Future: Old Towne North
Plan
Master
Rationale for Policy Fix




Current Policy is ad hoc from project to project
Not all developer’s treated the same
City has gotten away from need-based incentives
2006 “fix” was superficial



Did not address: application fee, need-based approach, ceiling on
assistance, loans vs. grants, job quality, types of projects obtaining
assistance
2006 fix didn’t address regional aspects of incentive policies
Compact of Job Piracy by City Rejected – New Compact by 7
Rivers Region Alliance now has 100 organizations signed on
Features of Proposed Policy






Standard Application Form/fees
Only Gap financing
Ceiling on assistance
Requirements, but no incentives for job creation
(State/Federal role)
Specific guidance on project eligibility
No cash grants, instead favorable loans
Features of Proposed Policy

Unresolved Issue
 Process

- Who negotiates?
How is Underwriting going to be done and who
should pay for it
 Key
Provision - Project Evaluation – Proforma
Determines Gap
Financing Approaches
Gap Financing
Traditional
$200,0
00
$200,0
00
Bank
Borrower
$800,0
00
$700,00
0
$100,0
00
Bank
Developer
City
New Conventional Approach
TIF Funded Development
$330,000
Bank
Developer
City
$620,000
$50,000
Feedback so far…






Need Formal Policy
Need better follow-up on developer agreements
Some want super-majority vote on development
agreements
Proposed fees are counterproductive and extreme
Application deadlines will force projects elsewhere
Why does the City need outside financial or legal
help?
Feedback so far…






10% project cap is too low
Why should City get part of ROI over 15%
If no free money (cash grants), program will not get used
List of eligible projects is limited and unjustified
Raise bar even further – Personal Guarantees, clawbacks
good, conduct post mortum on all projects to determine if
need was there (unjust enrichment) and evaluation of the
TIF as a whole
Streamline initial evaluation of project
Bottom Line - Continue Incentives




City has a different bottom line than developers,
who wouldn’t take cash grants?- free money is not
free
Critical to conduct real due diligence on financial
evaluation of projects to determine gap, city has no
expertise – must have outside help
Eliminate over subsidizing (fund real gap) so the
City can assist even more projects
Eliminate GRANT$, let the state fund job creation
through tax credits
Our Next Steps






Review comments/questions
Introduce Resolution to Council
Public Hearings at Finance and Personal Committee,
Committee of the Whole
Possible Workshops with F&P Committee
Final Action by Common Council
Policy Implementation
City Policy on the provision of incentives for economic
development/TIF

Thank You!






Larry Kirch, AICP Director
City of La Crosse Planning & Development
400 La Crosse Street
La Crosse, WI 54601
789-7512
[email protected]

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