HomeMy WebLinkAbout11/21/2016Council Work Session
November 21, 2016
Time indicated below
Harold E Getty Council Chambers
Roll Call.
Approval of Agenda, as proposed or amended.
3:45 p.m. Discussion of Watercraft Ordinance Amendment (7-8-1: Use of Public
Facilities)
Submitted By: Paul Huting, Leisure Services Director
Approx. TIF Certifications.
4:OOpm
Submitted By:NoelAnderson, Community Planning and Development
Director
ADJOURNMENT
Kelley Felchle
City Clerk
Cedar Rapids increasingly turns to tax breaks for growth I The Gazette Page 1 of 7
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Cedar Rapids increasingly turns to tax breaks for growth
A key strategy after 2008 flood, city awards tripled in three years
The south edge of the 19-acre Fountains development at the comerof Edgewood road and Blairs Ferry roads NE is.shown in Cedar Rapids on Tuesday, Sept 20, 2016. (Adam
Wesley/The Gazette)
B.A. Morelli
The Gazette
More stories from B.A.
Nov 20, 2016 at 6:00 am j Print View
CEDAR RAPIDS — Four years ago, when developer Joe Ahmann signed an
agreement with the city to construct a six -building office and retail park called
The Fountains on farmland, some questioned the use of a public incentive —
five years of tax reimbursements worth an estimated $3.7 million — for his
private company.
The incentive helped jump-start, and remove some of the risk from, the $35
million gamble Ahmann would find in a market for hundreds of thousands of square feet of retail and office space.
The incentives came with a catch, though.
The Fountains had to hit a minimum assessed property value of $20 million by 2020, construct high -end office space in 80 percent of
three office buildings, certify annually 300 full time jobs from 2020 to 2027 and set aside 30 percent of the 18 acres as green space
with a lighted pond, fountain and outdoor seating.
"People think of TIF like a magic ATM," Ahmann said. "But you put in your money and get a portion back. Look at what we've created
in tax value in two years that wouldn't have been here."
Economic development agreements — or economic incentives made possible through tax increment financing — have been a key
strategy in rebuilding Cedar Rapids after the 2008 flood. They've been connected both to high -profile projects such as the
redevelopment of Westdale Mall and building the CRST Center, as well as smaller projects including renovation of the Ideal Theater.
While critics question economic development agreements as unnecessary or government interference in the private sector, city
officials are committed. They say the tool has successfully spurred growth that otherwise would not occur in a city where the property
tax base has stagnated and is creating a stronger, better planned city in the long run.
Tax giveaways triple
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TIF lets communities capture extra revenue created by property tax growth in pre -defined areas and reuse it in targeted ways in those
areas. This could be for road and utility improvements, or the practice more common in Cedar Rapids — using the money to entice
businesses through economic development agreements.
The number those deals awarded per year tripled in Cedar Rapids from seven in 2012 to 21 in 2015. The expected giveaway
connected to those deals climbed nearly fivefold in that period, from $7.5 to $35.5 million.
Number of projects receiving tax breaks by year
Year Projects City incentives Business investment Assessed value Jobs created Jobs retained
2012 7 $7,530,385 $68,276,000 $54,839,700 370 472
2013 11 $19,404,235 $143,680,000 $105,802,000 841 625
2014 15 $17,673,892 $102,883,649 $58,023,400 214 0
2015 21 $35,519,137 $143,090,257 $82,841,000 373 71
2016 8 $2,181,606 $36,840,000 $16,701,900 132 84
In total from 2012 through 2016, Cedar Rapids has awarded an estimated $82 million in tax breaks to 62 companies. The awards
have leveraged $495 million in private investment, 1,930 new jobs, 1,252 in retained jobs and nearly $318 million in anticipated
property value, according to city figures.
Overall, Cedar Rapids has approximately 275 tax incentive agreements on the books corresponding to $795.5 million in new property
values over the next decades.
The practice of tax increment financing is regulated by the state.
Municipalities are required to file annual urban renewal reports detailing TIF use with the Iowa Department of Management. The most
recent report for the 2015 fiscal year shows Cedar Rapids had 21 urban renewal districts, generated $14 million that year in TIF
revenue, spent $11.5 million and had $182 million in outstanding TIF revenue.
By comparison, Des Moines reported 14 urban renewal areas, generating $26 million in TIF revenue, spending $25.5 million and
having an outstanding revenue balance of $251 million.
Effects on the market
Critics are dubious, contending the system disrupts the private market, is unnecessary because people would invest anyway and
diverts money from schools, police, firefighters, libraries and other needs,
Number of tax breaks promised by the city in the coming years
0
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
40 80
Shown are the total number of tax breaks that are estimated to be
granted by the city to businesses and residents. The numbers are
broken down by fiscal year. These are based on current agreements
from the city. More could be added over time.
'You freeze the value, so the schools and everything that gets
the tax money are stuck at that frozen level," said Karen Guse, a
Cedar Rapids real estate investor who hasn't used tax
incentives. "I just don't think that is fair.°
Guse said the incentives have been used well in some cases to
spur reinvestment in deteriorated areas, such as upgrading the
First Avenue NE Hy-Vee. But they have been misused in others,
such as the $13 million and closing off Second Avenue SE from
10th to 12th Street to lure Physicians' Clinic of Iowa from
Hiawatha to downtown Cedar Rapids.
°The city too often kowtows to large investors, who I don't think
need it," she said.
Cindy Golding, who owns a building on 33rd Avenue SW, said
two tenants were lured to a downtown Cedar Rapids project
backed by tax incentives. Golding sees it as the city interfering in
the private sector.
°You are giving money to businesses and developments that
couldn't make it on their own, and when the money goes away
they can't stand on their own," Golding said.
Economic development agreements have been linked to many
major projects in recent years here.
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Developers take advantage
• The redevelopment of Westdale Mall received $11.7 million;
• Erecting the new 11-story CRST Center downtown received an $8.35 million pledge;
• And a developer wants $23 million in city aid for a proposed $103 million, 28-story downtown high rise called One Park Place.
Tax deals also have gone toward much smaller projects, such as an estimated $20,000 break for the $700,000 historic rehabilitation
of the old Ideal Theater in NewBo.
Cedar Rapids has approved eight agreements so far in 2016, and has another four in the works, including recently introduced plans
by West Side Wolf Pack V for a new brewery, which qualified under the grayfield exemption for underutilized property.
The development promises to restore the property value to $570,000 after it slid from $351,657 in 2008 to $110,400, and seeks
$95,000 in tax incentives.
"The most compelling argument against TIF is that the development would happen anyway, but the developers I talk to say it is very
problematic to get a project going without it," said City Manager Jeff Pomeranz, who was hired here in 2010 partly because of his
success in growing West Des Moines.
Incentives are directly connected to growth in tax value, so as city officials see it the system has built-in protections.
A property owner continues to pay taxes as usual on the base value before improvements. The ultimate amount of the tax break is
determined when the property is assessed. If it is worth more than expected, the tax break could be greater than the estimate. If it is
less, the incentive would be lower or possibly nothing if the plan falls through.
"If they don't spend what they said they would spend, they don't receive the rebate because it is based on value," Pomeranz said.
City demystifies tax incentive program
City officials are confident in the approach. They're actively marketing the various types of tax incentives available for development.
"We'd been doing it for years, but we wanted to be more proactive," said Jennifer Pratt, the city community development director. °We
wanted to make sure we didn't lose out on people not familiar with our community."
The city published online exactly what qualifies for an economic development agreement, and detailed the terms.
A project devoting 75 percent of the property to housing can get a 10-year, 100 percent tax exemption or reimbursement, and
commercial projects can qualify for a 10 year, 44 percent tax exemption or 10 year, 50 percent tax reimbursement, as long as they
meet city code and gain City Council approval.
Projects have to fall into one of nine categories that fit city needs.
`Open for business'
"We needed to create a culture of being open for business in Cedar Rapids,' Mayor Ron Corbett said. °And it was extremely critical
after the flood of 2008."
The approach after years of watching businesses being lured away has fueled a transformation in Cedar Rapids, he said. Corbett
points to the revitalization of downtown including construction of the CRST Center, The Fountains, redevelopment of the old Nash
Finch property along Blairs Ferry Road NE and Westdale, and vibrancy in the New Bohemia District.
"It's been communitywide," Corbett said. °It's about creating jobs and increasing our tax base."
City Council member Scott Olson, who also is a commercial broker, has been lukewarm on the use of tax incentives.
"The important part is to have a system to measure the benefits," Olson said. °We have to be careful it is not damaging something
else in the community because of the incentive. You have to have a pretty darn good reason to get it?
Olson said he is confident the checks and balances are in place, and notes the City Council has backed away or pushed back on
agreements that didn't meet the test, such as a request for an incentive for Terex to move across town to The Fountains.
Parties won't call the Terex deal officially dead, but The Fountains is moving ahead without.
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2 districts near end
TIF districts have 20-year time limits, and two districts from 1996 are coming to an end.
The Southwest TIF, which is north of The Eastern Iowa Airport, saw its base value increase from $39.5 to $250.3 million.
The city invested $31 million from the additional taxes to infrastructure improvements, such as the Edgewood Road viaduct and
improving the Sixth Street and Wright Brothers Boulevard intersection, and $6 million as incentives to business, such as Nordstrom,
National Computer Systems and the Prairie View Technology Park.
In River Ridge North, near Blairs Ferry Road NE and Ushers Ferry Road, the value increased from $13.8 to $49.4 million, with the
majority of the TIF funding, $2.4 million, used to help Toyota Financial expand into a new building.
In the case of The Fountains, four of the buildings are erected and 90 percent occupied, and the foundation for the fifth should be in
by winter, Ahmann said.
The property value has increased from $9,304 in 2006 to $10.4 million now, and a recent 10-year lease by BMO Harris financial
services promises 175 full-time lobs, which should push the development past the 300 threshold by spring.
'They are not one of the bad ones'
The state created TIF as a tool to help address areas that had deteriorated, were under performing or were losing property value, said
Dave Swenson, an economist at Iowa State University who tracks the use of tax incentives.
"Using them broadly to develop willy nilly makes no sense," he said, "but using them in targeted areas makes sense."
Cedar Rapids has $295 million worth of assessed property value tied to TIF districts, which ranks it No. 7 in Iowa, with Des Moines
No. 1 and Coralville No. 2.
The overall value of Cedar Rapids TIF property is not surprising, considering it is the second largest city in the state, but what is more
telling is the proportion of TIF compared with the total property tax base, Swenson said.
Cedar Rapids has 4.5 percent of its $6 billion property value tied to TIF, which is low compared with other Iowa cities. By comparison,
Coralville has 43 percent of its tax base in TIF.
Swenson has some criticisms — that cities shouldn't use tax incentives for retail or housing development — but considering TIF is
such a small portion of the city's tax base, he said Cedar Rapids appears to be using the power prudently.
"Cedar Rapids is not abusive," he said. "They are not one of the bad ones. They are using it wisely."
Business
Westdale
Mercy Care
CAST
The Depot
The Fountains
Cornerstone Place
The National
Northtowne Market
42nd & Edgewood
Kingston Pointe
Lofts at Red Cedar
Great Furniture Mart
West Side Transport
Great Furniture Mart
Water Rock
Sanctuary at Ellis
City incentives
$11,675,501
$10,300,000
$8,350,000
Economic development tax breaks: 2014-16
Business
investment
$90,000,000
$10,300,000
$31,000,000
$18,000,000 80
Assessment
Jobs
created
Jobs
retained
Community benefit
$60,000,000 500 0 Redevelopment of declining mall, new jobs
$7,200,000 28 0 New High Quality Jobs
Expansion of local business, downtown reinvestment,
floodwall
0
$5,426,400 $17,000,000 $11,900,000 100 0 Brownfield Redevelopment, core district housing
$3,700,000
$3,458,000
$35,000,000
$13,000,000
$26,000,000
300 0 Class A office construction
$2,300,000 0
0
Historic presrevation, adaptive reuse, core district
housing
$2 600 000 $2,600,000 $950,000 15 0 core district reinvestment, grayfield redevelopment
$2,128,000 $16,000,000 $10,400,000 60 0 brownfield/grayfield redevelopment, new jobs
$1,596,000 $12,000,000 $8,400,000 85 0 New High Quality Jobs
$1,569,400 $5,900,000 $1,920,000 0 0 Core district housing
$1,509,250 $9,200,000 $6,500,000 0 0 Downtown Housing
$1,500,000 $5,330,000 $3,500,000 0 0 Core housing
$1,400,000 $13,250,000 $9,275,000 250 450 Expansion of local business
$1,330,000 $0 $0 0 0 Historic property: downtown housing
$1,287,440 $11,000,000 $5,600,000 0 0 brownfield redevelopment
$1,239,894 $4,200,000 $3,830,000 0 0 Core district housing
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Cedar Rapids increasingly turns to tax breaks for growth
The Gazette Page 5 of 7
Business
Smulekoffs Building
Geonetric
Coventry Lofts
Mott Building
Intermec
Cornerhouse
NewBo Station
RuffaloCODY
600 3rd Ave SE
Monroe School
Kingston Village
GRR-DTE -Sullivan Bank
New Pioneer
The Gardens CCRC
Apache Hose
Raining Rose
Green Develoment Sokol
Thompson Truck and Trailer
MidAmerican Aerospace
Miron Construction
Knutson Building
Bowling Street Flex Space
Cedar Rapids Day School
Kenworth
Acme Electric
Center Point Apartments
Creekside Apartments
NADTA (CRST Truck
Training)
Commonwealth
Fleck Sales
Diamond V Mills
Auxiant
Vspec LLC (IGD Industries)
Pinnacle Engineering
Oakhill Villages
Edgewood Station
Acme Graphics
Amtek
Armar Ventures
Cona & KN Properties
Iowa Brewing
Rowell Hardware
OPC Allan Investments
1612 Development LLC
Green Development 12th
Ave
Ideal Theatre
City incentives
$1,229,743
$1,200,000
$1,183,700
$1,123,989
$1,100,000
$1,074,200
$1,064,000
$1,034,000
$1,024,000
$931,000
$836,000
$750,000
$731,500
$727,000
$683,700
$676,385
$665,000
$660,000
$585,200
$510,245
$500,000
$480,000
$480,000
$433,840
$357,000
$350,000
$350,000
$270,000
Business
investment
$15,000,000
$4,500,000
$4,450,000
$4,661,257
$12,500,000
$6,000,000
$4,000,000
$15,000,000
$5,400,000
$3,500,000
$9,766,000
$6,000,000
$5,500,000
$16,000,000
$7,310,000
$7,750,000
$2,500,000
$8,300,000
$5,000,000
$4,000,000
$7,000,000
$4,700,000
$3,500,000
$4,200,000
$1,500,000
$5,500,000
$5,500,000
Assessment
$4,500,000
$4,122,300
$1,720,000
$900,000
$6,343,900
$4,200,000
$2,800,000
$13,179,400
$4,832,400
$4,100,000
$5,000,000
$7,000,000
$1,289,800
$8,700,000
$7,200,000
$7,887,400
$576,000
$4,350,000
$5,000,000
$2,500,000
$I,234,400
$1,750,000
$2,922,500
$213,400
$3,300,000
$3,300,000
$2,800,000 $3,997,100
Jobs
created
Jobs
retained
50 0
0 60
0 0
0 0
0 200
0 0
12 0
0 0
9 106
0 0
0 0
25 0
50 0
80 0
15 27
15 97
12 0
10 34
0 40
14 4
77 0
15 0
0 0
0 0
0 0
0 0
0
0 0
0 0
12 98
0 0
30 50
7 24
0 0
0 0
2
14
0 0
35 0
16
4 0
4 0
0 0
Community benefit
Historic Preservation, downtown housing
Expansion of local business
Adaptive reuse, core district housing
Historic Preservation, core distric housing
Reinvestment in downtown
grayfield redevelopment
Core district housing, new jobs
Expansion of local business
Reinvestment in downtown
historic preservation, workforce housing
core district housing
Historic property; downtown housing
new jobs, adaptive reuse
New skilled care nursing units
Local business expansion, new jobs
Reuse of brownfield property
Historic Preservation, core district housing
Expansion of local business in target industry, new jobs
adaptive reuse of strip center
LEED Certified, New Jobs
Historic Preservation, core housing
Facility -type new to the market
Downtown Reinvestment, new jobs
expansion of local business in target industry
core district housing
Core housing, stormwater mitigation for McCloud Run
Core housing, stormwater mitigation for McCloud Run
0 Expansion of local business
$264,000 $12,992,649 $2,000,000 Historic Preservation, core district housing
$235,000 $2,000,000 $6,621,700 expansion of local business
$230,000 $4,500,000 $7,961,300 Expansion of local business
$220 000 $1,825,000 $1,189,900 downtown reinvestment, expansion of local business
$174,606 $3,600,000 $2,800,000 Expansion of local business
$150,000 $1,026,000 $792,200 Expansion of local business
$148,428 $558,000 $531,000 Core district housing
$147,000 $2,200,000 $1,384,400 new jobs
$137,734 $1,400,000 $1,148,100 17 Flood -impacted business
$130,000 $600,000 $1,983,800 45 Expansion of local business
$95,000 $800,000 $941,500 redevelopment of strip mall
$87,780 $750,000 $845,000 Downtown Reinvestment, new jobs
$52,668 $2,611,000 $315,000 Downtown Reinvestment, new jobs
$40,000 $500,000 $210,000 Historic Preservation
$40,000 $500,000 $306,900 Historic Preservation
$36,652 $350,000 $148,600 core district housing
$20,000
$20,000
$240,000
$700,000
$120,000
$215,000
I Comments: (319) 339-3177; brian.morelli@thegazette.com
4
0
0 Historic Preservation
0 Historic Preservation
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