Title
Transformational Incentive Program Changes (B)
Explanation:
At the April 18, 2005 meeting the CRA directed staff to explore options to restructure the Transformational Incentive Program in the following ways: 1) Provide for a 50% incentive cap on the program; 2) Create a differential for those districts redeveloping more slowly; 3) Address public safety, infrastructure and land assembly issues; 4) Recommend changes to the Points system; and 5) Provide a timeline for the changes.
Based on the significant investment made by several projects currently underway staff recommends a compromise where the first complete eligible application submitted by noon on December 29, 2005 in each district be given grants under the current 80% program. Second applications received regardless of date would be under the modified program.
Staff has been working with the City's Finance Department to provide an overview of the financial impact the change to a 50% cap would have on the developers. A chart showing those calculations is attached. Based on the direction given at last month's meeting staff recommends the following changes to the Transformational Projects Incentive program. These items are outlined in the attached backup.
1. Provide for a 50% incentive cap on the program- Staff is recommending that several items be changed to meet this goal including clarification that the incentives are based on the "but for" test with the given percentage over 15 years serving as a cap; the removal of the additional 10% for projects receiving over 50+ points; the removal of the 19-24 point category; and the removal of the decreasing percentage formula.
2. Create a differential for those districts redeveloping more - Staff is recommending that the CRA offer three Transformational Grants per district in the Downtown and College Park University Heights districts with the first complete eligible application submitted by noon on December 29, 2005 be given a grant at the current 80% rate, the second grant be offered with a 50% cap and the third be offered at a 30% cap, and then the retirement of the program. Staff recommends four grants per district in the Eastside and Fifth Avenue Pleasant Street Districts be available with the first complete eligible application submitted by noon on December 29, 2005 be given a grant at the current 80% rate, the second and third projects be offered with a 50% cap and the fourth project be offered at a 30% cap.
3. Address public safety, infrastructure and land assembly issues- Because the CRA has no funds to invest up front in key projects this program has been set up to reimburse the developer for a wide range of infrastructure and redevelopment related issues including stormwater, streetscaping, upgraded lighting, water and wastewater upgrades, brownfield remediation, land acquisition, and demolition. Staff is recommending the addition of clarifying language as noted in the back up. Public Safety issues would need to be addressed outside of the program within the context of the Redevelopment Plan and budget cycle. The program was originally written to allow the CRA to add an additional 1% of the total project cost for streetscaping. Since this funding is not likely to be available staff is recommending the reference be removed.
4. Changes to the Points System- Staff is recommending several changes to the points system as clarified in the back-up including the removal of the District Impact Points and several changes to clarify the desire for market rate and homeownership projects.
5. Provide a timeline for change- Earlier staff recommended that the program be limited to a specific number of grants within each district. Staff is also asking the board to consider an option that would allow the 50%/30% projects within each district to receive its incentives earlier in the process rather than over 15 years. Staff makes this recommendation based only on the program moving to the 50%/30% formula. The CRA has never bonded/borrowed for a specific project before and there are certain risks associated with bonding/borrowing. Staff recommends the following parameters if the CRA chooses this option. Bonding would not occur until the project has been completed and obtained a Certificate of Occupancy. No more than 50% of the increment would be bonded. The developer would be paid the net present value of the 15 year incentive with a cap of 50% of the increment. Insurance would be maintained on the property, at the property owner's expense, to cover the cost of repayment of the bond/borrowing should the project experience a disaster that lowered the taxable value. The current CRA debt policies would need to be amended to allow for this option.
6. General change- Staff is recommending several general changes. The developer is required to provide a letter from the Property Appraiser's office to establish the estimated taxable value of the project, and increment projection would be based on that letter. Formalize the review by a real estate development consultant prior to the Advisory Board review and change "generated by" to "received from" in the first line of III of the program. Add language that grant awards are contingent on execution of a Development Agreement with 12 months.
Fiscal Note
None at this time
Recommendation
Interim Executive Director to the CRA: 1) Recommend that the first complete eligible application submitted by noon on December 29, 2005 in each district be given grants under the current 80% program; 2) recommend the changes to the Transformational Projects Incentive program as laid out in the back up.