Title
Review of the Transformational Projects Incentive Program (B)
Explanation
At the March 14, 2005 City Commission meeting, it was suggested that the Community Redevelopment Agency (CRA) review the Transformational Incentives program. There has been some concern discussed that the program may be too generous and does not provide enough increment to the CRA districts.
The history of the program is as follows. At the December 2003 CRA meeting, the Board directed staff to prepare an incentive program for projects that were transformational in nature. Staff was asked to create a program that met several goals: to provide incentives that were performance based; to provide the CRA with a clear way to evaluate which projects would have the largest impact on redevelopment; and to assure that the District receive some of the financial benefits from the increased tax increment immediately. This new program is targeted towards those projects that are so large in scope, or are in such prominent locations, that they would have a significant impact on the district in which they are built. Because these projects are more comprehensive, the development gap is greater. The goal of the program is to help the developer bridge the gap and bring the project to fruition, thereby transforming the area in which they are located. Because the City is no longer in a position to lend the CRA funds for upfront payments to the developers, the incentive program was required to have payments to the developers after the project was completed on fully on the tax rolls
In February 2004, the CRA approved the concept of a scoring system that could be used to evaluate the projects and to determine the level of incentives that a project would be eligible to receive.
The point system was developed so that the more desired items a project provides, the greater the incentives offered. There are enough categories so that projects would not have to provide everything to receive enough points to be eligible for incentives. A wide variety of combinations would be accommodated by the system. Categories include items such as number of residential units, whether those units are rental or condominium, amount of retail and office space provided, public parking generated by the project, number of stories used, and the overall impact on the district. There are merit points built into the system so that the CRA would have an opportunity to award points for special components of the project, including prominent location or resolving existing area flooding.
The Advisory Boards each reviewed the program and made recommendations. A number of their recommendations were incorporated into the program, although some Advisory Board recommendations were found not to be appropriate. Initially, the CRA approved the concept recommending two funding levels with a decreasing payment scale. The Advisory Boards recommended that the points required in order to be funded be higher than originally considered and that the spread between the percentages of incentives provided be wider. Based on the Advisory Boards recommendations, if a project received 25+ points it would be eligible for 80% of the increment for 15 years. Those receiving 19-24 points would be eligible for 60% of the increment for 15 years. The decreasing payment scale would allow the developer to receive the highest incentives during the first five years of the project when it is most needed, smaller amount in years 6-10, and a still smaller amount in years 11-15, with the total of the payments equaling 80% of the increment over 15 years. As an example, if the developer qualified for 80% of the increment for 15 years, they would receive 90% of the annual increment in years 1-5, 85% of the annual increment in years 6-10 and 65% of the increment in years 11-15. In the 60% range the developer would receive 90% of the annual increment in years 1-5, 60% in years 6-10 and 30% in years 11-15.
When a project applies for this program, the potential tax increment will be determined and a 3% growth rate would be applied as a cap for the payments. The developer will be asked to work with the Property Appraiser to obtain a letter providing the estimated taxable value of the property. As the project comes on line, the developer would receive an annual payment based on the percentage of the TIF generated by the project. Over the course of the agreement, the developer's payments would be capped by the total initially agreed upon. Should the payments reach the limit prior to year 15, no additional payment would be made. If the cap amount were not received by year 15, no further payments would be made.
At the recommendation of the Advisory Board, while the overall program remains the same, each district has a point system by which applicants would be evaluated. This allowed the districts to create point systems that reflect the district's particular goals.
The CRA adopted the program at their August 16, 2004 meeting with two changes. The reference to eminent domain was removed from the program and the CRA added that for projects that received 50 or more points the CRA could, at its discretion, provide an additional 10% of the increment to the developer, making the cap 90% of the increment over a 15-year period.
Fiscal Note
None at this time.
Recommendation
Executive Director to the CRA: 1) maintain the Transformational Project Incentive program; however, limit the total increment allowable to 80%.