Memorandum

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager
FROM:	Diane Stoddard, Assistant City Manager
CC:	Cynthia Boecker, Assistant City Manager
Date:	March 31, 2008
RE:	Tax Increment Financing Policy and Transportation Development District Policy

As discussed at a study session in January, many cities have adopted policies on various economic development tools. Several of the larger cities in Kansas have adopted policies regarding the establishment of tax increment financing (TIF) districts and transportation development districts (TDDs). TIF districts are a redevelopment tool that enable the incremental revenues from a development to pay for public improvements associated with the development in order to help spur development. TDDs are a tool to enable the use of either special assessments or a special sales tax to be added to an area with the owner’s consent to finance certain transportation infrastructure projects.

Attached is a table outlining the key elements of both TIF and TDD policies. Also attached are some sample policies from the cities of Overland Park, Lenexa, Olathe, and Merriam. The draft TIF and TDD policies have been developed using the elements from other communities as a guide. It is important to emphasize that, rather than simply reiterate in the City policy the process requirements and other issues outlined in state statutes, generally these draft policies emphasize additional process clarifications and requirements not provided in state statutes. The state statutes will serve as a guide for the appropriate process steps.

Gary Anderson, the City’s bond counsel from Gimore & Bell, has reviewed the draft policies and his comments have been incorporated in the drafts.

Additionally, it is important to note that the recently approved Oread TIF project would meet all of the requirements set forth in the proposed TIF and TDD policies.

Many of the TIF and TDD policies from other communities require significant application fees and ongoing administrative fees. City staff does not believe these fees are necessary given that the project, if approved under each policy, will have a significant benefit to the City and should be encouraged by the City.

TIF Policy Draft:

The draft policy addresses the following key elements:

Process:

· Requires submission of a written proposal

· Governing Body will decide to commence statutory process to create a redevelopment district as set forth in the TIF Act

· If the district is approved, the City and the applicant will enter into a redevelopment agreement upon approval of the redevelopment project plan

Criteria:

· City will use TIF judiciously for projects that demonstrate a substantial and significant public benefit

· Project will construct public improvements that will, by creating new jobs and retaining existing employment, eliminate blight, strengthen the employment and economic base of the City, increase property values and tax revenues, reduce poverty, create economic stability, upgrade older neighborhoods, facilitate economic self-sufficiency, promote projects that are of community wide importance and implement the Comprehensive Plan and economic development goals of the City

· The TIF proposal must demonstrate that “but for” the use of TIF, the project would not be completed

· TIF projects involving debt issuance must provide debt coverage of at least 1.25 times the projected debt service

· Amount of TIF assistance is based on economic payoff expectations and significance of project to the community

· TIF proposals that provide for the redevelopment and stabilization of residential, commercial or industrial areas that have or will likely experience deterioration will be favored

Developer Requirements/Contribution:

· Developer must demonstrate financial ability to complete and operate the project

· Projects that have at least a 50% developer contribution toward the total project costs will be viewed more favorably

Agreement:

· A redevelopment agreement with the developer is required. A funding agreement may also be required that sets forth certain costs regarding the evaluation of the proposal that will be paid by the developer

Fees/other Costs:

· Developer may be required to enter into a funding agreement to pay for certain costs of evaluating the proposal and if the district is formed, these costs may be reimbursed to the developer as TIF eligible costs

TDD Policy Draft:

The draft policy addresses the following key elements:

Process:

· Developer submits petition in accordance with state statute

· Governing Body then follows statutory process to create a TDD

Criteria:

· TDD shall only be used either as a pay-as-you-go situation where the developer has installed all of the public improvements at no cost to the City or in situations where the City installs all or a portion of the pubic improvements

· The use of TDD should not alter the requirements of the City’s development policy in regard to the requirements of a development to pay for public infrastructure

· At least one of the following criteria should be met:

o Promote and support efforts to redevelop sites within the City

o Attract unique retail and/or mixed use development which will enhance the economic climate of the city and diversify the economic base

o Result in building transportation infrastructure beyond what the City can require or would otherwise build

Developer Requirements/Contribution:

· Developer should provide evidence that they have the financial ability to complete and operate the project

· Projects with equity or private financing contributions from the developer in excess of fifteen percent (15%) of the total TDD eligible expenses will be viewed more favorably

Agreement:

· A development agreement would be required between the City and the developer

Fees/Other Costs:

· The applicant may be required to pay costs such as outside consultant and attorney fees and such fees may be considered project costs and may be reimbursed from TDD revenues if a TDD is established

Requested Action:

City staff requests feedback on the proposed policies by the City Commission. Additionally, staff suggests that a period of at least 30 days be established for the purpose of gathering public comment regarding the draft policies.