Memorandum

City of Lawrence

City Manager’s Office

TO:              David L. Corliss, City Manager

CC:               Diane Stoddard, Assistant City Manager

FROM:          Roger Zalneraitis, Economic Development Coordinator/Planner

DATE:           August 17, 2010

RE:               Request for CID for 23^rd and Ousdahl

The following memo provides an overview of the Community Improvement District proposed at the intersection of 23^rd and Ousdahl Streets.  Based on the discussion below, staff recommends approval of the applicant’s petition.  An ordinance or resolution is forthcoming to establish the District.

Overview of Proposed Community Improvement District

The owners of several parcels of land located at the intersection of 23^rd and Ousdahl Streets have requested to establish a Community Improvement District (CID).  The purpose of the CID is to provide for reconstruction and improvements to both the land and the buildings on the site.  The total investment proposed by the applicants is approximately $1.5 million.  About $558,000 of this will be infrastructure improvements, and approximately $800,000 for building renovations.  Much of the infrastructure is public, while substantively all of the building improvements are private investment.     

The applicant proposes to finance this investment with a 1% special sales tax.  The special sales tax would be in effect for 22 years, or until $1.5 million of special sales tax is collected through retail activity in the District.

Lawrence CID Policy

The City CID Policy, passed on May 11^th 2010, lists five criteria to evaluate whether to permit a new CID.  An applicant must meet at least one of these five criteria to be approved for a CID.  These five criteria are:

• redevelopment of existing commercial space;
• attraction of unique commercial, office, or industrial uses;
• new retail that adds to the sales tax base and is “unique and exceptional”;
• cultural or tourist facilities; or
• new infrastructure above and beyond the City Code requirements.

While the “unique and exceptional” language for retail is not currently in the policy, this was an oversight on staff’s part when finalizing the language for the Resolution.  For the purpose of reviewing CID requests, we will treat the “unique and exceptional” language as if it is active.

After reviewing the proposal from the applicants, staff believes that two of the five criteria are met for this CID.  These two criteria are: redevelopment, and new infrastructure above and beyond the City Code requirements.  Each is discussed in more detail below.

Redevelopment

The CID can be a useful incentive for redevelopment of existing commercial districts.  In these locations, there is generally less public improvement needed than private improvements.  As such, an economic incentive that can finance private improvement may be more useful than one that cannot.

However, market demand can incent redevelopment without economic incentives.  An important public consideration, therefore, is whether the market appears to be adequately investing in a particular area of the community for redevelopment. 

The applicants have requested to establish a CID within the 23^rd Street corridor.  This corridor extends from Iowa Street on the west to O’Connell Road on the east:

The commercial district is split in two as a result of residential properties near Haskell University.  Not included in this redevelopment corridor is the new Fairfield Addition to the east.  Fairfield is being developed on formerly vacant land, and therefore should not be considered as part of a redevelopment area.  The applicant’s property at 23^rd and Ousdahl is near the western edge of this corridor.

The following table shows the current commercial property value, as well as commercial investments over the last 5 years, in the 23^rd Street corridor and in the rest of the City.  This table does not show the value of land, only the value of real property:

The value of properties in commercial districts in Lawrence appraised at $457 million.  Of this, about 14 percent, or $62 million, is in the 23^rd Street Corridor.  Over the last five years, the 23^rd Street Corridor has received about $12.5 million of the commercial investment within the City’s commercial districts.  This is just over 12 percent of the commercial investment in the City’s districts.  Accounting only for reinvestment, the 23^rd Street Corridor has received a smaller share of investment.  Only $5.3 million of $48 million- or around 10 percent- of all district reinvestment has occurred along 23^rd Street.

This suggests that commercial reinvestment may be lagging in the 23^rd Street corridor. Incentives might help increase private investment in this area.  Thus, a CID may be appropriate to strengthen redevelopment of this important commercial area.  The $1.5 million of investment proposed by the applicants would be about 12% of the total investment on the 23^rd Street corridor over the last five years.

Infrastructure

The 23^rd and Ousdahl proposal contains a number of improvements to the private and public infrastructure at the site.  This includes closing a curb cut onto 23^rd Street; increasing the amount of pervious surface; improving the sidewalks as well as the curbs and gutters; repaving and restriping the parking lots; and replacing the signs along 23^rd Street, among other improvements.

The Planning Department has stated that the upgrades the applicant has proposed are not required by the Development Code at this time given the uses and redevelopment requested with the approved site plan. Improvements could be required if major redevelopment occurs in the future, but would occur in an ad hoc way compared to the consolidated fashion proposed with this request. Thus, every public and private improvement being made exceeds code requirements at this time.  As noted, there were over $500,000 of infrastructure improvements to the site, much of which is public.  This amounts to over one-third of the investment in the project.      

Additional Considerations

There are two other items that the City Commission should consider regarding this CID application.  These are the amount of private investment, and the nature of reinvestment on the 23^rd Street corridor.

First, the City’s policy discourages, but does not prohibit, using a CID sales tax to fully finance private improvements.  The proposed sales tax for 23^rd and Ousdahl fully finances the private improvements included in the original request.  However, the applicant is working on an additional project that could lead to over $700,000 of private investment above that proposed in the original application.  The applicant has discussed with planning staff the need for additional site planning for this particular building.  This investment would not use special sales taxes, but the CID special sales tax on other portions of the project would make this additional investment possible.  If completed, this would result in over $2 million in project investment, making the 23^rd and Ousdahl project one of the largest investments along 23^rd Street in the last five years.

A second consideration is the nature of redevelopment in the 23^rd Street corridor.  The corridor is “stripped out”, which means that much of it is very narrow.  Ownership along the corridor is also fragmented.  Both conditions make it difficult to undertake a more comprehensive redevelopment effort.  This project mitigates these conditions by placing four contiguous parcels that span both sides of 23^rd Street into a single CID for redevelopment.  This helps make redevelopment in this area more comprehensive than conditions along the 23^rd Street corridor generally allow.

Summary

The 23^rd and Ousdahl proposal meets two of the five criteria for in the City’s CID policy.  It contributes to redevelopment by investing in an area that may not be receiving an adequate share of reinvestment.  It also provides infrastructure improvements that exceed the Development Code for the anticipated level of use and development at the sites.  In addition, more than $700,000 of private investment will be funded without using the CID sales tax.  With regard to conditions along 23^rd Street, the project successfully merges several parcels into a single district, which helps promote more comprehensive redevelopment.  Finally, this project is likely to be one of the largest investment projects along the 23^rd Street corridor in the last five years.

Recommendation

Staff believes that it is appropriate to establish the CID as requested by the applicant, with a 1% special sales tax.