Consideration and Adoption of Resolution No. 2020-07:  A resolution of the Flagstaff City Council adopting a Flagstaff Adaptive Reuse Program to support small businesses during the site plan review process and to encourage adaptive reuse of vacant commercial or office spaces.

An adaptive reuse program is intended to assist small businesses with the initial costs of moving into a new space. Often these initial costs are a significant barrier to the reuse of vacant space in the community and to the potential expansion of a small business. Staff looked at existing successful programs in other communities and worked with Community Development and other stakeholders to develop a policy intended to serve our unique community. 

The proposed Adaptive Reuse Program, funded with BBB Economic Development funds for $25,000, has been developed to set small businesses up for success and to activate vacant space. The program requires a business owner to have a current business plan, to employ a design professional, to locate in an existing vacant space under 5,000 square feet, and to attend a free pre-application meeting offered by Community Development at the City of Flagstaff. Applications that meet the criteria may be awarded $5,000 towards eligible expenses associated with the permitting process and redevelopment of the space. Funds are intended to be transferred internally to the City of Flagstaff cashier so that the business owner may draw upon those funds to pay for associated development review fees.

$25,000 has been budgeted for the Adaptive Reuse Program in 052-07-213-0830-4-4290. The budget approval of this project occurred during a far more stable business environment than is being experienced during this time of the global pandemic of the novel Coronavirus. The program is now intended to assist in small business development, potential job creation, and support the recovery of our local economy by setting up local businesses for success.

This Adaptive Reuse Policy works toward a community and Council goal to activate vacant spaces and to support local businesses. It supports the Regional Plan goal of infill and the Council goals to grow and strengthen a more equitable and resilient economy and to improve the small business experience when going through the City process. This policy is the result of Business Retention and Expansion having direct engagement with internal stakeholders such as Building Inspection, Engineering, Development Services, the Office of the City Attorney, and Management Services for the development of this policy that meets unique needs of Flagstaff. The offices mentioned are prepared to implement the Adaptive Reuse Policy upon Council approval.

Council Goal: IMPROVE THE SMALL BUSINESS EXPERIENCE WHEN GOING THROUGH THE CITY PROCESS
Regional Plan Goal ED.1. Create a healthy environment for business by ensuring transparent, expeditious, and predictable government processes.
Policy ED.1.2. Steadily improve access to easily understandable public information.
Policy ED.1.3. Use economic best practices to promote quality and fiscally sound projects.
Regional Plan Goal ED.3. Regional economic development partners support the start-up, retention, and expansion of existing business enterprises.
Policy ED.3.1. Encourage regional economic development partners to continue proactive programs to foster the retention and expansion of existing enterprises and home based businesses in the community.
Policy ED.3.4. Take advantage of federal, state, and local incentives available for business retention and expansion efforts.

Council approved to budget $25,000 for staff to develop an Adaptive Reuse Policy during the 2017-2018 budget cycle.

Option 1: Approve the resolution and the related policy as it is written.
Option 2: Approve the resolution with amendments.
Option 3: Reject the resolution and the related policy as written and provide guidance.

In an effort to assist small business development and prepare policies for more difficult economic environments the Community Investment Director presented the conceptual framework of an adaptive reuse policy in the 2017/18 budget discussion.  The Flagstaff City Council was supportive of the development of such a policy and approved funding for the program with $25,000 one-time BBB funding.

Staff researched examples of other adaptive reuse policies to determine a framework to best support business within the City of Flagstaff. For example, the City of Phoenix Policy is quite complex with three tiers of eligibility for projects in structures ranging from under 5,000 square feet to 100,000 square feet, and funded with $100,000. Staff explored adaptive reuse policies implemented by other municipalities and realized that in general terms, adaptive reuse may mean any adaptation of a previous use or structure, and in terms of policy development that such a policy should be designed to address specific unique needs of the community.  

Staff was also aware of some small businesses struggling to open their business in Flagstaff and used discussions with these specific business owners to inform Flagstaff's adaptive reuse draft policy. Not only is the funding intended to assist in the initial costs that can be prohibitive for a new business, but the policy guides the business owner to the free pre-application meeting and other resources. This is an important step that allows a business owner to meet with development staff to learn how to make their concept of development a reality. Additionally, it encourages the use of a design professional. A design professional can help an independent business owner to best plan to convert an existing space into a new concept to meet the business’s needs, but that cost is often prohibitive. However, use of the design professional can make the experience better and faster both for the business owner and for the staff. The hope is that the funding and the use of these other tools will help the applicant and Community Development staff have the easiest process possible which leads to savings for both entities.

One specific element that has been a discussion point is the possible use of a claw-back provision, or the retaining of funds until after the process is successfully completed. In this policy there is no claw-back provision and funding is accessed at the time of need. After review and discussion with other cities and community members, the decision was made to generate the draft without those criteria. Running a business takes enormous risk, capital, and perseverance. Independent businesses, start-ups, and small businesses contribute to greater economic resilience for a given economy and community. After meeting certain criteria to be eligible to use the Adaptive Reuse funding of $5,000, an eligible business will be able to draw down the funding as needed so that the business owner may use more of their start-up capital to launch their business successfully.

Success of this and other Adaptive Reuse programs is determined by the program supporting businesses in their efforts to use vacant space. Starting a business also takes enormous risk. The term seed money refers to money that is given to a business idea so that it may try to grow into a sustainable business. Seed money implies a small amount of money that is given in the hope of growth and with the understanding that businesses fail, seeds may grow and die or grow and thrive.

Added benefits of the program include greater understanding of the business community as well as staff identification of structures or areas of our community that struggle to grow capacity or resilience and why. Such structures or areas of our community may need new investment or infrastructure to become more viable. Over time, as more individuals use the Adaptive Reuse program, staff has the opportunity to learn of structures that have failed to grow a business.

The funding for the Adaptive Reuse program is one-time BBB-Economic Development funding. Once the funding has been used to support five separate businesses, staff will report to Council the level of success of the program. If the program is successful, staff may bring those stories back to Council as part of future budget discussions.

The community has brought the topic of adaptive reuse to many different city offices during outreach activities over time. Historic Preservation, Advanced Planning, Development Services, Economic Development, and Sustainability are a few of the offices that have heard directly from the community during plan development and general outreach efforts that there is great interest in preserving the character of the community while helping that character serve as home to business and job opportunity. The Adaptive Reuse policy sets small businesses up for success in places that preserve community and neighborhood character.

Community Investment staff has engaged the community at large throughout the development of this program. Many comments and suggestions have been incorporated into the policy.