7.
City Council Combined Special Meeting/Work Session
- Meeting Date:
- 09/13/2016
- From:
- David McIntire, Community Investment Director
- Department:
- Economic Vitality
Co-Submitter:
TITLE:
Development Tax Incentives and Proposal for Incentive Related to Project at I-40 and Country Club
DESIRED OUTCOME:
Staff was asked to inform City Council of Vintage Partners, LLC's (Vintage) request to use a retail tax incentive agreement to facilitate the development of a parcel of land located on the east side of Flagstaff. This presentation will inform the City Council and the public about the requirements and impacts of retail tax incentives and provide necessary background to allow City Council to provide direction regarding whether it is interested in using this type of incentive, both in general and with respect to Vintage's request.
EXECUTIVE SUMMARY:
Retail Development Tax Incentives (Incentives) are a type of economic development tool used to stimulate or accelerate retail development. The tool uses revenues anticipated to be generated by the specific development's transaction privilege tax, commonly called the sales tax, to reimburse the cost of public infrastructure required for the development. The theory, in its simplest form, is that the community receives enhanced infrastructure and additional revenues by using resources it would not have generated without the development.
Incentives of this kind have been used in various communities throughout Arizona and the nation to stimulate development. There have been conflicting opinions regarding the actual benefit to the public from these types of incentives, which will be discussed in more detail during the staff presentation.
Vintage has requested the use of an Incentive to overcome cost issues associated with infrastructure for their project. Vintage asserts that the development is not feasible and states that it will not proceed with the project as originally planned without the Incentive.
The Incentive proposed by Vintage would provide a rebate of 50% of sales tax generated by the project to reimburse Vintage for infrastructure costs up to $2,500,000. The reimbursement will continue until $2,500,000 has been reached or fifteen years has passed, whichever happens first. Additionally, the funds from the Capital Improvements Program currently set aside for the improvements to the drainage in Fanning Wash will be provided to Vintage. These funds are programmed at $250,000 for a total anticipated reimbursement to Vintage of $2,750,000.
Vintage's project is divided into two phases and includes two one-hundred-room hotels, approximately 250,000 square feet of retail space, and a residential component. The first phase is currently under construction. The second phase of the project is currently in the design review process with Community Development.
Vintage proposes reimbursement for two types of infrastructure. The first is the realignment and improvement of Soliere Avenue. The second is the drainage improvements to Fanning Wash to address flooding issues in the area. The street improvements are not required for health and safety purposes and are not planned to be addressed by the City's Capital Improvements Program. The street improvements will create a larger piece of developable land for Vintage to utilize. On the other hand, some of the Fanning Wash improvements are scheduled in the City's Capital Improvements Program.
City Council has a number of options to consider:
1) The Council may provide direction for staff to pursue additional detail and negotiate a development agreement amendment for Council to consider regarding the incentive requested by Vintage. In this case, staff will continue to work with Vintage on finalizing the amendment for Council to consider as an action item.
2) Council may also direct staff not to pursue the additional information if Council is not interested in using this type of incentive for Vintage's project.
3) Irrespective of Vintage's request, Council may provide guidance on whether it is interested in considering sales tax incentive agreements, like the one proposed by Vintage, on a case by case basis, or if Council wants staff to develop a policy for consideration that would provide parameters for the use of incentives such as this.
Incentives of this kind have been used in various communities throughout Arizona and the nation to stimulate development. There have been conflicting opinions regarding the actual benefit to the public from these types of incentives, which will be discussed in more detail during the staff presentation.
Vintage has requested the use of an Incentive to overcome cost issues associated with infrastructure for their project. Vintage asserts that the development is not feasible and states that it will not proceed with the project as originally planned without the Incentive.
The Incentive proposed by Vintage would provide a rebate of 50% of sales tax generated by the project to reimburse Vintage for infrastructure costs up to $2,500,000. The reimbursement will continue until $2,500,000 has been reached or fifteen years has passed, whichever happens first. Additionally, the funds from the Capital Improvements Program currently set aside for the improvements to the drainage in Fanning Wash will be provided to Vintage. These funds are programmed at $250,000 for a total anticipated reimbursement to Vintage of $2,750,000.
Vintage's project is divided into two phases and includes two one-hundred-room hotels, approximately 250,000 square feet of retail space, and a residential component. The first phase is currently under construction. The second phase of the project is currently in the design review process with Community Development.
Vintage proposes reimbursement for two types of infrastructure. The first is the realignment and improvement of Soliere Avenue. The second is the drainage improvements to Fanning Wash to address flooding issues in the area. The street improvements are not required for health and safety purposes and are not planned to be addressed by the City's Capital Improvements Program. The street improvements will create a larger piece of developable land for Vintage to utilize. On the other hand, some of the Fanning Wash improvements are scheduled in the City's Capital Improvements Program.
City Council has a number of options to consider:
1) The Council may provide direction for staff to pursue additional detail and negotiate a development agreement amendment for Council to consider regarding the incentive requested by Vintage. In this case, staff will continue to work with Vintage on finalizing the amendment for Council to consider as an action item.
2) Council may also direct staff not to pursue the additional information if Council is not interested in using this type of incentive for Vintage's project.
3) Irrespective of Vintage's request, Council may provide guidance on whether it is interested in considering sales tax incentive agreements, like the one proposed by Vintage, on a case by case basis, or if Council wants staff to develop a policy for consideration that would provide parameters for the use of incentives such as this.
INFORMATION:
COUNCIL GOALS:
9) Improve the economic quality of life for Flagstaff through economic diversification, and by fostering jobs and programs that grow wages and revenues.
REGIONAL PLAN:
CD.1.6 - At the City level, provide a regular analysis of funding and financing policy alternatives needed for infrastructure development and rehabilitation.
ED.8 Promote the continued physical and economic viability of the region's commercial districts by focusing investment on existing and new activity centers.
9) Improve the economic quality of life for Flagstaff through economic diversification, and by fostering jobs and programs that grow wages and revenues.
REGIONAL PLAN:
CD.1.6 - At the City level, provide a regular analysis of funding and financing policy alternatives needed for infrastructure development and rehabilitation.
ED.8 Promote the continued physical and economic viability of the region's commercial districts by focusing investment on existing and new activity centers.