ED & Planning Committee Meeting Summary for February 21, 2007 Page 1 COMMITTEE AGENDA TOPICS I. BUSINESS CORRIDOR REVITILIZATION STRATEGIC PLAN Action: Review Draft Business Corridor Revitalization Strategic Plan. II. SCALEYBARK TRANSIT ORIENTED DEVELOPMENT Action: Review updated information on Scaleybark Transit Oriented Development proposals and ask Committee to affirm or revise its January 31st recommendation to City Council. III. ECONOMIC DEVELOPMENT (ED) FOCUS AREA PLAN for 2008-2009 – Action: Review and discuss Draft 2008-2009 ED Focus Area Plan for Council consideration. COMMITTEE INFORMATION Present: Time: Councilmembers John Lassiter, Andy Dulin, Don Lochman, Nancy Carter and James Mitchell 3:30 p.m. – 5:35 p.m. ATTACHMENTS 1. 2. Scaleybark Station Area Transit Oriented Development FY2008 & FY 2009 Strategic Focus Area Plan Draft DISCUSSION HIGHLIGHTS I. Subject: Business Corridor Revitalization Strategic Plan Darrell Williams, (Co-Chair, Business Corridor Revitalization Strategic Committee): Back in September, the City brought together 25 diverse business and community leaders to work with staff to go through this strategic plan for corridor revitalization. We have had some real lively discussions among the members and I think we can come back with some real good recommendations for you to consider. Since October, the Steering Committee met monthly and we had the opportunity to review and discuss the valuation of the current corridor efforts that are going on and made some suggestions for improvements in the area of study. We also reviewed several peer cities relative to Charlotte to see what are the best practices, what are the types of things they were doing and made some suggestions for incorporating some of the good things that are happening in those cities. We also assisted staff in … information so the focus group could create the strengths, weaknesses and opportunities in our community relative to these corridors. Finally we provided some feedback to the Plan which Tom will share with you. As a Committee, we believe that we really represent the interest of the community. It was a good diverse group, there was a lot of discussion, a lot ED & Planning Committee Meeting Summary for February 21, 2007 Page 2 of debate and we think the Plan you have before you is one that was really supported by the Committee. I think the community will be excited about the potential of that Plan. One of the things we talked about in particular was making sure that the City involved the County as a partner with CMDC’s funding to help implement this study and to make sure that we stay on the County to continue to improve the permitting process. That is real important because several businesses along the corridor said they want to do certain projects, but they get intimated by the permitting process. As you know, the corridor revitalization is a very complex issue. It is going to take several partners and a lot of collaboration among many to insure the success of these corridors. It is great that the City is willing to facilitate that process, but the City can’t do it alone. What the City can do is help facilitate it to make sure that the corridors in the City are improved to improve the quality of life throughout the community. Lassiter: This is a tremendous piece of work and I think from where we started as a Council, not sure how this is going to end up, I think we continue to come up with a framework that we can be … Williams: One of the things we had to deal with, there was some community people there that felt like the neighborhoods around these corridors need to have some focus as well because as businesses come into these areas, they want to feel safe. I think while the Economic Development Department is not responsible for handling these neighborhood issues, the key is to make sure that these neighborhoods are being taken care of so businesses will feel more comfortable coming into these corridors. Flynn: What you have in front of you is a document that takes the executive summary and the recommendations and the work plan because I think that is really the heart of what you want to talk about. He pointed out changes that have been made, the first is on page 3 of the draft in the italics section, which is really the goals from the overall policy statement. We have changed the number 3 there to read “support the revitalization of corridors into mixed use areas promoting the adjacent neighborhoods”. These corridors are not just business corridors. When you look at Beatties Ford Road, you have mixture of uses on Beatties Ford Road. You have a mixture of uses on Freedom Drive as well as on Wilkinson Boulevard. They are really mixed uses corridors that support the adjacent neighborhoods so we wanted to make that a clearer change, that it is not just business corridors. Further down in the midsection of that page we have said basically that this report is recommended based upon where we have made other neighborhood improvement program investments, where we have adjacent neighborhood projects that we are working on and a variety economic and social variables that we showed you and CMDC showed you that we have identified five corridors as priority corridors. That is Beatties Ford, Eastland Mall area, Rozzelles Ferry, North Tryon, and the area around Wilkinson, Freedom and Morehead and Bryant Park. Questions/Answers/Comments Dulin: Tom, are those five in order? Flynn: No. Dulin: When will they start being shuffled? Flynn: Our program is to attack them all simultaneously. I think with the work that CMDC is doing that you are seeing on Rozzelles Ferry, the work that we will be kicking off with the Urban Land Institute at Eastland, and some of the work that we have already kicked off on North Tryon Street with the North Tryon Street Plan, and the Bryant Park Plan, all of those are very ED & Planning Committee Meeting Summary for February 21, 2007 Page 3 Lassiter: Flynn: Carter: Flynn: Carter: Flynn: Carter: Flynn: Lassiter: Carter: Foxx: Carter: Lochman: Foxx: Flynn: Lassiter: achievable. My sense is that it is a function of timing and as you have private interest, as you have available land, as you have tools that fit, that will drive the efforts to some extent. In the case of North Tryon, it is going to have to come on the backbone of the Plan. In the case of Eastland Mall, we are going to be using the combined efforts of the ULI study with the interest of the key land owners, Bryant Park a redevelopment that is underway, Rozzelles Ferry an opportunity to sell off existing public property and convert that into infrastructure improvements. Beatties Ford, as we’ve got a plan in place, now the question is how do you begin to stimulate that kind of development you want on the corridor. If a developer were to walk in here with something that is not on one of the three things, we wouldn’t say, no, sorry that is not in our priority area. He directed the Committee to the recommendations that are on Page 5. We have modified some of the language in light of your last conversation about this. Is this a revolving fund? If the projects are sold off and if we have an investment in the plot of land, for example, if an investor comes in and sells it to someone, would that money come back into the development? Yes, if there are proceeds from the sale, yes that would come back. Net or gross? Net proceeds. It has been our experience on Wilkinson and it has been our experience in other places that you are going to be doing some writing down of land costs. That should be expressed in the title of that fund because I am not sure that the community understands that this is ongoing. That is a good point and we can make that change. My understanding of that entity on our budget was that it was not set up to be any kind of revolving, but it was intended to be some cost but obviously if we are able to generate value upon resale of some transaction, it is a one-time chunk of money. It is not like CMDC money that has an expectation of going in, spinning out and coming out for reinvestment. I may be wrong, but I believe that was the premise, which is why you state that if these funds are gone the need will be to refund that source in future years. I think we need to keep a certain level of investment in the program, how it is achieved. I think we need to debate as a Council, but I think part of that idea as a revolving fund is a very valid one because it dedicates that initial investment. I think both of you are right actually. I think the fund is not itself contemplating some type of revolving funding; however, CMDC actually had a policy statement when it was created to reinvest proceeds it recovers from investments it makes. You may see ripple effects of these investments over time as a result of what CMDC does. Other investments may be just some costs so I think there is some truth in what both of you are saying. I think that is a policy debate that we need to have on Council. How much has the CMDC generated? Do we know at this point in time, for reinvestment? I don’t know, but they have recovered some from the Wilkinson Business Park. The City West Commons is in the process of being sold, but has not been sold yet. Frankly, it is not like a market transaction so you are not going to get the kind of return you would get in a market type transaction. My understanding is that CMDC has about $1 million in equity. I think the premise has been with CMDC invest, each time they invest it is going to lose some of its value, but it pulls some value back out and is able to invest that over time, and if declining to the point to it reaches where it needs a new injection of cash. It will recover ED & Planning Committee Meeting Summary for February 21, 2007 Page 4 Foxx: Lassiter: some of those costs for potential reinvestment. I think the way to think about this, take Belvedere for example, today Belvedere is not generating any return to the City. Once that business park is developed, it will create $8 million worth of value which can then be transferred into other City priorities like roads and other things. I’m not too hung up on whether it is revolving or not revolving. I think Ms. Carter’s point is a good one and certainly as we are looking at this issue and we analyze the raising of funds, should there be some guidelines in terms of return and replenishing those kinds of purposes. (Continued presentation on the review of the draft) Flynn: Lochman: Flynn: Lochman: Flynn: Lochman: The real point of consistency and what Darrell heard from the Committee was the need for the City and its partners to purchase land, assemble land and redevelop land in the corridors. He directed the Committee to Page 7 under #5 – Councilmember Carter asked us to go back and look at the “Big Box Study” and look to see what are recommendations in there that are not covered by this report or have not otherwise been implemented from the Big Box Study. There are three of them in terms of looking at studying tools to assist developers financially in the up-fitting of vacant big boxes, looking at flexibility on setbacks, especially the larger corridor planning process, not just individually, but part of a larger corridor planning process. Also, the idea of soliciting proposals for area redevelopment rather than by parcel redevelopment. When it talks about the City has to answer a fundamental question, how does it identify the right companies who group the business corridors? How does it address the work force needs of these employers? How can it leverage the … they should support both efforts. That bothers me. I just don’t see government’s role. I think you have to create a market environment that is sufficiently attractive to make companies want to come and participate in these areas. When you go out and recruit companies it smacks immediately, what are you going to give these companies to get them to come. We already have one training program after another throughout the City and County so I would hope that we are not considering anything incremental. I think there are two pieces of that. The first piece is totally … and that is what section one talks about. Making it an attractive place where companies want to be. We’ve done a very good job of that on Wilkinson Boulevard. The second piece of that is trying to identify companies that have a competitive advantage of being located on a corridor. They want to be close to the Center City, they want to be close to other suppliers, so they gain some competitive advantage. What are those – maybe marketing corridors is a way to attract them. Right now nobody is doing that. I don’t have any problem with marketing as long as marketing doesn’t mean “and by the way here is a list of subsidies that will bring your way …” The second piece of that is more of a retail piece which we heard from the neighborhood saying there are retail services that are missing on the corridors. Part of that would be to go outside to identify those and market and recruit those. That may require some subsidy to get them to go into a land redevelopment project on Beatties Ford Road. You may have to subsidize the total redevelopment project. That puts the government in a role of trying to evaluate how a particular business model or a particular retail chain will perform in a particular area. With all respect, you can’t do that within any reasonable sense of reality, so you are right back to some kind of guarantees and ED & Planning Committee Meeting Summary for February 21, 2007 Page 5 Flynn: Foxx: Lassiter: Lochman: Lassiter: Kimble: if you don’t make X we will give it to you. It is unhealthy. It may not take the subsidy. Don, I agree with you to the extent that what you are saying you can’t subsidy your way into supporting sustainable businesses in these areas. I think as you go through this, part of what they are trying to do is to say that subsidies can play a role, but I don’t expect a company will sustain its presence in an area because you subsidized it. It is going to be because it is safe, because the infrastructure is there, because there is economic decisions that that company has made that justifies its presence in a particular place. Part of the challenge is that a lot of companies don’t know how to think about these markets. An example, there is a part of Los Angeles that is very, very poor and Harvard Business School did a study of that area where the median income levels were around $13,000 per year. You compare your immediate income survey to that area versus areas of suburban Los Angeles where their incomes are much higher, companies would make an economic decision to locate outside in the suburbs. What the study showed was that if you looked at population per square mile and not just median income, you actually look at the density of the population, it would support a strong grocery store presence that wasn’t in that neighborhood, pharmacy presence that wasn’t in that neighborhood. I think it is somewhat helping the market think about these markets differently in a way that actually meets the economic interest. I am hopeful that when we get to the recommendations, as they look at what is an over retail area that they say there is an example to take some of these large boxes and market them as call centers. There may be a traditional incentive grant as if it were something else and I think as a Council we have said if they meet our standards we are going to consider those. There is nothing in here that extends that beyond existing Council policy. It simply says these are the tools available and we would consider the same kinds of support and incentive, should it be Council’s policy. I have no problem with marketing, I just think we have to be careful because once you get a certain level of investment then it requires this much more investment and this much more investment to protect our original investment. How much do we pay in government subsidies per job that we actually generate? The standard was $1.4 million for Google. I think we can tweak this. (Continued the review under II, Create Strong Local Economies) Flynn: Carter: Foxx: Flynn: Carter: The changes on this one are on Page 8, #8 – Assist viable corridor businesses to relocate along the corridor when displaced through appropriate City programs. I am uneasy with limiting it to City programs because of what has happened along Independence. That was not a City development, but it was a State development and it had impact on local businesses on a local corridor that were absolutely devastating. I would suggest eliminating City. Through government action would really be my suggestion. Is the City program you are talking about the programs that help displaced businesses or is it a City program that displaced the business? It is the latter. In a redevelopment scenario, if there had been a viable business out on Wilkinson, the thought was let’s help relocate them. When it is either displacement in the City, if it is a City generated difficult or if it is a State or Federal generated difficulty, we could also lobby those entities for programs to help. I think those businesses really need the assistance from us. At least identify the problem, ED & Planning Committee Meeting Summary for February 21, 2007 Page 6 identify the possibilities, it might not be subsidies, but at least we could be identifying appropriate opportunities. (Continued with B – Develop Strong Partnerships) Lassiter: Sometimes our decisions on extending water lines, sewer lines, etc. are not the most sensitive for future development. Putting them catty-cornered across a piece of land, dissecting the land and reducing its development capabilities. There may be similar situations here where you’ve got extensions that are moving in to reach something else. As you encourage redevelopment, the way to which we extend our City services, and generally other services are going to track so as we go here, here comes the phone, here comes the gas and they all use the same corridor. Can we be sensitive in the way that is done so that we keep it in rightof-way, we keep parcels in larger pieces or can be assembled in a way that can be developed easier as opposed throwing easements and stubs through existing property and thereby reducing its long-term development possibilities? Flynn: That is something we can look at, but when we get to both the storm water and the sewer system, we are dealing with gravity. Lassiter: It is not gravity I am talking about. It sometimes is the ease of going across land that is not developed and not tracking the street taking a right-hand turn simply because they are not sure what is under the street. In the case of where you’ve got a large parking lot and you’ve got to extend the sewer line, or storm water line, the easiest thing to do is go right under that parking lot where it is undeveloped as opposed to staying along the right-of-way and preserving that open space for redevelopment. Kimble: The issues Mr. Lassiter is referring to are, if you take a total picture view of what the return on future development would be and count property taxes, but not just the cost to the water -and sewer fund and the storm water fund, would you have generated a different method by which you install these if you looked at the model from a more realistic standpoint and I think we have started to do more of that. Then you’ve got to figure out how that transfer between those funds occurs to share that need. Lassiter: I think about assemblage of land and the degree to which you can assemble land that then has a pad that simply requires demolition and it doesn’t have a lot of easements crisscrossing it, making it that much easier for someone to come in and redevelop it. Kimble: There are a few of those kinds of projects that we are chewing on right now. Foxx: Number two says Organize interdepartmental teams to address revitalization on corridors, (question was inaudible). Flynn: We have done that in the past and certainly continue to do it. I think what we would try to do would be doing more. Quite frankly, and this gets to staffing issues, in the Economic Development Office we have lost some of the positions that were the team leaders of some of those revitalization teams. That would probably be the difference if you pass this and also provide for those two positions. Flynn: (Continued with #6) – Darrell talked about this a little bit – Engage the support of Mecklenburg County in the redevelopment of distressed business corridors. They have a large part in the building codes and we were successful in getting a rehab building code and now we need to market that some more. We need to work with them on parks and greenways, libraries and how they are located and how they can be anchors for redevelopment as well. We have also been working with some national organizations and we want to continue to have that engagement both with the Local Initiatives Support ED & Planning Committee Meeting Summary for February 21, 2007 Page 7 Cooperation, the initiative for Competitive Inner Cities and Economic Development Council. Lassiter: Flynn: Lassiter: Flynn: Lassiter: Campbell: Lassiter: Flynn: Carter: Flynn: (Continuing with C) – The Kauffman Foundation has just started a program called Urban Entrepreneurship Partnership that works through Urban Leagues. We want to explore that a little bit more. They try to identify people who live in urban areas, inner city areas, or distressed areas that might have entrepreneur skills and how they can foster those entrepreneurs skills because that would really be something we would want to look at. I don’t know if this is still in place, but several years ago I attended a lecture from folks that funded a study that analyzed how a neighborhood is actually operated and how to rebuild networks. Many were lost in the areas that have been converted from one historical context to another. It might be good to see if that data is also available because it talked about how you built the networks between the small businesses and larger businesses, how it connected between the organizations. My guess is there is some similarities with this although it has been 8 to 10 years ago. (Continued reviewing the draft at III) Almost all of these changes here are a result of a group session we had, including the Police Department to get their perspective on this. What do they suggest? You’ve got limited ability to come into existing uses and implement land design. We talked about that and they said we need to get started with something like you did with the sign ordinance, when you made a change in use then you had to implement these changes or your had seven years to implement the changes. This is just a preliminary type thing and that is one of the issues we have to look at. Debra, do you have any thoughts about that? Definitely challenging. What we may want to do is think about it for future or new uses, versus trying to retrofit existing uses, unless they are expanding, then they would have to meet whatever the new potential development regulations would be. As we are doing this North Tryon Corridor Study, maybe that is the place to test some of those ideas to see what is potentially doable. That has been raised as a real issue as you go out North Tryon and a string of auto sales and auto salvage, but try to figure out how do we create that. None of the rest of the recommendations have changed significantly since you saw this. If you have no questions, I will skip to the bottom of page 12 and the top of 13, Our Focal Plan of Work. I have questions about the variables that will be considered. When I see what you have detailed here, that businesses were not necessarily considered, in other words, business loss, downgrading of businesses from A type business to C type business, vacant lots, buildings, infrastructure impacts, challenges like freeways or transit construction, those things were not really discussed in your variables. Whether that was intentional, I am not sure. No, it certainly wasn’t intentional, but a lot of what you just talked about would be caught up in some of these others, such as the concentration of vacant or blighted retail or commercial buildings. It would also be some of those things would reflect in your tax base value change and your value of building permits. Areas that are in decline, you are not going to see a lot of commercial building permits or buildings that are boarded up, you are not going to see a lot of commercial building permits. ED & Planning Committee Meeting Summary for February 21, 2007 Page 8 Carter: Flynn: Lassiter: Flynn: Foxx: Lassiter: Flynn: Dulin: Lassiter: So by extrapolation you have addressed those items. What about identifying opportunities such as … or supporting businesses, that is not necessarily identified in here. Along Central Avenue, and I am speaking with experience, the clumping of ethnic businesses being an asset, looking at that tracking to see if there are opportunities within those parameters to establish certain districts where X factor is what will bring the community together. I am also thinking about Independence as a transportation center, as we looking at Wilmington as a port, 74 being developed as the interstate feeding into our area and looking at the outer edge of 74 becoming a transit or transportation center. Looking for opportunities such as this. Let me think about that a little bit and see how we might be able to look at that. Can I come back to the Committee on that? Yes. You asked us to put together a Plan of Work to go with this and you will see that beginning on Page 13. We have actually already started on some of this, the Corridor Strategic Plan, the Belvedere Development and we are beginning to work on Bryant Park in terms of leveraging that. If Council approves this, we will be looking to see what type of options we could get on some vacant retail commercial around Eastland and study that. That would be out plan of work for the remainder of this year because there is not a lot of time left in this fiscal year. One piece of feedback from me on the Plan of Work is that going back to those Roman numeral points that we looked through, there are a lot of policy and programmatic changes or research and recommendations that I would image would follow those and the first thing I would like to see is some timeline given to those recommendations and being folded into this Plan of Work. I think they are critical to the success of these other efforts. We’ve got the business purchase program where we are reaching out to talk to existing businesses and how we can help them. It would be good to have these business located corridors pretty high on the priority list because we don’t want to lose the folks we have invested in already, and talk about what they need, how it is going and what is taking place so that we are giving them that encouragement. They are at risk perhaps more than somebody who is sitting … We will put that in the Plan of Work. Darrell, this is huge – thank you for your leadership. This doesn’t just appear so thank you very much. I met with the Business Advisory Committee last week and they asked us to find ways to get some of their membership engaged in this process. We will see this again in a couple weeks for approval and then send it on to Council. II. Subject: Scaleybark Transit Oriented Development (Tracy Finch, Transit Station Coordinator, used PowerPoint to give an Overview of the subject) Questions/Answers/Comments Lochman: Where is the $3.8 million …? Flynn: We will touch on that a little later. It is in two places, in the South Corridor Infrastructure Program and the Smart Growth Land Acquisition Fund. Lochman: What is the source of funding? ED & Planning Committee Meeting Summary for February 21, 2007 Page 9 Flynn: Lochman: Flynn: Lochman: Flynn: Lassiter: Gaskins: Lochman: Flynn: Lochman: Lassiter: Lochman: Dulin: Finch: Vaughn: Dulin: Vaughn: Dulin: Mitchell: Vaughn: Mitchell: Finch: Flynn: General Fund Revenue. Why do you determine available City funds? If there were $4.3 million available, would it be a $4.3 million loan? The way it is written, here is the amount of cash we have on hand so let’s use that as the number. You are absolutely right on, but the problem we ran into was that one of the teams was requesting more and we would have gone out and issued debt in order to then turn around and make them a loan. We just can’t do that and Greg Gaskins might want to talk more about that. If we have cash on hand that comes from General Fund sources, not debt, we could use that just as we have done in other projects such as City West Commons and University City Shopping Center. There was City money in that and we have the ability to make loans for that. I presume the South Corridor Infrastructure monies would then be somehow earmarked for the portions of this project that would qualify as infrastructure. Yes. That would have to be a grant because those monies were actually GO bond money, so that could not be part of a loan. I would like for Greg Gaskins to speak to this because it comes from a question of how to work through this challenge because there was some issues about what you could not issue loans for. It is a statutory limitation. You cannot borrow money under the North Carolina Statutes to loan and that is simply something that we are not authorized to do. In general, we are looking at a complex deal if you will, but somehow the $3.8 million seems to be an appropriate number. Was there compensations made elsewhere? I think if you will let us proceed you will see how that all that fits together. It looks contrive and if we limit it to $3.8 million, then do we do things elsewhere to make this deal … because we limited it to $3.8 million. We limited it to $3.8 million because that is the funding source we could get our hands on. As I understand the issue there was an assumption made that you could in fact do this low cost loan and then we discovered there was a prohibition statutorily to do that. There was a lot of work going on in the last 4 or 5 days trying to find a vehicle that would let you do that and this is I think part one of that discussion. It might be that if we let Tom walk through the overall financing plan and see what that created and where it comes from and where it ends up so you can then see the whole picture. It is important that the public understands that this is coming from the General Fund which could be used for police, roads or whatever. Has the Section 8 vouchers already been worked out with the Housing Authority? Yes. It would be based on the allocation of Section 8 vouchers that it would be available. Do they have the allocation of them? No, the ownership entity would have to apply to the Housing Authority. That is not out of pocket for us at all for the $315,000? How many vouchers are you actually talking about? 15 Just 15 – 30% AMI. Continued her presentation. We thought this … you might take 10% returns on equity, but probably looking for 12% returns on equity. ED & Planning Committee Meeting Summary for February 21, 2007 Page 10 Lochman: Flynn: Lochman: Flynn: Vaughn: Flynn: Dulin: Lassiter: Dulin: Vaughn: Dulin: Finch: Flynn: Pappas: Mitchell: Pappas: Lochman: Did Bank of America depend on new market tax credits? Yes. So they also have less than they thought they would in that regard? No. We feel pretty confident with the level of the allocations primarily because we are … as capital…restricted in terms of……. inaudible. We have access to…….. In other words, the New Market Tax Credits sort of have to sit there for seven years. Their capital structure allows that to work for them better than it did for Colonial Properties. I am not as confident about the New Market Tax Credits and allocations. I think the difference in the two, even though there is a little bit of left hand/right hand, they are all within the same … as Bank of America and they’ve got working knowledge relationships that can access them and they can adjust their capital structure that is being financed by the same vehicle that gives the tax credits. In the case of Pappas Properties, they would have to satisfy the third party who has the tax credits and a third party equity partner all in the same agreement. They may work out,but I think it is going to take a little time to get a sense of comfort. The Bank of America proposal, as you go for the tax credits, you have to go and apply and you have to have a deal that stands on its own and it has to fly separately from the Bank of America and it could be any bank, is that correct? It would have to make sense before we … inaudible. We do have some internal degrees of flexibility with regard to term parameters on the new market tax credits. My concern is that if we go ahead and then it doesn’t work out then they have to come back for another chunk of change. Is there anyway we can get a letter from the bank saying this is where we are, we feel good about this proposal? We’ve got original submittal of a … letter and in our understanding … inaudible. It is not until they have a signed Memorandum of Understanding from the City and Banc of America, CDC that they can really go to them and say this is the deal, this is what we want and probably within 30 to 60 days after that we will have a definitive answer. I wanted to thank the staff for working so well with us and apologize that we’ve had complications. I think the Committee raised the issue of the new market tax credits at the last meeting and we wanted to make sure that we could deliver that. The complication on our structure was simply that Colonial was prohibited from having secured debt on the residential so we couldn’t count any of the residential over the retail toward the new market structure, thus lowering the amount of the allocation. We were able to get the allocation much like Bank of America, we just couldn’t get as much so our gap was going to be wider and it would take a good amount of time for us to work through another structure. I think with time we could work it out, but we understand from Tom and Tracy that you’ve got to make a decision now so we wanted to get all the facts on the table and we appreciate your consideration of our proposal. If we had the best of both worlds in 90 days, what would be the equity return on this project? I think we would have to go back and restructure the whole project. If we couldn’t achieve above a ten, it is a non-starter for us. Even that is a low threshold for us so I think what we would have to do is look at different uses on the site to narrow that gap and really stay at the same level of public participation with maybe a different development plan. I think trying to come up with that scenario, realistically, we got this information from Wachovia Thursday afternoon, so trying to come up with a solid proposal I think it would take an amount of time. I think it is interesting that the concern is that if the new market tax credits don’t come ED & Planning Committee Meeting Summary for February 21, 2007 Page 11 Flynn: Lochman: Flynn: Lochman: Flynn: Lassiter: Flynn: Lochman: Flynn: Lochman: Flynn: through that we are on the hook. I presume that if a proposal is made and they assume part of that proposal is new market tax credits, if they don’t materialize, that is their problem, not the City’s problem. Secondly, I don’t see under public investment, I don’t see any new market tax credits. Are they not public investments? If they are not local public investment. They are public investments? I think that should be part and parcel as it is presented to the public. Thirdly, if the $3.8 million from the General Fund is in this plan, how much was in the last plan from the General Fund? What do you mean the last plan? The last iteration. This is a changed iteration and a different proposal. That same $3.8 million was in the last one. That was the discounted value alone. Yes, and then there was a grant when the Committee selected Scaleybark Partners last time, there was a grant piece and there was a loan piece. That $3.8 million was in the grant piece at that point. Referred to the tax generation and said in terms of total return, wouldn’t you have to offset that with the return on what the City would enjoy on monies that they are willing to commit here? We are getting tax money back, but we could also be getting interest or whatever on other forms of return on that $3.8 million. That is correct. This number is not a net. I am just thinking in terms of the public getting as accurate a picture as possible. We will get that number for you. (Continued presentation on Public Investment Structure) Flynn: Lochman: Flynn: Lochman: Dulin: Flynn: Lochman: Vaughn: Lochman: Flynn: Just so everybody knows what we are talking about, they will pay us back interest only at 2% for 20 years on that $3.8 million. We will have a re-opener in there that says if there is refinancing or a sale we can go back in and look at that debt. If there is proceeds there we can get paid off early, if not we don’t get the principal back until the end of 20 years. Why 2%? That is what they have requested and that is what works for their proforma. We are tying City money up at a very unattractive rate of return. Doesn’t sound like a real good deal to me. We could invest that much money. We make about 4% on our investments and that is the money we use so you are talking about $98,000 roughly per year for 20 years. The difference between the 2% we are getting back and the 4% we get on our money. What are they getting with what they are loaning? What is the interest rates for the loans that they are putting out? The way this transaction is structured we are not actually making a loan on the project. I know you’re not. I am just comparing this return versus what you get on your everyday business. I am wondering why the City is in the business of giving away 2% loans. We are not in the business of this, but they have come to us and they have shown that this project has a gap and there is no more money available from the proforma to pay more than 2% and in order to achieve our policy goals what we are recommending is that this funding ED & Planning Committee Meeting Summary for February 21, 2007 Page 12 Lochman: Lassiter: Flynn: Gaskins: Lassiter: Dulin: Kimble: Dulin: Finch: Dulin: Lochman: Flynn: mechanism be used. I understand, so in addition to the $3.8 million from the General Fund, we also provide a certain amount of money beyond that. This $3.8 million is a loan so we recover it either at the end of 20 years or should they refinance or sell the property we recover our principal. Yes. Another way to think about it would be is if they had to borrow, they would probably borrow it at 5.5% to 5.75%. There is no question, in order to make this deal … it requires some subsidy of interest rates within the constraints of what we can do statutorily and this is the only vehicle to get there by tax through the Smart Starts Program creates the capital and then you loan that capital at a discounted rate. It is similar to the Metropolitan deal in the sense that we can recover that based on how we invest it in our projects next year. How many parking spaces are across the street from the Government Center in its deck? I think there are 1,000. This is not that large of a deck. This is just a 315 space deck. It is a 400 space deck. Residential will also use that deck. That is still small. That is market appraisal rates for that land value? Yes (Continued presentation with Action Requested) Mitchell: Dulin: Finch: Made the motion to accept Bank of America CDC for the Scaleybark Station, Mr. Lassiter seconded the motion. I am so concerned that this deal is so complicated that the folks at Bank of America aren’t going to be able to pull it off. I’ve got the highest respect for Bank of America and I’ve got the highest respect for Scaleybark Partners and their team. It concerns me that if Scaleybark Partners can’t figure this thing out, Bank of America is right on the heels of not being able to figure it out and they are on the edge of what they can do. No disrespect Bank of America Partners, please. I really admire my colleague, Mr. Lochman and his ability to think through these problems. He did this for a living and I respect his thoughts and his input. I’m spooked that we are stepping into an area that really can’t be pulled off. I’ve always been concerned that we made this thing so complicated and tried to cram so much stuff in there that the numbers got crammed also. The new market tax credit, admittedly so, is new to me and I don’t understand those things up and down like I understand everything else and they’ve got me a little bit concerned. I would be very upset if we okay a proposal today and 60 to 90 days later we find out it doesn’t work, and I am also upset that this thing has taken so long. It has drug on three months longer than it should have and we should have been able to work through this quicker. I’m not comfortable voting for Bank of America today. I would like to find out more about Option D that got moved up to Option C. The variance between the tax revenues from Bank of America to Option C Do Nothing today changed some. It used to be not as big a gap as it was today to us. Can you talk me through the property tax generation, Banc of America CDC benefits is $6.5 million and Do Nothing is $3.1 million. Where did the $3.1 number come from? We had estimated that under the Do Nothing that the tax generation was $309. I will have to ED & Planning Committee Meeting Summary for February 21, 2007 Page 13 Dulin: Votaw: Dulin: Kimble: Lassiter: Dulin: Lassiter: go back and look if the numbers have changed that much. We have looked at them in so many different ways. The numbers that we have run with in terms of the tax generation have pretty much stayed the same. This thing has been driven by the parking needs of the Scaleybark Station and CATS is over a barrel about getting those parking spaces up and running between now and November 30th of next year, which is already tight and close. If we were to vote on a Do Nothing today and it passed, what does that put in motion and obviously it has to go to a temporary surface lot anyway, but what happens with the Do Nothing recommendation today? A couple things happen, one you would have to build the parking which is estimated at $1.1 million, as the permanent parking lot. That money is no longer available …. inaudible. So CATS has got us over a barrel again? This is something that we talked with you about since October last year and we worked through the RFP’s. This was before the Committee and it began to go in a thousand directions. We took it back to Council to clarify what it was we were supposed to bring back. We were to bring back a parking deck or parking facility, we were to bring back a repayment of the dollars necessary for the full funding agreement. That is what is in front of us. Every one of the proposals is financially complicated. Some are more complicated as you get into the details because we didn’t see the value of having significant … involving a lot more land and then narrowed it to the pieces for both Bank of America and Scaleybark Partners of the differences in the way they lay out and design, financially began to look very much alike. In fact, the Bank of America changes that came in a week and a half ago aligned against what Scaleybark had in part and the Scaleybark pieces coming into our last discussion aligned with Bank of America. I think it is good to understand how we got from here to here and that the vote we’ve got today is in essence similar to the one we had two weeks ago and the only difference is that one of the parties has had a change in their underlying financing and no longer can guarantee the time that is required by CATS. If we were in the position that we had the 90 days that we had back in October and we had clarity of mission, we would take the 90 days and see if that same thing could be reconstructed so we had a comparison. I think that is how we got to this point and we are obligated to take back to Council a recommendation and deliver the two things that we committed to Council that we would do and that is provide a parking facility and provides a return on investment that CATS has to have to satisfy its … How can we get Bank of America to pay us a fair return on our loan to them and 2% is not fair? Two percent is a bad business deal. We had a similar loan structure on the Scaleybark proposal you voted for two weeks ago. It was in essence the same deal. The only reason it has changed is that Greg Gaskins has done some analysis for Bob Hagemann … that we can’t loan money to a private investment that we have taken out for bonded indebtedness so we have had to come through a work … that says for basically rolling cash through one vehicle to create a new body of cash that we can loan and have those dollars available, which we have secured in repayment over a 20-year cycle or return equity if the parcel is refinanced or sold. That is the same deal and we had roughly the same rate structure before us when you break the loan transaction out. I think anything beyond that if we were to … with that math results in one of two things happening. Either we have to make a larger cash grant to write down the debt or we have to reduce some of the amenities that we have expected in the proposal, specifically relative to public housing. ED & Planning Committee Meeting Summary for February 21, 2007 Page 14 Flynn: Lochman: Flynn: Vaughn: Lochman: Flynn: Vaughn: Flynn: Dulin: Vaughn: Lochman: Flynn: Lochman: Flynn: Banc of America CDC has talked to us about structuring if there is another bucket, if you will, in the revenues coming off of the project, that we could participate in that bucket if there is another bucket and to write that into the development agreement. What they are saying right now, given their proforma, the 2% is what it is. As we move down the table, we are going to be working back and forth across the table with them, looking at those numbers to see if we can get them. We talk about a gap. What is the anticipated rate of return on the developer’s contribution? That obviously is a key ingredient to creating or defining what the gap happens to be. Their equity returns? On the component, the transaction that pertains to where most of the public investment is located is the mixed income component. We are looking at a range on a return of the investment of around 8% to 10%. Now that is one section, so what you are suggesting is that by nature that answer I assume, our contribution is being restricted to the portion of the project which was just enumerated? Yes, the mixed income, retail and the parking deck that goes with that. No retail. The parking deck supports the retail. We had a tough vote Monday night on a rezoning for affordable housing for seniors. This is an opportunity and it costs money to keep our City rolling and to provide housing for folks that do need help. These people that will be eligible to live there are not exactly on the cusp of the lowest among us, but they are down there and with a little bit of a tug can stay up, and be productive citizens in our City. Miles, you are going to be able to pull this thing off for me aren’t you? We feel confident that we will, for you and everyone else that has an invested interest in the success of this. Let me get back one more time to that gap and rate of return. You seemed hesitant when I asked you that. Have we gone through the calculation or is this a Bank of America … No, we have gone through the calculation and we hired an outside consultant to go through that. So you are comfortable with it? Yes, I just couldn’t remember what that … fund off the top of my head. VOTE: Motion was made by Mitchell and seconded by Lassiter. Vote was to: Recommend to City Council the selection of Bank of America CDC development team for the transit oriented development at the Scaleybark Station; and authorize the City Manager to negotiate a Memorandum of Understanding with Bank of America CDC Development Team, consistent with the framework previously outlined. Favor: Against: Councilmembers Carter, Dulin, Lassiter and Mitchell. Councilmember Lochman. III. Subject: Economic Development Focus Area Plan for 2008-2009 Ron Kimble, Assistant City Manager, called attention to section ED.6. Based on comments that several of you made about permitting process improvements. We tried to identify a type of measure and target and one of the things that we learned is that at some point before the end of this year, we should do some sort of ED & Planning Committee Meeting Summary for February 21, 2007 Page 15 benchmark survey with the community and have them respond and we could use that as a launch point for when we make improvements. Questions/Answers/Comments Mitchell: I would say, if we can, that we move very quickly and reach out to the development community to do the survey. This is one of the times that follows the law for a long period of time. Kimble: There is a game plan here of being in front of the Council at your April 2nd Workshop to talk about the permitting process improvements that we intend to harbor on and then a timeframe and schedule for getting the survey out by the middle of this year, getting those responses back and creating the benchmark and also measuring the improvements that we … Dulin: I’m sorry, run that by me one more time. Kimble: By the end of this year, we are going to need to develop a survey instrument and then have that survey instrument administered, collect the results and then create the benchmark. The survey could be a benchmark for every study that is done thereafter. If they wait to measure, you’ve got to establish where you are at this point in time in terms of the community view of the permitting process. Dulin: I’m still new to this I guess, but I think the biggest hiccup that whole Scaleybark deal had was the questionnaire six weeks. Kimble: That is a different form of questionnaire that we are talking about in terms of a benchmark survey. This doesn’t mean that we are not going to work on improvements in our permitting process, but while we are getting ready to have the survey administered and collecting the results, it is going to be a dual approach and movement forward on improvements that the development community and the community at large sees with our permitting process. Lochman: Don’t we know what they want, what they need, what they are upset about? We have been listening to it for the seven years that I have been on City Council. Kimble: Yes, and we fully intend on creating and showing to you what our steps are for correcting what they view as some of the issues and problems. I think you need to have some measurement tool that eventually says to the development community, you are going to have an opportunity to comment every so often on a periodic basis and then you can use that as a Council and community to determine whether the improvements that we have made are producing results out in the community from their perspective. You can do that anecdotally every year and you can take the pulse of that in the community, but I think you would want a more definitive document that actually shows you … Lochman: Certain things you ask are going to get a negative response right now. I don’t care what you do. Kimble: There are ways to develop a numerical - how satisfied are you with the process. Lochman: You can’t correct the replies they bring to it. Lassiter: To me this is a classic reengineering question and what you’ve got to do is diagram your processes and determine who is doing what, how long does it take, what are the functions that that person has and where is it breaking down and where is it costing you money. It would seem to me that what we need to do is associate some external help that can do that kind of reengineering analysis, that can help design a process for us that runs with another track that has got a … or use a stakeholders group, but a group of users who are accessing the system, who will be part of the ones completing this benchmark study and are also the ED & Planning Committee Meeting Summary for February 21, 2007 Page 16 Kimble: Lassiter: Kimble: Mitchell: Lassiter: Dulin: Lochman: Lassiter: Mitchell: ones who can identify the bottom lines to slow down the difficulties and issues that are there and begin to put in place a process for engineering that needs to be reviewed and then come back for policy or administrative changes. That can get the recommendation to go ahead and made those adjustments. Then you are benchmarking as you work through those improvements of which will take some time. It is ultimately going to engage the County and County functions because they are woven into the deal, to then rise up to some larger scale policy for instance, who should be doing what and how to integrate certain thins. I am a little bit cynical that what we are going to hear is more bellyaching and it is not going to get … until we are where we begin to move in a way that says we are going to identify where these problems are, where the improvements can be made and we are going to use somebody external who will come in and do that. In my case when I worked for Belk, we brought in external analysis of the first view and we developed our own teams internally and then carried them out for the remainder of where they had to go. I think in this case, we don’t have the internal expertise to figure that out. Whether we hire a big … county firm or whether we hire a systems consultant, I don’t care, but we need somebody who can come in and do that structural analysis. We have brought somebody in externally for the preliminary exercise. What do we look like and how have some other structures been done and at a first blush what do you see as some of the places where we are either inefficient or colliding and no being as customer service oriented as we should be. Let’s find out a … view on the front end and then you can move forward into your focus groups and into soliciting your feedback from the community that then can be used to make change and do what you are suggesting from the process reengineering. Let me suggest that in this description we somehow capture action steps beyond taking people’s temperature. There needs to be an affirmative step that we are now working toward some level of process reengineering of function and timing and developing a methodology that will also include active engagement of users. There should be a measure that says we in fact can generate additional amounts of tax revenue by moving the projects and construction at a faster rate so it reaches valuation purposes that generate positive tax … inaudible I think you need an efficiency measure put into this as well as the … services. When you look at all these items in our draft, everything is oriented to economic development. We are missing the “P” in Planning and I wish that somehow we could do ED-7 to talk about, in my mind, upgrading some of our area plans and neighborhood plans. The Plan is 1995 and here it is 2007, so I don’t know what can we say that would capture that or reopen that, but I think if we could have some type of draft to deal with the planning. What if we accomplish an inventory of our plans? My sense is that right now if you were to ask anybody in this room they can’t tell you how old certain things are, when was the last time they were done and create a little bit of shelf life analysis that says these plans that are 15 to 20 years old, which ones, based upon our other priorities, deserve a revisit so that we give some direction to the Planning Director and her work. Rocky River is brand new. I agree, but you and I know the answer is going to be, I can’t update them because I don’t have enough staff. I’m not saying that, just inventory them. This is an interns job, somebody who lays them out. I think what would help us when we present it to Council, those who say what planning aspect, we could at least have a bullet point saying to do the inventory is the first step. ED & Planning Committee Meeting Summary for February 21, 2007 Page 17 Kimble: Mitchell: Kimble: Flynn: Lassiter: Kimble: Do you want that to actually be ED-7 or do you want it to be a footnote to the Economic Development Focus Area Plan? I think we need it to be ED-7 to give it more creditability. Tom, you had a comment about ED-3. On ED-3, we would like to change the target a little bit. It would be complete plans, studies and RFP process and implement Council approved recommendations. This is for your FY2008/2009 and all of those activities are going to be done and pretty much be wrapped up by the end of this summer. The next step in FY2008/2009 is for us implement the things that you have approved that are recommended in that plan. That is why we want to add that language. Do we need a motion to approve that? I think you can just direct us. You are going to have the opportunity to vote on these Monday night along with the other four. V. Subject: Next Meeting The next meeting is scheduled for March 7, 2007 at Noon. The meeting adjourned at 5:35 p.m.