Larry Kirch, AICP
Planning and Development Director
City of La Crosse
March 1, 2012
WAPA Spring Conference


Background - National View of Incentives

Rationale for Proposed Policy

La Crosse - Business Assistance Efforts

Features of Proposed Policy

Feedback

Next Steps
March 1, 2012
WAPA Spring Conference


Businesses seek incentives
 Governmental Response


Federal, State, Local, Economic Development
Corporations/Authorities
Federal = Tax Credits (e.g. Work Opportunity Tax Credit), low cost financing and targeted grants
 State = Tax Credits, Job Creation Tax Credits, Sales and Property
Tax Abatement, Development Zones, Authorization for TIF, Job
Training Grants, Loan programs, loan guarantees


Businesses seek incentives – it’s a given – very pervasive
 Governmental Response
 Boeing to Chicago - $100,000,000 in State and Local incentives for 400 jobs = $250,000 per job
 Daimler Chrysler move to Georgia – Proposal included planting tulips for
German Executives, having state economic development officials dressed in lederhosen at plant entrances to welcome employees
 Wisconsin example - $87,000 per job incentive
 Fort Collins Colorado Model – NO INCENTIVES, come for our educated work force, quality of life, but we will not pay you to come here


Film Industry incentives now in 40 states, up from five states in 2002.

Some states up to 30 percent tax credits.

$1.8 billion in incentives given between 2006-08.

State budget shortfalls are causing reexamining the credits, including
Wisconsin.
Governing.com

Rationale For Proposed Policy -
Incentives can be good

Why are we discussing this issue?

Incentives locally have escalated similar to national examples – given incentives when not needed

Research indicates not all incentives are worthwhile

La Crosse has evolving but rudimentary system

Little, if any, financial analysis of need for City participation

Decisions should be fact based – level playing field needed for all businesses/developers

Rationale For Proposed Policy – What other Wisconsin Cities are doing

La Crosse surveyed Wisconsin Communities -2009

Eau Claire, Wausau, Racine, Kenosha, Fond du Lac,
Sheboygan, Janesville, Oshkosh, Appleton, Waukesha,
Green Bay, Madison and Milwaukee

Most cities surveyed in Wisconsin have no incentive policy (4 of 13)

Not surprisingly Milwaukee and Madison have most sophisticated policies/programs

Rationale For Proposed Policy – What other Wisconsin Cities are doing

15 Survey Questions

Do you have a written TIF policy regarding developer incentives?

Are the following types of projects eligible for TIF consideration?

Which type of projects hold priority during the consideration process?

Do you have a preference to TIF loans vs. grants?

If you prefer loans do you collect interest? If yes, how do you determine interest rate?

Rationale For Proposed Policy – What other Wisconsin Cities are doing

15 Survey Questions

Does your TIF policy include job creation incentives?
If yes, what incentives do you offer?

What other types of developer incentives does your
TIF policy include?

Do you have a written TIF application?

Do you charge an application fee? If yes, how much do you charge?

Rationale For Proposed Policy – What other Wisconsin Cities are doing

15 Survey Questions

Do you charge a processing fee? If yes, how much do you charge?

Do you use TIF proceeds to pay city staff and/or reimburse the operating budget? (Finance, Clerk,
Assessor, Legal, Mayor, Planning)

Do you have any type of annual review strategy?

Do TIF projects compete with projects in a 5 year/annual capital improvement program?

Rationale For Proposed Policy – What other Wisconsin Cities are doing

15 Survey Questions

Have you ever issued TIF revenue bonds?

Do you have a maximum percentage of project cost that you will provide to a developer based on taxable value increase?

Survey Results – See Handout




The City has been involved in economic development for decades
 Incentives primarily consisted of Industrial Development
(reduced land price)


City infrastructure surrounding site
TIF – Downtown TIF #1, Valley View Mall TIF #3, and Airport
Industrial Park-Terminal TIF #4
There is a need to balance redevelopment objectives with incentives
Development Projects can severely impact the City’s Capital
Budget, borrowing limits, debt service


Businesses seek incentives – it’s now a given


FROM :
Incentives have escalated from:
 Reduced land price (industrial)
 City infrastructure surrounding site
TO:
 Grant$ of Land ($1.00)




Grant$ for construction of new buildings
Cash Grant$ ( upfront/reverse) for developer costs (fill, demolition, contamination, building construction)
Job creation Cash Grant$
Tax Base Cash Grant$


Business loan and tax credit programs:



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


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Small business development loans/Commercial Rehabilitation loans
Upper floor renovation loans
Architectural & Engineering Analysis 80/20 funding program
Assist with State tax credits for job creation, job training
Industrial Park administration (Airport, International Bus Park)
Business communication and outreach
Marketing and business recruitment
Tax Increment Financing (TIF)


Business assistance & redevelopment projects:





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Riverside Center buildings
Doerflinger Building
 Michaels Engineering & Authenticom, Inc.
Kwik Trip expansion
Trane Plant 6
Park Plaza
4 th & Jackson Streets


Future: Exxon-Mobil Oil
Future: Xcel Energy



Provided over $4.8 million in loans (for example:
People’s Food Coop)
RLF Program has assisted over 30 businesses to create over 450 new jobs



Former Rowley’s Office Supply now home to Kick Shoes and City Wear clothing stores
Grand River Station
Lynn Tower
Upstairs Jule’s Coffee Shop


Business communication and outreach:

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City-Business roundtable meetings


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Nearly 35 roundtables have been held
#1 Conduct City organizational assessment
#2 Establish a long-range plan for the riverfront
#3 Exit 3 area development
City-Business e-newsletter
One-on-one meetings


Marketing and business recruitment:


Grand River Great City marketing effort
 Marketing/recruitment tools



DVD
Folder/inserts
Profile & media packet
Future: Improve and coordinate marketing efforts
 Public-private working group to focus on recruitment


North La Crosse Business Association:

Highway 53 Corridor Study

First Impressions study & ad hoc committee


Future: Zoning study
Future: Exit 3 visioning

Future: Old Towne North Master
Plan







Current Policy is ad hoc from project to project
Not all developer’s treated the same
City has gotten away from need-based incentives
2006 “fix” was superficial

Did not address: application fee, need-based approach, ceiling on assistance, loans vs. grants, job quality, types of projects obtaining assistance
2006 fix didn’t address regional aspects of incentive policies
Compact of Job Piracy by City Rejected – New Compact by 7
Rivers Region Alliance now has 100 organizations signed on


Standard Application Form/fees

Only Gap financing

Ceiling on assistance

Requirements, but no incentives for job creation
(State/Federal role)

Specific guidance on project eligibility

No cash grants, instead favorable loans


Unresolved Issue

Process - Who negotiates?

How is Underwriting going to be done and who should pay for it

Key Provision - Project Evaluation – Proforma
Determines Gap

Gap Financing
Traditional
$200 0
00
$800 0
00
$200 0
00
Bank
Borrower
$100 0
00
$700 0
00
Bank
Developer
City

TIF Funded Development
$330 000
Bank
Developer
City
$620 000
$50 000


Need Formal Policy

Need better follow-up on developer agreements

Some want super-majority vote on development agreements

Proposed fees are counterproductive and extreme

Application deadlines will force projects elsewhere

Why does the City need outside financial or legal help?


10% project cap is too low

Why should City get part of ROI over 15%

If no free money (cash grants), program will not get used

List of eligible projects is limited and unjustified

Raise bar even further – Personal Guarantees, clawbacks good, conduct post mortum on all projects to determine if need was there (unjust enrichment) and evaluation of the
TIF as a whole

Streamline initial evaluation of project





City has a different bottom line than developers, who wouldn’t take cash grants?- free money is not free
Critical to conduct real due diligence on financial evaluation of projects to determine gap, city has no expertise – must have outside help
Eliminate over subsidizing (fund real gap) so the
City can assist even more projects
Eliminate GRANT$ , let the state fund job creation through tax credits


Review comments/questions

Introduce Resolution to Council

Public Hearings at Finance and Personal Committee,
Committee of the Whole

Possible Workshops with F&P Committee

Final Action by Common Council

Policy Implementation

City Policy on the provision of incentives for economic development/TIF

Thank You!

Larry Kirch, AICP Director

City of La Crosse Planning & Development


400 La Crosse Street
La Crosse, WI 54601

789-7512
 kirchl@cityoflacrosse.org