HomeMy WebLinkAbout20080331 - EDA Report
1
March 25, 2008
TO:
The Honorable Mayor and Council
FROM:
John Grossman, HRA Director
RE:
Working Group Report on EDA - Updated.
The attached report was forwarded to City Council in January, 2008. Information
received since then corrects a statement made under B.l. At that time it was assumed that
if the BRA powers were assigned to an EDA the ability to levy or bond for HRA
programs would be lost. As that is not the case, there is less reason for having both an
EDA and an HRA as described under B.2. of the report.
1. EDA and HRA levy and bonding authority.
If separate, the HRA would continue to levy to fund its programs, with Council approval.
The EDA tax would be levied by Council. If all the HRA powers are transferred to an
EDA, both levies would be available. Maximum rates are set by statute but the actual
levies could be less, as described in an annual budget. In addition, the EDA would be
able to issue tax-exempt bonds for both economic development and for housing and
redevelopment purposes. General obligation bonds require Council approval.
2. EDA and BRA boards
If separate, the HRA board could continue to be five members. The Work Group
recommended an EDA board of five citizens and two council members.
The Group considered the option of having both an BRA and an EDA with the same
persons appointed to both boards. This is possible but complicated. Except for a short
period while assets were being transferred, this option has less to recommend it.
An EDA with BRA powers, with a board of five citizens and two council members,
could hold one meeting and act on both housing and redevelopment business and
economic development business.
3. Establishment of an EDA.
An enabling resolution would be needed to set up the EDA with HRA and other statutory
development powers. The board would then be appointed. TheHRA would have to
continue legal existence for a time after an EDA is established in order to transfer its
assets and obligations to the EDA. All the BRA property, tax increment districts, loans,
accounts, agreements and contracts would be transferred and notice given to affected
parties. Staff estimates this could take up to six months. After completion, the BRA
would be dissolved.
2
Working Group Report on an Economic Development Authority
The working group appointed by the Mayor to study the need for an Economic
Development Authority (EDA) includes members ofthe Council Planning Committee,
Tony Alongi (Chair), Danna Elling Schultz, and Mike Slavik, Housing and
Redevelopment Authority (BRA) commissioners Ron Toppin and Dennis Martodam, and
Economic Development Commission (EDC) Commissioner Shane Bauer.
A. After research and discussion, summarized in the attached Frequently Asked
Questions document (F AQ), the group reached consensus on the following:
1. The Council should consider establishing an EDA to encourage business growth,
taking advantage of statutory powers and tools not now available to the City. See
F AQ 1 through 8.
2. If established, the EDA board should be made up of council members and
residents rather than city council members only. See F AQ 9,
3. If an EDA is established, the EDC would not be necessary. See F AQ 11 and table.
B. The group did not agree on combining the EDA and HRA or keeping the HRA
separate. See FAQ 10, 11 and attached table. There were two points of view on
organization and levy authority, the advantages of each summarized as follows.
1. An EDA including HRA powers:
· One board could provide a consistent, balanced direction. Development and
redevelopment frequently impact each other. One meeting a month rather than
two is a more efficient for all concerned. Two boards would require more
coordination.
· The EDA would budget for both development and redevelopment and request
only one tax levy, rather than levy for both EDA and HRA.
· A simpler government is easier for citizens to access.
2. An EDA and an BRA:
· Two boards would double the number of residents participating and allow for
some specialization of interest.
· An alternative with the efficiency of one board would be the same council
members and residents serving as both the EDA board and the HRA board,
meeting once monthly.
· The City needs both new development and redevelopment. Without separate
revenue sources, one or the other could be under-funded. The Council, with
annual budget and levy approval power, can limit the total amount oftaxes
levied by an EDA and an HRA.
If you have questions or comments contact:
Council Member Anthony Alongi: alongihastings@comcast.net or 438-9320
HRA Director John Grossman: igrossman@ci.hastings.mn.us or 480-2347
Frequently Asked Questions
Consideration of an Economic Development Authority (EDA)
1. Why would an EDA be of benefit to Hastings?
Local commercial and industrial businesses provide employment opportunities, generate
other business activities and pay a share of property taxes. Economic development is
generally understood to have two specific measurable outcomes:
. An increase in the value ofthe Commercial-Industrial (C-I) tax base.
. The creation of new, permanent jobs at living wages.
An EDA would provide assistance to foster economic development where the private
market has been unable to do so. There are indications that Hastings would benefit from
a focus on Economic Development:
· There are vacant or underused commercial properties that have not attracted
private redevelopment.
· Hastings' employment growth lags behind the rest of Dakota County.
· The total taxable value of commercial and industrial property value is not growing
as fast as the total value of residential property in the City.
· Many local industrial jobs are concentrated in manufacturing components for
residential and commercial construction. A greater variety of products would be
beneficial.
· The rate of residential growth is slower than in other areas of Dakota County.
This may be partly due to availability of jobs.
2. There is a City HRA, how is an EDA different?
a. The purpose of an HRA: is blight removal and prevention, using
rehabilitation and redevelopment activities for the purpose of maintaining safe
and vital built-up areas, both commercial and residential. HRA powers are
focused on re-using land and remodeling buildings and on public improvements.
The elimination of blight may result in economic development by making
property available.
b. The purpose of an EDA: is assisting business for the purpose of economic
development resulting in tax base and job creation. EDA powers would be needed
if the City wanted to provide financial assistance directly to businesses, to
develop vacant land where blight is not an issue.
3. The City could establish a Port Authority. How is that different?
The purpose of a Port Authority is harbor improvement and industrial, warehousing and
transportation development. Its membership is five or seven members appointed by the
Mayor and Council. It has authority to levy up to .0181 % without Council approval. It
has most EDA powers, but not BRA powers. The Economic Development Authority was
authorized by the legislature as in improvement on the older Port Authority law.
4. What could an EDA do that can't already be done?
It could provide direct financial assistance to businesses solely and specifically for the
purpose for economic development, without the need for blighting conditions.
It could facilitate the development of open space, not previously developed, for economic
development purposes, such as a commercial-industrial park.
It could be an equity partner in, and recover its investment from a business.
s. What types of assistance could an EDA offer to businesses?
· Issue revenue bonds to finance business assistance
· Make loans and grants for commercial and industrial development
· Enter into limited partnerships with businesses to provide capital
· Conduct studies and research related to local economic development
· Conduct public relations and marketing activities for business recruitment
· Improve property and infrastructure to make it available for business use
· Establish Development TIF districts and authorize tax abatements with Council
approval.
. Acquire, sell and lease property
. Establish or assist industrial park development
6. What specifically would an EDA start doing if established?
a) An EDA could start accumulating an economic development fund by collected a
levy each year, in order to be ready when an opportunity exists.
b) An EDA could work with the City and property owners to guide and zone
property for a business park and prepare for development. The City would not
have to own of the land. For example, tax increment could be used to reduce land
costs or assessments for streets and utilities.
c) Research the commercial market and business promotion strategies.
7. Has the City provided Economic Development Assistance in the past?
The City has provided economic development assistance in the Hastings Industrial Park.
The City entered into "business subsidy agreements" with business owners. The business
owner received the land with the sale price deferred like a loan. After five years the
taxable value of the building and the size ofthe business payroll are credited against the
land, usually reducing the price to $1.00 an acre. In return the community receives the
direct benefit of increased property taxes and the indirect benefit of increased wages and
business.
8. Where could the EDA facilitate development?
The EDA business assistance powers could be used anywhere in the City. The City
Council would have to designate Development Districts or Tax Increment Districts to
allow the use of some powers., such as establish a business-industrial park.
9. Who would serve as members of an EDA?
State law provides that an EDA Board may consist of3, 5 or 7 members appointed by the
Mayor. The Council can set up an EDA in one offour ways:
1) All seven City Council members.
2) One City Council member and two citizens
3) Two City Council members and three citizens.
4) Two City Council members and five citizens.
10. How would adopting an EDA affect City taxes?
State law authorizes Cities to levy special taxes for EDA purposes. An EDA would
submit a budget and levy request to the City Council approval. An EDA levy limit is
.0181%, approximately $320,000 annually. The City Council may set the amount of the
levy at a lower rate. Ifthe state re-imposed levy limits, the EDA levy is part ofthe City
levy limit while an HRA levy would not be. The HRA levy limit is .0144% of the taxable
market value, approximately $240,000 annually.
On a house valued by the assessor at $250,000, the existing BRA levy is $36.00. The
EDA levy could be $45.25. These amounts would be generated if levied at the maximum
rate on the 2007 taxable market value.
11. Would an EDA be in addition to, or in replacement of, the HRA and Economic
Development Commission?
Whether combined or separate, the City can use both the HRA powers to keep existing
neighborhoods vital and the EDA powers to facilitate commercial and industrial growth.
The citizen advisory role ofthe EDC could be fulfilled by the HRA and EDA boards, or
could be continued as a separate organization. The attached table shows some of the
possible options.
January 17, 2008
OPTIONS MATRIX
ORGANIZATION MEMBERSHIP FUNDS STAFF POWERS
1. HRA kept as is 5 residents BRA BRA Blight
Levies with Director or prevention,
Council City staff redevelop areas
approval and rehabilitate
HRA may properties
fund staff
2. EDC kept as is 9 residents, ex City City staff Advisory to
officio Chamber budgets Council:
and Council from Economic and
members general levy No staff cost community
development
issues and
solutions.
3. Adopt EDA 2 Council and 3 Council EDA Economic
Eliminate EDC or 5 residents levies for Director or development
------------------------
EDA. City staff
7 Council
EDA may
fund staff
4. Adopt EDA, 2 Council and 3 As above ED Director Economic
eliminate EDC and or 5 residents and/or city development,
transfer HRA staff and blight,
powers to EDA specialists redevelopment
EDA or City and
may fund rehabilitation
staff
5. Adopt EDA, no 7 Council As above City staff Economic
change to HRA development
No new staff when needed;
cost build ED fund
over time.
6. Adopt powers 7 Council as Separate City staff: Economic
without separate board for both EDA, HRA Director and development,
organizations. EDA and BRA budgets and specialists; blight
levies EDA and prevention,
approved BRA may redevelopment
by Council fund staff and
rehabilitation
6.B. EDA and BRA 2 Council and 3 Same as Same as Same as above
as two or 5 residents as above above
organizations with board for both
one board EDA and HRA
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