Jan 10, 2018 Economic Development Partnership Board on 2018-01-10 11:00 AM

Interrupt the presentation for questions if that's something that would help the discussion along the way so Don't hesitate to raise your hand and the chair will recognize you and we can move through it that way. So Let's go ahead and get started With everybody's favorite thing state laws and statutes, so we're just we're just jumping right into the fun stuff But it is important in this case to begin at the beginning With the recognition that the power to enter into these types of agreements whether they're tax Abatements or chapter 380 rebates or special assessments through public improvement districts That's granted to the city by the state and I just want you guys to see this brief chart About the tax type that is in question the program that is used and then the statute there Under which the regulations fall I'm gonna define a couple things for you starting with the tax abatement That's an agreement that exempts from taxation all or part of the value of a taxpayer's Real or business personal property for up to ten years So that's under chapter 312 and that specifies that in order to authorize Tax abatements a city must adopt a tax abatement policy every two years. So that's why we're starting this conversation now Because our two years are up in April of 2018 So everybody clear on tax abatement. That's a reduction to a taxpayer's bill in Whole or in part before they read before they even have to pay it. So it's just taken off the top Carolina would you? Mind reminding some of us an example of those that here in Denton maybe for all three of these Sure, that's a great. That's a great point. Um, so since mr . Fikes is here in the room We can use Peter built as an example they have Done some expansion to their plants and have requested tax abatements related to those expansions and been granted them So that is tax abatements can be done on new construction like brand new construction or on expansion projects But Peter built is an example of that type of project that's received a tax abatement So when we're looking at what best practices and economic development are related to incentives They dictate that a policy should address all of the incentive tools that a city plans to use Which is why our incentive policy also includes chapter 380 agreements So chapter 380 agreements give cities really broad discretion to make loans or grants of public funds to promote business development in Denton our chapter 380 agreements have historically taken the form of tax rebates in Which a taxpayer pays their full tax bill But then is refunded all of the portion all or a portion of the taxes that they paid for a certain number of years So unlike tax abatements, there is not a 10-year limit on chapter 380 rebates if you Were so inclined to go and look at the statute that talks about chapter 380s It is a very short little paragraph and it is very broad So cities use it in different ways, but as I said typically here in Denton our chapter 380s are in the form of rebates so an example of an entity that's received chapter 380 is O'Reilly Hospitality Management the Convention Center their incentive agreement is structured as a chapter 380 rebate any questions about chapter 380s Okay, and then finally something that we haven't talked very much about recently with this board our public improvement districts and Those are districts that offer a means for improving infrastructure to promote economic growth within a certain defined area and a city is authorized to Levy and collect special assessments or fees special assessment just means fee on properties within that type of area and The city of Denton does have one kid right now and it's the razor ranch kid and we're going to talk more about that When we come to the section about Pids later on in the presentation Okay, so as you know from looking at the backup we have policies and guidelines that outline the use of tax abat ements chapter 380s and Pids the Tax abatement and incentive policy was first approved by the City Council in 1989 and it's most recently Been approved in April 2016 as I mentioned So we're due in April 2018 in 2016 It was reauthorized with no significant changes I think one of the only changes we had was updating a map that's included in it so this is going to be the first time in several years that there's been a discussion and real re-examination and proposed changes to that policy the public improvement district guidelines were first approved in 2007 at the request of the Developer of Hunter Ranch, which is a large master planned Community or I mean it is not in existence, but it is a master plan community to the south Along I-35, but that was the impetus for the council adopting a public improvement district Guideline and it was amended in April 2014 At the request of red development the developer of razor ranch to add the option of revenue bond sales for Construction financing when it was first adopted it only had two options for financing and then this amendment in April 2014 added the third option For clarification back at the top the city didn't policy so This will be in 2018 the first update since 1989. No, I'm sorry if I wasn't clear about that The the last Content update was in 2014 I mean there were some additions and changes made in 2014. They just there weren't any made in 2016 So yeah, we have to approve it every two years. So it's been updated every two years. No significant changes last time So the economic development partnership board plays a key role under both of these documents Because it is the first entity to review Incentive or pit applications and make a recommendation on those applications to council The EDP board is also tasked with reviewing and recommending the city's incentive policies to the council for approval. That's That's a responsibility that's outlined in the EDP boards enabling ordinance So since the incentive policy must be reapproved in 2018 as I've said We're bringing staffs recommended changes to the policy to you today for your review and discussion further our understanding is that City Council members are wanting to have a work session about the current PID guidelines because there has been an uptick in Developers contacting council members to ask about the establishment of pins And so it's a good time to just go ahead and bring these two things up together and talk about them and review them As We in the economic development department develop our detailed work plan for the year the first thing that we do as a department is ensure that our projects and activities align with the city's strategic direction and I'm sure that many of you are aware that when the City Council adopts its annual budget each September It also adopts the annual strategic plan and the strategic plan is organized around five key focus areas or KFAs Which are long-term defined priorities for the city the third KFA in the strategic plan is Economic development and has been for a number of years and one of the commitments under that strategic plan KFA is to develop targeted policies and incentives that boost economic growth This fiscal year my department also crafted a departmental level strategic plan to complement the city's overall plan and to add some details under those really broad KFAs and Our plan is organized under four goals The first of those is business development and one of the objectives that we have under the goal of business Development is to revise the city's incentive policy and application. So again, that's yet another reason why we're here today talking to you about it because it is a strategic goal of the city and of the department and Finally as we're examining our projects and activities We want to compare them to the city's core values and make sure that we're aligned with those core values of integrity fiscal responsibility transparency and outstanding customer service So in the case of review and revisions to the incentive and PID policies and guidelines We not only have clear ties to the city and departmental strategic plans and core values Particularly those of fiscal responsibility and transparency But we have an obligation under state law and a mandate under best practices in the field of economic development So that's all the background and now we are going to delve into the policy for tax abatement and incentives I Want to make sure that you all have an understanding of what our review and revision process at the staff level entailed as part of the policy review and revision process we reflected on lessons learned from prior incentive agreements from recent initiation of a number of incentives as well as the recent termination of Several incentives and our ongoing incentive administration , which is one of our department's responsibilities Just so you guys know we have 17 active incentives right now. So there's a significant amount of administration that we do We also reviewed incentive policies from other cities including Frisco Garland Flower Mound, Louisville and Plano We've also incorporated total impact 2.0 into the application process And total impact as some of you may remember is the city's fiscal and economic impact analysis Software that has been customized specifically to our particular situation as a full-service city and allows us to perform a true cost-benefit analysis on a proposed project that's requesting incentives and Finally, we discussed our proposed policy changes with our colleagues in the finance and legal departments as well as the city manager's office and then incorporated their comments So we're gonna start with the formatting changes We want to make some revisions to improve the organization clarity and readability of the document We propose expanding the general provisions section to define our economic development goals and target industries And then we further propose expanding the definitions section and bringing all the existing incentive programs We have an incentive program under a separate ordinance That's called the ED investment fund as well as another one called the based aircraft incentive We want to roll those all under this policy so that all of that information and guidelines are in one place At this point in time, we're not proposing any changes to those other policies the ED investment fund or the based aircraft incentive policy Can you tell me where the funds come from that are administered through the ED investment fund and the based aircraft incentive? I'm just I'm not as familiar with those and right that's a great question. No They the easy why we would or not would not put them under this right? We'll do the easy one first the base aircraft incentive. It 's facilitated as a chapter 380 agreement So they're the funds for that are they come in from the taxpayer and then they would be refunded the ED investment fund That is funded through mixed beverage sales tax, correct? Yes, mix beverage sales tax is a certain amount is set aside It's like a hundred and fifty thousand dollars a year. So I 'm looking at Erica 150 thousand dollars a year is set aside into that specific fund so it's really just it's kind of a house cleaning measure so that When someone looks at our policy, they don't have to go look at three different policies They see it all in one place and the point being it's all taxpayer. So that's right Yes, ma'am, that's really more of a comment than a question on this a readability is a big one For me understanding what it is that we're being asked for and when we talk about the umbrella policy everything Being under one umbrella. I'm wondering if it's possible if we can create a scorecard an actual scorecard with all of the the items or criteria on one side and if that that business that's asked for the incentive Is a yes or no on those criteria's mm-hmm just something physical and simple for us to see That might be a tool that we could develop To help the EDP board and the council in their analysis I mean, is that what you're talking about instead of incorporating something into the policy itself? Because we're gonna kind of get to something along those lines that we're proposing as it changed to take something out But I like that idea of something real simple and straightforward Kind of does it hit this or not? Yeah. Yeah, and the other thing too is that Our total impact Analysis software produces a one-page summary as well as like a ten-page sort of Mediary report and then a 30 page really significantly long and involved report so that you could lay out This is a project. This is this is what it looks like under total impact You know how many jobs it will create how many? New housing units it would generate with this level of investment How long the payback period would be if we offered them an incentive? So it's kind of a one-page infographic style piece of information That is very helpful for looking at Projects next to each other even okay, so but I appreciate the suggestion. I made a note and we'll discuss that Jim's got a question Would that be an element in the approval process or Would that kick a business completely out as far as being qualified? No, it's just to emphasize that these are the targeted industries and and that there there is some additional weight But I I don't think that anybody would want to just discount a potential project because it wasn't a target industry It's just to call out the ones that are particularly desirable as determined by this board and by the council Okay, so we have on our incentive application we do have a list of criteria of Not quite a scorecard, but kind of a scorecard that they check a box on it says I'm doing this this this and this so That maybe could be expanded Within that because we have some Targeted not industries, but things we want to make sure that they meet on the application We don't have an application. I don't know if everybody seen the application in here Um, I think that we include and I think we include a copy of the application with people's orientation materials But it could have been it could be a while and the other thing too is we've actually we've revised the incentive application just on an administrative level to make sure that we're capturing all the information that we need to do our total impact analysis and Capturing the information that our utilities need to help us gauge the kind of impact a project would have So we've tweaked that on an administrative level. I mean it doesn't have anything to do with policy So we just changed it to capture what we needed with our new analysis But if everybody would like to see a copy of that we can email it out after the meeting The ED investment fund how long have we had that I Think this is the third year third fiscal year. We've had it and that is Correct me if I'm wrong money that we've set aside so that if a big project comes up and we need to I'm trying to think what the project what it came up with a few years ago, but Help pay for something that were able to Provide an incentive. We've got cash to be able to do that when we're competing with Other cities a lot of those people have a 4a or 4b sales tax this thing where they have money set aside that they can buy a piece of land or help it in infrastructure and Okay So that's money that the council that we recommended the council agreed to set aside so that we can Build that up to be able to maybe offset some costs as somebody's coming in there That would have to come through here and it have to go to City Council before any of that money was spent And the aircraft and Cindy was a new policy that we've only had a couple of years As well that for specifically for the airport. We've had a couple of folks that came out With some projects out there that we wanted to make sure that was Something we can do out there right and just to reiterate any incentive agreements that would be entered into using ED investment fund funds or a based aircraft incentive would go through the exact same process that any other chapter 380 agreement or tax abatement would would go through and would be governed by the same kind of contracts with thresholds and Verification and all of that stuff, but Marty makes a good point The ED investment fund is intended to put us on a better competitive footing with other communities that have For a or type a type B sales taxes and there are some higher level very clearly defined requirements that Go along with the project's eligibility to be considered under the ED investment fund It's a minimum capital investment of 15 million dollars instead of five million dollars like under the regular policy We've defined what a higher paying job is or skills Skills based jobs, so they have to meet two out of three criteria That are clearly defined to be eligible and we have not used the ED investment fund to date So just a little bit more background for y'all Any more questions? Thanks good Okay, so on to the proposed content changes We are and this just gets right into what we're we're talking about here but um We want to put forward the proposed change to limit Chapter 380 tax rebate agreements to terms of 10 years or less To make those consistent with the limitation on the term of tax abatements There are a couple different reasons behind our suggestion for this One of which is beyond a term of 10 years. It becomes difficult to do an analysis on The accuracy of an analysis on a project Significantly declines outside of the time frame of 10 years I just heard what you said sign on the door. I'm gonna have to get a basket and take up everybody's phone All right, we'll use it to buy cookies for the next Disrupted the meeting Okay getting back on track because we don't want to be here until 2 o'clock So the first proposed content change that we have as I said is limiting chapter 380 tax rebate agreements to terms of 10 years Or less to be consistent with the limitation on the term of tax abatements We also propose excluding retail projects Some questions on that We have 17 that we're working on and I can't remember the details on all those So how many did we have that were longer than 10 years? Or do we have in place? there are two That are 25 year terms That I can think of right now If you're gonna if you're gonna add to it you got gonna have to come up here and talk into the microphone My Name's Erica Solomon which we all know but for the public the analysts so I actually administer the incentive agreements So we would have four That would be our sales tax agreements. So it'd be Golden Triangle razor ranch tent and crossing in Unicorn Lake Those are all longer than 10 are they all 25 years Erica, okay, so Okay between 15 and 25 years you had mentioned excuse me Erica mentioned Golden Triangle razor ranch Bossing and what was the fourth? Thank you very much So none of those projects would have qualified under this No, they would have they would have qualified but they would have been limited to a 10-year term Jill thank you. So my question is First of all is If we make this change does it limit council from approving outside those guidelines or can they make a variation and secondly If every single time we go through a vote and they're all looked at on a case-by-case basis as we all know Why would we limit ourselves outside of? the laws of Texas to what we can't can't do I can see discouraging it because of the issues that come up with over 10 years, but Just so mark that off the list doesn't I don't know why this is an adjustment to kind of The guidelines there just aren't any in our own policy that being said the policy as it is written allows the council to have discretion to go outside of what's stated in the policy and we're not proposing a change to that because we understand that We want to have clear guidelines so that companies know what to expect and kind of what the norm is However, there can be situations that we cannot anticipate When the council would want to have the flexibility to go beyond that so I don't think it's reasonable to Remove that language that would allow the council to make the kind of decision that it needs to make in an extraordinary circumstance to do something different and to boil it down the Limiting that would be because of the difficulty in administering After a 10-year mark is that the reason that that's limit that's one of the issues and it's not difficulty in administration It's difficulty in judging what the real value of a project is outside of the time frame or in a time frame beyond 10 years Somebody's gonna be here administering something if we enter into an agreement with an entity It has to be administered for the life of the agreement So the the administration is not the problem I think that There's also there's also an issue with you know The issue of foregoing revenue for an extended amount of time. I mean frankly that is an issue So these are the things that as we talk through these things as we look at what our challenges have been as we Talk to other staff members These are the issues that come up over and over again. So we're bringing these to you for your discussion Jim But a unicorn lake and raise your range with the build-out is over a longer period of time Is there some way we can put a provision in there so that you do it in phases? Like we did Russia range we did the North side I think there needs to be something there to give you a little flexibility To not force somebody to think they've got to get it all done in 10 years. Although that that would be the goal Some of these bigger projects might not be feasible Okay, thank you Anybody else have any comments or questions I guess Just to make sure everybody's on the same page on 380 agreement. We use Denton Crossing as an example they collect sales tax revenue from from Best Buy when they sell a computer and We agree up front to give them some of that money back over a certain period of time That can be 50% goes back years one through five that it's 40% and then it's 20% or whatever So the years and how much money they get reimbursed or are both part of that equation. And so while we are giving money back over time 15 to 25 years down the road that may be 10% or 20% or whatever the deal is so it's not just a year 's thing. It's a when somebody comes and asks for a Rebate its years and how much are we giving them over time? And when we have these discussions We usually have several scenarios to talk about they want 100% for 100 years and we want You know 20% for three years And so we kind of come up with something that works out there. So I Don't mind 10 years being a goal if we had that as a stop then the ones that we have right wrong or different wouldn 't have Gotten a great wouldn't have gotten an incentive or what they have may or may not have happened Raise a ranch wouldn't have worked on 10 years Well, and that's that's why it's important to retain the flexibility for the council to make The decision that they deem appropriate Outside of the 10-year time frame, but I guess I don't know Outside of we're trying to line it up with the tax abat ement policy, which I don't even know if that's relevant In my world I have to look at rules and regulations and how often we make exceptions to those and if you're making exceptions to Them all the time then you need to look at whether that's a reasonable rule Regulation and if I look at our current five Chapter 380 agreements, they're all over this. So what are we really getting ourselves into we're asking the council We put ten years in there and we make a recommendation for 15 and council Next week or ten years from now says what's our rule? I don't want to make an exception because what does that look like? To the council people and putting Words in your mouth. I guess they don't want to make the exception because it's outside the policy and people are mad because we're outside the policy I Don't know that's really reasonable I don't know if this is a comment or a question or what? But the city of Denton has changed over the last ten years Significantly and as we're proposing content changes Does this really? Capture what we want to do over the next ten years. I mean the city and Surroundings have changed significantly. So is this really going to meet our need? For the years to come. I don't know the answer. I'm just asking a question Well first the other part of this all these are retail projects on the next item is to exclude retail projects. I don't It's a question of whether we get into the details of that one a little bit We're looking at more retail projects because we have so many going towards that is probably a really good question. I guess I'm From the you know first time really taking a chance to talk about this. I'm Opposed to having ten years out there and I think that makes it harder for us to get things done Understand we've got some flexibility But when you look at the ones that are on the books were all 15 to 25 years. Why would we? Ten years Well, there are a significant number of them that are less than that. I mean we've had some that have been three years I mean I can think of several that have been three years recently So but those are the I mean razor-edge a big deal didn't crossing was a big deal at the time No one tried them all those are I Just don't want to I just want us to be able to have options and I don't want to make those options exceptions my personal opinion Carolina Does that limit this board from being able to say that we recommend Additional I mean in my opinion it doesn't It would I mean the flexibility could would be there at the board level and the council level For the sake of being a devil's advocate we could set it at 25 years and we could make them recommend less than that Or you could send it John Baines or you could set it at 10 and say that at the discretion of council they could Expand it right and that's already built into the policy. I 'm and we We would retain that language in my opinion is that language could stay it should stay in there to allow for that Jim Have a different start date for different places approve it all at one time And first the first phase would be ten years and then when the second phase kicked off then that would be the start date for that one And there could be thresholds Associated with the first phase that would have to be met in order to initiate second phase John Baines so Jim what you're saying is that it would basically come back to some review board of some sort after the Yeah, that's that's what razor ranch is doing now They have a threshold they have to meet to get an extension and then they have their final threshold Jill jester and I think that that's something that we you could word I mean if if that's the ends up being the recommendation that although it's a you know up to by law 25 years potential that it is the recommendation or that it is strongly recommended that It be divided up into phases no more than 10 years or something like that if that's the way we choose to go Okay, all of these projects are Different and a case by case. So when we come when we have somebody doing that again, they all want all the money in the world for Forever and there's also a dollar limit on all these so It's all negotiation Economic Development Department comes to us with a recommendation and we have a talk about like we're doing here about each each project and then make a recommendation to City Council So, I guess Do we need to all say raise our hand and say we're okay with this right now or I think that's up to you how you want to do that. I mean, we're all making we're all making notes as we're talking But if you want to specify by each point what the board's consensus is that's definitely one way to go No, we need to Vote on that or not or we're just providing comments and feedback right now. It's it's really comments and feedback There's not action to be taken. So Yeah, just we're taking the direction as you're giving it John Baines Just a little clarification here on the 15 million. So with these particular Okay, one thing Jill you you said something that I want to clarify not that this would ever come up but just because Under the state statute that governs chapter 380s. There is literally no time limit on how long the incentive can be It could be a hundred years long. So 25 is just where some of our agreements have landed Because that was that was what was deemed necessary to make the deal work for both sides Thank you for that clarification. I appreciate that. You're welcome Okay, can we move on to the retail project bullet? Okay So we're proposing to exclude retail projects except those that address a gap or leakage in the Denton market So a gap means we don't have it and we want it. It's not here And so if you have a gap you have leakage of people going to where that retail is If it's not in Denton, they're going to another community to shop there and so we want to be able to close those gaps and Keep that leakage from happening in our market I have two examples of that. So Say Nebraska Furniture Mart wanted to open a second North Texas location Of course, we would want to talk to them about their project and that would be retail that would address a gap the example on the other side of that is Kroger how many Kroger's do we have three two and a half? How many are we about to have? We're gonna have we're gonna have another one and they came very aggressively wanting to be incentivized We have already Kroger's we don't need to incentivize another Kroger So that's the kind of thing that we want to we just want to head that off at the pass Because that that's not a constructive use of anybody's time and while we want to help them and support them and answer their questions We don't need to have a conversation about incentivizing Somebody to build another Kroger depends on the cheese selection Give us your cheese list and we can we can add that Keely has a question But just to address what we're talking about now so gap or leakage I assume Identifying those will set priorities and will that be this economic Department that does that or is that like a study that we? Well, we put an RFP up in the high I mean is that who pays for that if we want to if we want to get that information right now We have to get it ourselves at the staff level because we don't have I mean you can spend quite a bit of money to get A very sophisticated analysis of what leakage you have in your community But frankly, we don't have the budget to pay for those kinds of studies So it's you know, we can we can do it if we need to and we understand Basically where our leakage is so and so the next question is I have underlined didn't market What exactly when you say didn't market does that mean are we defining that by zip code by an area by drive time? I'm defining denton market as The areas in which we capture sales tax because that's really our key. Yeah, we should be city of Denton That I can rephrase that Yeah, but it's where we capture the sales tax Okay, did you have Keely did you have another question on the next point on the next point? Okay Okay, so let me let me finish with a couple of some bullets there. Um We are suggesting that the project must generate at least 15 million dollars in annual taxable sales to be considered and we did some comps on that like what The kinds of sales that Academy is generating as well as looking at what some other cities policies specified as far as a minimum amount of annual sales to be generated and then we also proposed capping a sales tax rebate at 50% of sales tax receipts and again, it's because we're Comparing what other cities policies have we're looking at Cases that we have on the ground right now and what's reasonable and trying to kind of put forward some parameters around What what we're willing to enter into as a starting point But again, the flexibility would remain to do something different if the situation These sub bullets of the exclude retail projects the last two Yeah, it's just further detail about how we would structure it and if that's the case Do you need to reference a gap for leakage and they didn't market? I mean as long as they're hitting those two thresholds Do you care? Well, you know, I guess if we got mega giant Kroger and it was generating 20 million dollars in annual taxable sales We still wouldn't want to incentivize the fourth Kroger necessarily so I Would I think I think that this I? Mean my inclination is to leave that language In but again, this is an opportunity for y'all's feedback. So do you think it's redundant? Is that your I just don't know that it's necessary I'm sorry Both of those a gap and 15 million dollars in annual sales So We would consider retail projects that address the gap or leakage. So it's the exclude word that Just I was thinking as a matter of fact instead of exclude maybe target retail projects that blah blah blah Just so that because when the public is gonna read this and think about moving here I just same thing with kind of the 10-year we just even though they're guidelines We don't want them to not approach us. Okay, you're all right Yeah, so my thought is along those same lines they exclude jumps out at me because it seems a little restrictive and Gap or leakage is a little ambiguous because it's Who ultimately decides I mean I understand your department makes a recommendation But a gap or leakage to you may not be to me, you know, so I think if there is some I Think it I think it's even I mean Unfortunately, it's a little ambiguous. I'd go way of ambiguous because I just don't think there's a way to detail it, you know correctly, so if I if I say, you know Those that you know retail projects will be considered on a You know application basis or apply, you know that sort of thing with those other two Sub points that it needs to be this is a suggested threshold 50% you know, but I think because I think you can get into Understanding that the purpose and trying to get their rightwards guidelines and understand that and fold that into my thinking but it's just It's difficult. I Take the perspective of people that are gonna be anti anything we do right? So if I'm on council and I got someone it's like hey, I don 't want to do any of it Then I don't know that The thresholds are gonna help right? So then you kind of move to the to the center of that discussion those that may be Malibu, okay. Well, what would let's have that conversation , you know, so that sort of thing So I throw out the extremes look at the middle and I don't know that that language helps me Communicate to those that are asking asking questions. Okay , just my thought so the gap or leakage could mean we don't have a business in our city that sells that product and everybody's going to Dallas or whatever whatever that whatever that would be And probably a good example of how this comes into play at least on the retail side is when razor ranch came and there were talks of you know Dillard's moving well, we don't want to Incent we the ED board at the time the city didn't want to incent them to Move Dillard's across town because they're already here. And so we actually excluded any existing stores they so that we exclude that I don't even know where that D illard's whole thing is but If Dillard's I know where it is now, but where they were moving to razor ranch or not There's been a lot of back and forth if They did move as an example We they were not going to get any incentive for the sales on that store because we didn't think that's fair So this to me is a similar thing. We're full of with retail If something comes that we we don't have or missing a market and everybody's driving To somewhere else to get that then we've got an out but it 's got to be a really big project Then we're limiting that so Basically, you've got two markets you're at yeah, you're adding You're not cannibalizing one to get the other one. So would you incentivize that one? Like that's a Board question that comes here we talk about it Keeley so I Think changing the exclude to target is is okay is good. I 'm okay with gapper leakage I mean as a city council person and improving incentives that is one thing if we're missing I'm all for you know, approving the incentive and I think Those are market terms. Those are terms that people understand that are in the retail business So I don't have an issue with those and we can as I was talking earlier about expanding our definitions section we could we could find a working definition of gap and leakage and include those in the definition section if that would help address the issue that some people have and So on the must generate 15 million. Is that a projected amount over a certain time? I mean and who does that projection? I just want to clarify on That's something that we would do the projection with my office would do the projection with in conjunction with the applicant themselves, I mean they would have to They would have to provide us documentation that comparable stores would produce at or over that amount And then they would be held to that in their agreement as a threshold When they ask for rebate they ask for an amount based on the projections and so either ten years without amount comes and if they Over project and don't get there then they don't get the money if the time comes up So they have to be realistic when they're doing that right? If they do they won't get it right because we do we do we have the mechanism for third-party verification in the case of sales tax and in the case of ad valorem taxes because The central appraisal district handles ad valorem taxes and the comptroller's office provides information about sales tax So it's a very straightforward verification mechanism That we have in these cases My next question is about the sales tax rebates right now I mean you said it will be capped is there not they're not a cap right now. It's it's agreement by agreement It has been the way that has been approached I just I never worked retail so I don't recognize gap and leak is so I would like those definitions and then also I think Really I struggle with I mean Retail right I mean everything Technically could fall under retail I mean if you if you word it right or if you it's just no no different than that I look forward I look back on the conversation we had about tech businesses tech enabled There's not much that won't fit under that category now and so for me again If we're going to have broad terms, which I I could be wrong, but I see that as a broad term retail I just I'm ignorant to the definition and if someone were to come to me and say this business or that And it and it's close. I don't know a defining line to say no that is not retail Yes, that is retail and so if there's a clear line that I'm missing I'd love you to articulate that to me But if there if those are blurred lines I don't know that a regulation that straddles the line is or is left up interpretation of just That person's experience is great and that could just be an ignorance on my part But I just look at that conversation we had about people feeling misled about technology tech enabled and trying to You know we need to pin it down and say here's the clear line And if you cross it then you're out and if you decide you 're in so I'm hearing that you would be more comfortable if we Included a definition of what what our definition of retail is Versus a service well yes, I'd like a definition and an example of what's out you know because I think that's where we get in trouble It's like okay. Why read this definition again, and I go to this all the time if we can we had a National argument about the definition of is is so I don't you know there's no there's no level of wording that think that is will be exhaustive enough for some right so but if there's an example of Because I'll give you a great example of leakage, and that 's main event that that that type business And I consider that retail and I know we had that in the works in Andy B's But assuming that's not in the works I would give half of everything to get that here because we 're losing that money every day You know and so I don't know if anyone else would agree that an entertainment complex like that is Retail you know, but I see it as that you know so that's where kind of it kind of gets to where we There's examples of what's in what's out by suggestion obviously everything is flexible. Okay? Thank you well, we'll we'll take that under consideration and See what we can do to get closer to a place where you're comfortable with it Alright Next bullet point Do we want to do this bullet point and then yes, mr.. Chair break for lunch, okay? Okay, so our final proposal Under this slide for content changes is to remove the existing capital investment based framework and the additional factors While at the same time retaining the five million dollars minimum value of investment in business personal property Or or real property. I'm sorry not real property, but structures to be considered for a tax incentive and the reasoning behind that Is there are several reasons behind that the first one being that? removing the existing framework for length and percentage of the incentive allows for more flexibility to Determine a potential incentive based on the projects actual merits and how it fares under our total impact cost benefit analysis There's been some concern expressed that the existing framework and additional factors lead people to believe or businesses to believe that an applicant is Entitled to an incentive of a certain length or certain percentage if they make a certain level of capital investment so We think that this move would allow us to really look at projects based on their own merits instead of Just kind of saying oh well if you make this type of investment the chart says you get this And and I do think that we have run into run into People who have come to us and said well, I'm doing this type of project. It's I'm gonna invest this much money So I'll be getting I'll be getting my incentive at X level So I think it sets up some expectations that are not necessarily reasonable in all cases So please discuss Yeah, I just want to make and thought I would show page 3 of 18. So this is the framework We're discussing correct and are these the factors those are the recommending right? So what Jill has is additional factors in a big list there And make it building things like yes And those are things that have sort of they've evolved and been added over time to address particular needs or priorities and the list has become extensive the other thing with those additional factors is applicants can check them and use them as You know use them to bolster their argument that their percentage of incentive should be higher however We have not in the past Had a mechanism to hold them to actually doing any of those things Some of that can be addressed in contracts some of is very hard to verify So it's an interesting situation that's that's created because those things those additional factors are beneficial I mean, it's it's making a commitment to you know support local nonprofits or didn't schools or public art I mean, I don't think anyone would argue that those are not necessarily valid or good intentions, but the question is How do we hold the company to actually fulfilling what they say they're gonna do and how do we verify it? If we try to hold them to it the community involvement was one that I lobbied for many years ago And really I've said this several times Peter built is my willingness to ask for anybody that comes here and asked for an incentive Because of how what they do for the community We have some examples of companies that received incentives and all the numbers work out great and they get here And then they don't return phone calls don't do anything that I don't join the chamber. They're not involved in anything It's nice to have the numbers but part of what makes us a great place to live is Having all the people out doing all the things that we're all out doing So, you know with that being said how do you measure that How much money you gave to United Way how many people were involved in the 5k runs or whatever the deal is so I can see where that's hard to keep up with And if so, what's the point right? It could just be a report that That we have to give us It would be hard and I look at it as a what have you what are you doing? And what can we expect there was somebody that flat-out told me because I asked a question We're gonna do United Way campaigns and they don't do anything So if somebody is not doing it or if they're not Doing enough. How do you take the incentive away or if they 're not doing that? I mean, I think that's the hard part Yes, they may report that we did this this and this but was that enough? Or no, it's just subjective. It's a nice idea Basis for the decision if there's no Follow through right or because they do that's all they do do they qualify for X percent John Baines, are we discussing additional factors? Is that what we yes. Yes, sir. All right So with that being the case do we need to add some ampl ification or some You know some more texture to that to that phrase so people are Well, we're talking about removing all of them removing it. Yeah right, and so in an application there is a way for people to If they feel like they want to include that kind of information about their community involvement, that's that 's great. And you know, we can We can say this is a community that values involvement in X and Y and support of X and Y and wants to see companies undertake green initiatives So if you would like to add any of that information to your application, that's good color commentary to have But that's not necessarily something we would You get five additional percentage points because you were going to do this Jill Jester right now there is a number tied to it if you meet For each of these not to exceed I think I think something like you can pick three Then you get an additional or they can consider granting an additional five percent abatement so I think as far as I think it's possible to include some of these and say these things are What make you attractive to us? But as far as tagging elements that you can check off a box and expect to check off these numbers in return If we have no way to confirm That then they should not get a specific monetary amount increase tied to that element I think is where we're going. However, I think miss Simmons here is saying but these are things that we are wanting to attract and would give special attention to because they're meeting some of these factors, so Is there a way to do both? And as I said, you know we we allow space and when we discuss Filling out incentive applications with companies. That's something that I know I personally communicate Look, this is the kind of community we are and if you are the kind of company that aligns with these things I encourage you to mention it in the extra section of your application Just for our consideration but not tied to a guarantee of any additional percentage So I just Discovered that this is where and I don't know correct me if I'm wrong. Is this the only place where percentage? For using renewable energy or anything like that is in the contract and that is awesome That's what you're projecting you want to take out as well. It's one of the additional factors so that in our incentive policy a business who comes in and does all these things wouldn't going forward be considered for It wouldn't be applied to their criteria to get the incentive is that it wouldn't be directly tied to an additional Percentage or an increased percentage of an incentive It could still be taken under consideration But you know renewables are one of those few additional factors that would be Easier than others to apply an actual measurable parameter to right You will install X number of solar panels on your building and you either do it or you don't or you know you will participate in DME's green sense program. I'm just I know that's really at the residential level But you know and that could be verified but there are so many other things on that list that can't be verified Well, I would like to keep the conversation open for those because they can be measured and we can go back and see if Because those are certain things that companies do and I would like to make sure that Those are the ones that we're attracting to our community. So right now if you look down that list, it's And that's what's on the application. You can check I'm doing these three things and that automatically gives you Percentage you get 15% tax rebate because I checked three things that say 5% And so not that these things still aren't important to us. That's why they're in there But we're just you're saying we don't want to tie them to it because you do this it could be that you're a renewable energy Company and that's that you're doing that and we can still give you a big thing I'd like to figure out a way to keep these as part of the conversation other than staff telling you here's what we think it is but have it involved in the application or Here's some guidelines for things that That will help your application but not tie the percentage directly. Yeah and I think that that could be a good middle ground and we actually have Internally had some discussions about how we could condense that list a little bit without you know, kind of losing the the general Idea that we want to encourage green energy community involvement, etc, etc. So Maybe it's a condensed list You can check the boxes then we expect a little bit of an explanation, but it's not tied directly to a percentage increase The application is part of their narrative John In keeping the conversation going let's say you take all of these items and The companies that come forth and say hey, we want to do some of these things Can we not ask them to tell us how they're going to? to monitor these and provide us with Instances of their Performance So rather than us being the police Let them police themselves and say this is what we're gonna do and then we hold them to what they say they're gonna do I take your point it is And we can try to do that but again, it's We need to have something that's verifiable by a third party that's the ideal standard for any kind of threshold in a contract and We want to believe that everybody would be honest about what they're doing and not inflate their participation Everyone's honest other not right You live in a really nice world I Understand what you're saying, but you know, unfortunately in the cold hard world of contracts and you know having to Having to agree on how something is verified independently. That's a little bit difficult and we do have We we do have verification forms with some of our most recent contracts that people have to fill out But those are things that we can then turn around and go to a third party and verify But they do have to sign it these certificates of compliance But we still want to be able to verify it independently possible. We've had people Check the box for community involvement. They want a 5% part of that incentive and they have an annual bike rally They have a what an annual bike rally is their community involvement, which is nice But compared to a lot of the people in this room and things that you're doing in the community is then old water Your land couple of other things here that I think really important to is the Statement where they would hire Denton residents and their jobs and hire local contractors and subcontractors That's important My opinion is I don't want to remove these from the process Maybe we don't tie the 5% of doing that stuff and how do we mean we can verify if they hired somebody or not But I think it needs to be part of the process. Here's what we hold as important to our community If you want an incentive the more of these things that you 're doing and you can put in your application to prove to us that You're doing and plan to do and how you're gonna do it the better your chance of getting incentive is Maybe just special emphasis on Anything else on this bullet point All right, we're gonna take a short break and Reconvene here in a few minutes so Conversation to go over proposed content changes and we'll let Caroline pick it back up Okay, I hope everybody has been fortified by lunch Please feel free if you need to get drink refills or cake just help yourselves We are gonna move into a discussion about the addition of minimum thresholds for valuation to our incentive policy So minimum thresholds are intended to encourage submission of accurate information about investment and job creation data in the incentive applications because those Applications and the information they contain they serve as the basis for the threshold So we're asking the company to give us their best projections about what their investment and job creation numbers are gonna be and then we're going To use that information that they provide to establish minimum thresholds in the agreement for new development projects We propose and again this kind of comes back to our third party verification that we do through the central appraisal district for new development projects we're proposing that the valuation by DCAD needs to be at least 80% of the eligible investment that the applicant submitted in their application The reason why we don't Propose that it be a hundred percent of what they submitted in their application Is that as you all are aware these projects can take between 12 and 24 months to complete and there are a lot of things that Can happen in that time that are outside of a businesses control things with the economy or industry specific changes that might affect Their plans and they're still moving forward. They're still making the investment. They're still going to create the jobs But it might not hit that exact number that they put forward in their application So for new development and for jobs we're wanting To hold them to 80% of what they submit an application now for expansion or redevelopment projects we have learned recently That there can be a significant discrepancy in The investment amount that a business makes in that expansion or redevelopment and the way that the value is Is calculated by DCAD? It's often significantly lower than what the actual investment amount is And we have had to in fact Terminate several incentives that were given for expansion or redevelopment Projects because the threshold that was put forward in the contract was not met and our opinion is that we were putting we were setting it too high so Here under the this bullet about expansion and redevelop ment We're proposing that the threshold for those kinds of expansion or redevelopment Projects be 50% of the eligible investment that was submitted in the incentive application to account for the fact that The company is making the investment they're doing what they say that they're gonna do But DCAD does not value those types of projects the same way that it values a new development Yes, that's a very good point Very very good point Those and that has happened in a couple of other situations that that we've had and and we have had some interesting conversations with accounting departments our financial folks from some of these companies Where we have this conversation about well your Recourse is to go and protest your valuation But you'd be protesting it to be higher and that's sort of a strange conversation to have But at that point it becomes a business decision for the company Do they want their valuation higher so that they pay more taxes so that they get their incentive or is it actually better? On the whole for them to take the lower valuation and fore go the incentives or tax burden would be lower. So These are things that we reflect on as we go through the administration process and have these experiences. So We wanted to put that out there for y'all's discussion and and just so that we can talk about it Everybody loves this idea Right, so I mean this is I've covered everything that's on the slide so So I have the question about the jobs created and Just help me understand. Why is it 80% and not a hundred percent of jobs create? I mean that comes what they say they're going to do then why aren't we holding right that comes back to the fact that The lag time between when an incentive application is submitted and when a project actually opens it could be it could be up to 24 months And operational things or environmental factors that are outside of the company's control could change in that ens uing time and there We've just discovered that we need to have a little bit of flexibility for the companies Because it's it's a really bad situation when a company is is doing everything that they say that they're going to do and They're making the investment but factors that are outside of their control change the situation on the ground and You know having to terminate an incentive is not where anybody wants to end up, right? and It could alter It could alter the decisions that a company makes in the future and it's not that we don't want them to do what they say They're gonna do. Of course we do but as we all know Things happen that are outside of anyone's control that nobody would have wanted to have happen and So that's just trying to account for this So 80% is the floor Right, right that that would be if you dropped below 80% of what you said the number you said you were gonna hire in your incentive application that would be cause for non-receipt of the incentive Okay, and so Since this is all new to me earlier. I heard you say the word clawback and so On this part of it, how do we how do we check and at what point do we check? Is it every year that we we check that? Yes before there's a payment made or whatever their payment Schedule is but just let's say it's annually We verify every year all of the thresholds no matter what they related to if it's related to jobs or if it's related to the evaluation or a certain number of sales certain amount of sales tax We verify that every time before a payment is made Jim And they finished it in 2007 Personal Right Somehow I think figure out Put it on hold for a year Have a mechanism that allows you to move forward at a lower percentage Instead of termination some kind of there's a evidence of good faith to Some of our agreements are structured that way where if you miss your threshold in a certain year You don't receive your incentive for that year, but it you have a chance to try again in subsequent years Some other of them are set up where you miss you miss a year and that agreement is terminated From that point forward you could have an application that Is a new development and jobs are going to be created and we're making a decision based on both of those things and if they added 50 million dollars in new development to the tax rolls, but they missed their employment by 79% or we're really going to take away their incentive and I guess just kind of getting back to your comments does As we're writing contracts does it have to be? all or none or that reduces instead of you getting proportional reduction $20,000 a year and an incentive back that now $15,000 or skip I mean because I They're all different. They're all big everything can happen and I don't like the idea Maybe that there's certain circumstances where it does if you don't do this then you don't get get the money and You can reapply or can we amend because we have there's nothing prevents us from amending somebody's Incentive agreement, that's correct. We have had the experience where we've run into time constraints where we these are these little things that are strange circumstances, but Disputes of DCAD valuation ARB reviews We inevitably have a handful of companies with incentives that Go for ARB reviews every year So we can't verify if they met their threshold until the AR B review is complete and then it's getting to the end of the calendar year and we have to You know, we are advised by our legal department that we have to you know Take action on the contract if there's gonna be an amendment it has to happen before the end of the calendar year Well, what happens at the end of the calendar years? Everybody stops having meetings. We can't get anything done . So I Understand exactly what you're saying about amendments and that is an option but like practically that can roll out in a strange way because of the review process that the company is undergoing the DCAD and That kind of thing. So just something else to think about the two that we just had to Terminate because they're Nothing to prevent them to come back and ask for an incentive. That's less or whatever There's nothing to prevent them from coming back again Well, I was just gonna add that we do have extensions because council approved certain extensions when Right, so the business has an ability to come and say well we're about to meet this or we have it But we will right so if can you extend this out a little bit further? That's that's true but in the example that I just mentioned where there's that kind of calendar constraint between their ARB review and and the end of the fiscal year They have the ability to come and do that. But sometimes we run out of meeting, you know, they're The the body that would have to make the decision is is not available Unfortunately, you know that that can be a circumstance that we run into But it could be a dissatisfier for how they spread the word somebody else if I come to them I Just I Don't like the idea of if they've missed it by a certain percent if they say they're gonna employ so many people and they are off by 10% or 5% or whatever That may be different if it's 10,000 people you're gonna employ you don't employ you only employ 9,000 or 190 That's not gonna have a huge impact talking about different kind of numbers But I hate this yanking it From folks is that gets pretty tough. I was Happy to see the last couple of deals that happened with yeah, I Understand this gives a threshold And it is you know, it's it's stated upfront it and There are other people who feel very strongly that if they don't do exactly what they said They were gonna do in the application They shouldn't get anything and we shouldn't waiver from what the application states So there are definitely a range of opinions on these things and you know Oftentimes what our role is is to seek it's to seek something in the middle that you know Maybe everybody doesn't get everything they want but we come to a reasonable compromise Jill Jill gesture I've got two questions first. Is there a current minimum? Are we going from zero to this or is there one and this is there there is not one in the policy? Okay One has been inserted at the request of council members in the Sally Beauty expansion incentive at the 80% is is that was the first instance of that threshold arising Second question. Can you for some of us tell us what an ARB review is? it I'm not gonna call Erica up here, but I can't I don't know what ARB stands for but it's the protest What'd you say appraisal review board? So it's the protest of your valuation for tax perks. Thank you appraisal review board Thank you Thank you, so this what this is doing correct me if I'm wrong is gives us some wiggle room If they don't meet that 100% Decad value or employment or improvement that gives it so we don't have to pull it If they fall a little short Yes, that's for this Is intended to be more favorable so we don't have to we can continue with the That's correct, you know we want If if we think a project is significant enough that this board makes a recommendation to the council and the council approves it I think everybody's intention is that they would be successful in achieving Their thresholds to get their incentive and I see this as a way to help us Get our expectations all aligned and know, you know what what needs to be done to to keep things moving forward Anybody else Okay think this is our last slide on proposed content changes and this one is I Feel like this is a positive addition so as we look at The economy as it is now where it's heading in the future The ability to only incentivize businesses that generate significant ad valorem or sales taxes puts us at a disadvantage when we're competing for businesses that create high-paying and knowledge-based jobs and desirable sectors like technology So what we're proposing here is the addition of a jobs based incentive option for businesses that Do not meet either the five million dollar Minimum value of structures and business personal property or that 15 million dollars in annual taxable sales that we talked about earlier but that create What would be defined under the policy as knowledge-based high-skilled jobs that meet a certain wage criteria? So we wanted to put that out there There are so many communities that have this kind of option and it does allow us to Address recruitment in certain desirable fields that we're just not able to incentivize certain types of businesses Without this kind of an option Jill So my question is, you know why we have the criteria in the first place the minimum Value and the minimum in annual taxable sales Is it because of the cost effectiveness of the administration of it? That's kind of what I assumed as to why we say, okay, it's not gonna be really worth what the city has to spend in compliance and the studies and everything else so long so Am I along the right lines and if so so What we've What we have come to understand is that The five million dollar minimum capital investment is The investment that allows a business to cover its cost of service for city services And at the same time it helps supplement cost of service for other other businesses and residential Units so it it pays for itself at that point in time That's an analysis that was done through our utility department Many moons ago and it has held up over time So that's where that initial threshold came from for the five million dollars the 15 million dollars in annual tax able sales That's something that we're proposing for this revision based on our review of other communities policies and comparable Projects that are on the ground here in Denton does that answer your question? So with having this variation and I'm not I'm not against it. I'm just questioning The math as to you know, how small of a Group we would consider Making a variation here if they don't meet these Minimums because of the types of jobs. I feel like I'm not Number of jobs, right there it could be a minimum I Don't think this this to me is not about number of jobs It's about quality of jobs like there would be there would be tied to you know There we would want to see these types of jobs pay above the Denton County median wage or you know a certain percentage above the city of Denton's median wage or You know, we would need to we would need to define that if this is this is not this is not the end of the conversation this is the beginning of the conversation and under the Edie investment fund we already define High wage and knowledge-based jobs. So the the precedent exists just under a different capacity This would not require them to meet other factors, too. Okay This is exactly this is for tech. I mean really the best example of this is technology companies Okay, you know I'm speaking with a couple of homegrown technology companies That are on the cusp of expanding that are legitimate companies They've been through two and three rounds of venture capital funding and they're ready to hire new engineers at $75,000 a year salaries. Do we want the ability to encourage that when we're encouraging other types of investment? I Think we do want that and I think if we don't have that ability it puts us at a competitive disadvantage to other communities I would agree with what you just said So we have here didn't County medium and then just then in your conversation you said or city of Denton Do we know which one is higher wage and why are we focusing ? I mean, are we focused on on the higher wage is that didn't County or it didn't County media That would be a higher wage without knowing the figure off the top of my head It's gonna be higher at the county level. So that's why that's Go back to the number of jobs The type of company you just described could be for people And it takes a minimal amount of investment for them to have a company like that You know in most cases And they could get an incentive for one year and then decide well, we're gonna pick up far amount I struggle with that a little bit because I think we're more in the business of trying to fund something that Is bigger? It's gonna provide more jobs. Maybe they're not the highest paying jobs, but it's 200 jobs not I think there's room for both types of things for sure because Quantity and sort of scale is definitely important I Think that we can address contractually the concerns about Being incentivized here and staying here But I hear I hear the concern because if you have a large capital investment in a plant or a facility Much harder to just pick up and leave. I understand that concern certainly John Baines, so in the instance of jobs There may need to be a minimum You know, so Like Jim was saying you don't want to incentivize someone with two or three jobs that can move so easily You know Well, if you had a if you didn't you get everybody that has four employees could imply For an incentive and then the nightmare to keep up with I have eight It's gonna at least be nine With the number you may be looking for is payroll So you maybe you have to have a hundred employees if your salary is here and if your salaries up here or less employee I mean there may be some kind of deal there. I like having Something that is not tied to capital investments, but we need to come to an agreement on What that could be and what you know how to run those traps ? Again anything Somebody came and we want to do that. It's all coming here to talk about out loud and we have to Work through all those issues of what the likelihood of them leaving and what kind of traps we can put in place if they did Okay, well we'll we have to have a minimum we'll work on some refinements to this particular point Are you saying a minimum if you're gonna have Less than this many employees you have to pay them at least this much per year. That's my thought is because if If you're bringing Ten people with making million dollars to that company do you get that incentive or if you bring in a hundred people that they make? minimum wage that still may be maybe hundreds not the right number but that there still may be a You know if you're at the same time if it's a high number of people was probably a capital investment That's what I was just gonna say Yeah, this is really impact. This is really intended to address the space that is not addressed at all at this point I mean, that's what our thought was if they're able to be incentivized based on sales tax or capital investment We would not be we might consider We might consider the fact that they were adding jobs as a part of their overall package But they wouldn't sort of get the jobs incentive and a capital based incentive to that. That was not our intention here Just to follow up on that and one of the things as a council member I hear is that you know There's just not enough high paying jobs here and then if this addresses that in some way we can find a way to Do that. I think that we should we should explore those options I mean, it's also a way people say people are leaving the universities, you know, how do we retain our students? I mean this may be you know way that we can do that Yeah, and then you heard me talk about the strategic plan earlier one of our longer term strategic initiatives is to Raise the percentage of jobs in Denton that pay $75,000 a year or above I mean that that's a long term further down the road, you know 2020 kind of initiative But you know this speaks to that I guess before we move on if Staff or council or the combination come up with that we want to do that. That's coming back here to talk about the way that I think this should go is we're on the agenda next week for a work session and I'd like to bring the feedback from that work session back to this group and that you know We can't sort of do that endlessly, but I think this is a big enough discussion that Bringing it back one more time to this group is reasonable That sound okay. Yeah I mean if we're gonna come up with a minimum number of employees or a payroll or whatever do I'd like to this group? Bill will say we're all on board with that here. Then here 's why and make that recommendation to council. Okay Okay So quickly here. This is a very simplified overview of the incentive application and approval process I just wanted to put this on here because not everybody in this room right now has been through one of these yet So We're starting up here with the application is received by our department we vet its viability based on our policy and the application itself It that could either go forward or not if we're not able to bring it forward for policy reasons We always offer the business other assistance and we don't just say no, we can't help you by So we would be working with them in other capacities at that point if it does move forward We would run it through our total impact system brief legal finance and city manager's office about the application and the project and then we would bring it to this body for its review and Recommendation to counsel or not at which point it would stop the process but again, we would be offering other kinds of assistance if This board does recommend it it would go to council for review and vote and please remember in in the midst of all this There's a lot of back-and-forth negotiations refinements And it could go through these steps back and forth a few different times Then if the council does approve it the incentive is administered By economic development for the term of the incentive. So does anyone have any questions about the basic steps that Okay, you guys are being really patient I know this is a lot today this presentation part of the presentation is a lot shorter But Jill said she has a lot of questions All right, so we're going to talk about kids As I said earlier our council members and economic development staff have been receiving an increased number of Inquiries regarding kids a lot of them are regarding residential kids as opposed to specifically mixed-use or commercial kids Only one public improvement district has actually been established in the city of Denton today That's the razor ranch kid number one is its official name and that was set up in March of 2014 The reimbursement agreement for that kid was approved by council in March 2016 However, the service and assessment plan that's required Under state law as part of a kid has not yet been submitted by the developer. So we're kind of At a holding point until they produce that plan because we cannot move forward with having it approved by council Which is the next step? Until they produce the plan Do we know why that's happening I mean is it is there a time limit on that and is there an issue that they're trying to work out there has to be An approval of a service and assessment plan within five years of the establishment of the PID Okay As my understanding of the state law as to why it hasn't been done yet. I don't know the answer to that So is this the last year? It's 2019. It would have to be done by March of 2019 Next year. Okay So again we have gone through a review and revision process of the existing PID guidelines Kind of looking back over the types of requests that we've received Did a review of policies from comparable communities including Dallas Fort Worth Grand Prairie Kyle and Sealy and then we discussed our proposals and you know issues that we've Encountered ourselves in economic development with the finance legal and city management departments So you all had a chance to look through the existing PID guidelines Very first thing that jumped out at me is as we say they have to submit an application, but we don't have an application Which is a little odd and seems like a good first step to develop an actual application to make sure that we're collecting all the information that we need then We felt like it was important and we saw in some of the other communities PID guidelines that they have these interdepartmental task forces that are pulled together to review applications Now we're already working together On most everything that we do very closely with legal and finance But we think it would be important to pull in development services in this case because the existing PID guidelines talk about You know providing You know products in the case of housing in particular that go above and beyond what's required by the development codes and so we we think it would be beneficial to pull in some high level high level staff from development services to be a part of that task force to review the applications to make sure that What the developers proposing? Does indeed exceed the existing code requirement To address the issue that we're in right now where we don't have a service and assessment plan But we have a reimbursement agreement We think it is reasonable to require that the service and assessment plan be developed and submitted prior to the establishment of the PID itself That's just I think that's putting things in the correct order As just a reasonable step We also recommend requiring a developer funded and city administered fiscal impact analysis prior to the establishment of a PID to provide some Independent verification and this says city administered but that means that we would select a third party to perform this fiscal impact analysis because these are very complex instruments and You know, there are lots of moving parts and pieces So we would we would want to turn to a qualified Consulting firm to do that kind of analysis and then finally We think it might be reasonable to add a home value threshold Because again, we kind of talk about going above and beyond but we don't really define what that means and you know as As we all are aware, you know We do have a lack of some higher end housing in our community and you know A PID is a mechanism that you would use to try to encourage that type of higher end development So perhaps tying a threshold to the median home value of the city of Denton or the median home value of Denton County Again, the county median home value is higher The city median right now according to the last ACS is 254,000 the county median is 251,000 so there are just a couple of data points that can be looked at for the establishment of a minimum threshold and those are I believe Those are all of the changes that we wanted to bring to you And as time goes on that's just going to continue to drag the median down And then the infrastructure that the city's required to participate with going forward after it's built out Puts a burden unnecessary burden on the city as well as school district so I Think we need to look at something that better defines than just the median of the city of Denton or the median of the county We need to define what are we really looking for in those developments If I could take a step back the reason this was this happened this policy came about in 2007 is because That was the time where a bunch of the larger residential developments were coming this direction The economy crashed and all that stuff nothing happened. So nothing's happened. Apparently it's coming back again. So we put this policy in place Back then with really the idea that we as an ED board at that time weren't real excited about incentivizing residential housing developments And if we were going to do anything like that There would have to be something that was extraordinarily above and beyond anything we would have in here not just because you get her home So I don't know how you get from A to B as most of them you see now have pools and That's a normal type Situation but it needs to be If we have a lack of high-end housing whatever that definition is, I mean low-end housing to me is You know starter home to me still $100,000, but it's actually like 220 So, I don't know where we come up with that value, but and I think it has to be a value not a Size of home or size of law or those kind of things and and that value will change over time So we've got to peg it to something that is that And I've been my opinion significantly higher than that. I don't think we want to incent my opinion Normal housing projects there's they're gonna come one way or another and they're not Creating jobs and Have a warm taxes. They're creating kids going to school I mean they're creating uses of all the things that we're having to pay for so yeah residential developments Residential developments do not cover their own cost of service period in our community at all so just One thing that I want to make sure that is clear is the way the way that these work with I mean PIDs work with either commercial or residential developments is that the property owner is assessed a fee and there are rules about excuse me The fees being disclosed and the fees are sensibly used to you know, make nicer things amenities in a residential development or commercial development But over time what happens as homes are sold and new residents come in that thread of I'm paying for additional amenities in my community via this assessment on my house that thread gets lost And so people just see additional fees that they have to pay but they don't really Connected and it can become it can become a real source of frustration for residents in these communities Over time really kind of like Jim was saying, you know these these they start somewhere They end up somewhere else in a lot of different senses So it's just another interesting thing to think about is is that is setting that up to exist over time. So Anybody have any other questions or comments My question is about the fiscal impact analysis and how that would be different from running it through the total impact 2.0 Software is that not something similar? No, that's that program is for tax related incentives and PIDs are PIDs are They're they're done by fee assessments So I misspoke earlier. We're not giving incentives. We're allowing a bid to be brought in well and and People people would say that PIDs are incentive tools. They 're just a different type of incentive tool. I mean basically when during the last financial crisis Developers stopped being able to get bank loans for these huge large-scale Development projects especially for residential and so they turn to cities as as a different financing mechanism through the sale of bonds PID bonds To help get their developments to a higher level. So it's the different it's a different type of resource for a developer But yeah total impact doesn't apply to PIDs I just wanted to add a little bit of color for that on the PIDs. So it is different than the total impact 2.0 In PIDs as Caroline said they're very complicated instruments. And so you're faced with a situation with a developer coming in saying We would like to do this development Whatever type and character that they're talking about But we're short by 50 million dollars or a hundred million dollars for all this infrastructure that's needed We need a detailed analysis an independent third-party analysis that says really what are the financials of this development? What's how much money are you making on each one of these lots? What's your profit margin? How much is really needed from a PID versus how much can be financed through the development? And to truly have an independent view of that because otherwise you really don't know what you what you really need to issue And how much really needs to be assessed how much of this is for profit for the developer versus? What's really needed there the other thing is you're trying to understand What's the value of the enhanced amenities? We're talking about home values as an example that's kind of one of those it's probably easier to put your finger on but Really these all the PID assessments have to be paid in that development to have higher level amenities So that could be parks. It could be trails. It could be What you're talking about pools and those kinds of things like that. What's the cost of those? How do we know that cost is accurate and that you really know what you're getting for the PID? So that's the kind of work we're looking at and as we've had these developments come through you're kind of you're struggling to understand Really what those details are without looking at it? So hopefully that helps provide a little color I did want to mention one other thing about the home values is I think as we we've looked at this There's an average across the city or across the county, but that's all kinds of product It's some of its old some of us knew as we've seen new home developments come in and new homes being built The average value is much higher that we're getting without any kind of incentive or any kind of PID or development incentive So it really I think the starting place should be the market values that you're getting on an average that are coming in and what? Above that would you want to get? And what would that number look like and maybe there's a way to look at that as percentage terms Rather than a fixed number because this policy can be put in place and it may be a few years before you ever come back to it Is is landtown within the ETJ of the city of Denton? Yes, sir It is it is a it's a mud a municipal utility district. There's actually several of those and that development So it doesn't have a pin. It's a little bit different financing mechanism And actually have a tax rate, which is basically a dollar It's a full 1% of the value of those properties that are paid back for that mud. I used to do lids WC IDs In my former life water control and improvement districts Levy improvement districts, so I'm familiar with the complexity of financing, but they were tied to the Texas Water Rights Commission and They had authority over the the water rights and then allowing these subdivisions to have taxation so all the rights would then stay with the city of Denton rather than Yeah, I'm not sure on that particular piece PIDs but pids are different than that. They're not tied to the water rights. Okay, just about infrastructure So sorry to get you off track information Question more of a statement just a generalization and kind of basic hit it's The city allowing a developer to charge the person who buys the home an extra tax really so there It's an extra fee or it's an extra tax For that person in that area as opposed to the person who may be on the other side of the street So right, okay Yeah, that's what it is and You know some people coming into these master plan communities They feel there's value in that and that's worth whatever it might be a five hundred to a thousand dollar fee on an annual basis They think that's worth it because of the level of amenities that they're getting Justified in some way, but if they don't then they're obviously gonna be dissatisfied But it's different than an HOA fee. It is right it is and so you can have a PID assessment and an HOA on top of it and In many cases they do have both so you might have the HOA Doing some common area maintenance or pool maintenance or those kinds of facilities And then the PIP would be other things It's kind of a one-time Typically used to issue bonds as as Caroline's mentioned so you finance some improvements or infrastructure and then pay that off over time But the bonds are issued by the city What thank you Brian one follow-up though, I don't I don't know that that character Characterization is exactly accurate in most instances. They're they're removed from other neighborhoods, right? I mean, it's not you're not right next there. They're not coming to North Lakes and saying hey We're gonna put be right next to a neighborhood is Traditionally, I mean so you I think 380 Savannah That's right at one point in time was out by itself Then there's that other the other neighborhood subsequent to that So I don't is is there an instance that I'm missing where it's Right next to a development because I don't think that comparison is accurate if you're talking Hey, my neighbor just across What is that what give me that's I'm saying there's not any indented right now well even outside of it I don't know that that because they're the primary argument is the infrastructure So if you're saying the infrastructure is right across the street, but I need Help bankroll in the infrastructure. That's not gonna hold water I'll give you an example is one that we've talked about with a council in the past is coal ranch It's out on the southwest side of the city really undevelop ed part of the city right now So for right now there would really be no one across the street that would be an issue But over time 10 20 30 years is that area develops you could have another development next to it They could have different costs and different amenities But typically they're pretty large self-contained master plan communities But you could have something across the street. That's not Yeah, and I'm not aware of one right now that exactly and I know am I and so yeah You're telling me there's a premium for being the first one sure I mean that that is that's Par for the courses I understand you don't have to be the first one there you can wait it out and then move Later and not pay that or that's my thing I just wanted to make that distinction that it's not I've not I'm not aware of one which right across the street and Two people initially are paying different rates down the road. You're absolutely correct happen. Yes, so Brian. Yes, sir Tell us why the city cares or there's we have pids or not The city's issuing bonds. I mean there's the risk is right with that So I guess I think that's probably what we're all struggling with. I think there is some rest to the city There's certainly a reputational risk of City's names on the bonds and if they were to default there 's some administrative things that we could talk about later and we have to handle with that but another aspect of that is Maybe touched on this is there is a political element to this of Someone's paying whatever it might be a thousand dollars in taxes and in this development you might be paying two thousand dollars Because you have the PID Is there going to be a push by that community not approved bond packages to prove packages for schools? Are they going to have a different set of? Really kind of thoughts about how they want to approach government and some of the things that are there Is that politically are you creating a different group that 's going to really struggle to approve things in the future? I think that's a concern. I don't know if that would happen or not But I can tell you talking to some people I know who live in different developments. Sometimes they don't they really can't distinguish What's what who's who's paying what fee or what tax or what assessment or what mud or whatever? It's just one number to them and they kind of attribute it all just to the government So I think that's an issue we need to think about going forward I think the discussions that we had recently with the council over the last couple of years They were really concerned about doing it for primarily a single-family residential development and coal ranch without really understanding What that true amenity was going to be that they felt like was a higher level I think their thought was at the time that they were really saw these as more like commercial tools And that was the feedback I got at that point a commercial You could even have a bit of business improve in district the commercial you could pay for things like their own street cleanup and trash collection some stuff like that the right Businesses are are paying for and I think that even though razor ranch does have a potentially a small component of it It is residential most of that's a commercial development. So that's kind of the differences They saw but we've gotten a lot of interest recently on p eds most of them are single-family housing developments very large developments and we're kind of looking for some policy direction from this board and Council how you want to approach it? They are complicated Hope that adds a little I hope I didn't make it more more confusing I like the idea of having a multiple of the current new home market value I Like the idea of having a value threshold instead of the average value making that The average new home value whatever the definition is and having a multiple, you know It's got to be one and a quarter one and a half times that They're bringing enough amenities in but it's a big enough impact that you want to do that versus just somebody Return it to market rate as what? Yeah, no I am I Think there has to be a I don't know what it is and now how yield to you know Your expertise what other communities are doing but some sort of component that gives back to the community So for example in Austin, there's they required, you know low and moderate income housing to be a component of a percentage of one thing that jumps in my mind is a freeze of the HOA fees to have that manageable not skyrocket on those individuals, but some kind of component that says If we do make a decision to go down this road with you know , then there needs to be some kind of value add to those that are purchasing the house and then to in the community and then I guess a third part of that would be I like I would like to see what the residents are what Documentation is presented. So I don't know if there's a way to Standardize that because what my concern is in other neighborhoods. It's it's hey The realtor didn't tell us we're gonna be part of this HOA the opt-out period has passed or or hey that the PID paperwork wasn't clear didn't say and so Before you close on the house you have to get all that information that we It's all it's regulated by the federal government. Well, yes Control certain HOOA parameters because that's something that Is over and above what the city can do? Well better said I'm Unable to see it right now. I'm assuming they bury it some degree But if a resident comes to me and says hey, I wasn't told and I if they're borrowing money I promise you 100% they're not closing alone without knowing that information. They might not pay attention to it But still I don't get a chance where you see it every day right I don't and so I don't have it and it happened I'm sitting in HOA meeting like hey, I didn't I didn't know and the realtor didn't disclose that I'm just signing away or whatever and so it would be finished beneficial for me as a representative to say well the document Would look like this and it's traditionally here, you know, so it could be just an Educational session for me to sit down and say hey, here's how the documents organized traditionally Here's what they are, you know Because if you're talking about a subpoena a citation this Saturday other like another legal document that I'm 100% with you And I know how those flow but I just I'm ignorant to that and that question has come up words What did they get the document? I don't know. I mean did the realtor do his job or her job? I don't know But if I knew hey here's the form look like and it has to be presented to you then it just makes it easy conversation For me and I may be alone in that but that's just conversations I've had John Baines as a person who's had to do the auditing of several of these entities the Being a pain in the weave, you know More often than not More often than not people do not read the documents as they do as they should Yeah, I know for me if people are gonna do alone or anything I say give me the documents a couple of days ahead of time so I can read Because I'm not gonna just go in there and just say just sign this page, you know, this is what it says I don't like that So a lot of this happens though because this is the procedure that happens in a lot of these institutions So but like you say people need to make sure that they understand what they're signing on for it be it PID HOA, etc. Etc. Yes Please disregard prior comment audience at home. Thank you You have enough feedback from us and I think so So to just keep moving You guys have this in your backup This is the same kind of diagram about what the PID application process would look like if we made these particular suggested changes and Next steps for both the incentive policy and the PID Guidelines we're going to incorporate the feedback that y' all have given us today and we're gonna have a work session With council next week to share with them all of this great feedback and get their direction and then as I said earlier Will incorporate council's direction come back to EDP board and then eventually it will go to council for their final approval as individual consideration items, I Don't see on next steps come back to the DDP board. I just added that I Think when we come up with a direct minimum number of jobs or whatever I think we need to know what that is. I think you have a sense of what we want to do and Council may be 100% in agreement or not, but I'd like to think we left some things undefined that we'd like to be able to recommend We did and we'll we'll get that stuff incorporated make some suggestions so that y'all have something to react to At the next meeting and we'll make sure to get you your backup plenty of time ahead of time and I just want to take a second to Reiterate that anytime you get back up and you've got questions ahead of time I understand there are definitely some things that you would want to bring up in the course of the meeting With the group for discussion, but you're also always welcome to ask us for clarification in advance If if that can help you get more comfortable with the material you can still ask the question in the meeting, too But we're here to help be a resource Not just during the meeting but outside of it, too Yeah, okay, I think we already did that part May I make a suggestion in interest of time? I think y'all have probably heard me talk enough and Adam has a report to give but Are you comfortable with taking it out of order to let him come and give his report now? Or do you want to just stick with what's on the agenda? I am comfortable with leaving this along as fast as we can So I will I will offer to forego making my verbal report And I'll just send an email to the group with some detail about our activity I know that Jim had specifically requested last time that we Produce a report about all of the RFPs that we responded to in the last fiscal year that was included in your backup I'm glad to answer any questions about that, but I don't feel like in the interest of time. I need to go over it but Glad to answer any questions offline I think it'd be nice to maybe have that we have that back up we have questions when you add it to the agenda next time also Sure, sure Okay He's anybody Have any questions or we have all the backup on the reports . We have all the information. Do you want to hear more? Or you want to look at and have questions? I would like to if you have an update on the downtown fire I would like to hear that Yes, Julie is here to do that update and I just want to thank all of you again for your great review and comments and feedback It was a great discussion. So thank you. So we're done with our work session. We need to start our regular meeting with EDP 18 - 002 We're going to forego any comments on staff reports except for number four update on the downtown fire Well, believe it or not. It has only been two weeks yesterday since that fire It feels like about two months to me and to other people I 'm sure and even though it looks like nothing is happening There's a lot of stuff going on in the background. So Things we have done since the day of the fire Compiled a list of businesses and contact information for the fire department and police departments we gave the folks that were affected with the fire and in the line of smoke, etc a List of city businesses and I'm sorry services that they may find helpful Like if you need a dumpster call don't call the main number call this person. Here's her name Here's her direct line tell her who you are and she's gonna move you to the front of the line and expedite that service for you We've put in an application with the National Trust for Historic Preservation for an emergency grant For 108 North Locust, which is the mini mall we've also put in one for preservation Texas very small grant that would cover some engineering cost for them and As of yesterday, we started working on one for Jupiter House as well To look at the wall there that has maybe some issues I sent a bunch of information to the Texas Main Street Architect and they have provided some information back to us about other cities that have had fires and how they dealt with it and Here's some ideas that when as you go to redevelop this property, here's some ideas that the owners might be able to use You know the courthouse took on a lot of smoke and soot through their HVAC system and the fact the wind was blowing that way That day so they have spent a couple of weeks cleaning up. They were back in their offices yesterday the museum will be closed for several months as they have to Take every artifact out of its box unwrap it clean it if necessary rewrap it in new bubble wrap put it back in a new box and Then update their system where they know where everything is We've been I've been in contact everybody's been in contact with them through emails Text phone calls if you saw me run out a couple of times. That's what it was. It was Joey calling about something We still have downtown mini mall Jupiter House Lottie dot and shop the barn remain closed There we need a structural engineer to go look the firewall s held which was amazing and wonderful But some damage may have been done to those walls that need to be fixed before those businesses can can reopen We do have a partial closure of Austin Street and the fence goes out into Lucas Street taking up those parking spaces We know that fence is an issue and we're working to resolve that as quickly as possible. But until we can get until the wills can get a structural engineer and Get their plans to over to development services at which time their permit will be forthwith We've got to have some plans before we can move that fence back secure the walls and move the fence back at this time If anything were to happen and either of those walls decided to come down Hopefully that fence would contain it and protect people passing by so that's that's why that's still there That's pretty much it unless you have questions Okay, we have a question I do have a question because I've heard structural engineer like for the past two weeks from the very beginning So is that the who who is that whose responsibility is that is it the city structural engine? Is it the because each individual from what I gather is there the difficulty that it's having is that there's different? Insurances there's a tenant and then there's the building owner Is it the the insurance adjuster who's sending the structural engineer out and that what we're waiting for or? In the case of the wills and I have not spoken to their insurance people. I've just been in direct contact with them I understood they needed three different bids from three companies and there are private companies that links construction looked at that I know a couple of others did as well But I think it's up to them to get the bids and then take it to the insurance company and say here's our bids and make a Decision but it's not the city's obligate It is not our obligation and the fencing that is up right now was covered by their Their insurance and serve appropriate that fence up the day of the fire once they got it under control and they are paying for that I just want to make sure that as the city we are doing and and I think on like Jupiter house Well both buildings on each side. There's a tenant. There's a building owner I've talked to Frank Zangrel several times about Jupiter house and Joey. I Think that Frank is the one taking the lead on that because I believe Joey has like content insurance But Frank has the building insurance. So yeah, there's some there's a few complex things But it's just gonna take a little time before we can work through it Are we any closer to knowing the cause of the fire? Is that still invest and until we can get those front and back facades kind of shored up and we're trying to do everything We can to save the historic facade on the front side until we can get those shored up It's really not safe to let anybody in there including the firemen So once that happens the fire department will go back in and make see if they can make an assessment I've been told that we may not know because it was a long hot fire, you know And then the cleanup crews can come in after that after the firemen look at it See if they can find a cause make sure everything safe for the cleanup crews to come in And so who does that? The initial step with the walls the shoring up of the walls That will be the whoever the company is that the wills hire to do that. They'll draw some plans up. I imagined it's gonna be like scaffolding and then they'll be a Almost like a box like you see in some bigger cities when they're doing stuff So the pedestrians can walk under it and be protected in case anything were to fall from the you know from the construction Thank you Thanks, Julie Appreciate the update All right last item On the business agenda is our considered the minutes of our December 13th 2017 meeting item EDP 1803 Distributed advance and attached to the back of your packet . I'll love to take a motion Prior to today's meeting of the December 13th 2017 meeting We have a motion by Jill and the second by Carol Anne any further discussion All those in favor say aye. Aye any opposed? Minutes are approved unanimously and we are adjourned. Thank you for being here today