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HomeMy WebLinkAbout11-15-12 Economic Development Council minutes 1 of 6 City of Bozeman Economic Development Council (EDC) Meeting Minutes November 15, 2012 9 am – 12 pm Madison room, City Hall, 121 N. Rouse Members Attending: Anders Lewendal (Contractor), Teresa McKnight, (Montana State University Innovation Campus), Cheryl Ridgely (Bozeman Deaconess Hospital), Tracy Menuez (Human Resource Development Council), Stuart Leidner (Prospera Business Network) Members Absent: Daryl Schliem (Bozeman Chamber of Commerce), Deputy Mayor Jeff Krauss (liaison) Staff Present: Chris Kukulski (City Manager), Brit Fontenot (City Director of Economic Development and Community Relations), Aimee Brunckhorst (Deputy City Clerk) Guests / Public Present: Cyndy Andrus (Bozeman Commission), Chris Mehl (Bozeman Commission) Rob Gilmore (Northern Rocky Mountain Economic Development District Director) NOTE: These minutes are not word for word and should be considered in addition to the audio recording of the meeting. A. Call to Order Cheryl Ridgely called the meeting to order at 9:07 a.m. as the Chair and Vice-Chair were not present. (Vice-chair Leidner joined the meeting later.) B. Public Comment Cheryl Ridgely opened public comment. Seeing no public comment, Cheryl Ridgely closed public comment. C. Minutes – October 18, 2012 This item was moved to a later time in the meeting when a quorum was present. D. Non-Action Items Minutes of the Economic Development Council for November 15, 2012 2 of 11 Impact Fee Discussion (Fontenot, et al) 1. Impact Fee Update 2. October 8, 2012 City Commission Meeting Packet Materials: Impact Fee Study Update (this document takes a few moments to load) Mr. Fontenot explained that a few months ago a local developer came to Mr. Fontenot and said he lacked information that he needed to tell a good story on why Bozeman is a competitive place to do business. Mr. Fontenot and partners began the huge task of pulling this data together. Since then it became evident to Mr. Fontenot that the Commission and Impact Fee Committee were having policy discussions that have significant impacts on economic development strategy. Mr. Fontenot has attempted to provide this Council and the Commission information to make good policy decisions that are synchronized with each other and not at cross purposes. The Impact fee discussion was planned to go before the Commission Nov. 26th but the date was recently moved to December 10th. Mr. Fontenot would like to make it very clear that the work Mr. Fontenot and Mr. Gilmore have been doing is not an effort to undermine the impact fee study or the conclusions made by consultants, staff or the advisory committee. This is simply an effort to provide the Commissioners with as much information and knowledge as they can to ensure the impact fee policy and the economic development policy will work together for the same goals; creating jobs and diversifying the economy. Mr. Fontenot provided a brief recap of the last meeting saying there was an introduction of the impact fee study followed by discussion and questions. Mr. Fontenot referred to a draft discussion point document he provided to Committee members prior to the meeting and reminded them that the document is just a draft and he would like to add and revise as advised by the Council members. Mr. Fontenot explained this document is an attempt to put the impact fee discussion into a broader context. Rob Gilmore began introducing the discussion points on the document.  Document started 3 weeks ago  Focus on impact fees and how they impact economic development and broader decisions the city has to make  Researched other communities: Statements, notes, disadvantages of fees  Broader sense of the impact fee issue and what other communities have done  There is not a standardized process for evaluating fees – community basis  Most cities with populations over 20,000 do collect fees for operations not just water and sewer.  Trends for fees overall have fallen a bit in the last few years in response to downturn  No evidence to show that reduced or eliminated fees had any impact on building economic development.  Bozeman has had a history of allocating costs to the users. Effective way to collect fees  Bozeman is an island in the greater market area - surrounded by areas that do not charge fees. Fairly common in other areas as well Minutes of the Economic Development Council for November 15, 2012 3 of 11  Prevailing thought - typically the market will adjust itself through normal activities.  Some communities charge municipal fees on properties to offset this. Providing municipal land at a discount – particularly for major sectors you are trying to attract.  Impact fees are a part of the landscape for communities of this size. Communities that have tried to make an attempt to lower those fees have not necessarily achieved.  Recognition that fees can be a hurdle – needs a balance  Takes a study. What are investors doing? What will facilitate development? What fees and structures are hurdles to development?  Recommendations were made in the document. o Based upon advantage of having municipal property – Mandeville brought online o Education of future investors showing short and long term investor advantages for charging impact fees o Perception that fees are out of the pocket. Advantages long term. Dependable, infrastructure that can support your business.  Mr. Fontenot added this is an effort to explain by telling a story how the program adds value to projects over the long term. Dependable infrastructure removes some of the risks to development. The County may not have that dependability and strength in the infrastructure. Need to provide people with the information to share the story that there is value in impact fees to change the narrative from simply that impact fees are costly. Ms. Ridgley asked that the Council look at the recommendations one on one and provide input. Recommendation #1 – Recommendation to bring Mandeville online Ms. Ridgely asked whether reduced impact fees or impact fee incentives with municipal owned properties is the goal with this recommendation. Mr. Gilmore explained that impact fees cannot be reduced, rather the property itself could be offered at a lesser price to offset the fees. Mr. Fontenot said this is similar to what they have been discussing for some time – leveraging the property for infrastructure. The City does not have the money to put in the infrastructure – how do we get it in while still trying to achieve established goals. Impact fees will be an issue for the city on the Mandeville property. He spoke about targeting certain industries including manufacturing that would benefit from a build out of the Mandeville property. Ms. McKnight asked why Mandeville is specifically targeted when it is a municipal owned property? Mr. Fontenot explained that Mandeville is one of the highest priorities for the Commission. Chris Mehl had confusion as to why all the other recommendations are broad except the first recommendation which is specific to Mandeville. Commissioner Mehl said it would make more sense to provide the background around impact fees first then move to concrete things like Mandeville. Minutes of the Economic Development Council for November 15, 2012 4 of 11 Ms. McKnight feels the recommendations should be broader. Mr. Kukulksi said Mandeville is not the only area in town we are trying to incentivize investment. There are multiple areas that may broaden that, but he does not know if getting into specific areas really fits into this document. Impact fees are separate issues. Ms. Ridgely said that in this context of impact fees it comes across that we are going to do something special with Mandeville as it relates to impact fees. That is a bit misleading. Mr. Fontenot pointed out that the impact fees have yet to be established and what those fees end up being will have an impact on how Mandeville farms is considered. Ms. McKnight said she feels the Economic Development Council represents the community so why would we place one project above another. Mr. Lewendal said having discussion about whether impact fees damage or improve economic development in our community. In respect to Mandeville, if you are suggesting we give land away for $1 to get businesses to come here, is that what it takes to get businesses to come here? If the prices are higher than outside and not willing to come down, are we driving economic development outside? Do we have to discount properties significantly to get development in the city? Mr. Lewendal referred to businesses that chose to develop outside the city and raised questions as to why. Mr. Leidner said the Council was tasked by the City Commission to look at and address the Mandeville property as our #1 priority. Since the beginning, they have been charged with putting work together and making recommendations for Mandeville. The city needs to make a decision whether to bring this online or not. If there are not going to be conversations about financing Mandeville and bringing that forward the city should sell and get out or invest and move this forward. He referenced that the infrastructure was not there when BlackHawk and other companies mentioned were looking for a location. What will the costs be to bring Mandeville online? Ms. Ridgely – If we are looking at recommendations regarding an approach going forward towards impact fees, what are the implications that this is the #1 recommendation? Mr. Fontenot explained there was not a particular ranking of the recommendations intended. He said they can make this recommendation more generic. These are recommendations for discussion. This is meant to raise these points for Council discussion and Commission discussion. Mr. Gilmore said the point was that impact fees and Mandeville are related because it is municipal property and impact fees can be mitigated through the negotiation of the property. Cr. Mehl said we want to go from broad to narrow in this discussion. We could also use general fund money to incentivize something like manufacturing. Minutes of the Economic Development Council for November 15, 2012 5 of 11 Mr. Kukulski said to keep in context that the impact fee analysis is not the consultants telling us what to charge with impact fees. They follow the letter of the law, etc. on what the impact fee can be. Determining the fees is up to the City Commission. Recommendation #2: preparation of educational materials Mr. Fontenot explained this recommendation is due to an absence of a narrative regarding how Bozeman’s impact fees relate to competitiveness, and how because we have impact fees, the city can build the infrastructure those developers need. Ms. McKnight referred to economics of scale of the city bonding and taking on the debt versus an impact fee that has to be shared in your cost analysis of a business. Cr. Mehl referred to a report previously prepared by the Finance Director regarding how much we would have to raise general fund fees if we lowered impact fees. Mr. Lewendal said that if Mr. Gilmore is suggesting that we educate future investors that impact fees have short and long term advantages, then we should charge the full commercial rate for the Mandeville land. Mr. Gilmore said you can show that there are benefits to an impact fee model without taking away the advantages of you want to incentivize. We can Show that there are economic advantages of an impact fee model vs. taxation. We can show that there is an advantage of an infrastructure that is in place, and has longevity and stability. Impact fee is the part of the fabric for financing the infrastructure. A company that goes out of the city may need to have a well, a septic system and have related problems. We need a way to compare one against the other. Mr. Lewendal said we need to hear from the business community that there are advantages to being charged impact fees. Right now that is subjective. Mr. Gilmore spoke regarding the difficulty of articulating those advantages. The recommendation is an attempt to quantify this. Ms. Ridgely asked about this recommendation as it relates to the Economic Development Team and there tools for communication. Mr. Fontenot said this type of materials would provide staff that interacts with people the knowledge to talk about impact fees in a broader context. Providing this documentation would also expand our army of people that can speak intelligently about impact fees and the positive effects to our community of having impact fees. Ms. Ridgely pointed out the importance of staying positive with other entities that we collaborate with. We want to be mindful not to be disparaging to the areas around us. Minutes of the Economic Development Council for November 15, 2012 6 of 11 Mr. Kukulski said to start with the question is not impact fees. The first question is whether infrastructure is critical to business retention and recruitment. Intuitively the answer is yes, but to be more deliberate about that. Impact fees are a funding mechanism. If you begin with the critical need for the infrastructure and then follow up with how that is paid for the discussion opens up. There is a stronger connection then, as to why the rate payer would pay the maintenance and replacement costs and the impact fee would be set around the incremental increase in demand on the system. We cannot repeat enough what impact fee funds are used for and what they are not (and cannot) be used for. Commissioner Mehl said he received a number of peer review literature from Tischler-Bise and staff members McHarg and Saunders that indicated that impact fees are positive yet it is clear that no one has articulated this very well. It seems like we will be swimming in anecdotes. There is probably not a way to get a clear mathematical answer because every business is unique. Should we just embrace the fact that it is complicated? Mr. Saunders said you should never undersell something as simpler than it is. He is trying to put some graphics together to do a better job of explaining how impact fees fit into the larger question of funding infrastructure as a system. The reality is that a third of the various plants are growth related, 2/3rds are paid for by the existing user. He spoke regarding the individual factors in a city that drive the hardware needs of the plants and the needs for service. There are many various complexities in every community. Mr. Gilmore said this is a complex issue. There really is a baseline here and that is that the city already charges fees. This discussion is not to question that but to look at it in the context of economic development. We need to find middle ground so you are not discouraging businesses but are also generating capital for the future. Ms. Ridgely said the discussion is about two things. One is to have factual educational materials explaining how the system works. The other is perceived advantages which will depend on the investor or developer. There are a lot of misconceptions. Mr. Kukulski said the Council is tasked with determining the impact of impact fees on economic development which will drive which pieces are critical for the investment side or whether there are sectors we should say other funding mechanisms should be looked at. Mr. Fontenot said he would move from calling these recommendations to calling them discussion points. We are really just trying to broaden the discussion. We do not have the answers of what the impact fees should be. Ms. Ridgley said when we started today; staff was looking for recommendations from the EDC to take to the Commission. At what point is the Commission looking for more than discussions? Mr. Fontenot said we can still move recommendations on to the Commission as part of the broader packet. Minutes of the Economic Development Council for November 15, 2012 7 of 11 Recommendation #3: To suggest to the Commission that a discussion of what percentage of the recommended fee should be charged? Should this be at 100% or something less? Mr. Fontenot said there are examples on the exhibit of local communities that charge less than 100% to lower the burden on some types of businesses. Mr. Lewendal said the Commission wants to know from the EDC how much we value the businesses in the city versus outside. Mr. Lewendal feels the EDC should recommend a percentage. Do impact fees themselves drive businesses out? Mr. Kukulski asked whether we are targeting anything or is all increased demands on the system equally subsidized. For the sake of discussion we may not need to incentivize retail or residential growth but may need to incentivize manufacturing. The business side is much more complex. What does not get paid for by the impact fee is going to be picked up by the tax or the rate payer. Mr. Kukulski said that when transportation impact fees were reduced to 60% there was nothing scientific about that. There was never a follow up discussion about where the difference would be funded. Mr. Lewendal spoke regarding who does pay that difference. He then said we want to bring in growth, but maybe not at the expense of lower service. Mr. Leidner referred to the exhibit and said these are the hard things that will educate the discussion. We need to remove the anectdotal parts and get down to the numbers and the level of service that the community is ready to accept and go from there. Mr. Fontenot said another piece of why BlackHawk and Simms went out of town is that there was nothing available within the city that met their needs. This brings us back to the Mandeville discussion. Mr. Leidner spoke regarding education, targeting and looking at hard numbers. Mr. Fontenot said if we are planning on targeting, we need to make an effort to provide some type of relief. Chris Saunders spoke regarding the differences in the past methodology and the current proposed methodology for water and sewer impact fees. The current methodology looks to consciously split the water plant and distribution into separate components. The piece that varies by individual project is the size of the parcel being developed upon. They would look at what the total future service area is and what hardware will need to be put in to service the area. As a project comes in, if you choose to use a more land efficient project, you will pay less. This method is more sensitive to individual project decisions. More proportional to actual demand and helps people see the more direct costs. The Trip Exchange District was based on a national survey that looked at things like, “How do travel characteristics vary?” The survey looked at downtown as a whole. Two things that are different in the proposal for trip exchange is that the Minutes of the Economic Development Council for November 15, 2012 8 of 11 proposed area is to be a slightly larger geographic area. Under the new structure if approved by the Commission, everyone in the district would be applied equally and not specific to the type of user as it has been in the past. Council members continued to discuss level of service desired vs. charging impact fees at 100% vs. incentivizing some desired businesses. Mr. Kukulski said transportation is not as easy. The question becomes whether there are other funding mechanisms besides impact fees and taxes. For example, transportation should be more complex in its funding than it is. Mr. Saunders said the Highway fund is bankrupt or will be shortly. Federal and state will not be rescuing us with funding in the future as they have in the past. Council members continued discussion. Mr. Fontenot spoke regarding how on the whole, residential impact fees will be lower with certain areas on the commercial side being higher. Tracy Menuez joined the meeting at 10:36. Mr. Kukulski said that if you get into picking sectors, have to raise the money some other way. Mr. Lewendal asked whether it was worth asking the community about what level of service we do want. Responding to a question from Ms. Ridgley, Mr. Saunders said there are areas at risk from a service delivery/infrastructure standpoint. Streets that have already reached substandard condition are listed in the transportation report; in fact 6 to 8 are at that stage already. As far as water and sewer, there are significant piping needs. Mr. Fontenot brought up how risk is defined. Businesses that do not have what they need in the ground and missed opportunities also present risk. Mr. Saunders spoke about timing issues related to impact fees. Mr. Fontenot said he would like the Council to simply consider the effects on your economic development process simultaneously. Warren Vaughn, a guest from the County joined the meeting at 10:45 p.m. Ms. Ridgely asked whether there are other funding mechanisms. Mr. Kukulski said there really is not any other for water, sewer and fire. The only other funding mechanism for streets would be a regional gas tax the County Commission would have to approve. Minutes of the Economic Development Council for November 15, 2012 9 of 11 Discussion occurred regarding the possibility of deferring impact fees until occupancy and what advantage that might offer for developers. Saunders: Asked investors: different types of home loans and percentage of down payment are affected. Mr. Fontenot and Mr. Saunders explained most developers have said it would be an advantage to defer the impact fee cost until later in the project. This has been one of the strongest requests that developers have made. Don’t have to carry it through the life of the project. There is a risk to the city in doing this as well as services are needed prior to occupancy. Ms Menuez said it could be a matter of the risk being shared more with the city. The risk to the city is actually substantial. Mr. Saunders spoke to the possibility of reasonable protections to guard against that risk. Council members continued to discuss timing issues for paying impact fees.  Difference between residential and commercial?  Pay a percentage of impact fees at time of occupancy? Recommendation #5 linked to #2: Mr. Fontenot and Mr. Gilmore spoke regarding economic development being everyone’s business and making education a priority. Recommendation #6 Fee Schedules: Take a look at the fee schedules of other cities. Ms. Ridgely felt the methodology was good. This is a good benchmark to look to see where we are in comparison. Mr. Gilmore explained the comparison attachment provided in the discussed document. Ms. Ridgely spoke to the need to find out what funding sources other communities may have found that charge low impact fees. Focus on retail, commercial and industrial. Mr. Gilmore spoke to the many variables that make impact fee comparisons difficult. Mr. Leidner recommended simplifying the comparison document to provide a snapshot of one type of business for discussion purposes. Cyndy Andrus concurred that it would be helpful to parse out the different examples. Further discussion occurred regarding interpreting the comparison attachment. Minutes of the Economic Development Council for November 15, 2012 10 of 11 Further discussion occurred about how comparisons need to take into account other expenses. For example, a community that may have lower impact fees may have much larger property taxes or much lower levels of service. Mr. Fontenot spoke to adding #7 to the discussion point list: #7 Targeting five specific sectors for impact fee relief. Discussion occurred regarding whether it would be best to send these as discussion points or recommendation points. How should the EDC weigh in on this? Cyndy Andrus said if the Council felt comfortable making recommendations, it would be helpful. Mr. Fontenot and Mr. Gilmore will reword these recommendations as discussed and send them out via e-mail to the Council for further comments and feedback. The Council can then take action for a formal recommendation on the Dec. 6th meeting. E. Minutes – October 18, 2012 The minutes of the October 18, 2012 EDC meeting were approved unanimously. E. Action Item 1. EDC Appointment Recommendation to the Bozeman City Commission Mr. Fontenot said there are four applicants for the current vacancy on the EDC and asked the Council if they would like to forward a recommendation to the City Commission. It was moved by Ms. McKnight, seconded by Stuart Leidner that the EDC forward the name of Heather Bellamy for recommendation. Discussion on the motion was concentrated upon what type of representative the Council may be missing at this time. Vote on the motion that the EDC forward the name of Heather Bellamy for recommendation. The motion failed. It was moved by Tracy Menuez, seconded by Stuart Leidner to nominate Erik Garberg for recommendation. The motion passed unanimously. F. FYI/Discussion Minutes of the Economic Development Council for November 15, 2012 11 of 11 1. Mr. Fontenot and Mr. Gilmore will refine the recommendations and circulate. Board members will chime in over email and then vote on the recommendations at the next meeting. 2. Cyndy Andrus said she appreciates the discussion today. 3. Ms. Brunckhorst explained that the city’s Economic Development page and the board page were combined. She asked members to take a look at the economic development page for suggestions to be emailed to her. 4. Need to look into whether Mr. Kukulski is an official board member. G. Adjournment Cheryl Ridgley adjourned the meeting at 12:09 p.m. * NOTE – Full audio of this EDC meeting is available at: http://weblink.bozeman.net/WebLink8/0/fol/46967/Row1.aspx ____________________________________ Cheryl Ridgely, Secretary PREPARED BY: ____________________________________ Aimee Brunckhorst, Deputy City Clerk Approved on: Economic Development Council meetings are open to all members of the public. If you have a disability that requires assistance, please contact our ADA Coordinator James Goehrung, at 582- 3232 (TDD 582-2301).