HomeMy WebLinkAboutA003 - Memo from City Manager to Council, Zoning charge contract, Somerset Village -7
M E M O CITY MANAGER'S OFFICE
CITY OF AMES
TO: Mayor and City Council
FROM: Steven L. Schainker, City Manager
DATE: January 24, 1997
SUBJECT: Zoning Change Contract - Somerset Village
As you know, Staff has been working for many months with the Developers of the
proposed Somerset Village to create a plan that would be acceptable to both parties. After
many discussions and compromises by both sides, we have now settled on a concept that
is more reflective of a mixed use development than a neo-traditional integrated village. It
is our intent to utilize a technique known as "contract zoning" (which is provided for in
Chapter 414.5 of the Iowa Code) in order to accomplish the rezoning. Hence, it is
essential that we finalize an agreement between the City and the Developers
outlining all aspects of the plan prior to approving the rezoning.
In order to expedite the approval process for the Developers, we set the date of hearing
for the proposed rezoning for January 28th in the hope that the contract details would be
finalized in time for the hearing. Unfortunately, we were not able to meet with the
Developers to review their counterproposals to the proposed contract until Wednesday,
January 22nd. While we are optimistic that an agreement can be reached on the
majority of their proposed revisions, we were not able to finalize the agreement in
time for the hearing. Therefore, it is recommended that the City Council delay action
on this matter until our negotiations are complete!
It is apparent that we will be at impasse on at least one issue. Since our final negotiations
with the Developers, an additional item was requested: the use of tax increment financing
(TIF) to fund infrastructure improvements. Staff believes that the City Council should
give serious consideration to the following issues prior to making a final decision
regarding this request for the TIF incentive.
• When Should An Incentive Be Used?
Typically a City would offer incentives to induce a developer to participate in a project
for the public benefit where otherwise there would be no interest in the project. This
rationale influenced the City's decision to sell the land at the Depot and 1915 Municipal
Building at a below-market price.
The majority of this development is comprised of large apartment complexes,
condominiums, and traditional single family home lots. Historically, in our community
construction of these types of housing options have occurred without the need for
inducements. Therefore, there does not appear to be a justification for this type of City
incentive.
• The Effect On Our Tax Base
As you recall, the City is unique since approximately 42% of our land area is tax
exempt. In addition, the majority of our taxable property is residential and, as you
know, the property owners in this category are only being taxed on 58% of their
assessed valuation. The establishment of a TIF for residential property will further
erode our tax base for an extended period of time and serve to shift the tax
burden to commercial/industrial property owners and other residential property
owners who have not received the benefit of a TIF in their subdivision.
Hence, the City Council should be aware of this shift in tax burden when
considering this incentive.
• The Establishment of a Precedent
To date, the City Council has not offered TIF as an incentive for residential
developments and, therefore, no decision-making criteria have been established to
offer guidance as to when this incentive should be offered. (We have created a
funding matrix to evaluate industrial developments and a philosophy of only providing
incentives for "gap" financing.)
Remember, we hope to entice other villages in the New Lands area by granting higher
densities integrated with commercial properties. Other residential developers will, no
doubt, seek a similar incentive from the City based on fairness.
The City Council should consider whether it is prepared to offer this same
incentive to other residential developers throughout the City.
• Who Will Pay For The Cost Of Growth
As long as the TIF district is in place, the taxes that are paid by the property owners
will be diverted to pay the debt for the infrastructure improvements in the subdivision.
However, since the citizens in the new area will expect services immediately, the City
will be increasing our operational expenses in the absence of tax revenue support.
The City Council should consider the impact on the City's operating budget if
the taxes generated in a TIF district are diverted to pay for infrastructure
improvements rather than for operational costs.
• Conclusion
Since an impasse has occurred over this issue, Staff believes the City Council
must make a decision regarding the use of TIF for this project before we can
finalize the Zoning Change Contract. Furthermore, Staff recommends that you
not approve any items on the Agenda related to this proposal until the Zoning
Change Contract has been finalized.
Given the extensive amount of tax-exempt land in the City's tax base, I would advise the
City Council to be cautious before taking any action that would further erode our tax base
and shift the tax burden to those property owners who have not received the benefit of a
tax abatement or TIF.
I do understand the concerns of the Developers regarding the marketability of this new
concept in the City of Ames. Therefore, I would offer as a means to mitigate the risk to the
Developers an escape clause in the agreement that would allow termination of their
requirement to complete the "village" if, over a period of time, the market does not accept
this concept.
sls/lw