RDA Resolution R-5-2017

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RESOLUTION NO. R-5-2017:         Fourth Budget Amendment                                              June 13, 2017

RDA Tax Increment Reimbursement Program Policy

RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY ADOPTING AN RDA TAX INCREMENT REIMBURSEMENT PROGRAM POLICY

WHEREAS, the Redevelopment Agency of Salt Lake City (“RDA”) was created to transact the business and exercise the powers provided for in the Utah Community Reinvestment Agency Act; and

WHEREAS, the Utah Community Reinvestment Agency Act grants the RDA authority to enter into participation agreements (also known as tax increment reimbursement agreements) with property owners within a project area, for the purpose of providing incentives in the form of tax increment to redevelop the property; and

WHEREAS, the RDA has a Tax Increment Reimbursement Program (“Program”), whose purpose is to provide reimbursement for certain upfront development costs related to projects in RDA Project Areas that meet the intent of the RDA’s project area plans; and

WHEREAS, the Board of Directors (“Board”) supports the goal to provide tax increment reimbursements through the Program pursuant to the process outlined below.

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY, that we do hereby establish policy guidelines for the RDA Tax Increment Reimbursement Program to include the following:

1.   GENERAL

1.1 Mission

The RDA Tax Increment Reimbursement Program (“Program”) may provide project developers a tax increment reimbursement (“Reimbursement”) for the development of improvements in an RDA project area that meet the goals and objectives of the RDA’s project area plans and provide significant public and economic development benefits. The Program is designed to provide reimbursements that are calculated using Salt Lake County’s assessed value. The developer will receive a percentage of the tax increment generated from its project for a specified timeframe, and the RDA will receive the residual tax increment generated by the project.

1.2 Eligible Projects

To be eligible for the program, projects must meet the following requirements:

a.  Projects shall achieve a minimum of: a) align with the RDA’s project area plan in the applicable RDA project area, and; b) meet at least one Public Benefit criteria, as further defined through the RDA Loan Program, to include Sustainability, Public Amenities, Adaptive Reuse, Historic Preservation, Permanent Job Creation/Retention, Architecture/Urban Design, Economic Impact, and Affordable Housing.

b.  The applicant must provide sufficient evidence that tax increment funding is necessary for the project to succeed and to verify that the request is reasonable.

c.  The proposed project must involve significant private investment so as to assure adequate yield of tax increment.

1.3 Eligible Project Locations

Eligible projects shall be located in a tax increment collection area within an active RDA project area that allows tax increment reimbursements pursuant to the project area plan.

1.4 Eligible Costs

The tax increment reimbursement will be limited to funding hard cost construction and site improvements. Use of funds for environmental remediation or demolition shall be considered on a case-by-case basis. The RDA may determine if the entire project or only specific project elements are eligible.

1.5 Design Requirements

Projects approved for tax increment reimbursement must consider the RDA’s Design Guidelines and utilize the guidelines as practicable. Projects will be required to be in conformance with all Salt Lake City policies, ordinances, and codes.

2.   REIMBURSEMENT TERMS

2.1 Maximum Tax Increment Calculation

The formula to calculate the potential maximum total tax increment reimbursement generated from the proposed improvements and available to a developer shall be as follows:

a.  Step 1: Calculate the Total Annual Tax Increment

•      The difference between the base taxable value of the proposed project prior to improvements and the estimated new growth in taxable value resulting from the improvements. (New Growth – Base Value)

•      Multiplied by the current Salt Lake County effective tax rate.

(New Growth – Base Value) x (Effective Tax Rate) = Total Annual TI

b.  Step 2: Calculate the Annual Tax Increment Collected by the RDA

•      Total Annual TI multiplied by the percentage of TI collected from the taxing entities by the RDA

(Total Annual TI) x (% of TI collected by the RDA) = Annual TI Collected by the RDA

c.  Step 3: Calculate the 1^st Year Developer Allocation

•      (Annual TI Collected by the RDA) x (Developer’s Reimbursement Split [defined  below]) = Estimated Year 1 TI Reimbursement to Developer

Refer to Section 2.4: Reimbursement Split for more information on calculating the split between the RDA and the developer.

d.  Step 4: Calculate the Maximum Amount of Tax Increment Available to the Developer Over the Term of the TI Reimbursement Agreement.

•      (Estimated Year 1 Tax Increment Reimbursement to Developer) x (the Term of the Reimbursement Agreement*) = Total Developer Tax Increment Available Over the Term

*Note: An annual growth multiplier based on current economic conditions may be applied to this calculation.

The actual total of the tax increment reimbursement may fluctuate. Tax increment reimbursement is dependent on the increment being generated by the project, and projects that do not generate sufficient tax increment during the Reimbursement Term will not qualify for the full tax increment reimbursement amount.   

2.2 Interest

Interest will not accrue against the RDA on the anticipated or projected tax increment to be reimbursed to the developer.

2.3 Maximum Reimbursement Term

The maximum reimbursement term shall be 10 years or the sum of the remaining operating years of a project area, whichever is less.

2.4 Reimbursement Split

The standard reimbursement split between the RDA and the developer shall be determined by the number of years the applicable RDA project area is in operation at the time of project completion, and the number of Public Benefit Incentives the project qualifies for. The split available to the developer shall be determined as follows:

a.  Projects Completed Years 1 through 5 from the Establishment of a Project Area.

For projects that are initiated and completed within the first five years of the date the project area was established, the developer’s split shall be determined as follows:

•              70% of the annual tax increment generated by the project and captured and retained by the RDA for years 1 through 5 of the Reimbursement Term.

•              50% of the annual tax increment generated by the project and captured and retained by the RDA for years 6 through 10 of the Reimbursement Term.

•              Projects shall be eligible for up to a 20% increase for qualifying for Public Benefit Incentives.

b.  Projects Completed 6 or More Years from the Establishment of a Project Area, but Excluding Five Years Prior to the Expiration of a Project Area.

For projects that are completed between year six of the date the project area was established and five years from the date that the project area will expire (i.e. years 6 through 20 of a project area with a 25 year life span), the developer’s split shall be determined as follows:

•      50% of the annual tax increment generated by the project and captured and retained by the RDA for the full Reimbursement Term.

•      Projects shall be eligible for up to a 20% increase for qualifying for public benefit incentives.

c.  Projects Completed Five Years Prior to the Expiration of a Project Area.

Projects completed within five years prior to the date of project area expiration are not eligible for tax increment reimbursement.

d.  Public Benefit Incentives.

An increase to the standard developer’s split percentage shall be available if the project meets more than one of the following Public Benefit criteria: Sustainability, Public Amenities, Adaptive Reuse, Historic Preservation, Permanent Job Creation/Retention, Architecture/Urban Design, Economic Impact, and Affordable Housing. For each criterion fulfilled, beyond the initial Public Benefit Incentive required to meet the eligibility requirement to apply for a tax increment reimbursement, the project may receive a 5% increase from the standard reimbursement installment rate, with a maximum increase of 20%.

3.   EVALUATION AND APPROVAL PROCESS

3.1 Review by RDA Staff

All applications shall be made to RDA staff, on standard RDA forms created by RDA staff.  All applications must be complete to be considered for approval or denial, and if either the applicant or proposed project fails to demonstrate the ability to meet application requirements, RDA staff may deny the application.

3.2 RDA Finance Committee Review

RDA staff shall forward complete applications that meet minimum requirements to the RDA Finance Committee. The RDA Finance Committee shall evaluate applications, supplemental materials, and other documentation necessary to thoroughly review the application and formulate a recommendation to the Board. In addition, if the application is submitted in conjunction with the creation of a CRA (described in Section 5), the RDA Finance Committee shall evaluate whether the project achieves the program’s economic development goals as set forth in Section 5. The RDA Finance Committee shall provide a recommendation of approval or denial of all applications to the Board for consideration.

3.3 Approval Process

Upon review of the application and supporting material, the Board shall have the authority to provide tax increment reimbursement approval or denial. Any approval, and the terms of the tax increment reimbursement, shall be made by resolution.

3.4 Agreement Finalization

Once an applicant receives approval from the Board, RDA and the developer shall execute a Participation and Reimbursement Agreement (“Agreement”).

4.   AGREEMENT TERMS

4.1 Participation and Reimbursement Agreement Terms

In addition to standard terms outlining the tax increment reimbursement process as recommended by legal counsel, the following terms shall be included in the Agreement:

a.  Reimbursement to Benefit Project Owner: RDA Discretion.

The RDA intends that the beneficiary of the tax increment reimbursement will be the owner of the project for the life of the Agreement. In the event of a transfer or sale of the property, the Agreement and all benefits conferred under the Agreement shall benefit the project and be recorded against the property to run with the land, with the intent that all tax increment reimbursements will remain with the owner of the real property and project. In the event that the ownership of the real property and improvements are severed, the RDA will have sole discretion to determine the beneficiary of the tax increment.

If the Agreement is executed and the real property and project are conveyed to a third party while the improvements are still being constructed, the RDA will retain the right to consent to the transfer the Agreement to the new owner, in order to ensure that the benefits the RDA anticipated receiving under the original Agreement with the original developer are consistent with the new developer.  If RDA does not consent to the transfer of the Agreement, the tax increment reimbursement will cease and the Agreement will terminate. 

b.  Tax Appeals.

     All reimbursement recipients shall be required to notify the RDA if they have applied for a property tax appeal with Salt Lake County related to the tax increment reimbursement. In the event that any such appeal results in a reduction in property taxes, the percentage share of the tax increment payable to the recipient shall be decreased, and the percentage share of the tax increment payable to the RDA shall be increased, so that the dollar amount payable to the RDA is the same as if no appeal of the assessed value had been made. 

5.   SINGLE PROPERTY OWNER BUSINESS RETENTION TOOL: TAX INCREMENT REIMBURSEMENT FOR NEW COMMUNITY REINVESTMENT AREAS

5.1 Tax Increment Reimbursement for Single Property Community Reinvestment Areas

The RDA may create a single property owner Community Reinvestment Area (“Single Property CRA”) for an existing Salt Lake City property owner or business (“Local Business”)  if the Local Business owner proposes a project that achieves the City’s economic development goals for business retention and expansion. Upon creation of the Single Property CRA, the Local Business may become eligible for tax increment reimbursement, as outlined in Section 5.2.   The RDA shall seek the City’s participation as a taxing entity for the Single Property CRA, subject to the City Council’s approval, and the RDA may also seek participation in the Single Property CRA from non-City taxing entities. The RDA Board will endeavor to create the Single Property CRA and approve the tax increment reimbursement agreement simultaneously.

Pursuant to this policy, the terms of the tax increment reimbursement agreement for the project shall be determined by the RDA on a case-by-case basis, however, the RDA may, in its discretion, retain up to 10% of the eligible tax increment to pay for the RDA’s administrative costs.

5.2 Tax Increment Reimbursement Threshold Requirements for Single Property CRAs

The Local Business at the Single Property CRA must achieve the following threshold requirements to receive a tax increment reimbursement pursuant to this section:

a.  The Local Business must commit to invest a minimum $12 million in capital expenditures into the project.

b.  The Local Business must demonstrate the project will result in job retention and/or job creation.

c.  The Local Business must demonstrate that the tax increment reimbursement is necessary for the project to succeed.

d.  The Local Business must demonstrate that it is an existing Salt Lake City-based business and the tax increment reimbursement will result in the business remaining or expanding in the City.

e.  The project must employ sustainable construction practices consistent with a reputable sustainable building program approved by the Executive Director.

Once RDA staff has confirmed that the Local Business meets the threshold requirements for tax increment reimbursement listed above, the Local Business’ application for tax increment reimbursement will be reviewed and finalized pursuant to this policy.

6.  REPORTING

The RDA shall provide a written briefing to the Board, no less than semi-annually per fiscal year, which contains an update on the RDA’s Reimbursement portfolio. Such briefing shall include a summary of new Reimbursement deals and anticipated impact on the RDA’s budget.

Passed by the Board of Directors of the Redevelopment Agency of Salt Lake City, this 13^th day of June, 2017.