HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 06/15/2004 - RESOLUTION 2004-074 EXPRESSING COUNCIL SUPPORT FO ITEM NUMBER: 21
AGENDA ITEM SUMMARY DATE: June 15, 2004
FORT COLLINS CITY COUNCIL STAFF: Fischbach/Jones/
Krcmarik
SUBJECT
Resolution 2004-074 Expressing Council Support for a Package of Financial Assistance for the
"Summit Front Range"Lifestyle Center.
RECOMMENDATION
Staff recommends adoption of the Resolution.
FINANCIAL IMPACT
The recommended financial package to support the Lifestyle Center will impact the City in several
ways:
According to estimates,the center will generate$4.5 million of sales tax revenue each year—based
on the full City 3.0% sales tax. This financial package deals only with the City's 2.25% general
fund sales tax. The Center will generate$3.4 million in revenue from the 2.25% general fund sales
tax. It is estimated that of the $3.4 million — about half, or $1.5 million, will be retail sales tax
dollars not currently generated elsewhere in the retail community. This is the net new sales tax
revenue to the City. Over a ten-year period, the Center will generate $15 million in net new sales
tax revenue for the general fund.
Equally important is that a Fort Collins Lifestyle Center will stem the potential loss of$20 million
in sales tax revenue over the next ten years if a center is located in another city.
From proceeds of net new sales tax generated by retailers at the Center,the City will share back up
to $5 million of sales tax proceeds. The anticipated time frame for this amount of revenue is
between six and seven years. Through the development agreement with Bayer Properties, the City
may defer fees related to the project for up to five years. With the $5 million share back the City
will realize a$10 million net sales tax increase for the general fund over the initial ten-year period.
This,coupled with the"net new" sales tax, account for a conservatively estimated$30 million gain
to the City's General Fund over a ten-year period.
The final element of the package is the imposition of a public improvement fee to be collected on
retail sales at the site. The fees would be collected by the City for the developer pursuant to a
collection agreement.
June 15, 2004 -2- Item No. 21
An added benefit is that the City's Open Space Tax would collect an additional $4.2 million over
ten years from new revenues generated by the Center. If extended, the two remaining Building
Community Choices quarter-cent sales taxes would generate $8.4 million.
EXECUTIVE SUMMARY
Through adoption of this Resolution, Council would indicate its intent to set up an agreement
between the City of Fort Collins and Bayer Properties, the developer of a retail project located
on Harmony Road,just west of Ziegler Road (the "Lifestyle Center" or the "Center"). The
Project includes approximately 530,000 square feet of retail space. The estimated net cost of the
Center and related public improvements exceeds $70.5 million. The total value of the financing
package is approximately$13.7 million, of which $8.0 million is from a public improvement fee
and $5.0 million as the City's share. The remainder is from anticipated interest savings related
to the deferral of development and impact fees. (See Attachment A for a summary.)
Based on analysis of the market area for the project, an independent economic consultant hired
by the City concluded that in the first year, the Center would generate $4.5 million of sales tax
for the City. Of this amount, approximately$1.5 million would be annual net new revenue for
the General Fund, a substantial increase to the tax base of the City. According to the study, the
Center would keep and potentially add retail sales in Fort Collins, thereby stemming the growing
leakage to other shopping venues. Of the net new revenue, 50% would be shared with the
developer until the sum of$5 million is reached. While this level is expected to be reached in
approximately 6-1/2 years, any shareback arrangement is not to exceed ten years.
In addition to the sharing of sales tax, the City would agree, through the development agreement,
to defer a portion of the fees for the Center for up to five years. The City will charge interest on
the deferral, but at a rate lower than the developers' expected interest cost. The lower interest
rate will yield a maximum interest savings to Bayer Properties of$656,000.
The developer will impose a public improvement fee, a charge on retail sales. This fee is a
privately imposed fee. This fee will be remitted to the City(collected with City sales tax) and
then paid to the developer. The amount of total collections from the public improvement fee will
not exceed $8 million.
The final piece of the package is that the developer may pass certain development fees to Center
businesses. This would lower the costs to the developer and also lower the value of the fee
deferral.
June 15, 2004 -3- Item No. 21
BACKGROUND
Introduction
On February 10, 2004, the Council met in Study Session to discuss strategies for the retention
of sales tax. Background information about the Bayer Properties Lifestyle Center and the
McWhinney Centerra project in Loveland was included in the presentation. The Agenda Item
for the Study Session is attached for more detailed information. (See Attachment B.)
From the Council's discussion, staff identified the following parameters for considering a
package of public investment that could support the Lifestyle Center.
• The developer should investigate the use of a public improvement fee to offset its cost
of the public improvements at and near the site.
• The City should base any commitment of sales tax based on net new sales tax to be
generated by the project.
• Sharing of City sales tax from the Center should be limited to the 2 .25%tax levy,
which supports general government services. The dedicated quarter cent levies for the
Building Community Choices capital projects program and the extended quarter cent
levy for Open Space should not be included in the cost sharing because voters approved
these taxes for only specific purposes.
• The City should only consider sharing of sales tax based on the determination that the
Center's sales are above the average of other retail projects in the City.
• Deferring development and impact fees for a retail project may be a part of a financial
package, but should not exceed five years.
• The City could use special district financing. Through this mechanism, the developer
and subsequent owners could benefit from tax-exempt financing which allows lower
than regular market interest rates. This toot could lower the costs of financing and help
the developer spread costs over time.
Staff used this direction from Council in the discussions with Bayer Properties. The package
that has been developed for consideration meets the basic guidance provided by the Council.
The financing package consists primarily of three parts:
Developer Requiring Tenants to Collect a
Public Improvement Fee $8,000,000 58.6%
City Sales Tax Sharing 5,000,000 36.6%
City Deferral of Certain Fees (interest savings) 656,000 4.8%
Total Package $13.656.000 100.0%
June 15, 2004 -4• Item No. 21
Financing Package
City Deferral of
Certain Fees
4.8%
City Sales Tax
�..
Sharing
36.6% wA'h;B;iw.:
A 1,ngr:4 p,�4 A'2
Developer Public
Improvement
Fee
58.6%
Total Project Costs and Public Improvements
Based on construction cost estimates from The Neenan Company, the Lifestyle Center will
cost approximately$70.5 million. This figure includes revenue from future land sales that
Bayer Properties expects to make. It also accounts for the expected street oversizing
reimbursement that the City will make to this project, a standard process in the City for
projects that incur costs that will serve future development.
Based on the project cost estimates, City staff members have determined that the total fees and
taxes for the project will be approximately$5,980,000. The estimated costs of public
improvements at the site are approximately$13,237,000. Examples of the Lifestyle project
public improvements include a regional detention pond, extension and improvements of
Corbett Lane, a new road from Corbett to Ziegler, and improvements to Harmony and Ziegler
Roads. These public improvements will be used by members of public as well as the
customers of the Center. The public improvements form the public policy basis for the cost
sharing package that is being proposed.
The total amount of the fees, the developer's business objectives, the anticipated public benefit
from the public improvements, new jobs and the projected sales tax revenues provide the
underlying rationale for the deferral of fees and tools to offset a portion of the costs.
An added benefit to the City that has been discussed by Bayer and City staff is locating the
proposed southeast library building on the Lifestyle Center site. While there is no firm
commitment at this point, Bayer has expressed interest in making a site available for the library
structure. The Fort Collins Library is planning a 20,000 square foot branch library to serve the
southeast area.
June 15, 2004 -5- Item No. 21
Rationale for the City Makine Public Investments in the Proiect
Regional Competition. For the past several years, Fort Collins has faced an increased level of
regional competition for retail sales. The City has been a regional focus of retail activity for
many years. As other cities in Northern Colorado have increased their populations and
purchasing power,retailers have expanded in their jurisdictions. For example,the City of
Greeley has experienced tremendous retail growth in the last six years. It now has many of the
same retailers for which shoppers would come to Fort Collins. The City of Loveland has been
aggressively developing the Highway 34 corridor with"big box"retailers, such as the super
Target store and the Sportsman's Warehouse. At Highway 34 and Interstate 25, Loveland and
the McWhinney Companies are developing a large mixed-use development that includes a
large retail center, which could draw additional retail sales out of the Fort Collins economy.
Economic Planning Systems, a firm commissioned by the City, concluded that the proposed
Loveland center could draw$1.9 million of sales tax from the Fort Collins economy. The
chart below shows the difference between additional sales from the Bayer Lifestyle Center and
the Loveland center.
Estimated Net New Retail Sales
(Million of Dollars)
$100
$80
$80
$65
$60 Not Inflow if boated In Foil Collin
w �•
A
$40
0
w
$20
0
30
0 2 2005 2006 2007 2006 2009 2010 2011 2012 2013 2014
-320
Net outlaw If loatad in Loveland
-t40
-560
• e e e e e e e
-$80 ($64) (t64) (S6q
Year
As previously reported to Council,the Loveland project could have a detrimental effect on Fort
Collins revenue, similar to the impact Broomfield F1atIrons Mall has had on the City of
Boulder.
June 15, 2004 -6- Item No. 21
Boulder- Broomfield Sales Tax Comparison
1998-2002
$80,000,000
w
$70,000,000
o $60.000,000
$50,000,000
tBoulder
U $40,000,000 — Broomfield
$30,000,000
N
d $20,000,000
A
N $10,000,000
$-
1998 1999 2000 2001 2002
Year
Higher Amenity Level. According to organizations that study trends in the industry, the retail
sector`reinvents"itself every seven to ten years. In Fort Collins,we have seen the changes in
the original mall, strip development,redevelopment of the downtown, upsizing of the mall, big
box development, super discounters, and now the possible addition of a lifestyle center. The
demographics of our community indicate that ample income is available in this trade area to
support a"lifestyle center," a retail center that will have amenities and draws above and
beyond a regional mall. The center is expected to have numerous quality retailers that will
keep people in Fort Collins shopping locally, foregoing travel and dollars from going to
Denver, Broomfield, and even Loveland. The quality of the construction and the ambiance of
the center are expected to be a level above the existing mall and other retail outlets in Fort
Collins and Northern Colorado.
Council Policy: Protect the Retail Base. The City of Fort Collins, like the vast majority of
Colorado cities and towns, is dependent on the sales tax as the major source of revenue for
governmental services. In each budget process, the Council reviews this trend and considers
means by which to diversify the revenue base. As has been demonstrated in the recent
economic downturn,when the sales tax decreases, the City has to make tough decisions on
how to balance spending with the revenue. As a direct result of declining revenues, the City
lost $5.9 million of resources for services related to recreation, library, affordable housing,
street maintenance, and fire. By partnering in the proposed cost-sharing approaches for the
Lifestyle Center, the City will be acting in a manner consistent with the City's Financial
Management revenue policies.
June 15, 2004 -7- Item No. 21
City of Fort Collins
Life Style Center- Sales Tax Analysis
First Year
$6 $4.5
$4 $3.4
$2 $1.5 $0.7
E
$0
$2
,37.8
$4
Lifestyle Center Lilestyle Center Total Net NewiQ Amount for Port Collins Loss
Sales Tax 3.00% Sales Tax 2.25% 2.25% Sharing to Loveland
Prepared by City of Fort Collins Finance Oepartr ent.Wy,2004
Additional Revenue for Open Space and Capital Projects. The proposed sharing of sales
tax is predicated on the use of net new sales tax revenue from the base 2.25% sales tax rate.
All (100%) of the sales tax revenue from the center dedicated to the existing Building
Community Choices (BCC)packages will flow to those uses; the projected sales taxes from the
center will benefit the current BCC and future packages. The open space tax that extends to
2030 will be a prime beneficiary from the sales at the center; over a 10-year period it is
estimated that the open space will receive an additional $4.2 million as a result of the sales tax
revenues from the center. If the voters extend the other dedicated sales tax levies or adopt
additional sales taxes, all of the dedicated levies will receive their full share of the Lifestyle
Center sales tax revenues.
Other Ouestions and Answers
Are New Retail Jobs Really a Benefit to the Community?
Last August City Council approved an amendment to the Harmony Corridor Plan to allow a
Lifestyle Center as an acceptable use. In considering the amendment, Council questioned
whether the City would be better off using the site for future use as the locus for employment,
either manufacturing or office or research and development. It is not an easy question to
answer. To assist, staff enlisted the help of Colorado State University, specifically Professors
Harvey Cutler and Steve Davies. Using a model developed from Fort Collins economic data,
they concluded that a high-end retail center would have certain beneficial effects that would
not be received from regular manufacturing employment or high-technology employment. A
retail center would actually assist low and moderate income household gain a greater share of
the total income in the City. The costs identified in the model were lower for retail use when
June 15, 2004 -8- Item No. 21
compared to the two manufacturing alternatives. The retail use also captures a greater share of income
generated by existing employment in Fort Collins.
Why Not Use Special District or Urban Renewal Financing Techniques?
The application of special district and urban renewal approaches offers lower cost financing to the
developer. They also entail more complexity and other types of risks. These two factors would take
significant time to address. Bayer Properties believes that the success of the center and attributable
benefits to Fort Collins depends on the ability to move quickly and complete its project before the
Loveland center begins construction (if that is to occur). Given the risks, complexities and timing of the
economic benefits of special district or urban renewal, these options were not pursued.
Tax-exempt financing through a special district did not prove to be viable. A financing comparison
between the current tax-exempt rate of approximately 4.1% and the Bayer cost of funds rate of 7.0% was
calculated. Over ten years, the savings are about $2.7 million. Given the present value of the savings,
the $2.7 million savings does not meet Bayer's business objectives.
Does this set a Precedent for Future Retail?
Providing an incentive for the Lifestyle Center may be seen as an invitation for other projects to request
financial support. An element of the City's current Economic Policy states: "The City will continue to
afford new and existing business and industry the opportunity to seek specific assistance pursuant to
Council adopted ordinances and other programs enabled by state or federal legislation." The opportunity
for any existing and new business to request financial assistance is available. However, the City is not
obligated to provide financial assistance to any project and examines each request on its own merits and
the goals of the City.
How is this Center 'Better than Average" Retail?
The tenant mix of the Lifestyle Center concept is comprised of upscale apparel, home furnishing stores,
and restaurants—examples of the type of businesses likely to be in the Lifestyle Center include, Talbots,
Williams Sonoma, Pottery Barn, Banana Republic, California Pizza Kitchen, or the Cheesecake Factory.
Local independent stores would add local flavor to the mix. Bayer Properties has shared some
information about the retailers that it is trying to place in the Lifestyle Center. Staff and the consultants
from EPS agree that many of these retailers would be new to Fort Collins and Northern Colorado and
constitute new choices for goods and services. Such retailers would allow Fort Collins residents to shop
locally rather than drive to spend in Denver and Broomfield. Many of the proposed retailers are
considered "up-scale" and would have higher sales per square foot than numerous existing Fort Collins
retailers. This would also reduce vehicle miles and will help air quality in the region.
June 15, 2004 -9- Item No. 21
Was the Investment in Anheuser-Busch Good for the Community?
In the early 1980s, the City provided an economic investment package for the Anheuser-Busch
Brewery, a major employer in the region and a major property taxpayer in the City and County.
To assist AB in lowering its costs, the City issued tax-exempt bonds to lower their cost of
public improvements that would serve the site. AB committed to paying its share of the water,
sewer, and streets facilities. The City used revenues generated from the construction of the
facility, sales and use taxes, and property taxes to pay off a portion of the bonds. While not
formally a tax increment district, the project operated on a similar premise. Revenue, sales,
use and property taxes, generated by the project(approximately$6.8 million over a 15-year
period)was used for the cost of public improvements. Overall, this project has many economic
benefits for the community. The facility is the largest property taxpayer in the City. The
brewery employs more than 700 people with above average salaries. It draws many visitors to
the City and they help the retail economy. Anheuser-Busch has also proven to be a good
corporate neighbor, and the company and its employees participate in many philanthropic
activities.
What happens to the Lifestyle Center if the Loveland Project is Built and the Foothills
Mall is Renovated?
It is common for multiple developers/sites to compete for a major regional shopping center.
However, due to the size of the market, as well as the limited pool of potential tenants, usually
only one center is built. It is therefore unlikely that the Bayer Lifestyle Center, the Centerra
project and the Foothills Mall expansion will move ahead at the same time in their currently
planned configurations. The trade area is not currently large enough to support an additional
1.0 to 1.5 million square feet of space expected in the three projects combined.
The projects are also competing for the same limited group of department store and specialty
retail tenants. While a few of the target retailers have the market strength to warrant more than
one retail outlet, the majority of them will be interested in only one retail outlet in Northern
Colorado at this time.
It is difficult to answer this question without a better understanding of how Foothills Mall
proposes to redevelop as well as an understanding of their proposed timeline. Foothills Mall
does have the advantage of being a department store anchored center in a prime retail location
in close proximity to other retail establishments along a heavily traveled primary arterial. All
other factors being equal, most fashion apparel tenants would prefer a regional shopping center
location. On the other hand, there are difficult obstacles, the most important being the
potential for expansion, tenanting, and the ability of the company to negotiate these deals in a
timely fashion. Their ability to energize the center and make it look and feel comparable to a
new retail product is critical.
There will be sales losses to Loveland, particularly if Centerra is able to bring in a number of
upscale tenants that would be attractive to Fort Collins shoppers. However, the nature of the
losses will depend on the extent to which a redeveloped Foothills Mall can be competitive with
a new, exciting retail product.
June 15, 2004 -10- Item No. 21
Why does Bayer Properties Need the City Investment?
To be successful, Bayer Properties must have a major anchor tenant for the Lifestyle Center.
Given the competition for major tenants, they(the tenants) can dictate rental and ownership
relationships with retail center developers. To secure a major retail anchor, Bayer will have to
provide rent and ownership concessions. This, in turn, will lower its rate of return on
investment.
How does the Proposed Financial Support for the Fort Collins Lifestyle Center Compare
to Loveland's Financial Support for the Centerra Lifestyle Center?
It is difficult to make a direct comparison without more information. This is because the
incentives offered in Loveland were offered to Centerra, the master developer for the 1,300
acre development. The amount of incentives passed on by Centerra to Poag &McEwen is
unknown. For example, the PIF of 1.25 percent as well as the property tax increment are going
to the Centerra Metropolitan District(s)which will construct and maintain public
improvements for the entire development, a portion of which will benefit the Lifestyle Center.
The similarities of the packages negotiated in Loveland and under consideration in Fort Collins
include the impact fee deferral, as well as the credit for oversizing fees. Both communities
have a Public Improvement Fee(PIF), as well as some type of sales tax sharing agreement.
Loveland's 1.25%PIF is (for all intents and purposes) really a sales tax share back because the
City is voluntarily reducing the 3.0 percent sales tax rate to 1.75 percent. It is also imposing a
1.0 percent retail sales tax fee over and above the basic rate (3 percent). Bayer Properties is
proposing a 0.5 percent(PIF) increase over and above the 3 percent rate.
Once the Lifestyle Center is Developed,What are the Added Public Service Costs?
The City's costs for infrastructure, mostly streets, storm water management, and other utilities
will be met by the developer. The City estimates ongoing operations and maintenance costs
using a land use fiscal impact model. The size of the first phase of the project is approximately
59 acres. Using the existing base of land uses within the City and prorating the ratio to
governmental services budgets, the additional cost is expected to be less than $300,000
annually. As other phases of the project, City staff expects this amount to grow incrementally.
Is there any Effect from the Deferral of Fees to the City's Financial Position?
There is little if any impact on the future capital uses or projects for which the fees are
earmarked. The City does not collect fees from commercial development for park or library
facilities. The short term deferral will not impact planned capital construction projects in
Utilities. Street oversizing fees are not part of the deferral package; full street oversizing fees
will be paid as part of the construction costs the developer bears for the required collector and
arterial street improvements.
RESOLUTION 2004-074
OF THE COUNCIL OF THE CITY OF FORT COLLINS
EXPRESSING COUNCIL SUPPORT FOR A PACKAGE OF
FINANCIAL ASSISTANCE FOR THE
"SUMMIT FRONT RANGE" LIFESTYLE SHOPPING CENTER
WHEREAS, on August 19, 2003, the City Council approved amendments to the Harmony
Corridor Standards and Guidelines and the City's Land Use Code to allow for the potential
development of a Lifestyle Shopping Center in the Harmony Corridor; and
WHEREAS, on October 16, 2003, the Planning & Zoning Board approved a preliminary
development plan for the"Summit Front Range"(the"Lifestyle Center")at the location of Harmony
Road and Ziegler Road; and
WHEREAS, the Lifestyle Center would be a retail center with amenities and retail outlets
sufficient to attract shoppers to the Fort Collins area above and beyond those of the regional mall;
and
WHEREAS,the development of the Lifestyle Center would enable the City to bettermaintain
its place as the regional retail center of Northern Colorado in the face of competing retail facilities
that could otherwise draw significant retail sales revenues out of the Fort Collins community; and
WHEREAS,subsequent to the Planning&Zoning Board's approval of the Lifestyle Center,
City staff has been working with the developer of the lifestyle Center("Bayer Properties")to discuss
ways in which the City could provide financial assistance to the Lifestyle Center that would enhance
the likelihood that the Lifestyle Center would actually be developed; and
WHEREAS,the City Council met in a study session on February 10,2004 to discuss various
strategies for retaining and improving City sales tax revenues, including the provision of possible
financial assistance to the Lifestyle Center; and
WHEREAS,an economic consultant's report has concluded that,in its first year of operation,
the Lifestyle Center would generate approximately$4.5 million worth of sales tax revenues for the
City, including approximately$1.5 million in net new revenue, which revenues would constitute a
substantial increase to the tax base of the City; and
WHEREAS, according to the study,the development of the Lifestyle Center would prevent
additional sales from leaving Fort Collins to other shopping venues in Northern Colorado and
elsewhere; and
WHEREAS,Bayer Properties estimates that it will invest over$70 million in the Lifestyle
Center, including approximately $13,240,000 for public improvements that will be necessary to
offset the impacts of the Lifestyle Center, and that will also benefit future development and the
community at large; and
WHEREAS,Bayer Properties will also pay fees and taxes related to the construction of the
Lifestyle Center in the approximate amount of$5,980,000; and
WHEREAS,in order to encourage the development of the Lifestyle Center,the City Manager
is recommending to the City Council that the Council support a package of financial assistance for
the Lifestyle Center consisting of three components: the deferral of impact fees,the sharing of new
tax revenues generated by the Lifestyle Center,and the collection of a public improvement fee to be
imposed by Bayer Properties upon the purchase of all goods and services at the Lifestyle Center
except the purchase of food; and
WHEREAS, City Council believes it to be in the best interests of the City to support the
provision of the foregoing financial assistance to the Lifestyle Center.
NOW,THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS as follows:
1. That the City Council hereby expresses its support for a package of financial
assistance for the Lifestyle Center which would include the following components:
(a) The City will collect and deliver to Bayer Properties a public improvement
fee to be imposed by Bayer Properties upon the purchase of all goods and
services purchased at the Lifestyle Center except the purchase of"food," as
defined in Section 25-71 of the City Code, in an amount and for a period of
time sufficient to generate up to $8 million, which fee would be in addition
to the City's sales tax.
(b) Bayer Properties will defer the payment of up to $4.3 million in capital
improvement expansion fees,pursuant to Section 7.5-19 of the City Code,for
a period of up to five years at an interest rate that will yield a maximum
interest savings to Bayer Properties of$656,000.
(c) The City and Bayer Properties will equally share sales tax revenues generated
by the tenant businesses of the Lifestyle Center for such period of time as
may be necessary to repay Bayer Properties for$5,000,000 worth of public
improvements, or for a period of ten years, whichever first occurs, with the
understanding that: (i) the sales tax revenues shared with Bayer Properties
will include only"new" tax revenues (presently estimated at approximately
$1.5 million per year)generated by the Lifestyle Center and will not include
any sales tax revenues estimated by the City to be revenues that are
"displaced" from other, existing retail business in the City and (ii) this tax
sharing arrangement would apply only to the City's "base"tax levy of 2.25%
and would not include the sharing of any sales tax revenues earmarked for
specific purposes by City voters.
2. The foregoing financial assistance to the lifestyle Center is expressly contingent
upon subsequent approval by the City Council of a formal agreement between the
City and Bayer Properties.
Passed and adopted at a regular meeting of the City Council held this 15th day of June,A.D.
2004,
Mayor
ATTEST:
City Clerk
ATTACHMENT A
City of Fort Collins
Lifestyle Center Project Summary
June 9, 2004
Lifestyle Center Costs
1. Bayer's Estimate of Total Project Cost $ 73,100,000 a
2. Less the Street Oversizing Reimbursement (2,600,000)
3. TOTAL: Adjusted Project Cost ; ZLNUM
Public Costs
1. Estimated City and County Fees and Taxes $ 5,978,107 °
2. Public Improvements Eligible for Cost Sharing 13,236,723
3. TOTAL: Fees,taxes, and public improvements $ 9.214.830
Financial Package to Off-set Costs
1. Public Improvement Fee $ 8'000,000 b
(Privates fee imposed on Center customers
1/2-cent on net new sales)
2. Sharing of Net New Sales Tax $ 5,000,000 b
(City contribution - 1/2 of sales tax from
net new retail sales)
3. Deferral of Certain City Fees 656,000 °
(Interest savings due to lower interest rate)
4. TOTAL: Financial Package $ 1
Notes:
a Cost nets out future anticipated land sales by Bayer.
b Collections are for a period of time sufficient to reach the target amount.
c Bayer may pass certain development fees along to tenants, thereby
reducing some of the developer's fee costs by an estimated $1,036,500.
However, this would also lower the potential interest savings related
to fee deferral.
Attachment B
DATE: February 10, 2004 STUDY SESSION ITEM
STAFF: John Fischbach FORT COLLINS CITY COUNCIL
SUBJECT FOR DISCUSSION
Strategies for the Retention of Fort Collins Sales Tax -Update and Policy Discussion.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does Council consider it critical to the interests of the community that a Lifestyle Center
locate in Fort Collins?
2. Does Council consider the recent actions taken by the City of Loveland to participate in the
development of the Centerra project to be significant enough to warrant consideration of
public-private partnerships in order to protect the City's sales tax base?
3. If financial assistance is indicated by the analysis of the Lifestyle Center's data, does the
Council desire that staff proceed to develop possible packages of financial support for
Council consideration? _
Section 1. Introduction and Background
For many years,Fort Collins has been the most populous city in northern Colorado. In this position,
it was the leading city to support retail and commercial activity for northern Colorado. Retail and
commercial activity in our community has declined and languished these past two years. Sales tax
revenues, which support a wide range of our municipal services to citizens, also declined.
The regional picture has changed dramatically in the past few years. As other communities in
northern Colorado have grown,they have attracted their own retail networks. This is a natural event
in the maturation of a community. Surrounding cities and towns are growing, and they are hungry
for sales tax revenues to support increased demand for public services and facilities. They have
observed techniques used by cities in the Denver metro region and are beginning to offer incentives
to secure new development in their own communities. Developers and owners of retail centers(from
grocery store centers to large retail centers) have approached the City seeking different forms of
public assistance to help them be successful in this changing, more competitive environment.
February 10, 2004 Page 2
To date, we have only used public investment techniques to stimulate development in the
downtown, support the development of the Anheuser-Busch brewery, and through special
assessment districts, make investments in roads and utilities. Now, we have been asked to look
at whether we should consider using public financing techniques to support retail development
that is critical for maintaining the City's revenue base.
Last August, City Council approved an amendment to the Harmony Corridor Plan to allow a
Lifestyle Center as an acceptable use. Subsequently, the Planning and Zoning board approved
site and development plans for a Lifestyle Center. These actions were taken to bolster Fort
Collins as a regional retail center and reduce the loss of net tax revenues (by residents traveling
out of Fort Collins to shop).
Last fall the picture looked rosy. But the picture is changing.
In a recent decision, Loveland City Council unanimously approved a multi-faceted financial
package (taxes and fees) to facilitate the development of 1,300 acres of McWhinney Enterprises'
3,000-acre Centerra development. This paves the way to finance many of the public
infrastructure improvements necessary for full development. It boosts the potential for a regional
Lifestyle Center as well as other commercial projects to be built at Loveland's I-25/Highway 34
location. The Loveland-Centerra partnership fundamentally alters the regional situation. Market
factors suggest our region can successfully support only one Lifestyle Center at this time.
At this Study Session, staff will review the information that we have gathered and analyzed to
date—more is yet to come. It's important to have a good understanding of the current situation
and what our options are to protect the City's economic base. Staff is asking Council for general
guidance as to whether we should continue to work on this important set of issues.
Bayer representatives have indicated that in order to have a financially feasible project they need
access to public financing assistance. If Centerra's development costs (land, fees, taxes) are
lower than Bayer's, it is likely Centerra can provide some substantial discounts on the initial
leasing/rental costs to attract the retailers. If Bayer's costs are significant, they may not be able
to match the leasing and rental discounts needed to sign retailers.
With our goal to remain a strong retail center, we may need to provide appropriate economic
assistance to sustain a solid retail base in our community.
Figure 1 below shows the trend in Fort Collins sales taxes over the past few years. Attachment
A is an excerpt from prior work done last year showing that Fort Collins has the ability to
support a Lifestyle Center and that such a center would fill some local retail gaps.
February 10, 2004 Page 3
Figure 1: Fort Collins Sales and Use Tax Collections 1997-2003 and Sales Tax Collections
Adjusted for Inflation
IIII Sales & Use Tax Collections
(in millions of $)
$60.00
$70.00 ❑Total
$60.00
$50.00 ■ Sales
$40.00
$30.00 ■ Use
$20.00
$10.00 ■ Use Tax from
Business
$0.00
1997 198E 1999 2000 2001 2002 2003
Inflation Adjusted
Sales & Use Tax
(in millions of $)
sat
iM
6.3% -
i1i
iM
February 10, 2004 Page 4
Section 2. What is the Risk to Fort Collins? Quantifying the Flows of Retail Sales
A regional Lifestyle Center represents a unique market demand that is ripe in our region. If one
is constructed in Loveland, regional shoppers (including many from Fort Collins) will travel to
the Center and leave their dollars there. If one is constructed in Fort Collins, we have an
opportunity to provide a market niche for Fort Collins residents as well as those from around the
region. Each project has substantial sales tax revenue impacts to the City — positive if located in
Fort Collins and negative if located in Loveland.
a. We have an opportunity to generate added City sales taxes (estimated between $1.4 and $1.9
million per year) rather than seeing an almost equal reduction of $1.4 to $1.9 million in
revenues leaking to other locations—this is a net swing of $2.8 million to $3.9 million in
sales tax receipts. Without a strong and consistent sales tax base, our ability to provide
desired City services, programs and facilities will be hampered.
b. Shoppers attracted to Fort Collins' Lifestyle Center may also boost activity and dollars spent
at other retail, restaurant, service and entertainment locations throughout the City.
Conversely, the drain of our own shoppers to elsewhere in the region will hurt our existing
retailers and entertainment providers.
c. If the Fort Collins' retail market provides what local shoppers want, it helps to keep in check
the Vehicle Miles Traveled and resultant auto emission pollution.
To assist City staff in assessing the risk from retail competition in Loveland, we enlisted the help
of Economic & Planning Systems (EPS) consultants. EPS worked on the City Plan Update and
conducted retail analysis when the Lifestyle Center land area was considered for rezoning. EPS
consultants have also worked on City projects dating back to the 1980s. EPS provides valuable
expertise in the area of retail analysis and can provide meaningful advice about the
reasonableness of various financial support packages for the Lifestyle Center that are possible.
EPS, using data from the Finance Department, has completed some very interesting analyses of
the current retail situation. Retail outlets in the proposed Lifestyle Center will fall into five
primary retail categories:
Apparel &Accessories
Eating & Drinking
Furniture &Home Furnishings
General Merchandise
Miscellaneous Retail
Based on 2003 data, these five categories account for$982 million of the retail sales that occur in
the City-- approximately one-half of all sales. Most of the sales at the Lifestyle Center would be
in these five categories. The Lifestyle Center will draw additional buyers from outside the City
February 10, 2004 Page 5
and decrease the amount of retail leakage from Fort Collins. According to prior analyses done
by EPS, a Lifestyle Center would closely match the shopping needs of Fort Collins residents.
To place the retail activity in a City revenue context, EPS estimates that the proposed Lifestyle
Center would increase Fort Collins sales tax (for the base 2.25% sales tax levy) by $1.469
million per year. If the dedicated one-quarter cent sales tax levies are included, the estimated net
new sales tax revenue increases to $1.985 million.
Over a ten year period, EPS projects that the Lifestyle Center may draw about $16.8 million of
net new sales tax revenue to the City based on the 2.25% general fund levy. If the dedicated
one-quarter cent sales taxes are all extended through this time period, the total revenue would be
$22.5 million.
The City of Loveland has developed a financial support package to stimulate the development of
a commercial center near I-25 and Highway 24, the Centerra Project. If a Lifestyle Center is not
built in Fort Collins, but the Centerra project is built instead, retail sales and the accompanying
sales taxes will flow to Loveland. For comparison, EPS estimates that in the first year,
approximately $1.448 of sales tax (using the 2.25% levy) would occur in Loveland, not Fort
Collins. On the full 3% levy, this would amount to $1.931 million. Over ten years, this is a loss
to Fort Collins of$14.5 million on the 2.25% levy and $19.3 on the 3% tax rate. The leakage of
retail activity from Fort Collins will grow dramatically.
The net financial impact of not building the Lifestyle Center in Fort Collins and having it in
Loveland would be a large economic loss to Fort Collins. This loss directly translates into a
diminished ability to maintain our current services to citizens, to refurbish and develop our
capital facilities, and to purchase natural area and community separator lands.
EPS prepared the following graph to illustrate the magnitude of the impact. The graph shows
revenue from a Fort Collins Lifestyle Center on the top and the loss of revenue to Loveland if a
Center is not built here on the bottom.
February 10, 2004 Page 6
Estimated Sales Tax Flows from a Lifestyle Center
2006 - 2015
$3,000
New Revenue to Fort Collins
$2,500
$2,000
$1,500
8 $1,000
f500
N
F $o
g' -$500 2006 7 2008 2009 2010 2011 2012 2013 2014 2015
~ 41,000
41,500
42,000
-f2,500 Revenue from Fort Collins to Loveland
Year
-+-2.25 cent Levy —F3.00 cent Levy
The chart portrays the net sales tax loss to Fort Collins. If the Center is not built in Fort Collins
and a center is built in Loveland, the loss to Fort Collins would be the amount represented by the
distance between the lines. For the 2.25-cent general fund levy, it is $2.9 million in 2006, the
distance between the line marked with diamonds on top and the line marked with diamonds on
the bottom. For the 3.0-cent sales tax, the revenue loss is the difference between the outside
lines, the lines marked with the squares. In 2006, this amount is $3.9 million. Over the ten-year
term, the loss to Fort Collins would be $41.8 million at the 3.0 cent rate.
Most who participate in business and financial markets know there is also a psychological factor
involved here. When a community begins to lose its edge or place in a market, whether real or
perceived, it impacts the community and those who had planned to retool, redevelop or expand
begin to hesitate about future investments.
Section 3. Financial Tools Available to Cities in Colorado
Retail retention strategies are not new. For many years, Colorado cities and counties have
recognized the importance of maintaining a strong retail base. Given Colorado's tax structure,
sales tax revenue is the single most important revenue source for municipalities (a CIVIL study
found that over 70% of local tax revenue comes from the sales tax.)
Cities have been forging public-private partnerships since the 1960s. The purpose of a
partnership is to use public financing tools to assist in making the cost of a retail center
competitive in the market. The partnerships can take many forms. The simplest approach is for
February 10, 2004 Page 7
the local government to partially or fully underwrite public infrastructure and services required
for the commercial site. More elaborate tools include the creation of special taxing districts,
using tax increment financing, and agreeing to share a portion of future revenues to be derived
from the new commercial activity. Below, is a list of the basic tools that could be used for a
public-private partnership.
➢ Tax Increment District through an Urban Renewal Authority
➢ Options for other special districts
o General Improvement District
o Special Assessment District
o Metro Districts
o Business Improvement District
➢ Public Improvement Fee
o Without abatement of City tax levy
o With a temporary abatement of City tax levy
➢ Sharing of New Net Sales Tax with the Project based on Public Improvements or Special
Competitive Factors
➢ Deferral of Impact Fees for a number of years like base industry (depending on the
number of year, this may require Code amendment as the code as our Code allows up to
five years for base industry)
In the past, the City of Fort Collins has used a few of these tools. The City has successfully used
tax increment financing in the Downtown Development Authority district. Through this
technique, taxes that otherwise would likely have been non-existent have been made available
for public and commercial improvements in the downtown area.
The City has also extensively used special assessment improvement districts[s for road and utility
improvements and a General Improvement i p ement District in the downtown for public improvements p p ements
and aesthetic enhancements. To date, the City has not used metro districts or busine
ss
improvement districts.
In the last ten years, retail developments have worked with other communities to allow the use of
a Public Improvement Fee. This is usually a percentage of retail sales added to the total cost of
goods being sold. For example, the Park Meadows Mall (at the south end of the Denver metro
area) increased the value of sales made at the Mall by 1.4 percent. From 1996 to 2003 this fee
(like a surcharge) was collected and used to offset the costs of site improvements. This
technique has also been used by the City and County of Broomfield for the Flat Irons Mall, the
City of Lakewood for the Colorado Mills Center and the Belmar Town Center (under
construction). The City of Loveland anticipates using the Public Improvement Fee tool for the
Centerra Project. In some cases, the host cities have lowered their own sales tax so that the fee
does not make the project higher in terms of total taxes and fees higher than competitors. In
other cases the fee, combined with the total taxes, is nominally higher.
Some communities have also entered into tax sharing agreements with commercial projects. For
example, the City of Fort Collins master agreement with Anheuser-Busch shared sales, use, and
property taxes as part of the financial package to make it cost-effective for the brewery to locate
February 10, 2004 Page 8
here. Many Denver-area cities have sales tax sharing agreements with malls and shopping
centers. Examples include Westminster, Broomfield, Denver, Lakewood, Aurora. In most cases
the sharing of future taxes is related to the need for public improvements in the area.
Many communities also consider reduction or waiver of impact fees. In 1995, the City of Fort
Collins amended its Municipal Code to allow the deferral of impact fees for up to five years for
base industries. Through an amendment to the Code, the City could expand the impact fee
deferral to retail centers and also expand the length of the deferral.
Attachment 2 is a listing of the financial tools with some added descriptions.
Section 4. Evaluating Development Proposals
In addition to the population and sales tax analysis that EPS has done for the City, the firm has
the capability and background to review requests for financial support from developers. BPS is
familiar with the levels of return on investment that shopping center developers expect and the
criteria that investment banks apply when making loans on such projects.
Usually, public participation in a revenue sharing agreement is based on the documentation of a
financing gap in the project. For example, at the Flat Irons Crossing Mall in Broomfield, the
mall developer had to make financial concessions to the major tenants (anchors) in order to
induce them to locate at the Mall. The mall developer showed this lack of revenue in its pro
forma and shared the information with the City of Broomfield (now the City and County of
Broomfield). Given the financing gap, Broomfield determined that it would be reasonable for
the City to use a portion of the new revenues from the mall to offset some of the public-use site
improvement costs associated with the development of the mall. This in turn led to a multi-year
agreement to share a portion of the revenues from the project until the public improvement costs
are paid.
EPS and City of Fort Collins staff received some preliminary information from the
representatives of the Lifestyle Center. As of February 3, 2004, the information is still being
analyzed to determine the reasonableness of the request for public support.
Because the Fort Collins Lifestyle Center is competing against the Loveland project for tenants,
rents for Anchor Tenants are extremely competitive. With Loveland's public financing support
and the Loveland project owners' willingness to discount costs, it may be difficult for any project
in Fort Collins to compete with the Loveland project. Ultimately, the review of the Fort Collins
project and the justification for public assistance will need to be evaluated on its own merits.
The Lifestyle Center is requesting financial support from the City to offset a financing gap. The
initial request is for support related to the costs of public improvements for the site, the impact
fees and taxes, and the need to provide incentives for Anchor Tenants. EPS and staff will need to
closely review assumptions and explore areas for cost savings. However, this process cannot
begin in earnest until we see a formal request with the appropriate documentation.
February 10, 2004 Page 9
Section 5. Next Steps
Council and staff should continue the process of reviewing and evaluating the information.
This is one of the most difficult issues that the City has had to face. The decision, regardless of
the direction taken, will have long-term financial ramifications on the future of Fort Collins—as
an economically healthy City with adequate resources for City services and facilities. In prior
discussions, Council underscored its goal that Fort Collins continues as a leading commercial
center in northern Colorado.
The City used a financing package to support the Anheuser-Busch Brewery. Anheuser-Busch
was an important addition to the local economy and is one of the most stable employers as well
as a significant source of revenue, through property tax and sales/use taxes, for the City. The
City has also used tax increment financing to enhance the downtown area and special districts to
construct public infrastructure.
The decision is up to the City Council. Based on the heightened competitive nature of the retail
business and the City's reliance on sales tax as its major source of revenue for general City
services, it may be prudent for Fort Collins to consider some type of financial support.
Attachment 2. Financial Assistance Tools for Local Governments
Explanation Advantages Disadvantages
VoluntarV Sales Tax Share-Back A reements
•Developer pays all up front .Development standards and •Sets new precedent for
development costs fees not compromised possible future use
•City shares back future .Limited risk to City •Impacts City's future sales
sales tax to pay for certain .Flexible tax revenues.
costs
Special Districts
•Self-imposed tax on •Development standards and •Can't be used to finance
developer taxes to build fees not compromised impact fees.
public improvements .Minimal risk to City •City's past history with local
•Gives developer access to .No impact on future sales improvement districts was
tax exempt financing tax not good
• Metro Districts are separate •Familiar to staff, community
political authority •Appropriate for
• Local jurisdiction is developments with
governing authority in a significant off-site
Special Improvement District improvements
February 10, 2004 Page 10
Urban Renewal Authority and District
•Captures tax increment to • Development standards and •Controversial if used for
pay for improvements fees not compromised assembly
•Can be used to assemble • Recent deals may have
properties for re- compromised future use
development Impacts city, county and
school district property taxes
Impact fee Deferral
•Allow certain fees to be paid • Existing code language •Could create cash flow
over time allows alternative payment issues for fee supported
•Similar to a short-term loan schedules programs
•No security for City's interest
if development fails
•Weak incentive for developer
Public Improvement Fee (PIF
• Developer requires retailers •Provides a "tax like" revenue •Could create a competitive
to charge shoppers stream in jurisdictions with disadvantage for the
percentage based fee low or zero local tax rates development if local tax rates
•Similar to a"self-imposed" •Agreements usually have a are similar
sales tax limited term
•Can be collected by the •Works well when there is
developer or by the local little impact to the existing
taxing jurisdiction sales tax rate
• Used at Park Meadows
Attachment 1
Lifestyle Center Economic Impact Analysis
Final Report
June 5,2003
II. RETAIL SALES AND EXPENDITURE PATTERNS
This section of the report addresses the potential market for a lifestyle center in Fort
Collins including an analysis of the potential trade area and existing retail sales and
expenditure patterns.
NORTHERN COLORADO MARKET
According to ICSC,the primary trade area accounts for an average of 53 percent of
lifestyle center customers,compared to 60 to 65 percent for regional centers. In urban
areas,primary trade area customers live closer to the center(within five miles),are likely
to rate the centers as"convenient" from home,and tend to visit the lifestyle center more
frequently. Also,according to ICSC survey data,a higher percentage of sales comes
from households with incomes of over$75,000.
Lifestyle centers can have a larger trade area in underdeveloped trade areas such as
northern Colorado. The primary trade area population typically ranges from 95,000 to
350,000. The secondary trade area population ranges over a larger geographic area,
includes the primary trade area population and typically ranges up to 750,000 persons.
There are four potential regional retail centers planned in the north Front Range
Corridor. In addition to the Fort Collins' Harmony Road site,Poag&McEwen is
considering a site at the Centerra project on Highway 34 and I-25. This site may
potentially include a power center,in addition to the lifestyle retailers. CBL is
considering a location in Windsor at Highway 392 and I-25. A fourth proposed lifestyle
center is being considered for the Prospect/I-25 interchange area.
The Harmony Road site in Fort Collins best fits the criteria used by lifestyle centers
within the five-mile trade area as shown in Table 2. In the 10-mile radius,the Windsor
site has slightly larger numbers but is deficient in other ways. It is at an intersection
south of the unbanized area with little adjacent development. The Loveland site has
fewer households but higher incomes in the larger trade area. The larger Loveland
market area includes Fort Collins,which makes the site attractive to developers and
potential retailers.
9
Lifestyle Center Economic Impact Analysis
Final Report
June 5,2003
Table 2
Competitive Site Demographics
Lifestyle Center Economic Impact Analysis
Fort Collins Loveland Windsor
Characteristic 2 Mile 6 MIN 10 Mlle 2 MIN 5 MIN 10 Mile 2 Mile 6 Mile 1' Mlle
Population
2002 17,203 92.187 218,555 770 38,767 145,228 2.553 39.810 217,727
2007 20,220 104,427 244,431 875 42,999 165,598 3,043 47.140 243,784
Households(HH)
2002 8.119 36,620 84,377 279 14,967 54,314 929 14,289 83.488
2007 7,190 41,673 94,930 320 16,700 52,158 1,107 16,973 94,161
Income(2002)
Average HH $81,946 $71,318 $66,203 $109,720 $63,986 $72,806 $81,493 $77.676 $68,849
HH Income 375,000♦
Households 2,772 13.000 26,241 179 4,700 19,770 380 5,873 26,382
Percent of Total 45% 36% 31% 64% 31% 36% 41% 41% 32%
am..CJsrltui;Emnons.4 Pi.,m it mono
TRADE AREA EXPENDITURES AND SALES
The following tables show the EF'S retail model that estimates the inflows and outflows of
Fort Collins'retail market. This model can be used to help estimate subsequent impacts on
the City's sales tax revenues based on the potential location of the lifestyle center in the City.
For purposes of analysis,the primary trade area for the proposed center is defined as the
City of Fort Collins. This is somewhat larger than the typical primary trade area in an
unbanized area but fits the competitive shopping pattern of the City. The secondary
trade area would comprise the remainder of Larimer County(including Loveland) and
all of Weld County Colorado and Laramie County,Wyoming. Table 3 shows the
estimated households within the Fort Collins trade market area as well as total trade
area.Approximately 124,000 persons and 48,000 households live within the Fort Collins
primary trade area. The primary area has a total personal income of over$3 billion,
while the total trade area(primary and secondary)has a total income of over$12 billion.
Table 3
Household Total Personal Income(TPI), 2002
Lifestyle Center Economic Impact Analysis
Trade Area
Characteristic Primary Total
Population 124,133 539,189
Households(HH) 48,234 201,961
Average HH Income $63,512 $62,673
TPI ($000's) $3,063,438 $12,657,554
Note Primary Trade Area includes the City of Fort Collins and the total trade area
includes all of Lorimer County,Weld County,and Laramie County,Wy.
Source.Clamas;Economic 6 Planning Systems
10
Lifestyle Center Economic Impact Analysis
Final Report
June 5,2003
Table 4 shows annual taxable retail sales by major store category for the City of Fort
Collins. In 2002, there were a total of$973.2 million taxable retail sales in the City.
Table 4
Citywide Taxable Retail Sales, 2002
Lifestyle Center Economic Impact Analysis
Taxable
Category Sales
($000's)
Apparel&Accessories 84,280
Eating &Drinking 221,738
Furniture& Home Furnishings 120,301
General Merchandise 323,486
Miscellaneous Retail 223,347
Total $973,152
Source:City of Fort Collins;Economic&Planning Systems
Table 5 estimates retail expenditure potentials by type of good for Fort Collins residents.
Expenditures are estimated based on the percent of total personal income (TPI)spent by
store group based on statewide Census of Retail Trade data. For example,a typical
household spends 2.2 percent of its total household income on apparel and accessories.
The expenditure potential for the entire trade area is then calculated by multiplying
trade area population by average per capita income. The percent of TPI spent by store
type is then estimated and compared to actual store sales to estimate local capture and
sales outflow (or leakage).
Table 5 shows that Fort Collins residents are spending 85 to 90 percent of their retail
expenditures in the City with 10 to 15 percent sales outflow,primarily to the Denver
metro area.
Table 5
Citywide Outflows
Lifestyle Center Economic Impact Analysis
% of Expend. Sales to Outflow
Category TPI Potential Local Residents Sales
($000's) $ % $ %
Apparel&Accessories 2.20% 67,396 60,682 90% 6,714 10%
Eating & Drinking 5.35% 163,894 147,456 90% 16,438 10%
Furniture& Home Furnishings 3.07% 94,048 80,000 85% 14,047 15%
General Merchandise 6.02% 184,419 166,595 90% 17,824 10%
Miscellaneous Retail 8.20% 251,202 178,677 71% 72 525 29%
Total 24.84% $760,958 $633,411 83% $127,547 17%
Source:U.S.Census of Retail Trade;Economic&Planning Systems
11
Lifestyle Center Economic Impact Analysis
Final Report
June 5,2003
Table 6 compares actual Fort Collins store sales to the estimate of resident expenditures.
The difference is comprised of store sales coming from residents from outside of the
local trade area (inflow). These retail inflows shown are overstated in the general
merchandise category,which includes department stores. This is likely due to local
residents spending a higher percentage of their purchases in department stores than the
statewide average. Nevertheless,total inflows for the selected store categories are shown
as averaging 35 percent overall,which is believed to be a reasonable estimate for the
general merchandise,apparel,furniture and home furnishings,and other miscellaneous
shoppers goods (GAFO)store categories.
Table 6
Citywide Inflows
Lifestyle Center Economic Impact Analysis
Store Sales to Sales from
Category Sales Local Residents Inflow
($000's) $ % $ %
Apparel&Accessories 84,280 60,682 72% 23,599 28%
Eating & Drinking 221,738 147,456 67% 74,282 34%
Furniture&Home Furnishings 120,301 80,000 67% 40,301 34%
General Merchandise 323,466 166,595 52% 156,891 49%
Miscellaneous Retail 223,347 178,677 80% 44669 20%
Total $973,152 $633,411 65% $339,742 35%
source:City of Fort Collins;Economic&Planning Systems
REGIONAL COMPETITION
Lifestyle centers are generally not considered a threat to top performing malls. They are
typically smaller than regional malls and contain many of the same upscale apparel
stores found in an upscale regional mall without the complement of four to five full-line
department stores. In most cases,potential stores tenants will not move out of the mall
to locate in a new lifestyle center. If located far enough away(typically five miles or
more in an urban setting),a second store location may be possible.
Lifestyle centers,however,will directly compete with older,,smaller regional malls such
as Foothills Mall in Fort Collins. In older,lower performing malls,any new regional
store competition is a threat to the mall's viability and may generate transference of
store sales and/or a loss of tenants.
A well-performing regional mall generates average sales of approximately$350 per
square foot for mall space. Based on information provided by the City,taxable Foothills
Mall sales in 2002 were approximately$135 million for an average$226 per square foot
While mall space stores are generating sales of approximately$308 dollars per square
foot,the department stores are generating sales of less than$200 per square foot. With
the exception of Sears,the department stores are underperforming relative to industry
12
Lifestyle Center Economic Impact Analysis
Final Report
June 5,2003
averages. Table 7 below shows a breakdown of Foothills Mall sales by major store
category.
Table 7
Citywide Taxable Retail Sales, 2002
Lifestyle Center Economic Impact Analysis
Taxable No.of Total Sales/
Category Sales Stores Space Sq. Ft.
($000•s) lsF>
Mall Space
Accessories, Luggage, & Leather Goods 12,713 10 17,269 $736
Other Apparel 9,754 15 44,222 $221
Shoe Stores 4,615 6 20,688 $223
Upscale Apparel 17,259 11 53,015 $326
Eating &Drinking 6,391 16 13,292 $461
Books&Music 4,162 3 20,829 $200
Miscellaneous Retail' 14,565 28 56,017 260
Subtotal $69,459 89 225,332 $308
Department Stores 65,827 4 339,977 $194
Total $136,286 93 565,309 $239
Note:Excludes non-retail and unclassified/vacant space of 32,896 square feet.
'Includes cosmetics,beauty supplies,perfume,optical goods,sporting goods,hobby,toys,
games,home furnishings,electronics,and other shopper goods.
Source:City of Fort Collins;Economic&Planning Systems
Foothills Mall is an older,smaller property and is underperforming industry averages in
the store categories most competitive with a lifestyle center,including apparel and
department stores. Any new regional retail development is likely to have an impact on
the mall. Without significant reinvestment,the mall's share of sales and its overall
contribution to the City sales tax revenues will likely be vulnerable to new regional store
competition of any kind. However,the mall owners are also potentially expanding and
reinvesting in the mall.
The most measurable short term impact to the mall may be on tenants such as Ann
Taylor,Eddie Bauer,Gap and other"upscale apparel" retail within Foothills Mall
should a lifestyle center open within Fort Collins. Although they may not be initially
tempted to relocate, the concentration of upscale apparel stores within the lifestyle center
may attract some of their clientele away from the mall,with a subsequent drop in sales.
13
Attachment 2. Financial Assistance Tools for Local Governments
Explanation Advantages Disadvantages
Voluntary Sales Tax Share-Back A reements
• Developer pays all up front •Development standards and • Sets new precedent for
development costs fees not compromised possible future use
•City shares back future •Limited risk to City • Impacts City's future sales
sales tax to pay for certain •Flexible tax revenues.
costs
Special Districts
• Self-imposed tax on •Development standards and •Can't be used to finance
developer taxes to build fees not compromised impact fees.
public improvements .Minimal risk to City .City's past history with local
•Gives developer access to •No impact on future sales improvement districts was
tax exempt financing tax not good
•Metro Districts are separate • Familiar to staff, community
political authority •Appropriate for
•Local jurisdiction is developments with
governing authority in a significant off-site
Special Improvement District improvements
Urban Renewal Authority and District
•Captures tax increment to •Development standards and •Controversial if used for
pay for improvements fees not compromised assembly
•Can be used to assemble • Recent deals may have
properties for re- compromised future use
development Impacts city, county and
school district property taxes
Impact fee Deferral
•Allow certain fees to be paid •Existing code language .Could create cash flow
over time allows alternative payment issues for fee supported
•Similar to a short-term loan schedules programs
•No security for City's interest
if development fails
•Weak incentive for developer
Public Improvement Fee PI
•Developer requires retailers •Provides a 'tax like" revenue •Could create a competitive
to charge shoppers stream in jurisdictions with disadvantage for the
percentage based fee low or zero local tax rates development if local tax rates
•Similar to a "self-imposed" •Agreements usually have a are similar
sales tax limited term
•Can be collected by the •Works well when there is
developer or by the local little impact to the existing
taxing jurisdiction sales tax rate
•Used at Park Meadows