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AGENDA ITEM SUMMARY ITEM NUMBER: 32
DATE: March 2, 1999
FORT COLLINS CITY COUNCIL Frank W. Bruno/
SAMFIEimarik/Sherrie Temple
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SUBJECT:
Second Reading of Ordinance No. 31, 1999, Repealing Article VII, Chapter 5 of the City Code in
Order to Terminate the Development Impact Fee Rebate Program.
RECOMMENDATION:
Staff recommends adoption of this Ordinance on Second Reading.
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EXECUTIVE SUMMARY:
t The Development Fee Rebate Program was initiated in 1990 with City Council approval. The
Program was originally a Fee Waiver program,with the General Fund actually bearing the burden
for the firm. The program was modified in 1994, and converted to a Rebate Program. In this way
the fine pays the fees up-front, and then receives a rebate of the fees(as approved by Council)over
a time using the sales and use taxes received from the firm. At the time the program was designed it
was intended to assist in the location and expansion of basic industrial firms by reducing the initial
costs associated with the construction/expansion of the firms facilities. Since the program's
g inception,roughly $980,000 has been approved by Council. The actual results associated with the
program have,however,been very difficult to gauge. Ordinance No. 31, 1999,which was adopted
4-3 on First Reading on February 16, 1999, repeals the City Code provisions establishing the
program, and terminates the operation of the program.
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AGENDA ITEM SUMMARY ITEM NUMBER: 29A-D
DATE: February 16, 1999
10 FORT COLLINS CITY COUNCIL
STAFF: Frank W. Bruno/
SUBJECT:
Items Relating to the City's Economic Policy.
RECOMMENDATION:
Staff recommends adoption o `. a Resol` ti:oAanDtheO!rdinyanon First Reading.
FINANCIAL IMPACT:
There are no financial impac ire�y , 110G.
d i od�ication to the City's Economic
Policy. The projected financipacts a§sowith�M cturing Use Tax Rebate Program
for 1998 is expected to be ap oximateYy . There no direct or immediate financial
impacts to the City in connectioh"Wit'hrthe erfiunahon'of the De elopment Impact Fee Rebate,and
Street Oversizing Fee Exemption Programs.
IMPACTS ON BUSINESS SECTOR:
There are no direct impacts on the business community from the economic policy modifications.
The changes to the Manufacturing Use Tax Rebate Program changes will likely encourage both the
initial investment and re-tooling decisions of both large and small manufacturing businesses. This
would be consistent with the policy-change-designed to encourage-local business start-ups. The
termination of the Developme `impact) ee Reb te,and 3 ree versizing Fee Exemption Programs
may have different impacts. ith regard to theYelopmentnpact Fee Rebate Program, initial
development costs associated with tthe cbnstructioi-or expansion of business facilities will not
increase; however, there will no longer be an opportunity to seek a rebate of certain development
fees associated with the project. This may in turn impact business decisions to expand locally. It
should be noted that recent changes to the Street Oversizing Fee structure have actually resulted in
a significant reduction of the Street Oversizing Fee as it pertains to industrial business uses. The
termination of the Street Oversizing Fee Exemption Program will therefore have less long-term
impact on businesses.
DATE:
e ruary 16, 1999 2 ITEM NUMBER: 29 A-D
EXECUTIVE SUMMARY:
The following actions resulted from the City Council study sessions held in April and December of
1998. These sessions were held by Council to continue the ongoing discussion of the appropriate
City role in maintaining the long-term viability of the Fort Collins economy. Over the past ten years,
the City has begun a shift away from the former model used in many parts of the U.S. of using
financial incentives to encourage local business development and job creation. The current approach
emphasizes tools and techniques that focus on building local capacity for business development and
entrepreneurial activity. This includes refining the City's economic policy to reflect this shift,
modifying the Manufacturing Use ax Rebate Pro toe out g�new manufacturing business
start-ups, and expansions. A ition ('et
onsnc de rd c terminating the Development
Impact Fee Rebate Program, d the SOv i mpac :ee Rebate Program.
BACKGROUND:
On December 22, 1998, City Council held a study session to discuss the various elements of the
City's economic policy. There were five main topics discussed:
• Economic Policy Statement
• Manufacturing Use Tax Rebate Program
• Terminating the Develo ent Im a t Fe bate d S eet Oversizing Fee Exemption
Programs
• Economic and Comm . 'ty Indi tors
• Economic Policy Advi Boaz
Council requested that the following items be brought forward for consideration during a regular
City Council meeting. The items for consideration are as follows:
A. Resolution 99-23 Amending the Economic Development Policy and Renaming it as the
Economic Policy of the City of Fort Collins.
B. First Reading of Ordinance No. 30 1999 Conti in and Modifying a Temporary
Manufacturing Equip nt Use Pax Rebate ro or�ort Collins Manufacturers.
C. First Reading of Ordin ce No k 19 ,'R Baling cle VII,Chapter 5 of the City Code
in Order to Terminate the Development Impact Fee Rebate Program.
D. First Reading of Ordinance No. 32, 1999,Repealing Section 24-113(b)of the City Code,in
Order to Terminate the Street Oversizing Exemption Program.
Staff is currently compiling examples of various indicators from other communities for further
consideration at a later date. While there was no agreement regarding the establishment of an
economic policy board, Council suggested that the planned Community Dialogue process include
a session on economic policy in order to elicit citizen perspectives on this topic.
DATE: February 16, 1999 3 ITEM NUMBER: 29 A-D
A. Economic Policy
Action Proposed-Modification: As has been stated,the City's Economic Policy was last modified
in August of 1994. Since that time the City has initiated a shift away from the use of financial
incentives, toward a more entrepreneurial and small business approach. Perhaps the key to the
suggested modifications is a focus on building local capacity to generate new business activity,and
the spin-off of enterprises from Colorado State University, as well as existing businesses. The
Policy now reflects efforts made to develop the Fort Collins Virtual Business Incubator, and the
kick-off of a one-stop small business assistance center in concert with Front Range Community
College's Small Business Development Center. Both entities are co-located along with the Service
Corps. of Retired Executives SCORE)othP- I 1 ,th ey Bank building at Oak and
Howes in downtown Fort Col" s.A copy of the Economic (Deve ment) Pi$licy isions or
the prior version marked is
attached to this Agenda Item Summary.
B. Manufacturers Use Tax Rebate Program
Action Proposed-Modification: The Manufacturers Use Tax Rebate Program was initiated in 1996,
and was intended to focus on encouraging the investment made by local manufacturing firms in new
manufacturing equipment. This type of investment was once made every three or four years for most
companies. In this day and age od&,inveest"ments ale`b ade-pery 15 to 18 months for some
high-technology companies. sessingAe tax a e-to 'n`rg results in a relative windfall for
a community since there is li a addefd st or ;ct associ d with serving the existing fines
making these purchases. In 19'4' -,th City eb ted$380,287 10 of 27 firms that were eligible for
rebates. In 1997,the City rebated$439,917 to 15 of31 eligible companies. Staff estimates the 1998
rebate liability to be about $510,000.
In early 1998, City Council approved several changes to the Manufacturing Use Tax Rebate
Program. Many of the changes resulted from suggestions by local manufacturers. Staff is now
recommending elimination of the three-year eligibility requirement that is currently a restriction of
the program. This change reflects the Policy intent to encourage the initial investment as well as
reinvestment of smaller start-upYbusinessesxas well �eKisf�ng firms. Staff is also recommending
an extension of direct paymen angem�ents beI on th mti ru e-month period to the suggested
12 months. This would accommodate large-scale re . o ing pr�oects that require additional time for
completion. `
Consideration has been given to the tax equity and fairness questions that have arisen. Data shows
that the base industry manufacturing sector continues to carry a predominate share of both the use
tax and personal property tax load in Fort Collins. The attached graphs show that the manufacturing
companies that are eligible for this program contribute 72% of the City's $1.5 million in personal
property tax and 70% of the City's $5.4 million in use tax.
Staff is recommending that the Manufacturing Use Tax Rebate Program be continued on a year-to-
year basis due to the serious possibility that legislation will be brought forward at the State level in
1999 to eliminate Personal Property Tax. Similar legislation was passed in the legislature in the past
two years, but vetoed by Governor Romer each time. Such a change to the City's tax base
(elimination of approximately$1.5 million in revenue)would dramatically impact the City's ability
DATE: February 16, 1999 4 ITEM NUMBER: 29 A-D
to deliver current services. This situation might also require the curtailment of the Manufacturing
Use Tax Rebate Program. Staff will monitor this activity and keep the Council informed.
A copy of the Program Description with revisions from the prior version marked is attached to this
Agenda Item Summary.
C(I). Development Impact Fee Rebate Program
Action Proposed- Termination: The Development Fee Rebate Program was initiated in 1990 with
City Council approval. The Program was on mall a Fsm. ee Waiver�program,with the General Fund
actually bearing the burden fo he e ogram as od�ied in 1994, and converted to a
Rebate Program. In this way the firm p s the - ont, andthen receives a rebate of the fees
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(as approved by Council)over me usin a sales use taxe eceived from the firm. At the time
the program was designed it was intended to assist in the location and expansion of basic industrial
firms by reducing the initial costs associated with the construction/expansion of the firms facilities.
Since the program's inception,roughly$980,000.has been approved by Council. The actual results
associated with the program have,however,been very difficult to gauge. Ordinance No. 31, 1999,
repeals the City Code provisions establishing the program, and terminates the operation of the
program.
C(2). Street Oversizing Impact Fee Waiver Program
Action Proposed- Terminatia The S(al
O ; s ' ee a"mption Program was initiated in
August 1989, and was intendetishe caon and eansion of smaller basic industrial
firms. The Program functions admuustry,anecan be approved up to a maximum of$50,000.
The City Council has appropriated$100,000 each year for the past nine-years for the Program. The
funding is limited to the yearly$100,000 appropriation,and does not carry-over from year-to-year.
Since the program's inception, roughly $170,000 has been spent. The typical amount of an
exemption has been in the $3,000 to $5,000 range. Again, it is very difficult to link either the
success,or failure of a business to the existence of this program. From an anecdotal perspective one
could make an argument that this,and the Development Impact Fee Rebate Program,might provide
some added encouragement for a firm to expand in Fort Collins. Recent changes to the structure of
the Street Oversizing Fee Wai77y&7,,Tgram have cnr ly sulte'd-in a reduction of the fee for
industrial business uses. Ordinance No. i 2, 19 rP e the Ci, Code provision establishing the
program, and terminates the operation e P gain }