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HomeMy WebLinkAboutMINUTES-03/28/1995-Adjourned1 n March 28,1995 COUNCIL OF THE CITY OF FORT COLLINS, COLORADO Council -Manager Form of Government Adjourned Meeting - 6:30 p.m. An adjourned meeting of the Council of the City of Fort Collins was held on Tuesday, March 28, 1995, at 6:30 p.m. in the Council Chambers of the City of Fort Collins City Hall. Roll Call was answered by the following Councilmembers: Azari, Janett, Kneeland, McCluskey, Smith and Wanner. Councilmember Absent: Apt. Staff Members Present: Bruno, Krajicek, Roy. Items Relating to Large Basic Industrial Employers, Adopted as Amended The following is staff's memorandum on this item. "Executive Summary A. Resolution 95-45 Directing Staff to Prepare Information and Analysis Concerning City Support for Additional Financial Incentives for Large Basic Industrial Employers, B. Resolution 95-46Authorizing the Mayor to Communicate with Hyundai Electronics Industries Regarding the City's Review of its Financial Incentive Policies. Several weeks ago staff was made aware of an interest by Hyundai electronics Industries to locate a memory chip manufacturing facility in Colorado. City Council and staff responded by sending a letter and package of information to the Chairman of the Hyundai Electronics Industries communicating the City's desire to work with Hyundai and assist the finn as it considers its options. Subsequently Fort Collins Incorporated (FCI) staff indicated that Hyundai was focusing on the relative tax structures of the communities being considered for this $1.2 billion expansion. FCI's analysis showed the Fort Collins appeared to be at the higher end of the cost scale with overall tax payments (includes the City, County and School District) of approximately $150 million over a six year period. Other communities, including Colorado Springs appear to impose a much smaller tax requirement on basic industrial firms such as Hyundai. Over the same period, the overall tax liability in Colorado Springs appears to be roughly $35 million. Colorado Springs is able to offer such figures as a result of financial and tax incentive policies that it has adopted. Fort Collins Incorporated has written to the City and has requested that Council consider modifications to the 517 March 28, 1995 City's sales and use tax code, and financial incentive policy, which it believes are required for ' Hyundai to continue to consider Fort Collins as a potential location. During a Council Finance Committee Meeting held on Monday, March 27, 1995, direction was given for staff to prepare a Resolution (attached) which further directs staff to develop polices, recommendations and methodologies that, if approved by the Council, would enable the City to evaluate the financial and economic impacts of large basic industrial expansion projects and financial incentive requests such as the Hyundai project. The Committee also requested staff provide some additional background data regarding capping use tax liability, property tax credits in enterprise zones, and the starting framework for cost benefit analysis. Staff has attached for your review. It was the consensus of the Finance Committee to refer this recommendation to the full City Council for discussion and direction during the adjourned meeting of March 28, 1995. " Interim Deputy City Manager Bruno stated the Finance Committee directed staff to refer to the full Council its recommendation directing staff to provide additional information and analysis of possible revisions to the City's existing financial incentive policies for large basic industries. This was in part the result of an opportunity staff became aware of regarding the location of a major manufacturing facility related to Hyundai Electronics Industries. He stated Resolution 95-45 directs staff to prepare ' that analysis. An additional resolution, 95-46, authorizes the Mayor to communicate with Hyundai. Financial Officer Alan Krcmarik explained the options that might make the City more competitive in terms of its tax base. He provided information on a cap on the use tax, on Enterprise Zones, and cost benefit analysis on fee waiver incentives. Councilmember Kneeland stated one of the reasons the Finance Committee discussed a cap on sales and use tax is that some of the newer kinds of manufacturing plants are equipment heavy and the equipment becomes obsolete quickly. The Finance Committee was concerned about unduly taxing a certain kind of industry which may be counter productive to the community's desires. Financial Officer Krcmarik agreed that competition is tightening up world-wide and Fort Collins is competing with other cities in Colorado, other states and other countries. The stakes are higher because things are more capital intensive. Recent articles indicate computer chip plants become obsolete in 2-4 years so retooling and costs are much higher. Councilmember Kneeland made a motion, seconded by Councilmember McCluskey, to adopt Resolution 95-45. Lucia Liley, Chairperson of Fort Collins, Inc., spoke of the role of Fort Collins Inc. in the Hyundai issue. The opportunity to have a $1.2 billion high-tech manufacturing plant and its attendant jobs ' 518 March 28, 1995 ' in the community is important because of its magnitude and because of its tie to Symbios Logic and the retention of that business in Fort Collins. Fort Collins Inc. devoted time and resources to acting as a liaison between the two companies and the City. The sole goal was to get the tax issue on the table, specifically the issue of the disproportionately high amount of taxes on capital intensive companies, which are most compatible with the City's goals and objectives. She spoke of letters from the Poudre R-1 Board of Education and the Larimer County Commissioners indicating their desire to use existing legal mechanisms to negotiate an equitable tax result. She stated two issues remain, the sales and use tax and personal property tax. She supported a cap on sales and use tax at $2 million because a cap is consistent with the goal of trying to bring the tax down to a fair amount that doesn't operate as a disincentive for companies with special equipment needs. A $2 million cap could equalize the tax burden but would not operate as a disincentive. She supported a policy that would leave the real property tax in place to provide and fund basic services. She supported looking at a credit of personal property tax under existing legislation in the maximum amount that would preserve the financial condition of the City but would permit the City to negotiate agreements with individual companies based upon a set of defined criteria. If these two policies were applied to Hyundai, the company would still be paying City sales and use tax and personal and real property taxes, in excess of $7.2 million over a five-year period. She urged Council to adopt the Resolution and provide a letter to Hyundai with as specific as possible recommendations so the company can make its decision. Ed Stoner, 2236 Apache Ct., spoke on behalf of the Fort Collins Board of Realtors. He spoke of the A-B bond issues and clarified repayment of the bond issues was guaranteed by both A-B and Chase Manhattan Bank. He stated that when companies retool every 24 years, sales tax becomes a critical issue in their decision making process. He added housing values in Fort Collins will depreciate if Symbios Logic relocates. Linda Stanley, 2040 Bennington Circle, spoke of incentive effects on economic well-being in communities. She stated economic and statistical analysis has shown little significant connection between local taxes and local economic development. She stated it is an economic development myth that states providing incentives to attract high paying jobs into communities will increase the economic well-being of the community. It is also a myth that high paying jobs will provide employment for the unemployed or the under employed. In communities that have experienced rapid job growth, there has also been rapid growth in unemployment. Bruce Hansford, 1900 Mohawk St., stated high capital investment companies create higher paying jobs and help the quality of life by participating in charitable efforts. If companies are lost, there will be an impact on the tax base and on the charitable associations. There is a need to place Fort Collins on a level playing field with its competition. He urged Councilmembers to adopt the Resolution. Bob Vinton, 1513 Teakwood, representing Comlinear Corporation, encouraged support of the Resolution. He stressed the importance of having large high tech companies like Symbios Logic and H-P in the area to facilitate recruiting opportunities. He spoke of Comlinear's growth and expansion ' plans and stated tonight's decision will impact its decisions. 519 March 28, 1995 Gary Petty, 4518 Seaboard Lane, opposed tax incentives and viewed them as another way for , businesses to move the cost of doing business back to the employee and the community. Tim Johnson, 1337 Stonhenge Dr., NRAB member, spoke of process concerns surrounding these tax incentives. He stated no environmental questions have been asked and suggested the issue should be voted on. Kelly Ohlson, 2040 Bennington Circle, stated he believed the process was flawed and suggested the Hyundai deadlines were company orchestrated to circumvent any rational evaluation and proper process. Gerry Horak, 1511 Lakeside Ave., expressed concern about the speed of the process and suggested economic development should be left to the private sector. He questioned the logic on the tax cap for manufacturing machinery purchases and suggested Council was acting in a crisis policy making mode. Dick Beck, 520 Eagle Lake Ct., Chief Financial Officer, Advanced Energy, supported the study, analysis and information gathering so that a well-informed decision can be made by the Council. Trudy Haynes, business woman in the community, expressed concern about growth in the community. She stated the growth that has been generated is not paying for the infrastructure needed. She mentioned school overcrowding and delays in building of parks. She opposed tax I incentives for any company. David Neenan, 1606 Brentford Lane, pointed out that almost 50% of the properties that are on the business, commercial and institutional side of the City's tax base are tax exempt. He stated the Hyundai request is unique and deserves to be considered. Ann Vollman, Symbios Logic employee, spoke of the contributions to the community made by herself and other Symbios employees. She stated the semi -conductor industry is not the dirty employer portrayed by some. She supported further evaluation and information gathering. Laurie King, Symbios Logic employee, stated Symbios employees are concerned about where the company is going to be located. She asked that Council support the Resolution. Roger Sample, 1524 Brentford Lane, Fort Collins, Inc. Treasurer, stated the sales and use tax charges on the investment by Hyundai would be about $30M. He stated he believed the $600M plant would pay its way and that the City needed to be more competitive to draw the higher paying jobs. He supported the Resolution. Randy Humphreys, 4418 Viewpoint Ct., Symbios Logic employee, stated he had some of the same concerns expressed by tax incentive opponents. He spoke of emission abatement efforts initiated by Symbios and stated employees are concerned about the community and the school system. ' 520 March 28, 1995 Glenn Colton, 1025 Castlerock Dr., stated the City's overall tax base needs to be reviewed and opposed tax incentives. Helen Clements, 4342 Winterstone Dr., Symbios Logic employee, spoke of the positive things the company has done for the community and its employees. David King, Symbios Logic employee, stated the Hyundai jobs are the type of jobs the community should attract and encouraged Council to support the Resolution. Bob Valen, 1307 Ticonderoga, Symbios Logic employee, stated the community needs high paying jobs. Ken Bonetti, economist for the Forest Service and CSU, opposed attempts to subsidize developers and businesses. He asked Council to defeat the Resolution. Brent Holly, small business owner, opposed incentives for Hyundai. Mayor Pro Tern Janett asked what the City is evaluating and whether staff will be looking at the cost of services the City would be providing to the new employees. Interim Deputy City Manager Bruno stated it is staffs intent to look at the direct and indirect benefits provided by the company and to evaluate the direct and indirect costs associated with the manufacturing expansion. Indirect costs would include additional residential and retail development. Councilmember Smith asked for information on the impacts of Article 10, Section 20 (Bruce amendment) on this proposal. Financial Officer Alan Krcmarik stated the City's revenue base subject to Amendment 1 is about $75M. Each year the City will be allowed to grow by a certain percentage which is inflation and local growth. This has been in the 6-7% range in the last few years. The use tax paid by Hyundai would be about $15M or 20%. At some point that growth factor will catch up but the use tax will occur in 1995 and 1996 so it will not fit under the cap. A portion will be subject to the refund provision and the City will need to ask the voters to retain the revenue or the City will be in a refund mode, perhaps in the $IOM range. Councilmember McCluskey expressed concern about the diversity of the City's tax base because a large number of commercial properties are tax exempt. He asked if the City's current economic policies target a percentage of local hires. Bruno stated the City's current policy relating to rebate of development fees contains local hire provisions. Staff intends to include similar criteria in an evaluation of these larger projects. ' Councilmember Janett asked why staff recommends the deferral of sales and use tax. 521 March 28, 1995 Krcmarik stated the types of companies being considered have up front use tax which would be , difficult to fit into the City's growth limits. Other communities in Colorado have explored entering into tax increment agreements so that the use tax is not all payable in the first year. It could be paid equally over five years, delayed for seven years or an account could be set up to allow the City to draw only the amount needed to stay under the cap. Communities are trying to be creative in managing their revenue streams to stay under the growth limit. Councilmember Smith asked if there are methods by which the incentives considered can be applied to all businesses associated with capital expansion. Krcmarik stated other communities have a sliding scale where everyone would get some type of relief once they reach a certain threshold. As companies go higher on the curve, the cap would relate differently. Still, the largest entries into the market would receive the greatest amount of subsidy but some of the equity concerns would be addressed by smaller refunds to smaller businesses. Proportional rebates could also be considered. Councilmember Smith asked about performance based systems where taxes might be applied to specific other elements of the municipality and would contribute to the quality of life in the community. City Attorney Roy replied that there are mechanisms that apply fees or taxes to some use that is of special benefit to the taxpayer but also some general benefit to the community rather than waiving I or rebating the tax. Councilmember Janett made a motion, seconded by Councilmember Smith, to adopt Resolution 95- 45 with the following amendments to Section 1: "Evaluate the pros, cons and appropriate alternative methodologies for deferring collection of, placing a cap on, and/or otherwise modifying the manufacturing use tax for plant and equipment purchases made by large basic industrial firms; and evaluate all other pertinent policies related to the imposition and collection of such tax. Prepare a Pro Forma and methodology to assist the City in evaluating the economic and fiscal impacts of large basic industrial expansion projects, and requests for financial or tax incentives. Evaluate the pros and cons and consider for recommendation, policies regarding real and personal property tax rebates or credits available to large basic industrial firms through Senate Bill 94-182, and the State's Enterprise Zone legislation. Evaluate methods for improving the development review process of the City." 522 March 28, 1995 Councilmember Kneeland made a motion, seconded by Councilmember McCluskey, to amend the final bullet of Section 1 to add "including but not limited to the processes as they relate to large basic industrial development projects". Councilmember Wanner suggested the language read "Evaluate methods for improving the development review processes of the City as they relate to large basic industrial development projects." Councilmembers Janett and Smith accepted Councilmember Warmer's suggestion as a friendly amendment to their original motion. Councilmember Kneeland withdrew her motion to amend Section 1 of the Resolution. The vote on Councilmember Janett's motion, as amended, was as follows: Yeas: Councilmembers Azari, Janett, Kneeland, McCluskey, Smith and Wanner. Nays: None. THE MOTION CARRIED. Councilmember Kneeland made a motion, seconded by Councilmember Smith, to adopt Resolution 95-46. ' Councilmember Kneeland asked that the tone of the letter be an invitation and a welcoming for the City to have a dialogue with Hyundai. Councilmember Wanner made a motion, seconded by Councilmember Janett, to amend the Resolution as follows: In the sixth Whereas, substitute the word "might" for the word "would"; In the seventh Whereas, substitute the word "might" for the word "will"; The eighth Whereas would read "Whereas, City Council wishes to invite Hyundai Electronics Industries to consider our community"; Section 1. as follows: "That the Mayor is hereby authorized to prepare a letter to Hyundai Electronics Industries indicating the City's interest in discussing Hyundai's development of a major manufacturing facility in Fort Collins. A copy of Resolution 95-45, as well as the City's currently adopted policies concerning economic development and financial incentives shall be included." Councilmembers Kneeland and Smith accepted Councilmember Warmer's amendment as a friendly ' amendment to their original motion. 523 March 28, 1995 Mike O'Keefe, 1742 Hotchkiss Dr., Symbios Logic employee, stated he was not sure there is enough t time to attract the Hyundai expansion but expressed the hope measures will be in place before Symbios expands its facility. John Knezovich, 1205 Green, stated the comments of the Symbios Logic employees were the most compelling of the evening. He asked that the letter indicate that Symbios is important to the community and that Fort Collins would like to retain the company. The vote on Councilmember Kneeland's motion to adopt Resolution 95-46 was as follows: Yeas: Councilmembers Azari, Janett, Kneeland, McCluskey, Smith and Wanner. Nays: None. THE MOTION CARRIED. The meeting adjourned at 9:45 p.m. ATTEST: City Clerk 1 Adjournment 524