Loading...
HomeMy WebLinkAboutCC Minutes - 01/30/02 Work Session MINUTES Eugene City Council Work Session McNutt Room--Eugene City Hall January 30, 2002 Noon COUNCILORS PRESENT: Betty Taylor, David Kelly, Nancy Nathanson, Scott Meisner, Gary Rayor, Gary Pap~, Bonny Bettman. COUNCILORS ABSENT: Pat Farr. CITY COUNCIL WORK SESSION Mayor James D. Torrey called the meeting to order. A.Work Session: Hynix Enterprise Zone Tax Exemption Request Referring to an agenda item summary, copies of which were included in the meeting agenda packet, Planning and Development Department staff Denny Braud explained that the purpose of this work session was for City Council to consider a waiver of the employment increase requirement associated with Hynix's pending Enterprise Zone tax exemption pre-certification request, and to consider Hynix's request for a two-year extension of the tax exemption. Mr. Braud presented background information, which included that Hynix had submitted an Oregon Enterprise Zone Pre-certification application on June 11, 2001, seeking a tax exemption on a proposed investment of $156 million. He said the pre-certification application included a request for a waiver of the ten percent employment increase requirement, and a request for a two-year extension of the standard three-year exemption. Mr. Braud explained that the proposed investment includes $155 million in upgraded production equipment, and a $1 million building modification. With regard to Hynix's request for a waiver of the ten percent employment increase requirement associated with the Enterprise Zone tax exemption request, Mr. Braud stated that for investments of $25 million or greater, the Oregon Enterprise Zone statutes allow local zone sponsors to grant a tax exemption in-lieu-of the required ten percent increase in employment. The approval to grant a tax exemption under this waiver provision must be documented by a resolution of the governing bodies of the zone sponsor (City and County). Mr. Braud noted that the resolution shall specify the minimum number (or minimum percentage increase in the event of limited job creation) of employees that the firm must retain throughout the exemption period. He said the resolution may also include other conditions that the firm must meet. Mr. Braud noted that these other conditions might include such items as contributions to public infrastructure/services, community involvement, in-kind donations to charities, sponsorship of local education/training, support for local institutions, and other general policies. MINUTES--Eugene City Council January 30, 2002 Page 1 Work Session Mr. Braud explained that Hynix's proposed investment was concentrated in retooling and equipment upgrades that would allow the company to remain competitive in the volatile memory chip market. The proposed investment would not increase Hynix's production capacity. Mr. Braud said the investment was necessary for the company to produce the next generation of memory chip product. He said that because production volume at the facility was expected to be less than recent volumes, a reduced labor force was anticipated. The company's employment was currently approximately 645, a decrease from the 900- employee peak experienced early last year. The company would be committing to an annual average of 650 full-time employees as a condition of receiving the tax exemption on this new investment. Mr. Braud explained that, in absence of a waiver, Hynix would need to reach an employment level of 986 (1ten percent of its 12-month average prior to requesting pre-certification) in order to meet the standard employment increase provision. With regard to Hynix's request for a two-year extension of the property tax exemption, Mr. Braud explained that the State Enterprise Zone Program's standard three-year property tax exemption for qualified businesses may be extended an additional two years, subject to approval by the local sponsors of the enterprise zone. He said that to receive the extended exemption, a business must 1) provide all new employees an average annual compensation of at least 150 percent of the county's average annual wage; 2) abide by any additional conditions that the sponsor may reasonably request; and 3) enter into a written agreement with the zone sponsor confirming the conditions associated with the extended exemption. Mr. Braud noted that Hynix's average compensation (including benefits), as defined by the statutes, has been approximately $57,000, or about 200 percent of the current County average annual wage. With regard to the financial impact of Hynix's request, Mr. Braud explained that, based upon the proposed investment of $156 million, the three-year total tax exemption has been estimated at $4.8 million. He said the City's share of the proposed exemption represents a total of approximately $2.4 million of forgone tax revenue over the three-year period. He said preliminary estimates indicate that a fourth and fifth year of exemption would result in an additional tax exemption of approximately $1 million. Mr. Braud stated that the City's total share of the two-year extension exemption is estimated at $500,000. In terms of public benefit criteria, Mr. Braud explained that prior to the expiration of the West Eugene Enterprise Zone, the City and County adopted a local "public benefit criteria" policy for investments qualifying for tax exemptions after the expiration of the zone. He said the "public benefit criteria" policy is based primarily on the quality of "new jobs" resulting from a new investment. He said that because a waiver of the job creation benefit requirement has been requested, the public benefit criteria would not be applied; however, Hynix's existing jobs are considered to be very responsive to the public benefit criteria based upon the above average wage and benefit levels and its utilization of the local Employment Department. Mr. Braud presented a brief overview of applicable market conditions, miscellaneous background information, and deadlines associated with City and County action associated with Hynix's request. Mr. Braud noted that in the event that Hynix's exemption is conditioned on an employment waiver, the application must include a copy of the resolution granting the waiver. He said this would make it necessary that the waiver be approved by the City and County prior to April 1, 2002. Mr. Braud stated that to receive the two-year extension, a resolution must be approved prior to the zone sponsor's approval of the pre-certification and, therefore, the two-year extension would also need to be approved prior to April 1, 2002. Mr. Braud noted that a follow-up City MINUTES--Eugene City Council January 30, 2002 Page 2 Work Session Council session was scheduled for February 20, 2002, and the Lane County Board of Commissioners was scheduled to review Hynix's request on February 19, 2002. Following a brief review of City Council options regarding Hynix's respective requests, Mr. Braud issued staff's recommendation, as follows: Staff recommends that the City continue discussions with Hynix based on direction from the council on terms and conditions that would be acceptable in granting the waiver and two-year extension. In February, staff would bring back specific options for granting the waiver and two-year extension. Referring to a January 30, 2002, memorandum entitled Hynix Tax Exemption Request, copies of which were included in the meeting agenda packet, Mr. Braud stated that a recent meeting between Mr. Kelly, Ms. Nathanson, Mayor Torrey, and staff resulted in the following proposed approaches for responding to Hynix's tax exemption request: 1) approve the requested waiver and two-year extension with a commitment from the company to retain a specific number of employees during the exemption period; 2) approve the requested waiver and two-year extension with a commitment from the company to retain a specific number of employees during the exemption period, and a commitment from the company to dedicate a portion of their tax savings to specific community needs; 3) approve the requested waiver and two-year extension with a commitment from the company to retain a specific number of employees during the exemption period, and a requirement that the company pay a portion of their tax savings to the City, County, and schools. The City could use proceeds for general government or specific programs; 4) approve waiver and two-year extension with a condition that the tax exemption shall be proportional to the company's employment level; and 5) recapture a portion (or all) of the tax exemption and create a fund that supports economic development activities and is available to all Eugene businesses (including Hynix) for needs such as job creation/retention, facility upgrades, building improvements, or other uses. A portion of the recaptured funds could also be used for City infrastructure improvements. (This option was discussed only on the conceptual level, with limited discussion of the associated mechanics and legalities.) City councilors issued a number of questions/comments regarding Hynix's respective requests, including the following: In response to a question from Mr. PapS, City Manager Jim Johnson stated that Hynix's present requests were not reflected in the current budget. Referring to the five options proposed above, Mr. Pap8 said he favored options 3 and 5. Councilor Nathanson read into the record a written statement, as follows: Our objective should be to balance the need for a healthy economy - to pay attention and do something and not simply '~vorry" about it - with a responsibility to spend money wisely. If we aflocate funds toward a healthy economy we need to know that whatever action we take will do that, that public money is wisely spent. Are these jobs at risk, and if they are, would our actions provide certainty that the jobs, as this level of salary and benefits, will remain in the community for at least several years? And how does our action or inaction affect confidence in the local economy, and in the City? MINUTES--Eugene City Council January 30, 2002 Page 3 Work Session The Hynix request results in foregoing about $2.4 million over three years, revenue that would go to the City's General Fund. I'rn interested in looking at two alternatives to that proposal Each of these should meet the objective of supporting jobs and a healthy economy. Each would be a temporary program, for the same period of time - three years - and with a value equal to the proposal from Hynix. Option 1: Do not grant the waiver. Instead, use the revenue collected for a local economic development program. Half to fund improvements that benefit job retention and creation, such as brown field cleanup and redevelopment, local business grants and loans, and other activities associated with an economic development program. The other half for funding permanent City infrastructure improvements, such as utility upgrades, street and sidewalk repair and lighting. Option 2: Grant a partial waiver using funds to support Hynix jobs and the community. Haft to support Hynix's plant upgrade, as theyVe requested. Use the balance to fund either (a) improvements and program as described in Option 1, and/or (b) City expenses supporting schools and kids, such as measures to increase school safety, and after-school and evening programs for youth and community events. Ms. Taylor stated that she was opposed to the requested waiver; however, she supported Ms. Nathanson's proposals. Ms. Taylor stated that the City of Eugene was not responsible for supporting businesses that cannot otherwise succeed. In addition, Ms. Taylor stated that Hynix was responsible for a significant portion of local unemployment. Mr. Rayor expressed support for granting the requested three-year waiver as one means by which the City can reduce the risk to local jobs. Mr. Meisner stated that the City should not and, in fact, cannot guarantee the profitability of any business. Noting that he was concerned about the possible loss of employment that could result if the City does not grant the requested waiver, Mr. Meisner expressed support for Ms. Nathanson's Option 1. Noting that she would oppose Hynix's requested waiver, Ms. Bettman suggested scheduling a work session to consider a broad range of options. She said Hynix is part of a volatile industry and a waiver granted by the City of Eugene will not "make or break" Hynix or the industry as a whole. Ms. Bettman stated that if Hynix does succeed, it will be able to pay its fair share of infrastructure in the community. Noting the complexity of the issue at hand, Mr. Kelly stated that he would support granting some form of a waiver if Hynix was proposing to add new jobs. Mr. Kelly stated that because Hynix was not adding jobs, the enterprise zone philosophical basis did not clearly apply in this case. He said he supported the concept of Ms. Nathanson's Option 1 because it defines terms and criteria for assisting local businesses. Mr. Meisner suggested that the City Council discuss Option 1 during its April work session regarding economic development. Mayor Torrey stated that he would support granting a waiver that does not exceed two-thirds of Hynix's tax break. He suggested collecting and holding Hynix's paid taxes and, if Hynix maintains an acceptable employment level, granting the requested waiver at that time. Mayor Torrey noted that Hynix has paid more than $5 million in taxes to the City of Eugene. He said local schools are in need of that tax money. MINUTES--Eugene City Council January 30, 2002 Page 4 Work Session Mr. Kelly, seconded by Mr. Pap~, moved to direct the City Manager to continue discussions with Hynix based on the direction provided by the City Council and mayor, as well as exploring alternative 1 as proposed by Ms. Nathanson. The motion passed, 5:2; Ms. Nathanson and Ms. Bettman voting no. B.Work Session: Eugene/Springfield Metropolitan Partnership Referring to an agenda item summary, copies of which were included in the meeting agenda packet, Planning & Development staff member Cathy Briner explained that the purpose of this agenda item was to review the proposed new focus of the Eugene/Springfield Metropolitan Partnership (ESMP) and to consider a request for additional financial support. Ms. Briner stated that the Metro Partnership has provided marketing and business recruitment services for the City of Eugene, City of Springfield, and Lane County since its inception in 1985. She said that over the years, the scope of services has expanded to include business assistance, business retention and other economic development services. Ms. Briner explained that when the partnership's executive director, Lee Beyer, resigned in September, discussions were initiated on the future focus and funding of the organization. She said it was currently being recommended that the Metro Partnership divest itself of some of its services so that its staff can more effectively and aggressively focus on supporting the expansion of local businesses, as well as on community marketing and targeted business recruitment. In addition, Ms. Briner stated that it was also being recommended that the partnership secure a stable funding base to attract a highly qualified executive director to lead the organization. She said that as a result of that recommendation, the public partners were being asked to increase their financial support and to make three-year commitments, as detailed in Attachment A of the meeting agenda packet. Ms. Briner explained that the City of Eugene's financial support to the Metro Partnership in FY01- 02 is $30,000, which includes Sten,000 for the Lane Venture Forum. She said the current proposal calls for the City to increase its support in FY02-03 to $50,000 and to continue the Sten,000 for the Lane Venture Forum. Ms. Briner stated that the City of Springfield was being asked to increase its annual support from $26,000 to $50,000. She said the Springfield Mayor and Council President have indicated that it is likely that Springfield would respond favorably to this request. Ms. Briner noted that the Lane County Board of Commissioners was also asked to increase its annual support from $64,000 to $70,000 during the next fiscal year. She said initial indications were that this request would be granted. Mr. Kelly stated that he had been a member of the Metro Partnership Board for the past year. He said that if the Metro Partnership ceased to exist, City staff would have to assume the work of the partnership at a higher cost. Mr. Kelly expressed support for the new focus and targeted recruitment proposed by the Metro Partnership. He noted that according to a survey, 78 percent of Eugene citizens support the City taking an active role in economic development. Ms. Bettman said she would not support increasing Eugene's contribution to $50,000 because industry recruitment is a regional issue. She said State lottery funds, rather than City General Fund dollars, should be used for recruitment. Ms. Bettman stated that the City of Eugene's best tool for recruiting business is the creation of a safe and liveable community. MINUTES--Eugene City Council January 30, 2002 Page 5 Work Session Noting that he was also a member of the Metro Partnership Board, Mr. Pap~ said he would support the proposed increase. He said there is a need for the City of Eugene's participation in economic development. Mr. Meisner stated that the City of Eugene, as a matter of principle, should be involved in the economic development process. He inquired as to whether, in the event the council adopted a form of Ms. Nathanson's Option 1 from a previous discussion, a portion of those funds would be available to support economic development. City Manager Jim Johnson said a portion of those funds would be available. Mr. Rayor expressed support for the Metro Partnership targeting new businesses; however, he would not support the proposed funding increase. He said he wanted "quality growth that pays its way with quality jobs." Ms. Taylor said she concurred with Mr. Rayor's comments. She said she would support funding of the Lane Venture Forum; however, she would not support the proposed increase in funding for the Metro Partnership. She stated that if Eugene creates a livable community, new business will elect to locate here. Ms. Taylor suggested dividing the motion into two pads to separate the Lane Venture Forum and Metro Partnership funding requests. Mayor Torrey stressed the fact that it would cost the City of Eugene more money to withhold the requested funding than to approve it, due to the costs that would result from the demise of the Metro Partnership. Ms. Bettman stated that nobody had "done the math" to demonstrate that targeted recruitment was a wise investment. In addition, she said that it would create an additional level of bureaucracy. Ms. Bettman said the issue needed to be studied more in depth. Noting that targeting businesses would assist the City in creating a healthy economy, Ms. Nathanson said she would support the proposal. She said it was important to consider how the City Council's action would effect citizens' and business' confidence in the local economy. Mr. Kelly, seconded by Mr. Pap~, moved to direct the City Manager to include $50,000 in the FY02-03 draft budget to support the Eugene/Springfield Metro Partnership and $10,000 to support the Lane Venture Forum, assuming there are substantial increases in contributions to the partnership from the City of Springfield and from Lane County, with the understanding that retention of these funds in the adopted budget is subject to the normal budget process. Ms. Taylor moved to delete from the motion the proposed funding for the Metro Partnership. The motion died for lack of a second. Mr. Kelly said he did not object to dividing the motion into two pads. Ms. Taylor moved, seconded by Mr. Kelly, to amend the original motion by dividing the motion into two pads, thereby considering funding of the Metro Partnership and Lane Venture Forum separately. The motion to amend the original motion passed unanimously. MINUTES--Eugene City Council January 30, 2002 Page 6 Work Session Mr. Kelly, seconded by Mr. Pap~, moved to direct the City Manager to include $50,000 in the FY02-03 draft budget to support the Eugene/Springfield Metro Partnership, assuming there are substantial increases in contributions to the partnership from the City of Springfield and from Lane County, and with the understanding that retention of these funds in the adopted budget is subject to the normal budget process. The motion passed, 4:3; with Ms. Taylor, Ms. Bettman and Mr. Rayor voting no. Mr. Kelly, seconded by Mr. Pap~, moved to direct the City Manager to include in the FY02-03 draft budget $10,000 to support the Lane Venture Forum, with the understanding that retention of these funds in the adopted budget is subject to the normal budget process. The motion passed unanimously. C. Work Session: May Bond Measure for Fire and Police Projects Referring to an agenda item summary, copies of which were included in the meeting agenda packet, Assistant City Manager Jim Carlson explained that the purpose of the work session was to obtain council direction regarding two topics: 1) proceeding with four projects, which are relocation of Fire Station 1, fire redeployment Phase 3 (new Santa Clara station and purchase of a fire station site in west Eugene), construction of specialized fire training props, and the relocation of police employees from the basement of City Hall to a site adjacent to the Public Works yards; and 2) placement of a general obligation bond measure on the May ballot as the primary source of funding for the projects. Mr. Carlson recalled that on September 19, 2001, the council directed staff to plan for the relocation of Fire Station 1 and the relocation of EPD Property Control and Forensics Evidence units from City Hall. He said that during discussion on the motion, staff had indicated that information on the proposed site for a fire station and the order and timing of construction of new facilities to house these services would be brought back to the council in early 2002. Mr. Carlson said staff also indicated that a future recommendation to the council would likely include a bond measure to fund one or both facilities. Following an overview of background, policy issues, financial and resource considerations and timing, Mr. Carlson stated that the council had a number of options as to which projects should be implemented at this time, and which should be financed through general obligation funding. Mr. Carlson stated that the staff recommendation is that the fire projects be funded through a general obligation bond issue, and that the police facility at Roosevelt be funded from the Facility Reserves. He said this would mean that the Facility Reserves would be close to zero by the end of FY03. Mr. Carlson stated that assuming Fire Station 1 remains a top priority, the council could direct that one or both of the other fire projects be delayed or funded through other resources. He said the council could direct staff to include construction of the police facility in a proposed general obligation bond measure. Mr. Carlson said the council could also direct staff to develop a financing plan for the Fire Department projects that does not include any voter-approved general obligation bonds. He said MINUTES--Eugene City Council January 30, 2002 Page 7 Work Session staff would then develop a financing plan that would rely on making approximately $1 million of additional cuts in existing General Fund services and dedicating $442,000 transfer to the Facility Reserves for the next 20 years and present the proposal to the City Council during FY03. He said selection of this option would delay the projects while staff prepared the necessary budget options for review by the council. Mr. Carlson said it was staff's recommendation that the Fire Department projects be funded with a combination of $13,030,000 of general obligation bonds and $440,000 from the Facility Reserves and that the general obligation bond measure be placed on the May ballot. He said staff further recommends that construction of the Police Department facility at Roosevelt be funded with $4,240,000 of the Facility Reserves. Referring to Attachment E of the meeting agenda packet, Acting Police Chief Thad Buchanan presented a brief overview of the proposed Roosevelt police facility, noting that it was intended to house the Property Control Unit and the Forensic Evidence Unit currently located in the basement of City Hall. He said the basement of City Hall was both inefficient and unsafe, largely due to seismic issues, cramped space, marginal ventilation, and the lack of natural light. Referring to Attachments D and F of the meeting agenda packet, Eugene Fire Chief Tom Tallon explained that there were currently four issues involving Phase 3 of the Fire Redeployment Plan: 1) construction of a downtown fire station; 2) development of specialized fire training props; 3) procurement of land for future fire station development; and 4) construction of a Santa Clara area fire station. Ms. Taylor expressed support for all of the proposals. She inquired as to the amount of funds in the Facility Reserves. Mr. Carlson responded that there would be $3.5 million in Facility Reserves at the end of FY02. He said FY03/04 Facility Reserves would be necessary to fund the Roosevelt police facility. With regard to the new Santa Clara fire station and new police facility, Mr. Rayor said he believed the need for the projects would be clearly understood by the public. He said the additional $16 per year in taxes for the average home would likely be acceptable to most tax payers. Mr. Meisner expressed concern regarding the proposed per square foot cost of the proposed police facility when compared to the new library. He said that although he supported placing the proposed projects on the May ballot, he questioned whether all of the proposals should be placed in a single bond measure. Ms. Bettman stated that the downtown fire station should be located within walking distance of City Hall. In response to a question from Mr. Rayor regarding whether land had been acquired for the new Roosevelt police facility, Mr. Carlson stated that the City had purchased two parcels and was MINUTES--Eugene City Council January 30, 2002 Page 8 Work Session negotiating the purchase of three additional parcels. He said the property was being acquired with non-General Fund dollars. Ms. Nathanson stated that police/fire/emergency medical services staff were facing a complex situation in that they have outgrown current facilities due to an increasing population and increasing responsibilities. She expressed concern that the City was considering adding a Santa Clara fire station that would benefit non City of Eugene tax payers. City Manager Jim Johnson clarified that the unincorporated area was served by the Santa Clara Fire Department. He said the Eugene Fire Department would serve only incorporated areas of Santa Clara. Mr. Kelly stated that he would not support the proposed funding of fire training props due to the dollar amount requested. He said he did not want to make a decision regarding the placement of these issues on the May ballot until after the February 11 work session regarding financial issues. With regard to police funding requests, Mr. Kelly said he supported utilizing Facility Reserves to relocate the Property Control Unit and Forensic Evidence Unit currently located in the basement of City Hall. Mr. Kelly expressed concern regarding the council's 8:0 vote in April concerning master plan efforts related to facilities. He stated that he did not want to vote on the master plan issues until the master plan is complete. Mayor Torrey expressed support for using Facility Reserve funds to immediately relocate the police units currently located in the basement of City Hall. With regard to the proposed new police facility, Mayor Torrey said the estimated cost seemed unreasonably high. He suggested obtaining assistance from the private sector to lower the projected cost. Mayor Torrey expressed support for the proposed downtown fire station; however, he said he was not inclined to place the new downtown fire station and the new Santa Clara fire station on a single ballot measure. Ms. Taylor stated that she did not support placing multiple items on a single ballot measure. She said relocating the police units out of the City Hall basement and constructing a new downtown fire station were the two urgent issues. Mr. Kelly, seconded by Ms. Taylor, moved to extend the meeting time by ten minutes. The motion failed, 4:3; with Ms. Taylor, Mr. Rayor and Mr. Kelly voting yes. Mr. Kelly moved, seconded by Mr. Pap~, to direct the City Manager to prepare a general obligation bond measure for proposed Fire Department projects to be placed on the May ballot and bring the proposed measure to the council by March 1. The structure of the measure will allow council to remove one or more components and separate the items into separate ballot measures. The motion passed unanimously. Ms. Bettman stated that Intergovernmental Relations staff should lobby for system development charges to support public safety, libraries, and schools. MINUTES--Eugene City Council January 30, 2002 Page 9 Work Session The meeting adjourned at 1:30 p.m. Respectfully submitted, James R. Johnson City Manager (Recorded by Kim Kunkel) MINUTES--Eugene City Council January 30, 2002 Page 10 Work Session