HomeMy WebLinkAboutItem C - Enterprise ZonesEUGENE CITY COUNCIL
AGENDA ITEM SUMMARY
Work Session: Economic Development Committee Recommendations Regarding an
Enterprise Zone
Meeting Date: September 29, 2004 Agenda Item Number: C
Department: Planning and Development Staff Contact: Tom Coyle
www. cl. eugene, or. us Contact Telephone Number: 682-6077
ISSUE STATEMENT
A work session regarding the Economic Development Committee recommendations is scheduled on
September 29, 2004, to review issues related to the recommendation specific to Enterprise Zone tax
exemptions. The council is asked to direct staff to proceed with application to the State of Oregon to
establish an Enterprise Zone.
BACKGROUND
On August 9, 2004, the four primary recommendations of the Mayor's Committee on Economic
Development were presented to the City Council by Kathy Smith, chair of the committee. The report
was accepted by the council by a vote of 7-0. Motions related to specific recommendations were
postponed with a request that additional work sessions be scheduled in the fall to further examine the
specific issues.
The Economic Development Committee's Enterprise Zone recommendation received an 11-0 vote in
support of the following recommendations:
· Establish an enterprise zone in Eugene
· Consider a boundary similar to the previous West Eugene Enterprise Zone (Attachment A)
· Provide the maximum tax exemption benefit (100%) for redevelopment, infill, and brownfield
investments in order to meet the City' s sustainability goals
· Limit the tax exemption (consistent with state statutes and rules) to two-thirds for Greenfield
investments
· Create job quality standards for greenfield investments (consistent with state statutes and rules)
that would provide an opportunity for these investments to receive up to the maximum
(100%) tax exemption benefit when job quality standards are met.
A staff analysis of the committee's recommendation is included in Attachment B.
The Oregon Enterprise Zone program is a State program established by the legislature in 1985 for the
primary purposes of job creation, encouraging new investment, diversification, and competitiveness.
The program offers a three-year property tax exemption for new buildings, renovation and expansion of
buildings, and equipment investments made by qualified businesses located within a designated area
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defined by the zone sponsor. The exemption is designed to encourage new investment via a short-term
exemption, with the long-term goal of increasing tax revenue for taxing districts following the
exemption period. A qualified business is basically a (non-retail) manufacturing, processing, call-center,
headquarters, distribution, or warehousing business that will increase its base employment by at least
10%. Businesses can request two additional years of tax exemption if they agree to specific wage
requirements and other conditions that the zone sponsor may impose.
There are 49 active enterprise zones in Oregon, four of which are in Lane County: Springfield, Cottage
Grove, Florence, and Oakridge/Westfir. Zones are established for a ten-year period through a
competitive state application process. There are a maximum of 49 zones available in the state. The next
state application opportunity for establishment of a new zone will occur in Spring 2005.
In urban enterprise zones, the sponsor may require businesses to satisfy conditions in addition to the
basic state eligibility criteria (applicable to the three-year exemption). However, these conditions must
be "reasonably related to the public purpose of providing opportunities for groups of persons to obtain
employment." The conditions must be imposed pursuant to an adopted local policy, and must be in
addition to, and not in lieu of, state program criteria. The state has specific rules regarding the
reasonableness of conditions required by the zone sponsor.
The expired West Eugene Enterprise Zone was in place from 1987 to 1997, and was jointly sponsored
by the City of Eugene and Lane County. The zone boundary included approximately 6.5 square miles
in West Eugene. During its ten-year life, 57 companies participated in the program, and 87% of the
companies that used the program were existing local businesses. Not including the large investments
made by Hynix and HMT Technology, the average investment in the West Eugene zone was
approximately $800,000. The average three-year tax exemption benefit for those investments was
approximately $32,000.
The largest investments that occurred within the zone were made by Hynix ($1.66 billion investment,
$48 million tax exemption) and HMT Technology ($90 million investment, pending disqualification of
tax exemption). All other investments made within the zone totaled $62.5 million. Although the West
Eugene Enterprise Zone expired on June 30, 1997, state statutes allow companies that were participating
in the program at the time of the zone's expiration ("grandfathered" companies) to continue to use the
program's three-year tax exemption benefit on additional investments made after the expiration of the
zone so long as the company has an active tax exemption at the time that a new investment is qualified.
There are only two remaining grandfathered companies, Hynix and Lanz Cabinets. Their grandfathered
status expires in 2007.
RELATED CITY POLICIES
The enterprise zone tax exemption addresses the following related City policies:
· Growth Management. The enterprise zone advances the City's Growth Management goals by
encouraging more intensive industrial development in a defined area that has been zoned
accordingly, and where existing public infrastructure investments have already occurred.
· Sustainable Community Development. The council's Sustainable Community Development goal
addresses high quality of life and a healthy economy. The creation of an enterprise zone will
meet this goal by creating a healthier business climate, providing an incentive for redevelopment,
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infill development, and brownfield development, and encouraging quality jobs for projects that
utilize limited vacant land resources.
· Fair, Stable and Adequate Financial Resources. The long-term property tax revenues that result
from new investments that are encouraged by the short-term tax exemption address the council's
goal for financial resources adequate to maintain and deliver municipal services.
COUNCIL OPTIONS
1. Direct staff to proceed with an application to establish an enterprise zone in Eugene based on the
recommendation of the Economic Development Committee, with the application package returning
to the council for approval prior to the Spring 2005 state application deadline.
2. Provide direction to not prepare an enterprise zone application at this time.
CITY MANAGER'S RECOMMENDATION
The City Manager approves the staff-developed recommendation that an application to establish an
enterprise zone, consistent with the committee's recommendation, and consistent with state guidelines
and timeframes, be prepared for City Council approval and submittal to the State of Oregon in the
Spring of 2005.
SUGGESTED MOTION
Move to direct the City Manager to proceed with application to establish an enterprise zone in Eugene,
jointly sponsored with and supported by Lane County, based on the recommendation of the Mayor's
Committee on Economic Development, and consistent with State of Oregon guidelines. The application
package will return to the council for approval in advance of the Spring 2005 State of Oregon
application deadline.
ATTACHMENTS
A. Map of Proposed Boundary
B. Staff Analysis of Committee Recommendation
FOR MORE INFORMATION
Staff Contact: Tom Coyle
Telephone: 682-6077
Staff E-Mail: tom.g.coyle~ci.eugene.or.us
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ATTACHMENT A
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Committ~ Recommendation .:~',~ ~:~ Ra~ road
ATTACHMENT B
Analysis of Committee Recommendation
ZONE BOUNDARY (See Map- Attachment B)
The boundary recommendation includes the boundary of the expired West Eugene Enterprise Zone plus
the other adjacent industrial-zoned properties that were not included in the former zone. Nearly all of
Eugene's industrial-zoned property is concentrated within the proposed boundary.
The objective is to provide an incentive for industrial development in a targeted area that has been
planned for via zoning and existing infrastructure investments. Overlaying the short-term tax incentive
on this area would help assure that the City receive a long-term return on these infrastructure
investments.
What objectives are met with this boundary recommendation?
a. Boundary allows nearly all existing Eugene industrial companies, large and small, to
have access to the tax exemption incentive for new investments.
b. Provides incentives for new development, redevelopment, infill, and brownfield
development in a compact area that has been planned for industrial development.
c. Allows Eugene to remain competitive for new and existing business investments, and
helps assure that existing companies will remain in Eugene.
d. New development of vacant parcels will add value to adjacent, targeted
redevelopment properties and enhance their redevelopment potential over time.
e. Improves Eugene's image as a place to conduct business.
f. Maximizes the opportunity to attract industrial developments that, in the long-term,
grow the property tax base.
Should the proposed boundary be expanded to include other properties?
The only other major industrial-zoned property not included in the proposed boundary is the Chad Drive
campus industrial area. The Committee discussed the inclusion of this area, but there was limited
support for this option given the fact that most of the new development would occur on greenfield sites,
and given the non-industrial character of development that is occurring in this specialty zone area.
Should greenfield development sites be eliminated from the proposed boundary?
There are a few primary concerns associated with the elimination of greenfield sites from the boundary:
a. The concept of"leveling the playing field" between redevelopment and greenfield
development can only be realized if there are no other investment location choices
besides Eugene. For example, a redevelopment/brownfield tax exemption would be
effective if two Eugene sites (greenfield vs. brownfield) were competing for an
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investment. However, there are ample greenfield development sites in neighboring
communities such as Springfield that also offer the tax exemption benefit.
b. The City of Eugene has heavily invested in infrastructure improvements that provide
services to ready-to-develop industrial areas such as Greenhill and Willow Creek.
Eliminating these properties from the boundary may preclude timely development of
these areas.
c. Greenfield development projects have the potential to generate significant new tax
revenue in the long-term, and significant new jobs.
d. Eliminating areas that already have major investments that have grown the City's tax
base may discourage future expansion of these investments, and ultimately shorten
the life of these investments in Eugene.
ADDITIONAL LOCAL CONDITIONS
The Committee recommended that the state-allowed additional local conditions be utilized to help meet
the City's sustainability and job quality goals. Their recommendation would limit the tax exemption to
two-thirds (67%) for greenfield investments that are eligible for the tax exemption. The state rules
preclude zone sponsors from reducing the tax exemption benefit by more than one-third. The
Committee also recommended that greenfield development projects be given the opportunity to increase
their tax exemption benefit (up to 100%) in the event that the company meets specific job quality
standards focused on the following:
a. Attractive wages
b. Employee benefits
c. Job training and advancement opportunities
d. Job retention
e. Utilization of job programs that assist disadvantaged workers
How should greenfield development, redevelopment, infill developmet, and brownfield
development be defined?
Redevelopment: reusing, renewing and restoring existing structures, including structural improvements
and production improvements; removal of non-economic or outdated improvements; consolidation and
clearing of property.
Infill Development: creation of new and higher density uses for land within existing developments,
including expansion of existing facilities on adjacent property, and development of underutilized lots
within an existing development area.
Brownfield Development: abandoned, idle, or under-utilized industrial and commercial properties
where expansion or redevelopment is complicated by real or perceived environmental contamination.
Greenfield Development: new development occurring on the periphery of an existing built-up area, on a
parcel of land not previously developed
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Are there limitations provided under the state statutes and rules regarding the establishment of
additional local conditions?
Yes. The Oregon Enterprise Zone statutes (ORS 285C. 150) includes language regarding additional
conditions adopted by the zone sponsor. In summary, the conditions must be "reasonably related to the
public purpose of providing employment opportunities." Examples include wages, benefits, job training
and advancement opportunities. Additionally, the Oregon Administrative Rules (OAR 123-065-2500
through 123-065-2599) have established parameters that guide situations under which a zone sponsor
imposes additional conditions on businesses that receive enterprise zone tax exemptions. In summary,
the rules are intended to align additional local conditions with the job creation purpose of the state
program. The rules clearly discourage major deviations from this purpose, and preclude changes to the
basic state eligibility criteria that companies must meet. However, the rules do appear to allow some
recapturing of the tax exemption benefit (up to one-third in the form of a payment to the sponsor) if
there are reasonable standards for such recapture, and if the recaptured dollars are targeted towards the
employment opportunities public purpose. The Committee's recommendation was made within the
context of these limitations.
Because the enterprise zone program is limited in its capacity to impact all of the City's
sustainability goals, what are some of the other tools and incentives that could be considered to
meet these goals?
The Committee looked at options for including local sustainability measures and conditions in the local
enterprise zone program. They concluded that the incorporation of such conditions within the enterprise
zone program is limited given the state statutes and rules. It is recommended that the City look for other
more compatible tools to influence sustainable practices within the community. The following are
examples of other actions the City could consider in order to improve the general sustainability of the
economy over time:
a. Designate staff facilitator(s) to assist sustainable enterprises via information, referrals
and guidance through an array of development review and permitting processes.
b. Create an expedited permit processing loop for projects that meet recognized green
building standards.
c. Target planned capital improvements in nodal development areas, and in areas where
redevelopment opportunities exist.
d. Continue to support alternative modes of transportation such as BRT.
e. Consider new urban renewal options.
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