Agenda Item 2: Chapter 380 Program Update — original pdf

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Business Expansion Program Update Economic Development Department Economic Prosperity Commission May 15, 2024 PROGRAM DESCRIPTION AND UPDATE PROCESS Chapter 380 Revision: State Local Code LOCAL GOVERNMENT CODE TITLE 12. PLANNING AND DEVELOPMENT SUBTITLE A. MUNICIPAL PLANNING AND DEVELOPMENT CHAPTER 380. MISCELLANEOUS PROVISIONS RELATING TO MUNICIPAL PLANNING AND DEVELOPMENT Sec. 380.001. ECONOMIC DEVELOPMENT PROGRAMS. (a) The governing body of a municipality may establish and provide for the administration of one or more programs, including programs for making loans and grants of public money and providing personnel and services of the municipality, to promote state or local economic development and to stimulate business and commercial activity in the municipality. 1 C I T Y O F A U S T I N Current Program Development Background In 2018 EDD Staff utilized feedback from an extensive engagement process in development of the current Program Guidelines • Community conversations included 8 Sessions, held in each Council District • Stakeholder sessions with attendance ranging from 7 to 90, with 260 participants that provided approximately 2,500 comments Current Chapter 380 Policy and Program adopted by City Council • Community benefits incorporated by reference At that time, City Council authorized the City Manager to develop a Location Enhancement Program Business Expansion Program application, scoring matrix and scoring guidance developed by staff post City Council approval • Commitment to community benefits used to score project applications, but not a requirement for project eligibility • Application questions are not adequately tied to outcomes in scoring guidance • Eligibility and performance metrics lack transparency C I T Y O F A U S T I N Business Expansion Program Desired Program Impact Overarching goal is supporting economic growth through the creation of notable targeted job opportunities, in balance with strong commitments to community benefits Program Categories Local Expansions (Category 1) • 5 New Full-Time Jobs created over 5 Years • Operational for >12 months within City of Austin Targeted Hiring (Category 2) • Create one or more apprenticeships or internships • Create one or more full-time jobs hired and retained Austinites facing economic and socio-economic barriers to employment External Attractions (Category 3) • 75 New Full-Time Jobs created over 10 Years • Firm has no Austin Presence or project delivers new operation C I T Y O F A U S T I N Targeted Community Benefits Talent Development Diversity, Inclusion & Equity Business Type / Sector/ Industry Diversification Quality of Life Enhancements Employment Opportunity Mobility Solutions Neighborhood Connection Sustainable Business Practices C I T Y O F A U S T I N Program Award Eligibility •Award Eligibility  A firm may receive either a performance based “per job” payment or reimbursement of portion of increase of property tax liability associated with the relocation • Project applications are scored based on eligibility criteria and commitments to community benefits. Category 1 and 2 – up to five years Category 3 – up to ten years •Potential Award  Award Term • •  Award Amount • Up to a maximum of $1,800 per job over the term of an agreement • Reimbursement of up to 50% of incremental property taxes eligible for reimbursement C I T Y O F A U S T I N PROGRAM ACTIVITY AND ANALYSIS T N E M P O L E V E D F O E G A T S Y B Y R U Q N I I Review 5 Award, 4 Submission 12 Total Program Activity Level Application 59 Inquiries Only 311 Inquiries Only Application Submission Review Award C I T Y O F A U S T I N  E P Y T Y R U Q N I I C I T Y O F A U S T I N Total Program Activity Level E M O C T U O Y R U Q N I I G N I L I A V E R P C I T Y O F A U S T I N Program Update Process Refine Process and Update Program •Improve Project Scoring Guidance and Strengthen Application •Develop More Objective Metrics •Provide Greater Transparency in the Application •Update Existing Program Address small business Program eligibility barriers Explore opportunities to improve utilization and impact for Targeted Hiring Tighten corporate recruitment eligibility requirements Update Activity To Date Independent Analysis • Review state and local best practices and provide preliminary findings Identify Program gaps and provide strategy to revise guidelines and streamline the application process Subject Matter Expert Engagement Four Community Benefits Development Focus Groups Three Program Improvement Focus Groups • C I T Y O F A U S T I N SUMMARY OF PROPOSED UPDATES GENERAL ELIGIBILITY – Update Recommendations DEVELOP APPLICATION EVALUATION, PROCESSING AND APPROVAL TIMELINE Description: Program Guidelines do not currently have an established application process and scheduling. Summary of Focus Group Feedback Application processing and acceptance lack definition. Establish a process and review schedule that provides transparency. Staff Recommendation Develop an application processing procedure, to include: • Detailed stages of review and • consideration Provide a targeted schedule and anticipated timeline for consideration C I T Y O F A U S T I N GENERAL ELIGIBILITY – Update Recommendations CONSIDERATION OF ALTERNATIVE FORMS OF COMPENSATION FOR ALL CATEGORIES Description: Currently Program only counts base wage and salaries toward compliance with the Living Wage policy. Additional forms of compensation are not considered consistent or predictable, as a result tips, commissions, bonuses or shift differential aren’t counted toward complying with the Living Wage policy. Summary of Focus Group Feedback Additional compensation should be counted toward Staff Recommendation • • Incorporate additional compensation into compliance with Living Wage requirement Calculated for compliance as total annual compensation divided by total hours worked in a given year C I T Y O F A U S T I N GENERAL ELIGIBILITY – Award Amounts UPDATE AWARD Description: Currently up to either a total of $1,800 per job or 50% reimbursement of property taxes over a maximum term of 5 years (Category 1&2) or 10 years (Category 3). Summary of Focus Group Feedback • Program’s award eligibility is not competitive with other communities, especially when the property tax reimbursement is for only a portion of the overall assessment. Staff Recommendation • • • • Increase term to a maximum of 10 years for Category 1 Increase per job award up to a total for $3,000 per job over the term of the award, with an additional 10% for hiring economically disadvantaged individuals for all Categories Increase property tax reimbursement up to 75%, with a 10% bonus incentive for hiring economically disadvantaged individuals Include a provision for Category 2 of $500 per job per each full year of employment C I T Y O F A U S T I N GENERAL ELIGIBILITY – Application Fee ASSESS APPLICATION/PROCESSING FEE FOR LARGE AWARDS Description: Program does not currently assess a fee to offset expenses relate to processing applications. Summary of Focus Group Feedback Application fee sends a negative message to potential applicants, especially considering the Program doesn’t have a defined process timeline or outcome. Also, any fee would be detrimental to small businesses. Staff Recommendation Impose a reasonable application processing fee: • • Equal to $3,000 The fee assessed after staff develops an award eligibility that is accepted by the applicant and an item is required to be placed on a City Council agenda for consideration C I T Y O F A U S T I N CATEGORY 1 – Local Small Business Recommendations RECONFIGURE APPLICANT CATEGORIES Description: Currently the Guidelines address local small and large businesses in the same category, with vastly differing operational dynamics and business characteristics into the same eligibility standards. Summary of Focus Group Feedback Create a stand alone category for small businesses Staff Recommendation Move existing local large business to Category 3 leaving stand alone category for small businesses: • Develop small business specific • eligibility criteria Create performance standards tailored toward small business dynamics C I T Y O F A U S T I N CATEGORY 1 – Local Small Business Recommendations DEFINE SMALL BUSINESS Description: There is currently not a definition of small business Summary of Focus Group Feedback Staff Recommendation The Focus Group discussed small business as being a range between 0-500 with specific numbers at 10, 50,100, 250 and 500 dependent upon established guidelines at City, State and Federal levels. Define small businesses as: • Firms within the Austin city limits with 500 full time employees or less; or Firms within the Austin region that are relocating to a Targeted Area within Austin city limits with 500 full time employees or less • C I T Y O F A U S T I N CATEGORY 1 – Local Small Business Recommendations MINIMUM JOB CREATION THRESHOLD Description: Local Small Businesses must create a minimum of at least 5 new full time jobs to be eligible Summary of Focus Group Feedback Staff Recommendation Job creation requirement may be too high because small businesses slower growth rates. Local Small Businesses must expand full time employment the greater of 1 new job or at least 10% from the time of award execution over the term of the award C I T Y O F A U S T I N CATEGORY 1 – Local Small Business Recommendations COMPLIANCE DEFERMENT PERIOD Description: Program eligibility criteria was developed as a “one size fits all” approach for large and small business, without consideration of challenges small businesses face. Some eligibility requirements placed on small businesses are in excess of standard City of Austin policy and regulations. Summary of Focus Group Feedback Although a deferment period is reasonable, City should find a way to define expectations on addressing annual living wage increases. Staff Recommendation Provide for a compliance deferment period that allows a small business time to meet award compliance provided: • Subject to course availability, firm complete technical assistance training during deferment • Not eligible for award until training is complete and in full compliance with the all award terms C I T Y O F A U S T I N CATEGORY 2 – Targeted Hire Program Recommendations SHIFT ECONOMICALLY DISADVANTAGED TARGETED HIRE TO A CATEGORY 1 AND 3 BONUS Description: An independent third party qualifies Targeted Hires to protect applicant personal identifying information, which has been cumbersome and ineffective. The Program utilizes Workforce Solutions as the service provider, which has limited ability to identify economically disadvantaged hires. Summary of Focus Group Feedback Create a bonus program to give the applicant control of their Human Resource Function. Shift responsibility of identifying targeted hires to award recipient. Staff Recommendation Develop a bonus program for hiring economically disadvantaged hires: • Applicants will be eligible annually for filling at least 25% of new jobs with economically disadvantaged individuals. Shifts burden of proof of targeted hires eligibility to the firm. • C I T Y O F A U S T I N CATEGORY 2 – Targeted Hire Program Recommendations IMPROVE OUTREACH FOR PROFESSION AND TRADE INTERNSHIP TARGETED HIRE Description: Currently does not provide linkages to entities and programs engaged in workforce training and is ineffective at connecting employers to internship programs. Summary of Focus Group Feedback Need to access a greater network of programs/sources of talent than Workforce Solutions. Staff Recommendation Enhance Internship and apprenticeship utilization through the creation of a more robust network of service providers • Create linkages to Austin's workforce development network C I T Y O F A U S T I N CATEGORY 3 – Large Business Expansion/Relocation Recommendations REQUIRE MINIMUM CAPITAL INVESTMENT Description: Program does not explicitly require capital investment, but all projects must have at least a revenue-neutral fiscal impact to the City of Austin. Summary of Focus Group Feedback Addition of a capital investment requirement could limit project eligibility and impact. Staff Recommendation Recommend a reasonable capital expenditure requirement. Projects are required to be fiscally net neutral to the City, which is largely driven by impacts to property taxes. • Minimum capital investment of $2.0 million in real and/or personal property improvements C I T Y O F A U S T I N ADDITIONAL PROGRAM CONSIDERATIONS  Develop a small business program or expand the scope of category to provide awards focused on small business gap financing  Create small business loan program • Provide seed funding to an independent third party provider to administer a loan program addressing the needs of small business • City council appointed board of directors to include city goals  Enhance connectivity with the Development Services Department • Create a formal expedited permitting and fee waiver program C I T Y O F A U S T I N PLACE-BASED ENHANCEMENT PROGRAM (NEW) PROGRAM BACKGROUND DIRECTION FROM ORDINANCE NO. 20180830-058: Following the direction from the extensive 2018 community engagement around incentives, staff began developing programs around “location enhancement” with core priorities around affordable commercial space with major community targets: Commercial affordability for tenants of commercial space with … particular focus on small, local, heritage businesses, non-profits, cooperatives, and the creative sector Financial challenges faced by owners of commercial spaces by providing access to capital/financing to deliver community benefits, such as affordable and public spaces, creative spaces, new goods and services, and to preserve neighborhood identity​ Specific market needs, such as the delivery of goods, services and transportation solutions to underinvested areas that yield benefits to the community beyond local tax base contribution C I T Y O F A U S T I N PROGRAM BACKGROUND ADDITIONAL DIRECTION Live Music Venue Bonus and Incentive Program (Resolution No. 20220728-094): “Expanded facilitation of affordable commercial space... in new construction” for music venues Creative Space Bonus and Incentive Program (Resolution No. 20220901-089)​: “Expanded facilitation of affordable commercial space restrictive covenants in new construction,” incentivization of “lower cost/long term leases” including “potential property tax relief for owners,” and the use of Chapter 380 agreements ​ Palm District Plan: Revisions to the Chapter 380 policy to incorporate tools and mechanisms for small businesses and creative space preservation; Initiation of the Location Enhancement Program and an ordinance to Council for adoption​ ETOD Plan and Policy: Incentivize developers to provide affordable and favorable ground-floor lease terms for small businesses, non-profits, and community- supporting space C I T Y O F A U S T I N PROGRAM PROPOSAL PLACE-BASED ENHANCEMENT PROGRAM Category I - Affordable Space: This category will offer tax reimbursements to developers of mixed-use and commercial building projects to include affordable commercial leases for arts and music venues and establishments, small local businesses, and community development projects Category II – Community Impact: This will offer tax reimbursements that support the development of stand-alone high-impact community development projects including arts and music complexes, grocery stores in food deserts, childcare facilities, and industry hubs and incubators Category III – Cultural Preservation: This will offer tax reimbursements and potentially other programs to support retention of existing music venues, creative spaces, and legacy businesses, nonprofits, and co-ops C I T Y O F A U S T I N PLACE-BASED ENHANCEMENT TARGETS COMMUNITY BENEFIT TARGETS Music Venues and Creative Spaces • Music venues, performance venues, and theaters; ​ • Art workshops, studios, and galleries​; • Arts related retail or other uses as approved Community Development Projects​ • Specific, high impact projects to benefit underserved community or fill an industry • Grocery stores, childcare, industry hubs or incubators, etc.​ • Affordable housing if other non-residential community benefits are provided, in specific ecosystem “gap”​ projects Small, Local Businesses, Nonprofits, and Co-ops​ • Affordable space needs for these core organizations​ • Focus on businesses in economic and cultural districts, density bonus districts with affordable non-residential space elements, and target industry clusters​ C I T Y O F A U S T I N NEXT STEPS Next Steps Identify opportunities to revise the Program to reflect current market conditions and Austin’s evolving workforce and economy Continue to seek community input and Council direction Sharpen recommendations for Program improvements to increase economic impact to the community  Improve community benefit objectives  Tighten corporate recruitment  Address workforce support  Focus on small business programming  Formalize Commercial affordability Summer 2024: Develop draft of revised Program Guideline recommendations Summer 2024: Present recommendations to City Council for consideration of updating the existing Program and creation of a Location Enhancement Program C I T Y O F A U S T I N Thank you! Closing Comments? WWW.AUSTINTEXAS.GOV/EDD C I T Y O F A U S T I N