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Home My WebLink AboutIR 7348 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7'348 g.1 *p/T,RfO #f$ORD? To the Mayor and Members of the City Council February fi, 1989 } XAg Subject; Residential Development in Downtown Fort Worth When a report on Fort Worth's downtown was completed a few years ago, the "New Directions Report" noted that Fort Worth's Central Business District will not be able to maximize its potential for continued economic growth without several key ingredients. one such need was a significant increase in downtown residential development . While many of the other key ingredients have been addressed though the creation of the Public Improvement District, downtown housing has not increased. In 1983, the Downtown Fort Worth, Inc. Board of Directors organized a Retail/Entertainment Task Force. That task force visited Indianapolis and, in addition, brought representatives from a variety of successful cities to Fort Worth. The goal was to better understand what contributed to the success of those cities . One element which was identified as contributing to the success of a healthy downtown was downtown housing or close-by downtown housing. It was found that a strong, downtown residential community compliments and supports a vital , active downtown. A goal of any city should be to have a healthy, vibrant downtown. Without residents, a central business district (CBD) functions much like a suburban business park and/or convention district, not a vibrant , multifaceted central city. Increased residents in the CBD can contribute to the creating of a more desirable environment . The existence of a critical mass of downtown resi- dents can contribute to the ambience of the downtown by creating the perception of increased personal and property security, by creating a market for increased shopping opportunities, and in reducing traffic congestion and parking problems if residents walk or shuttle to work. Additionally, it will contribute to a downtown that is active not only throughout the day, but throughout the evening as well . Given the uncertainty and risk involved in downtown residential development, a number of cities have decided to share in the risk by providing incentives to residential investor/developers. Many feel that the positive benefits Will more than offset the public cost of the incentives. For example, several cities have reduced or abated the property taxes on new downtown residential develop- ment. A policy of this type in Fort Worth would essentially be a vote for trying to make our central business district vibrant, alive, progressive--by the public sharing some of the risk. f ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ' INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7348 p.2 w010"-'o February 7, 1989 • a�10J?r To the Mayor and Members of the City Council a� xrh' Subject. Residential Development in Dowtown Fort Worth .„1 Many cities began their downtown housing program through urban renewal and focused housing programs for low and moderately-low income persons . Now cities are expanding their programs to encourage new middle-income housing developments in the downtown. Many cities offer tax abatement or low-interest public loans. Currently, Fort Worth has existing programs for housing, such as the low-interest , rental rehabilitation loan program and the tax- free bond monies. These programs require that a certain percentage of the occupants have low or moderately-low income. Fort Worth also offers a form of tax abatement for structures which are historically significant. For those structures, no matter if they are for commercial or residential uses, if the structure is historically significant, the increase in valuation resulting from renovation is abated for up to 10 years. But there is currently no program for middle-income housing which would encourage new construction or renovation of a structure which is not historically significant. And yet it is the disposable income from residents of middle-income developments Y that will support vital retail and entertainment activities in the central business district . A 1980 Zuchelli-Hunter study identified that downtown Fort Worth retail is supported by downtown employees, tourists and residents of the downtown or near downtown. That study noted that each employee spends an average of $637 per year on retail , while tourists average $25 a day. Residents, on the other hand, were found to spend $751 per person per year. A study entitled "Housing for Downtown Fort north” was done in 1985 by the University of Texas at Arlington's Institute of Urban Studies. That report concluded that, if residential development is to occur in Fort Worth's CBD, the City of Fort Worth and pri- vate businesses must provide incentives to reduce the financial risk. And, it mentioned tax abatement as a form of public financial assistance that could be offered. With a cutback in federal development assistance, plus limited state assistance, more and more cities are looking to local re- sources to finance economic development programs. With city budgets already squeezed, tax incentives, particularly tax abate- ment, have been found to be feasible alternatives since tax abatement does not affect the current tax base, only the future increase in property value. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS-- INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7348 P'8 *,0rthto To the Manor and Members of the City Council February ?, 1989 �`txNg. Subject: Residential Development in Downtown Fort Worth Among the questions to ask when considering tax abatement are the following: 1) In the long run, does the public gain more than it loses by granting the abatement? 2) Is the abatement the appropriate means of attracting the desired investment? 3) How will granting an abatement now affect future devel- opment projects and negotiations? If it can be demonstrated that the project would not have been undertaken, that no project of greater overall benefit to the community would have been developed at that location, or that no similar project would have been developed in the community, then any tax revenue loss is theoretical . Tax abatements lessen the developer's risk and increase the pros- pects of making a reasonable rate of return. With tax abatement, the developer may be willing to undertake a project that is currently unprofitable but with good prospects for future profitability. Labor and transportation costs, not local taxes, heavily influ- ence a firm's long distance relocation decisions . However, for real estate investment property, where the principal development objective is the generation of rental income, the availability of tax abatement can clearly be an incentive. If tax abatement is a desired incentive for development of middle income housing in the downtown, the following steps would need to be taken: 1) Guidelines and Criteria Adopted Guidelines and criteria must be formally adopted; once adopted they are effective for two years. During that time, a three-fourths vote of the City Council is need- ed to change them. 2) Reinvestment Zone Established After proper notice, a public hearing is held regarding a proposed zone. The City can designate a zone any- where in the City if it finds that the area is likely to contribute to the economic development of the city .. if it is declared a reinvestment zone. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS--•— INFORMAL REPORT TO CITY COUNCIL MEMBERS No 73$8 p•4 "01TrY February ?: 1989 foRr4 To the Mayor and Members of the City Council 'NxPt Subject; Residential Development in Dawntvwn Fort. Worth 3) Tax Abatement Agreement After proper notice, the City Council can authorize a contract with a property owner providing that, in exchange for certain improvements, the City will exempt all or part of the increase in value over, the property's value in the Year the abatement agreement is made. Tax abatement cannot be granted for more than 15 years . City staff will be available at the February 7 , 1989, Work Ses- sion to discuss and/or answer questions about downtown housing and possible incentives. Staff needs Council direction regarding the exploration of incentives for development of middle-income housing in the downtown. Dou as Harman City Manager DH.ALD: js ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS---