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HomeMy WebLinkAboutItem 09 Electronic-Commerce Zone Preparedness AGENDA ITEM SUMMARY Meeting Date: 5/27/2014 Meeting Type: Regular Meeting Staff Contact/Dept.: John Tamulonis/CMO Staff Phone No: 541-726-3656 Estimated Time: 10 Minutes S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Community and Economic Development and Revitalization ITEM TITLE: ELECTRONIC-COMMERCE ZONE PREPAREDNESS ACTION REQUESTED: Approve/Not approve: A RESOLUTION OF SPRINGFIELD REQUESTING THAT THE SPRINGFIELD COMMUNITY ENTERPRISE ZONE BE DESIGNATED FOR ELECTRONIC COMMERCE AND AUTHORIZING THE SPRINGFIELD CITY MANAGER TO SUBMIT THIS RESOLUTION TO THE STATE OF OREGON FOR APPROVAL UPON A FIRM’S INTEREST IN LOCATING SUITABLE FACILITIES IN SPRINGFIELD ISSUE STATEMENT: When Springfield extended the Enterprise Zone in 2011 Springfield was considering other permutations to sponsorship and development areas to include in the application sent to the State of Oregon for consideration. Not requested, at that low point of the recession, was adding an electronic zone for those firms primarily using the internet for commercial activities that might consider locating in Springfield. With the economy improving Springfield should consider passing a resolution indicating Springfield’s interest in having an E-Zone added to the local incentive package available to firms and allowing the City Manager to present the Council’s request for designation to the State of Oregon upon a suitable firm’s expressing interest in locating here. Oregon has five e-commerce zones to designate and Springfield could be a prime location for a variety of call centers given the range of such facilities now in our community. ATTACHMENTS: 1: Resolution & Exhibit A 2: Business Oregon: Electronic Commerce Zones Brochure 3: ORS Division 662 Electronic Commerce Enterprise Zone 4: E-Commerce Application DISCUSSION/ FINANCIAL IMPACT: The ‘e-commerce’ zone has only a small, if any, local effect (related to the minimum value of exempt property for Enterprise-Zone eligible firms) and provides for eligible firms making capital investments and doing transactions on the internet or internet-based computer a credit equal to 25% of the capital investment made in a year against the business’s annual state income or corporate excise tax liability (maximum $2 million credit in a year and unused credits may be carried forward over the next five years). CITY OF SPRINGFIELD RESOLUTION NO. _______ A RESOLUTION OF SPRINGFIELD REQUESTING THAT THE SPRINGFIELD COMMUNITY ENTERPRISE ZONE BE DESIGNATED FOR ELECTRONIC COMMERCE AND AUTHORIZING THE SPRINGFIELD CITY MANAGER TO SUBMIT THIS RESOLUTION TO THE STATE OF OREGON FOR APPROVAL UPON A FIRM’S INTEREST IN LOCATING SUITABLE FACILITIES IN SPRINGFIELD WHEREAS, the City of Springfield sponsors the Springfield Community Enterprise Zone more particularly described and set forth in Exhibit A; and WHEREAS, the Enterprise Zone is one of the most successful economic development tools for the City of Springfield, contributing to the establishment and expansion of diverse businesses and the creation of family wage jobs; and WHEREAS, the City of Springfield with its supply of available land for development and complementary infrastructure has established itself as a community that can support electronic commerce business; and WHEREAS, the City of Springfield would like to encourage electronic commerce as part of its economic development efforts; and WHEREAS, pursuant to ORS 285C.095, the City of Springfield may file an application with the State of Oregon Business Development Department requesting that the Springfield Community Enterprise Zone be designated for electronic commerce. WHEREAS, the Council finds that such designation will provide additional financial/tax incentive for qualified business firms engaging in electronic commerce; NOW THEREFORE, BE IT RESOLVED THAT: 1. The City of Springfield requests the State of Oregon Business Development Department that the Springfield Community Enterprise Zone be designated for Electronic Commerce; and 2. That the Springfield City Manager is authorized to submit this resolution requesting designation to the State of Oregon Business Development Department upon the prospect of a firm’s that primarily use internet commerce indicating its interest in making eligible capital investments in the Springfield Community and specifically the Community Enterprise Zone; and Attachment 1, Page 1 of 2 3. This Resolution shall take effect upon its adoption by the Council and approval by the Mayor. ADOPTED by the Common Council of the City of Springfield this 2nd day of June 2014 with a vote of _____ for and _____ against. ______________________________ Christine L. Lundberg Mayor ATTEST: _______________________ Amy Sowa City Recorder Attachment 1, Page 2 of 2 Springfield Public Works, March 2010 There are no warranties that accompany this product. Usersassume all responsibility for any loss or damage arising fromany error, omission or positional inaccuracy of this product. 0 0.5 1 1.50.25 Miles Low Density Residential Medium Density Residential High Density Residential Mixed Use Residential Mixed Use Commercial Neighborhood Commercial Major Retail Commercial Community Commercial Mixed Use LMI & CC Light-Medium Industrial Campus Industrial Heavy Industrial Special Heavy IndustrialBooth-Kelly Mixed Use General Office Medical Services Quarry & Mine OperationsPublic Land & Open Space Total Enterprise Zone area within city limits: 11.44 sq. mi. CURRENT ZONING Enterprise Zone City Limits TaxlotsSpringfield Community Enterprise Zone EXHIBIT A Attachment 2 DIVISION 662 ELECTRONIC COMMERCE ENTERPRISE ZONES 123-662-0001 Purpose and Scope This division of administrative rules specifies matters related to areas designated for electronic commerce and the tax incentives especially available in them, including but not limited to the electronic commerce overlay of an enterprise zone: (1) In such areas businesses engaged in Electronic Commerce are not only eligible for the standard enterprise zone exemption, but they may also qualify for a state income tax credit based on their Electronic Commerce investment. (2) These administrative rules: (a) Have no bearing on any enterprise zone aside from its having electronic commerce status; (b) Do not control the fiscal parameters for tax abatements by the Department of Revenue; and (c) Are not intended to supersede applicable administrative rules in OAR chapter 150. Stat. Auth.: ORS 285A.075, 285C.050(5), 285C.060(1) & 285C.095(2) Stats. Implemented: ORS 285C.050, 285C.095, 285C.100, 285C.135, 285C.180, 285C.185, 315.507 & 315.508 Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10 123-662-0100 Definition of Electronic Commerce OAR 123-001 (Procedural Rules) defines terms used in this division of administrative rules, unless the context clearly indicates otherwise; in addition, for purposes of “Electronic Commerce” under ORS 285C.050(5): (1) “E-commerce zone” means any of the enterprise zones designated for electronic commerce under ORS 285C.095 or the area so designated under ORS 285C.100, as described in OAR 123-662-1200. (2) “Predominantly” means that more than 50 percent of applicable transactional activity is Internet-based in terms of receipts, number of orders, clients served or like measures, as opposed to activity handled directly or primarily through other means such as by telephone or e-mail. (3) Applicable business activity and related investments must: (a) Locate and occur inside the E-commerce zone; (b) Involve dealings with customers, suppliers, clients or other transactional entities that are external to the eligible business firm, predominantly over the Internet itself or on a computer network that utilizes the Internet as a platform; and (c) Entail, support or relate to the sale or purchase of goods, property or services, whether conducted on a wholesale, commercial, business-to-business, retail or other basis. (4) It also includes facilities, equipment, services, networks, software, broadband infrastructure, or the like that are produced or operated inside the E-commerce zone by a third party, who facilitates, fosters or makes possible business transactions by means consistent with sections (2) and (3) of this rule. Such a third party is eligible for purposes of tax abatement if other businesses or organizations represent 75 percent or more of its customers or gross receipts. (5) Beyond the initiation or consummation of the sale, purchase or arms-length exchange, it also encompasses elements of the transaction’s overall completion or delivery, if that element: Attachment 3, Page 1 of 5 (a) Is conducted in the E-commerce zone by means consistent with sections (2) and (3) of this rule, including but not limited to customer service, technical support, claims processing, client evaluation, performance measurement and so forth, even if the actual sale, purchase or contract originated outside the zone or through other means; or (b) Naturally serves, underpins or arises from the sale or purchase of goods, property or services inside the E-commerce zone by means consistent with sections (2) and (3) of this rule, including but not limited to distribution, made-to-order assemblage, direct after-sale support, shipping, warehousing, warranty service or any similar operation or order fulfillment-type activity. (6) One way to understand subsection (5)(b) of this rule is by means of a flowchart representing the totality of Electronic Commerce operations in the zone, such that if a critical node in that flowchart is handled by means consistent with sections (2) and (3) of this rule, then: (a) Substantially related activities both upstream and downstream of the node are also included for purposes of this rule; and (b) Associated qualified property or investments in capital assets shall generate their respective tax benefits subject to applicable requirements. Stat. Auth.: ORS 285A.075, 285C.050(5) & 285C.060(1) Stats. Implemented: ORS 285C.050, 285C.135, 285C.180, 285C.185 & 315.507 Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10 123-662-1000 Electronic Commerce Status and Application For purposes of an enterprise zone authorized/designated for electronic commerce under ORS 285C.095: (1) It may be any enterprise zone in existence, regardless of whether it is urban or rural, but the effective date by which the enterprise zone came into existence as described in OAR 123-650 or 123-656 must precede or coincide with its designation as an E-commerce zone. (2) Electronic commerce status fully overlays the entire area of an E-commerce zone inclusive of areas added by a subsequent change to the zone’s boundary. (3) The sponsor of an enterprise zone may revoke its status as an E-commerce zone by resolution(s), pursuant to which the Director shall order and set the effective date of revocation, and that enterprise zone may never again be an E-commerce zone. (4) The Department shall seek applications from zone sponsors respective to such revocation or to termination of an existing E-commerce zone’s underlying enterprise zone. Such a preexisting enterprise zone needs to reapply for electronic commerce in order to be re-designated, as described in sections (5) to (11) of this rule. (5) An application by an enterprise zone in accordance with ORS 285C.095 must consist of at least two items: (a) Copy of a resolution newly adopted by each governing body of the zone sponsor that requests designation for electronic commerce, consistent with its charter, by-laws or ordinances; and (b) A completed form as prescribed by and available from the Department and supporting materials. (6) An applicant zone sponsor shall use the form to respond to the following factors: (a) Significance associated with the location and attributes of the cities, business sites and so forth that are in the current zone boundary, as well as future boundary change requests (to be considered, any such boundary change must be acknowledged in sponsor resolutions); (b) Strategic or marketing plans, resources and readiness of the enterprise zone for local development relating to Electronic Commerce, including but not limited to being a result of public investments; (c) Past success in using the statutory and local incentives of the enterprise zone for inducing business development or comparable programs or tools; Attachment 3, Page 2 of 5 (d) Interest and support among local businesses, community organizations and the general public for having the enterprise zone obtain electronic commerce status; and (e) Other local assets that support and complement Electronic Commerce activity or investments (for example, training institutions, telecommunication infrastructure, environmental initiatives). (7) For designation of an applicant enterprise zone for electronic commerce, the Department shall evaluate the factors in section (6) of this rule, especially as necessary to compare multiple applicants. (8) According to a policy prescribed by and available from the Department, as hereby incorporated and made part of these administrative rules by reference, the Director may accept applications for and make designation for electronic commerce contingent on the readiness of a business firm for authorization under ORS 285C.140 respective to substantial Electronic Commerce investments. (9) The Director may set aside section (8) of this rule in the case of a zone sponsor reapplying for an enterprise zone to terminate by operation of law and seeking continuation of an electronic commerce designation that will be less than three years old. (10) The Director shall make a final determination, which is not subject to appeal, about whether to order electronic commerce designation for an applicant zone and shall prescribe an effective date for the designation, which may not be earlier than receipt of a complete application. (11) The Department shall promptly give written notification to any applicant zone sponsor rejected for electronic commerce designation. [Publications: Publications referenced are available from the agency.] Stat. Auth.: ORS 285A.075, 285C.060(1) & 285C.095(2) Stats. Implemented: ORS 285C.095 Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10 123-662-1200 Designated Areas (1) If the Legislature allows additional electronic commerce designations under ORS 285C.095, which are currently limited to 10 enterprise zones, the Department shall seek applications in accordance with OAR 123-662-1000 through the local zone managers of all existing enterprise zones. (2) Subject to change, the enterprise zones that are currently E-commerce zones are: Bend, Harney County/Burns/Hines, Medford Urban, Greater Redmond Area, Roberts Creek, Rogue, Portland and Salem. (3) The City of North Plains in Washington County is a city designated for electronic commerce under ORS 285C.100 effective on March 4, 2002, such that (a) All areas then or later inside the city limits or urban growth boundary of the City of North Plains are equivalent to an “E-commerce zone,” as used in this division of administrative rules, but only for purposes of Electronic Commerce and business firms that are eligible on that basis under ORS 285C.050 to 285C.250 and 315.507. (b) The city shall act as the effective zone sponsor and take responsibility for all duties of a zone sponsor as they apply to an Electronic Commerce business firm seeking to utilize areas of the city for special benefits. Stat. Auth.: ORS 285A.075, 285C.050(5), 285C.060(1) & 285C.095(2) Stats. Implemented: ORS 285C.095, 285C.100 & 285C.135 Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10 123-662-2000 Enterprise Zone Business Eligibility Attachment 3, Page 3 of 5 Respective to the standard exemption from property taxes under ORS 285C.175: (1) A business firm engaged in Electronic Commerce will likely be eligible in other ways under ORS 285C.135, but it shall not be subject to the requirements or restrictions of those other ways once the enterprise zone is effectively an E-commerce zone. (2) If an eligible business firm that originally sought eligibility based on Electronic Commerce does not satisfy that definition, it may still receive authorization and exemption subject to another way’s requirements or restrictions, except in an area described in OAR 123-662-1200(3). (3) The following may occur only once the enterprise zone is effectively an E-commerce zone: (a) Authorization and qualification of a firm that is eligible based only on Electronic Commerce; or (b) Exemption of personal property permissible only under ORS 285C.185(1)(b)(B). (4) Property that due to section (3) of this rule does not qualify for exemption by January 1 of the first year, for which a business firm may claim the exemption, may not qualify later. (5) After an area’s status as an E-commerce zone effectively ceases, a business firm shall enjoy the following protection for exemption on qualified property respective to Electronic Commerce eligibility, notwithstanding that the firm might be eligible in another way: (a) Under ORS 285C.245(1)(a), (b) and (c), consistent with applicable elements of OAR 123-674-8100 and 123-674-8200, if for whatever reason the underlying enterprise zone terminates and the location of the qualified property is outside of a subsequent enterprise zone. (b) Only under ORS 285C.245(1)(a), consistent with OAR 123-674-8100(1)(b) regardless that the firm was already authorized or qualified, upon: (A) Revocation of the zone’s electronic commerce designation; or (B) Termination of the underlying enterprise zone and designation of the location of qualified property in another enterprise zone without electronic commerce status. Stat. Auth.: ORS 285A.075, 285C.050(5) & 285C.060(1) Stats. Implemented: ORS 285C.095, 285C.100, 285C.135, 285C.140, 285C.180, 285C.185 & 285C.245 Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10 123-662-2500 State Income Tax Credit for E-commerce For purposes of a business firm receiving and using the credit under ORS 315.507 to offset state personal or corporate income/excise tax liabilities: (1) Respective to an enterprise zone’s designation as an E-commerce zone, the applicable investments in Electronic Commerce capital assets under ORS 315.507(2) must: (a) Be made in an income or corporate excise tax year, during or before which the designation took effect. (b) Not be in use, placed in service or completed in terms of construction or installation before that effective date. (2) The business firm must make: (a) Application for authorization before the effective date of either revocation of the zone’s electronic commerce designation or termination of the underlying enterprise zone. (b) The applicable investment on or before the enterprise zone effectively terminates, irrespective of: Attachment 3, Page 4 of 5 (A) Prior revocation of the zone’s electronic commerce status; or (B) Any continuing receipt or access to the standard property tax exemption after termination. (3) The business firm engaged or preparing to engage in Electronic Commerce may make applicable investments only: (a) During the remainder of the income/excise tax year, after the firm has received authorization by approval of its application from the zone sponsor and county assessor; (b) In an income/excise tax year that begins while the firm is actively authorized and ends before July 1 of the first property tax year of exemption; or (c) In an income/excise tax year that begins on or less than a year’s time prior to July 1 of a property tax year, in which the business firm remains qualified and qualified property is exempt under ORS 285C.175. (4) The third year after a credit is claimed as described in subsection (3)(a) or (b) of this rule must be a year described in subsection (3)(c) of this rule, in order for the firm to receive and keep the tax credit. (5) The capital assets that generate the credit do not necessarily correspond to qualified property exempt under ORS 285C.175, although there will likely be some overlap, and such assets consistent with sections (3) and (4) of this rule must concurrently relate to such qualified property. (6) The business firm will claim the credit as an amount entered with “other credits” on the taxpayer’s state tax return for an income/excise tax year (beginning before the date prescribed under section 3, chapter 913, Oregon Laws 2009), in which it makes the Electronic Commerce investment; there is no prescribed form or worksheet. (7) The firm shall be responsible for maintaining tax records under ORS 315.508, including but not limited to: (a) Annual qualification for exemption under ORS 285C.175, such as copies of forms filed with the county assessor and evidence of avoided property taxes, sufficient zone employment, and so forth; (b) Methods used to determine the basis and extent, by which the firm/taxpayer attributes capital assets to Electronic Commerce for purposes of calculating the credit; and (c) The actual cost of investments in terms of such calculations, as well as the annual limit under ORS 315.507(4) of effectively up to $8 million in relevant costs in any one income/excise tax year. (8) The tax credit is inapplicable in conjunction with the exemption under ORS 285C.409 (Long-Term Rural Tax Incentives). (9) In terms of capital assets for Electronic Commerce (in contrast to property tax terms, which typically relate to new physical vesting), to “make an investment” means: (a) As a matter of timing, to incur costs or binding liability in payment for the asset, for example, by entering into a construction contract or by having booked an order to acquire machinery & equipment. (b) Not only capital that is new to the E-commerce zone, but also the firm’s acquisition of assets already existing in the zone. Stat. Auth.: ORS 285A.075, 285C.050(5) & 285C.060(1) Stats. Implemented: ORS 285C.095, 285C.100 315.507 & 315.508 Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10 The official copy of an Oregon Administrative Rule is contained in the Administrative Order filed at the Archives Division, 800 Summer St. NE, Salem, Oregon 97310. Any discrepancies with the published version are satisfied in favor of the Administrative Order. The Oregon Administrative Rules and the Oregon Bulletin are copyrighted by the Oregon Secretary of State. Terms and Conditions of Use Attachment 3, Page 5 of 5 1 E-Commerce Designation Application Mail or Email completed form to: Business Incentives 2014-05-27 775 Summer St NE, Suite 200 Salem, OR 97301-1270 arthur.fish@state.or.us 1. Significance for electronic commerce of location and features of communities, business sites, etc., in the current or proposed zone, including future boundary changes noted in resolution(s) Electronic commerce provides significant numbers of jobs and a major diversification within our community. Royal Caribbean Cruise Lines and Symantec together now employ a total of about 2,500 staff with investments of nearly $100 million in our community. We have several similar sites that could be developed; several existing major buildings that have been analyzed for their characteristics, limitations, solutions to quirks, and redevelopment potential for an array of redevelopment opportunities; and potential additional sites should City Council expand our UGB as indicated by our commercial/industrial buildable lands studies. Council is examining several potential areas to meet the community's expansion needs. Within the existing UGB several opportunity areas exist with strong supportive infrastructure (utilities, transportation networks, regional bus systems, public and private fiber optic networks, etc.) as well as robust commercial, business, and public and private educational support systems to ensure business success and access to most any array of professional business services. 2. Strategic or marketing plans, resources and readiness of the enterprise zone, local development organizations or public investments, as they relate to electronic commerce. Springfield and our regional partners have focused on several clusters to expand our economy including software and 'edu-tech'. These sectors meld not only our educated work force, the University of Oregon educational resources, and an expanding set of over 150 software development firms, but also foster a strong local interest to continue building these sectors drawing on resources from local Chambers of Commerce and regional economic development organizations partnering with Springfield, Eugene and and Lane County. Public investments have focused on utility developed fiber networks, a Regional Fiber Consortium, and planning efforts to enhance redevelopment opportunities and intensify development in well planned and supported urbanized commercial and industrial areas. Springfield has worked with many property owners on redevelopment but several in particular have undergone a substantial process of vetting development opportunities with consultants and through workshops with the University of Oregon to best redevelop sites for e-commerce and similar firms. These private owners/investors understand not just their sites but surrounding areas and characteristics to meet the needs of these e-commerce firms. The Enterprise Zone was key to Springfield's original successes with Royal Caribbean Cruise Lines and Symantec, for example, as well as expansions and upgrades to their facilities. 3. Past success in using incentives for inducing business development in general Springfield has made good use of an array of incentives as demonstrated by the following:  Enterprise zones to ensure major industrial investments meet changing needs and expanding material inputs (Weyerhaeuser & Symantec), to expand local firms to wider markets (Blue Water Boats, Turtle Mountain Foods, Toby's Family Foods, Atkore International/Ridgeline Pipe Manufacturing);  Purchase, preparation, development, and sale of industrial land (Sony, Giustina Resources);  Urban Renewal payment of Systems Development Charges for investments conforming to newly adopted redevelopment plans (Glenwood's Candlewood Hotel, Downtown's Planktown Brewing & A3 School Expansion);  Brokering the relocation of BPA power lines through private financing that assisted both private redevelopment and the construction of the Interstate 5 fly-over at Pape Beltline intersection (allowing Attachment 4, Page 1 of 2 2 development of two hotels, a multi-user office building, a 15-acre commercial redevelopment, and the re- use of a 130,000 manufacturing facility… thus far) and  Springfield’s sponsorship of Sustainable Cities Year analyses of several private buildings and sites assessing the viability and creative redevelopment of under-used commercial and industrial buildings and sites by recommending alternatives to 'development as usual' (allowing two firms to expand their market for high-end, value-added wood ceiling systems and artistic panels). 4. Interest and support among local businesses, community organizations and the general public for having an electronic commerce enterprise zone (third-party letters may be sent directly to the department by the party) The existing set of both large small e-commerce firms have been very supportive of additional firms locating to the area. They speak willingly, frankly, and enthusiastically of their Springfield experiences during initial contacts, facility construction and follow-up contact when asked by other firms considering locating in Springfield. They have expressed general support for the e-commerce zone overall and some interest in how it might support their future expansion and/or diversification plans. Several firms have expressed an interest in recent years in local sites so Springfield applied for the last of the 10 zones available two years ago but was not successful at that time. We have had several opportunities for firms to locate in redeveloped facilities since then but financial requirements of redevelopment without the e-commerce designation made for close calls but not success. We anticipate third party letters in support of this application. 5. Other local assets that are supportive or complementary to electronic commerce business activity and investments (e.g., training facilities, telecommunication infrastructure, environmental initiatives) The Lane County area has substantial public training facilities and educational resources (University of Oregon, Lane Community College, Lane Workforce Partnership, etc.) as well as private training facilities (Pioneer Pacific College). In addition, there are several fiber optic utilities through much of Springfield to directly support e- commerce firms (Sprint, CenturyLink, Springfield Utility Board, Regional Fiber Consortium, etc.) as well as links to the larger BPA regional fiber system and the transpacific fiber. Most importantly for many firms and its employees is the local support through transportation systems. Springfield has two rapid transit bus lines (Lane Transit District's EmX System) and extensive bus services covering nearly all Springfield, Eugene and surrounding urban and rural areas. Several major sites are well suited for e-commerce facilities. They have supportive business services and food & beverage services nearby making access just a short walk or bus ride. In addition, our community was the first in Oregon to establish ground water protection areas that have led to new investments that fit comfortably in the community's environment-friendly outlook and approach to practical redevelopment. Symantec, for example, worked with the City and private providers of environmentally friendly products, researched and rethought its practices, and successfully LEED-certified its existing Springfield facility and applied that experience to its other buildings and operations world-wide. Royal Caribbean Cruise Lines' call center retrofitted its back-up electrical generators to use recycled cooking oils that reduced costs and increased reliability through City staff consultations with the firm and the local electrical utility. Our approach to large and small issues is important for success and we pay attention to the needs of firms and their what leads to their success not only when they come into our community but throughout their being part of our community over the long-term. Attachment 4, Page 2 of 2