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HomeMy WebLinkAboutItem 10 2021 Springfield Enterprise Zone Redesignation AGENDA ITEM SUMMARY Meeting Date: 4/5/2021 Meeting Type: Regular Meeting Staff Contact/Dept.: Courtney Griesel/CMO Staff Phone No: 541-726-3700 Estimated Time: 30 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: Encourage Economic Development and Revitalization through Community Partnerships ITEM TITLE: 2021 SPRINGFIELD ENTERPRISE ZONE REDESIGNATION ACTION REQUESTED: Provide feedback on Springfield Community Enterprise Zone re-designation and proposed boundary and direct staff to begin process for Springfield Community Enterprise Zone re-designation, including engagement and notice to affected taxing entities and scheduling of public hearings ISSUE STATEMENT: The current Springfield Community Enterprise Zone program has been in place since 2014 (est. 2011, boundary amendment 2014) and is set to sunset on June 30, 2021. Over the past 15 years, the current zone and preceding zone designations have supported 16 companies and 19 substantial property and employment investments within the community. The City of Springfield must authorize by resolution and reapply for a new Enterprise Zone on or before July 1, 2021 to continue use of the business retention, expansion and recruitment tool. This memo is intended to outline the fundamentals of an Enterprise Zone, performance of the Springfield Community Enterprise Zone program, and next steps for reapplication should Council choose. ATTACHMENTS: Attachment 1 – Enterprise Zone Re-designation Council Briefing Memorandum Attachment 2 – Existing Springfield Community Enterprise Zone Handout Attachment 3 – 15 Year Springfield Enterprise Zone Snapshot Attachment 4 – Proposed Draft Re-designation Boundary Attachment 5 – State Required Measure of Hardship Attachment 6 – April 5, 2021 Presentation DISCUSSION/ FINANCIAL IMPACT: The Springfield Community Enterprise Zone is authorized as a program by the State. The program allows the local municipality the ability to provide short term (three or five year) tax exemption of new investments made by a primarily traded- sector company within a zone. Investments must be new to the zone, in the category of property improvements and/or taxable large equipment, primarily in the theme of providing goods and services outside the region and include addition of new jobs within the zone. Springfield’s zone will sunset on June 30, 2021, requiring the passing of a Council resolution to reapply and re-designate a new Springfield Community Enterprise Zone. This new zone would go into effect on July 1, 2021 and remain in effect through 2031. Additional information to be discussed and included in attachments to this memo include: • Overview of Enterprise Zone Program Basics • Past Accomplishments and Impacts of the Springfield Community Enterprise Zone Program • Proposed Boundary Changes and Zone Re-designation • Next Steps for Re-designation M E M O R A N D U M City of Springfield Date: 4/5/2021 To: Nancy Newton COUNCIL From: Courtney Griesel, Economic Development BRIEFING Subject: 2021 Enterprise Zone Redesignation MEMORANDUM ISSUE: The current Springfield Community Enterprise Zone program has been in place since 2014 (est. 2011, boundary amendment 2014) and is set to sunset on June 30, 2021. Over the past 15 years, the current zone and preceding zone designation have supported 16 companies and 19 substantial property and employment investments within the community. The City of Springfield must authorize by resolution and reapply for a new Enterprise Zone on or before July 1, 2021 to continue use of the business retention, expansion and recruitment tool. This memo is intended to outline the fundamentals of an Enterprise Zone, performance of the Springfield Community Enterprise Zone program, and next steps for reapplication should Council choose. COUNCIL GOALS/ MANDATE: Encourage Economic Development and Revitalization through Community Partnerships BACKGROUND: The City of Springfield, Oregon currently carries a Rural Enterprise Zone designation by the name of the Springfield Community Enterprise Zone. The current designation has been in place since 2014 and is Springfield’s second Enterprise Zone (EZ) designation. The zone has supported 16 companies and 19 substantial property and employment investments within the community. In July of 2021, this zone will sunset, requiring the City of Springfield to redesignate by June 30, 2021 should the Council desire to maintain the benefit. Springfield has benefited historically from the EZ designations. For this memorandum, the historic recap will be focused on the past 15 years and on past EZ investments as well as current EZ projects. Currently, the zone includes 9 active EZ businesses with 3 pending applications under monitoring or filing. All Springfield Community Enterprise Zone businesses are compliant and meeting or exceeding their projected targets. This is especially significant at this point in time, as we work to recover from the impacts of COVID19. Of the 16 companies to benefit from the zone in the past 15 years, 15 remain operational in Springfield today with Symantec the single recipient no longer with a physical office in Springfield. That said, the large class A office space once home to Symantec was purchased in 2018, prior to Symantec’s closure, and is now home to PacificSource, Wayfair, and Trillium. Symantec remained operational onsite until 2019. Included in this memo is a brief overview of the fundamentals of an Enterprise Zone program, past accomplishments and impacts of the Springfield Community Enterprise Zone, changes which are anticipated should redesignation be desired by the Council, and next steps for redesignation by June 30, 2021. WHAT IS AN ENTERPRISE ZONE The Enterprise Zone (EZ) program is a State outlined and defined program. Standard program rules are outlined in State Statute (Oregon Revised Statutes 285C) and managed at the local municipal level. Municipalities are required to apply to the State to receive an Enterprise Zone designation. Attachment 1, Page 1 of 4 ATTACHMENT 1, PAGE 2 OF 4 Attachment 2 is the Springfield Community Enterprise Zone handout provided to businesses interested in using the tool. The EZ program allows for a business within a zone to receive short term three (standard) or five (extended) year property tax exemption on the assessed value of new investments made during a limited amount of time. The tax exemption is specific to investments made by a company to a facility or taxable equipment to be placed within the zone. The tax abatement is not eligible on items like vehicles or other smaller personal property. Additionally, an EZ exemption does not exempt any existing value on the tax rolls prior to the project. Rather, the exemption acts as a short-term delay for of taxation on the new investment. In many cases, this short-term exemption serves as a deciding factor when a company is choosing to locate to, or expand in, a community. This exemption serves as the most critical start up phase of a project, when the company is working to stabilize their new cost with new productivity. The primary goals of the program are to: • Incentivize the retention, expansion and attraction of companies in Springfield • Prompt bigger re/investment than might occur otherwise • Accelerate investments and hiring compared to an ordinary rate • Create long-term taxable valuation on employment sites • Create stable permanent employment in our region. Secondary benefits often include temporary construction jobs during expansion and job training partnerships when a company is requiring a new skillset for the local workforce. In either case, these secondary benefits are often hard to quantify as they are short term and unique to the investment type under construction. Additionally, in some cases, additional benefits may be negotiated by the EZ community. Springfield has experienced this through the use of Extended EZ agreements with companies requesting five-year exemptions. These additionally negotiated funds are often reflected as a small percentage of the overall investment to be repaid to the City for support of workforce and economic development. Per Business Oregon, the State’s economic development agency, the standard three-year tax exemption on new property is ‘effectively automatic and not discretionary.’ Rather, it is an ‘as-of-right’ benefit to eligible business firms who increase their employment, affording a degree of certainty to various business situations throughout Oregon. This certainty is critical in active recruitment and in assisting an existing business in financial planning. In order for a business to be eligible for the standard three-year tax exemption under the zone, they must: • Primarily be in the business of making goods or services sold outside of the region (traded-sector). • Add new taxable property/value to their site. • Add new permanent jobs at the expansion site. • Enter into a hiring agreement with the regional State employment office, WorkSource Lane. • Maintain existing and new employment within the region over the duration of the tax abatement and not create substantial curtailment (layoffs) in Oregon as part of the project receiving tax abatement. A company desiring to request an extended five-year exemption under the zone must additionally ensure that new permanent jobs hired as part of the project are compensated at an average totaling or exceeding 150% of the regional Lane County median income. In Lane County, this compensation requirement number is currently $67,799 and adjusts each year. As noted above, additional benefits and payments to the community can be negotiated as part of this extended five-year exemption. PAST ACCOMPLISHMENTS AND IMPACTS Seventeen Springfield businesses have utilized the Springfield Community Enterprise Zone for 19 different site investments since 2005. Nine of these companies are currently under active Enterprise Zone projects. Attachment 1, Page 2 of 4 ATTACHMENT 1, PAGE 3 OF 4 In total, past and current Springfield EZ companies over the past 15 years are estimated to invest over $375,000,000 in expansion and equipment and add over 3300 jobs. Estimates pertaining to past and current EZ investments are reflected in the table below. It is important to note current EZ numbers are only estimates as taxation valuation and multipliers change annually. It is also important to note that both past and current numbers are based on actual costs at time of investment and do not account for inflation of construction costs. Total Investment New Annual Jobs New Annual Wages Exemption Totals Past EZ $125M 2300 FTE $130M $10M Current EZ $250M 1000 FTE $60M $21M All TOTALS $375M 3300 FTE $190M $31M In the last 15 years, EZ companies have paid over $20M in local property taxes on the new investments following their exemption windows. For reference, the 10 sites which are now home to past EZ companies paid a combined $190k in property taxes the year prior to the EZ project. The total taxes paid in the 2020 tax year by these same companies will equal nearly $2M. A snapshot of Springfield Community Enterprise Zone Companies over the past 15 years is included as Attachment 3. PROPOSED CHANGES TO A REDESIGNATED SPRINGFIELD COMMUNITY ENTERPRISE ZONE During the 2014 designation, Springfield was designated a ‘Rural’ Enterprise Zone by the State. This designation was based on a number of factors specific to the federal naming of the Eugene-Metropolitan Statistical Area (MSA). In recent years, based on population and economic analysis, the regional MSA has changed in name to now reflect ‘Eugene-Springfield MSA,’ thus transitioning Springfield from a ‘Rural’ Zone definition to ‘Urban.’ With this adjustment, the zone must change in size and distance. Additionally, the City may also elect to apply additional benefits, such as the hotel/hospitality exemption benefit, and standard exemption requirements. These additional elements should be considered closely and are recommended to be added within 6 months of formerly applying for designation from the State. A comparison of these differences is reflected in the table below. Rural Rules Existing Springfield Zone Urban Rules Recommended Springfield Zone Area Maximum/Total 15 Square Miles 13.2 Square Miles 12 Square Miles 11~ Square Miles Greatest Distance Between Two Points 20 Square Miles 8.8 Linear Miles 12 Linear Miles 9~ Miles Longest Distance Between Nearest Points of Separate Areas 5 Linear Miles 1.67 Linear Miles 5 Linear Miles 1.5~ Miles Hotel/Hospitality Zone Not Allowed N/A Allowed Consider Post July 1 Adoption of Additional Requirements for Standard Program Not Allowed N/A Allowed Consider Post July 1 Attachment 1, Page 3 of 4 ATTACHMENT 1, PAGE 4 OF 4 Based on these required changes, a draft Zone boundary map has been created (Attachment 4) to show areas of recommended subtraction and addition and a new proposed zone which meets State requirements and total approximately 11 square miles. Factors examined in drawing this draft map included removal of areas which would not be desirable for redevelopment from their existing use to future traded sector uses and addition of UGB expansion areas which would. Priorities of focus included: • Removal of residential and adjacent community commercial areas. • Removal of substantial non-taxable public lands, public infrastructure and facilities, and environmental set back areas. • Removal of areas no longer meeting minimum distance requirements (Goshen). • Maintaining of key opportunity traded sector redevelopment areas. • Addition of urban growth boundary expansion opportunity redevelopment areas to the north and south of Springfield. NEXT STEPS To receive approval for creation of an enterprise zone, Springfield will be required to meet certain state mandated statutory provisions which include; • Meeting a measure of local economic hardship when compared to other regions of the State. This analysis is included and Springfield has been confirmed by State program staff to meet this test. Economic Hardship data is included as Attachment 5. • Consultation with local taxing districts. • Geographic parameters and boundary delineation. This proposed boundary was discussed above and attached here as Attachment 4. • An identified enterprise zone manager. For Springfield, this ‘manager’ role has been staffed by the Economic Development program. Should the Council decide to pursue designation of the Springfield Community Enterprise Zone, next steps to be completed before June 30, 2021 include; 1. April 5 – Council directs staff to move forward with designation process and evaluation 2. April & May – Notice and engagement with local taxing districts to occur 3. May/June – Public meetings and designation resolution passed Steps to occur in the 6 months after designation will include; 4. Reappointment of staff as zone manager, including written notice to the County Assessor and Department of Revenue. 5. Finalization of zone boundary and creation of publicly accessible location index of properties within the zone. 6. Drafting of any additional requirements of the program to be passed by resolution (allowed under Urban Zone designation) including consideration of addition or hotel resort business eligibility within zone. RECOMMENDED ACTION: • Direct staff to begin process for Springfield Community Enterprise Zone designation, including engagement and notice to affected taxing entities and scheduling of public hearings • Provide any feedback on proposed boundary and additional information desired from staff. Attachment 1, Page 4 of 4 For more information contact the Springfield Community Enterprise Zone Manager at: Courtney Griesel, Springfield Economic Development Manager cgriesel@springfield‐or.gov      541.726.3700     225 Fifth Street, Springfield Oregon, 97477 SPRINGFIELD COMMUNITY ENTERPRISE ZONE; 3 to 5 Year Business Tax Abatement Program  (ORS 285B.665) Through a short‐term tax exemption, an Oregon enterprise zone induces eligible businesses of all sized to make additional investments which will improve employment opportunities, spur economic growth and diversify activity.  New capital in a zone receives a total abatement for at least three (standard) and, in some cases, up to five (extended) consecutive years from the local assessment of ad valorem property taxes, which can otherwise have a deterring effect on private investors seeking to start or enlarge operations with a substantial capital  outlay.Who is Eligible?  Eligible firms include those with operations which serve businesses.  Such firms include manufacturers, processors, shippers and some types of headquarters and call centers (e‐commerce).  What is required of the Eligible Business? The business;  Must increase in full‐time, permanent employment of the firm inside the zone by the greater of one new job or 10%  May not generate concurrent job losses more than 30 miles from the zone due to the improvements   Must maintain mandatory employment levels during the exemption period  Must enter into a first‐source agreement with the local job training providers Four (4) and Five (5) Year Extended Abatements in the Springfield Community Enterprise Zone are subject to additional requirements;  1. “Compensation” of new workers must average at 150% or higher of the Lane County average wage 2. A written agreement between the local zone sponsors, which include the City of Springfield and Lane County 3. May include additional requirements as negotiated  ATTACHMENT 2, PAGE 1 OF 2 For more information contact the Springfield Community Enterprise Zone Manager at: Courtney Griesel, Springfield Economic Development Manager cgriesel@springfield‐or.gov      541.726.3700     225 Fifth Street, Springfield Oregon, 97477    ATTACHMENT 2, PAGE 2 OF 2 March 2021 ATTACHMENT 3, PAGE 1 OF 1 SPRINGFIELD OREGON COMMUNITY ENTERPRISE ZONE SNAPSHOT & SUMMARY (2005-2020) Past EZ Projects Current EZ Projects Projects 10 9 Recruitment 5 3 Retention/Expansion 5 6 Total Company Investments $125M $250M Total Annual New Jobs 2300 FTE 1000 FTE Total Annual New Wages $130M $60M Summary Estimates of Past EZ Projects Summary Estimates of Current EZ Projects International Paper (2017/2018/2019) - 5 Year Company Investment $85M Total Added Annual Jobs 0 Swanson Group Mfg. LLC (2017/2018/2019) - 5 Year Company Investment $75M Total Added Annual Jobs 228 Pivotal Health Solutions (2019/2020/2021) - 3 Year Company Investment $620 Total Added Annual Jobs 3 Advanced Elastomer Tech (2020/2021/2022) - 3 Year Company Investment $1.1M Total Added Annual Jobs 4 Custom Strut & Roll Forming (2020/2021/2022) - 3 Year Company Investment $2M Total Added Annual Jobs 7 Umpqua Dairy Products (2020/2021/2022) - 5 Year Company Investment $2M Total Added Annual Jobs 4 US Bakery (Franz Family Bakeries) (2020/2021/2022) - 5 Year Company Investment $25M Total Added Annual Jobs 90 Wayfair LLC (2020/2021/2022) - 3 Year Company Investment $5.7M Total Added Annual Jobs 370 Pacific Source (2021/2022/2023) - 3 Year w/CIP Company Investment $60M Total Added Annual Jobs 300 Symantec Corp. (2003/2004/2005 & 2007/2008/2009) - 2, 5 Year Company Investment $35M Total Added Annual Jobs 1150 Mt Hood Beverage (2003) - 3 Year Company Investment $9M Total Added Annual Jobs 100 0 Royal Caribbean Cruises, Ltd. (2006) - 3 Year w/CIP Company Investment $23M Total Added Annual Jobs 600 Toby's Tofu (2005/2006/2007) - 3 Year Company Investment $2M Total Added Annual Jobs 6 United States Bakery (2007/2008/2009) - 5 Year Company Investment $40M Total Added Annual Jobs 195 Ridgline Pipe - Atkore (2009/2010/2011 & 2014/2015/2016) - 2, 3 Year Company Investment $10M Total Added Annual Jobs 120 Hawes Financial (2009/2010/2011) - 3 Year Company Investment $6M Total Added Annual Jobs 175 Oregon's Only Organics (2017/2018/2019) - 3 Year Company Investment $900k Total Added Annual Jobs 3 ATTACHMENT 4, PAGE 1 OF 1 2021 SPRINGFIELD ENTERPRISE ZONE DESIGNATION ECONOMIC HARDSHIP DATA The State of Oregon requires that all (re-)designated Enterprise Zone’s “local area exhibit significant hardship, in terms of at least one economic measure.” Specific measure for a zone to qualify for redesignation are: • Unemployment rate, two percentage points or more above the statewide rate. (Springfield Meets Qualification) • Income level of 80 percent or less of the equivalent income level for the state in terms of per capita, media household or comparable figure. (Springfield Meets Qualification) • Percentage of persons or families below the federal poverty level that is at least five percentage points higher than the statewide poverty incidence rate. (Springfield Meets Qualification) • Ten-year change in population that is at least 15 percentage points below the state’s corresponding population change. U.S. Census, American Community Survey Estimates, 2015–2019 (2019 Inflation-adjusted dollars) Median household income in the past 12 months Left as percent of state/MSA (greater) Per capita income in the past 12 months Left as percent of state/MSA (greater) Poverty Incidence Rate Percentage -points of left above state/MSA (lesser) Rate of Unemploy -ment Percentage- points of left above state/MSA (lesser) Oregon $62,818 100% $33,763 100% 13.2% 0.0% 5.5% 0.0% Springfield city, Oregon $47,695 76% $23,779 70% 19.3% 6.2% 7.8% 2.3% U.S. Census, American Community Survey Estimates, 2015–2019 (2019 Inflation-adjusted dollars) Total Population Total Households Oregon 4,129,803 1,611,982 Springfield city, Oregon 62,077 24,578 Attachment 5, Page 1 of 1 SPRINGFIELD OREGON COMMUNITY ENTERPRISE ZONE 2021 RE-DESIGNATION April 5th, 2021 City Council Work Session Courtney Griesel, Economic Development Manager ATTACHMENT 6, PAGE 1 OF 10 SPRINGFIELD OREGON COMMUNITY ENTERPRISE ZONE •What is an Enterprise Zone •Past Accomplishments and Impacts of the Springfield Community Enterprise Zone •Proposed Changes and Re-Designation of Springfield’s Zone •Next Steps SPRINGFIELD, OREGON ATTACHMENT 6, PAGE 2 OF 10 WHAT IS AN ENTERPRISE ZONE •State Defined and Authorized Economic Development Tool •Defined Geographic Zone Allowing Short-Term Tax Exemptions on Business Investments of Property and Equipment •3-Year (Standard) and 5-Year (Extended) Exemption SPRINGFIELD, OREGON ATTACHMENT 6, PAGE 3 OF 10 GOALS OF AN ENTERPRISE ZONE •Incentivize Retention, Expansion and Attraction of Traded-Sector Companies •Prompt and Accelerate Bigger Investments & Hirings than Might Otherwise Occur •Create Long-Term Taxable Valuation on Employment Sites •Create Stable Permanent Employment in Springfield SPRINGFIELD, OREGON ATTACHMENT 6, PAGE 4 OF 10 COMPANY ELIGIBILITY •Traded-Sector; Business of Making Goods/Services Primarily Sold Outside Oregon •Adds New Taxable Value to a Site Within the Zone •Adds New Permanent Jobs to the Site Within the Zone (Without Decreasing Employment Elsewhere in Oregon) •Compensates New Employees an Average of 150% of the County Median Compensation (Applies to Extended Exemptions) SPRINGFIELD, OREGON ATTACHMENT 6, PAGE 5 OF 10 PAST 15 YEARS OF ACCOMPLISHMENTS AND IMPACTS Past Symantec (2) Mt. Hood Beverage Royal Caribbean Toby’s Tofu US Bakery Atkore (2) Hawes Financial Oregon’s Only Current International Paper Swanson Group Pivotal Health Advanced Elastomer Custom Strut & Roll Form Umpqua Dairy US Bakery Wayfair PacificSource Past EZ Projects Current EZ Projects Total Projects 10 9 Recruitment 5 3 Retention/Expansion 5 6 •16 Springfield, OR Businesses •19 Investment Projects ATTACHMENT 6, PAGE 6 OF 10 PAST 15 YEARS OF ACCOMPLISHMENTS AND IMPACTS Total Company Investments New Annual Jobs New Annual Wages Exemption Totals Pre-EZ Site Total Annual Combined Tax Contribution Post-EZ Site Total 2020 Combined Tax Contribution Past EZ $125M 2300 FTE $130M $10M $190k $2M Current EZ $250M 1000 FTE $60M $21M N/A N/A ALL TOTALS $375M 3300 FTE $190M $31M Past Symantec (2) Mt. Hood Beverage Royal Caribbean Toby’s Tofu US Bakery Atkore (2) Hawes Financial Oregon’s Only Current International Paper Swanson Group Pivotal Health Advanced Elastomer Custom Strut & Roll Form Umpqua Dairy US Bakery Wayfair PacificSource •16 Springfield, OR Businesses •19 Investment Projects ATTACHMENT 6, PAGE 7 OF 10 PROPOSED CHANGES AND RE-DESIGNATION Moving from a Rural Zone to Urban Zone Rural Rules Existing Springfield Zone Urban Rules Recommended Springfield Zone Area Maximum/Total 15 Square Miles 13.2 Square Miles 12 Square Miles 11~ Square Miles Greatest Distance Between Two Points 20 Square Miles 8.8 Linear Miles 12 Linear Miles 9~ Miles Longest Distance Between Nearest Points of Separate Areas 5 Linear Miles 1.67 Linear Miles 5 Linear Miles 1.5~ Miles Hotel/Hospitality Zone Not Allowed N/A Allowed Consider Post July 1 Adoption of Additional Requirements for Standard Program Not Allowed N/A Allowed Consider Post July 1 SPRINGFIELD, OREGON ATTACHMENT 6, PAGE 8 OF 10 Proposed Zone Changes Rural to Urban Removes Some Residential Areas Removes Some Adjacent Community Commercial to Residential Removes Public Lands, Facilities & Infrastructure Removes Goshen Area Maintains Key Opportunity Traded-Sector Areas Adds North Urban Growth Boundary Expansion Areas Adds South Urban Growth Boundary Expansion Areas SPRINGFIELD, OREGON ATTACHMENT 6, PAGE 9 OF 10 NEXT STEPS BEFORE JULY 1 •Direct Staff to Move Forward with Designation and Drafting Application and Resolution •Notice and Engage Local Taxing Districts •Public Meetings and Adopt Resolution for Application STEPS AFTER JULY 1 •Reappoint Staff as Zone Manager and Notice County Assessor and Department of Revenue •Finalize and Index New Zone Boundary •Evaluate and Determine If Any Additional Program Requirements or Benefits Might Be Adopted SPRINGFIELD, OREGON ATTACHMENT 6, PAGE 10 OF 10