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HomeMy WebLinkAboutCAP 2016-07-25 Item 2B - Discussion - Landscape Conservation and Local Infrastructure ProgramCity of Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM TO: Community Affairs and Parks Committee FROM: Laurel Humphrey, Council Analyst CC: Mayor Ekberg DATE: July 20, 2016 SUBJECT: Landscape Conservation and Local Infrastructure Program ISSUE Discussion on Landscape Conservation and Local Infrastructure Program Opportunity DISCUSSION In 2014, Tukwila received a $42,060 National Estuary Program /Puget Sound Watershed Protection and Restoration grant to evaluate how the Landscape Conservation and Local Infrastructure Program (LCLIP) could be implemented in the Urban Center and TIB Corridor area. LCLIP is a state program enacted program offers cities access to a portion of the County's property tax revenue from new development for up to 25 years in return for acceptance of development rights transferred from regional farms and forests. The Council received a briefing on the Feasibility Analysis that was conducted pursuant to this grant award at its May 26, 2015 Committee of the Whole meeting. Chair Quinn requested a discussion on this item to update the Committee members and allow an opportunity to provide input and guidance on next steps. ATTACHMENT Overview of New Infrastructure Financing Opportunity for Tukwila (prepared by Forterra) 5 N Overview of New Infrastructure Financing Opportunity for Tukwila What it is: in 2011 the State Legislature adopted the Landscape Conservation and Local Infrastructure Program ( "LCLIP ", RCW 39.108). This program is a form of tax increment financing (TIF) in which cities gain access to new sources of revenue to fund public improvements that support growth in exchange for agreeing to accept development right transfers (TDR). This combination of TIF and TDR is the only program of its kind in the nation. It gives cities a financial incentive to adopt policies that help them achieve growth targets and fund capital facilities while conserving the region's resource lands. How it works: In exchange for agreeing to accept a number of TDR credits (in Tukwila's case, between 81 and 405), Tukwila collects a portion of King County's share of property tax on all new construction within a designated district of the city's choosing, for a period of up to 25 years. This revenue can fund infrastructure within the district and can also support operations and maintenance. How it can work in Tukwila: Using state grant $ Increment • Incremental Assessed value H Q Base Assessed Value LCLIP start LCLIP end (25 years later) Time funds the city hired a consultant team to assess opportunities for implementing LCLIP in Tukwila. Key findings from this feasibility analysis and subsequent updates include: • The program will generate new revenue under all scenarios if Tukwila agrees to accept 405 credits (all amounts in nominal terms) • Conservative growth (below growth targets): $5.4 million • Meet growth targets: $10.1 million • Exceed growth targets: $18.2 million • Designating a district that includes most of Southcenter and Tukwila South will maximize the benefit for the city. • The most likely path to success is to leverage the demand for growth in the private market to place TDR credits. A simple approach is to create an incentive -based mechanism for developers to acquire credits by giving new projects access to an 8- year multi - family tax exemption (MFTE) in exchange for purchasing credits. This would involve the adoption of a MFTE provision. • Absent a MFTE approach or the construction of an arena LCLIP will not work. • King County has offered an incentive of $200,000 in amenity funding for Tukwila — in addition to the revenues generated by the LCLIP — contingent upon the city's adoption of the program. This funding would be available immediately. • The city can adopt the program now and time the implementation in conjunction with a known development that will result in the placement of TDR credits, thereby increasing certainty of program success for the city. • Adopting the program soon (in 2016) will confer greater benefits. VA Next steps: As part of the feasibility study the consultant team provided a detailed road map for the steps Tukwila would need to take in order to implement LCLIP. At a high level, key measures for the city to take include: 1. Notify King County that Tukwila intends to hold a hearing on LCLIP. This is non- binding and is a component of the state legislation requiring 6 -month notice. A council resolution would suffice. Timeline: immediately. 2. Draft an ordinance that incorporates the programmatic elements identified in the state legislation (covered in detail in the feasibility study). Sample materials are available as templates. Timeline: now through September 2016. 3. Draft an ordinance creating a MFTE provision for residential development that includes a TDR component. The core content for how this mechanism would function is available in the feasibility study. Timeline: now through September 2016. 4. Partner with King County to draft an interlocal agreement spelling out the terms of how the program will be implemented. Timeline: now through October 2016. 5. Bring the LCLIP and MFTE ordinances through the public process (planning commission, city council) after the notification period. Timeline: November 2016. Questions: • What are the risks to the city? None. The city collects revenue as long as development is placing credits in the city according to performance measures specified in the state legislation. If the city doesn't meet its TDR placement goals it can either acquire credits to continue the revenue flow or conclude the program early without penalty. There is no repayment to the county of revenue already received. • What if growth prospects are not optimistic? Even in the most conservative growth scenario examined the city still makes money. The key is to leverage the private market effectively through MFTE and developer agreements to place TDR credits. • Can LCLIP support other city objectives not related to infrastructure? Yes. By accessing a new revenue source for infrastructure Tukwila can direct funds it would have otherwise spent on public improvements towards different purposes. • What's in it for King County? The county benefits by gaining permanent protection of resource lands and reduced residential development pressure in rural areas. King County has made it clear they are a willing partner in this program. • What's the administrative obligation for the city? City staff will be responsible for tracking TDR use as part of the normal permitting process and sharing information with the county. There is also an annual reporting requirement to the state. Marketing and outreach to developers is helpful, as would be adding information about the program to the city website. The city could also contract program management to an outside party if desired. • Isn't this all too complicated? LCLIP sounds complex on its face but in reality cities have a wealth of resources available to draw on to make adoption and implementation a smooth process. Examples of ordinances and agreements are ready for adaptation to Tukwila's purposes, while partners at King County and other organizations are willing to provide technical assistance. It's a small task relative to the scale of benefits the program could create for the city. Rl