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HomeMy WebLinkAbout2006/08/08 Item 4 PAGE 1, ITEM NO.: MEETING DATE: l.\ 08/08/06 CITY COUNCIL AGENDA STATEMENT RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA SUPPORTING AND AUTHORIZING THE SUBMITTAL OF A JOINT APPLICATION AND FIRST.YEAR BUDGET FOR A REGIONAL ENTERPRISE ZONE, AUTHORIZING STAFF TO PREPARE ALL REQUIRED DOCUMENTS TO SUBMIT A JOINT APPLICATION FOR A REGIONAL ENTERPRISE ZONE TO THE STATE OF CALIFORNIA HOUSING & COMMUNITY DEVELOPMENT DEPARTMENT, AND AUTHORIZING THE CITY MANAGER TO SIGN A MEMORANDUM OF UNDERSTANDING WITH THE CITY OF SAN DIEGO FOR THE ADMINISTRATION OF A REGIONAL ENTERPRISE ZONE SUBMlnED BY: ACTING COMMUNITY DEVELOPMENT DIRECTOR ITEM TITLE: REVIEWED BY: CITY MANAGER (j' 4/5TH5 VOTE: YES D NO 0 BACKGROUND Since 2001, the City of Chula Vista has actively participated in a regional partnership with the City of San Diego administering the South Bay Enterprise Zone, which included portions of Chula Vista primarily west of Interstate 5. As part of this partnership, the City of Chula Vista and the Port of San Diego have provided funding to the City of San Diego to support the cost of managing the program and to enhance a marketing campaign for the South Bay Enterprise Zone. Because Chula Vista's economy is regional in nature, collaborating with other local cities and the State of California to expand business incentives increases the City's ability to compete with other regions, create new jobs and increase investment in our county. The Enterprise Zone (El) Program offers tremendous business incentives and helps the region assist employers and attract new ones. On January 27, 2007 the existing South Bay Enterprise Zone designation is set to expire, thereby requiring City staff to engage in the task of completing a new joint Application for Designation. The joint Application for Enterprise Zone Designation must be filed with the California Housing and Community Development (HCD) Department by September 6, 2006. RECOMMENDATION Staff recommends that the City Council adopt the resolution supporting and authorizing the submittal of a joint application and first-year budget for a Regional Enterprise Zone; 4-1 PAGE 2, ITEM NO.: MEETING DATE: f' - 08/08/06 authorizing staff to prepare all required documents and submit a joint application for a Regional Enterprise Zone to the State of California Housing & Community Development Department; and authorizing staff to execute Memoranda of Understanding (MOU) with the City of San Diego for the administration of a Regional Enterprise Zone. BOARDS/COMMISSIONS RECOMMENDATION Not applicable. DISCUSSION City staff is engaged in the task of completing a joint Application for Designation as an Enterprise Zone (El) that must be filed with the California Housing and Community Development (HCD) Department by September 6, 2006 HCD has released a Request for Proposals (RFP) for new applications by local governments that desire to be designated as EZs. They have done so because twenty-three EZs expire in 2006-07, one being our current South Bay enterprise zone. Purpose of the Enterprise Zone Proqram The EZ Program is intended to provide state and local incentives for businesses to invest and locate in qualifying low and moderate-income areas of California. State law currently authorizes forty-two EZs in California. The legislative purpose of the EZ Program is to "stimulate business and industrial growth in the qualifying low and moderate income areas of the State." The other purposes are to establish a program "to help attract business and industry to the state, to help retain and expand existing state business and industry, and to create increased job opportunities for all Californians." Essentially, EZs are competitively designated based upon qualifying low and moderate- income areas and the local government's capacity to carry out an economic development program. They must provide additional local incentives, and the Els are designated for 15 years. Benefits of the EZ Proqram The greatest benefit to Chula Vista having an EZ is that businesses located within this EZ may receive individual or corporate state tax incentives. Businesses can also receive local incentives, including local regulatory relief. EZ state tax benefits include the following: 4-2 PAGE 3, ITEM NO.: MEnlNG DATE: if 08/08/06 · Credit for hiring certain disadvantaged individuals: Qualified hires must fall within one of 14 categories, including economically disadvantaged, dislocated workers, veterans, or individuals receiving public assistance. Credits are 50% for the first year of wages, 40% of second year wages, 30% of third year wages, 20% of fourth year wages, and 10% of fifth year wages. The maximum credit is about $32,000 per qualified hire over a 5-year period. · Net operating losses: 100% of losses can be carried over for 15 years. · Credit for sales/use tax paid on the first $1 million in purchases (for individuals) or first $20 million (for corporations). · Business expense deduction: 40% of property costs (personal property, equipment, furnishings) can qualify as a business expense, rather than as a capital expense subject to depreciation. . Net interest deduction for lenders, based upon the net interest received from loans made to EZ businesses. To date, the El program has been utilized by six Chula Vista based employers, including Goodrich and South Bay Boat Yard, and has resulted in the creation of 114 jobs with an average wage of 14.58 per hour (216% above the CA minimum wage). The estimated value of the program to Chula Vista employers has been approximately $1,199,827 in California Hiring tax credits. The expiring EZ Program has consisted of a targeted area equivalent to approximately 440 acres in western Chula Vista. The proposed EZ joint application if approved, would increase Chula Vista's targeted area to encompass approximately 6400 acres as indicated on Attachment A: Map of Chula Vista's portion of the proposed joint Enterprise Zone boundaries. San Dieao And (hula Vista Will Collaborate To Comply With The Reauirements Of The State Of California Housina & Community Development Department As Follows: SAN DIEGO: CITY of SAN DIEGO staff will request from the SAN DIEGO City Council a resolution authorizing staff to submit a joint Application for Designation as an Enterprise Zone (El) that must be filed with the California Housing and Community Development (HCD) Department by September 6, 2006. SAN DIEGO staff will coordinate and provide technical assistance to Chula Vista in preparing documentation required for the joint Enterprise Zone request. SAN DIEGO staff will submit a joint request with all pertinent documentation to the State of California Housing & Community Development Department requesting the designation of a SAN DIEGO Regional Enterprise Zone. 4-3 PAGE 4, ITEM NO.: MEETING DATE: 08/08/06 L.J-. CHULA VISTA: The CHULA VISTA City Manager will request from City Council a resolution supporting and authorizing the submittal of a joint application and first-year budget for a regional enterprise zone; 2) authorizing staff to prepare all required documents and submit a joint application for a fRegional Enterprise Zone to the State of California HlTousing & eCommunity 4Development Department; and 3) authorizing staff to execute Memoranda of Understanding with the City of San Diego for the administration of a Regional Enterprise Zone. CHULA VISTA staff will prepare all documentation required by the State of California Housing & Community Development Department for the joint Enterprise Zone application, but not limited to, the following: a) Map/s illustrating the proposed ZONE AREA with commercial or industrial zoning and contiguous to the San Diego Regional Zone. b) Chula Vista's portion of the Regional Enterprise Zone's boundary description document. c) Chula Vista's portion of the Regional Enterprise Zone's street range document. d) Chula Vista's low and moderate-income 2000 Census tracts. e) Identification of ~ Chula Vista's goals and objectives in collaboration with San Diego Regional Enterprise Zone Program partners. CONCLUSION The EZ Program has provided the City's Economic Development division with an effective economic and employment development incentive to offer qualifying businesses located within, or considering locating within the Regional EZ. Recognizing the administrative/reporting requirements and EZ Program resource limitations created by the proposed Regional EZ, the City of Chula Vista and San Diego Unified Port District will provide 1) funding to support San Diego staff to provide services to businesses located within the Regional EZ and 2) marketing/promotional funds to augment expenditures currently made by the City of San Diego to promote the Regional EZ. The compilation of these resources will enable the partnership to provide services to businesses within the Regional EZ, at less cost than if jurisdictions did it on their own. Should a conditional designation be noticed by the Department of Housing & Community Development, City Economic Development staff will return to City Council to review and adopt a formalized MOUwith the State of California, accepting the zone designation. In addition, City Economic Development staff will also return to City Council with formalized MOUs with the City of San Diego and the San Diego Unified Port District, which will identify the financial obligations for the life of the EZ designation. In the meantime, City 4-4 PAGE 5, ITEM NO.: MEnlNG DATE: L1 08/08/06 Economic Development staff are meeting with staff from the City of San Diego Community and Economic Development Department, as well as the San Diego Unified Port District, to formalize a MOU which details the proposed resource offer, and establishes a framework for the continuing working relationship between these agencies. The proposed joint EZ application would confer a significant economic and employment incentive program to the Cities of Chula Vista, San Diego and National City. If approved, there will inevitably be instances where each agency pursues common business development interests and it will be important to establish a cooperative framework for managing these situations within the MOU. Given the offer of financial support and the geographic and cultural connectivity of the area, City staff views this application as a unique opportunity to continue and expand the regional collaboration of an economic development partnership. CONFLICT OF INTEREST Staff has reviewed the property holdings of the City Council and has found no such holdings within 500 ft. of the property is subject of this action. ENVIRONMENTAL STATEMENT The Environmental Review Coordinator has reviewed the proposed project for compliance with the California Environmental Act and has determined that the proposed action was adequately covered in the previously adopted Final General Plan Update EIR. Thus, no further environmental review or documentation is necessary. FISCAL IMPACT Funds in the amount of $115,000 have been appropriated from the City's General Fund in the Community Development Department Budget for fiscal year 2007, as approved and adopted within the City's two-year budget on June 21, 2005, for costs associated with the current MOU with the City of San Diego (operational, marketing and training cost not exceeding $97,000) and for cost associated with the preparation of the EZ application (not to exceed $18,000). Should the regional partnership receive a new 15 year EZ designation, the City of Chula Vista agrees to commit funding, which is yet to be determined, in-kind resources and staffing to the EZ for Year One, and acknowledges that this commitment is an annual commitment for the life of the EZ (15 years). 4-5 PAGE 6, ITEM NO.: MEETING DATE: , " )..J-- 08/08/06 AnACHMENTS Attachment A: Map of proposed Regional Enterprise Zone boundaries Attachment B. Proposed First-Year Administration Budget for Regional Enterprise Zone Attachment C. EZ Partnership MOU Prepared by: Gustava Perez, Sr Community Development Specialist, Community Development Deportment J:ICOMMDEVlSTAFF.REP\2006\OB-08-06\Enterprise ZonelCOUNCIL STAFF REPORT-EZ 2006 -draft.doc 4-6 '" = .. = >. - N ..~ .r!'l .. >"'"" ..'~ = - l:l. = = .. = -="'Il:l u- = '" ~ + i: Q . . s. ~ .' . l~ :n ;;.~ -= ,it t.. " ~S ~~ JI D \" i1'I!..' III]'l]! Ul.l , ., "{ll flnJj ilJ '\ -ml' 'II, I", - I 'I I mutl HH~ - -=- = = -Q~ C ~ <> ucg rI'.i~~ . Q ;:>- == ~II.~III ~1l6~ I ! "I ~w o- S! (" i \ ! o > . o o "~ ~- "! ~ - ~ ~ ;/. ~~ I . cc .... Z Ilol :E ::c u cc ~ ATTACHMENT B San Diego Regional Enterprise Zone Operational Budget - Year One Estimated Annual REVENUES: Vouchering of Eligible Individuals 2500 Vouchers x $50 $125,000 Breakdown of fee: Required HCD Filing Fee (pass-through to HCD) 2500 x $10 $25,000 Application fee for local program administration (San Diego) 2500 x $40 $100,000 MOU's with Chula Vista and National City $194,000 Appx. $97,000 each MarketinglPromotion from Jurisdictions San Diego Chula Vista National City $13,000 $5,000 $5,000 $3,000 City of San Diego Contribution Total Revenue $89,040 $421,040 EXPENDITURES: Staff (San Diego only) NPE (Includes office supplies, computer, etc) Travelrrraining Marketing HCD Filing Fee (estimate) Total Expenditures $365,040 $15,000 $3,000 $13,000 1 $25,000 $421,040 IN-KIND COMMITMENTS: The following jurisdictions will commit the folowing hours and associated in-kind contribution for assistance with the San Diego Regional EZ. Jurisdiction San Diego Chula Vista National City Hours Committed 1,000 1,000 500 Total In-Kind Commitments Value $63,000 2 $54,600 $16,900 $134,500 Notes: 1 Costs associated with reprinting existing EZ marketing materiais and mailing 2 Hours committed are in addtion to San Diego staff committed as referenced under "Expenditures" Updated 7126106 4-8 RESOLUTION NO 2006- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA SUPPORTING AND AUTHORIZING THE SUBMITTAL OF A JOINT APPLICATION FOR A REGIONAL ENTERPRISE ZONE TO THE STATE OF CALIFORNIA HOUSING & COMMUNITY DEVELOPMENT DEPARTMENT, APPROVING AN OVERALL BUDGET FOR YEAR ONE, AUTHORIZING STAFF TO PREPARE ALL REQUIRED DOCUMENTS TO SUBMIT THE JOINT APPLICATION, AND AUTHORIZING THE CITY MANAGER TO SIGN A MEMORANDUM OF UNDERSTANDING WITH THE CITY OF SAN DIEGO AND THE CITY OF NATIONAL CITY FOR THE ADMINISTRATION OF A REGIONAL ENTERPRISE ZONE. WHEREAS, the California Housing & Community Development Department [HCD] oversees the Enterprise Tax Incentives Program whose goal is to stimulate growth in economically ~epressed areas of the State; and WHEREAS, the City of Chula Vista [City] wishes to be designated as an enterprise zone and wishes to join with the City of San Diego and the City of National City [Partnership] and file ajoint application for an enterprise zone designation [Application]; and WHEREAS, the City has jurisdiction over the application area; and WHEREAS, the City supports job development, job creation, and economic development; and WHEREAS, the Application area has a history of high unemployment and low income; and WHEREAS, the multi-jurisdictional Application area is an economically depressed area and designation of the multi-jurisdictional application area as an Enterprise Zone is necessary in order to attract private sector investment to the multi-jurisdictional Application area; and NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Chula Vista, as follows: That the Council adopts a boundary of the proposed enterprise zone as described in Attachment A to the City Council Agenda Statement. 2. That the Council adopts an overall line-item budget for year one of the enterprise zone that reflects the sources and uses of funds, as described in Attachment B to the City Council Agenda Statement. 4-9 Resolution No. 2006- Page 2 3 That the Council finds that the application area is an economically depressed area and designation of the application area as an enterprise zone is necessary in order to attract private sector investment to the application area. 4 That the Council authorizes the joint Application for enterprise zone designation to be filed with the Housing & Community Development Department no later than September 6, 2006. 5 That the Council authorizes and supports job development, job creation, and economic development. 6. That the Council authorizes the Community Development Department to have staff available to maintain record-keeping, provide monthly updates on zone activities, and to discuss these activities with the Enterprise Zone Program auditors. 7 That the Council declares that the City of Chula Vista shall develop a self-evaluation process to measure its progress in meeting its goals and objectives; and this process shall be submitted to the HCD for review, approval, and inclusion in the Memorandum of Understanding between HCD and the Partnership prior to final designation as an enterprise zone. 8 That the Council agrees to complete all actions stated within the Application which apply to the City of Chula Vista should the proposed enterprise zone be awarded designation. 9 That the Environmental Review Coordinator has reviewed the proposed project for compliance with the California Environmental Protection Act and has determined that the proposed action was adequately covered in the previously adopted Final General Plan Update EIR. Thus, no further environmental review or documentation is necessary 10 That the Council directs City Manager to execute and submit the required documentation to the California Housing & Community Development Department for review and approval ofthe Application. II That the Council directs City Manager to execute a Memorandum of Understanding with the Partnership for the administration of the enterprise zone, as described in Attachment C to the City Council Agenda Statement. PRESENTED BY APPROVED AS TO FORM ~ ) (1fAL-> ~ _ Ann Moore City Attorney Ann Hix Acting Director, Community Development 4-10 THE ATTACHED AGREEMENT HAS BEEN REVIEWED AND APPROVED AS TO FORM BY THE CITY ATTORNEY'S OFFICE AND WILL BE FORMALLY SIGNED UPON APPROVAL BY THE CITY COUNCIL ~.tL~ Ann Moore City Attorney Dated: 8/ titm'<. A MEMORANDUM OF UNDERST ING WITH THE CITY OF SAN DIEGO FOR THE ADMINISTRATION OF A REGIONAL ENTERPRISE ZONE 4-11 ATTACHMENT C MEMORANDUM OF UNDERSTANDING FOR THE ADMINISTRATION OF THE SAN DIEGO REGIONAL ENTERPRISE ZONE PROGRAM A PARTNERSHIP AMONGST THE CITY OF CHULA VISTA. CITY OF NATIONAL CITY AND THE CITY OF SAN DIEGO This memorandum of understanding is for the purpose of administration of the San Diego Regional Enterprise Zone. This MOU is made and entered into on the _ day of 2006, by and between the City of Chula Vista [Chula Vista], City of National City [National City] and the City of San Diego [San Diego] [Partnership]. WHEREAS, the parties desire to encourage economic development and growth by supporting businesses and industries to expand or locate in the San Diego Regional Enterprise Zone, as well as provide jobs, goods and services to the inhabitants of this area. WHEREAS, the parties wish to have certain planned commercial and industrial areas of their respective jurisdictions designated as part of the EZ because of the potential for new and existing businesses within the EZ to claim certain state tax benefits, including a sliding scale credit for hiring certain disadvantaged workers, a sales tax credit for the purchase of specified manufacturing-related machinery and equipment, a net operating loss deduction, an accelerated expensing deduction, and other benefits which may be provided by the EZ. WHEREAS, in order to receive the benefits of an EZ, the goveming board(s) of the geographic area are required to enter into an administrative agreement, and the parties to this MOU wish to enter into this MOU in regard to the specific commitments made in the EZ Application submitted to the HCD. WHEREAS, the San Diego has received support from all jurisdictions and is hereby recognized as the administrative entity for operation of the Regional EZ, and has agreed to take the lead role in coordinating the overall administration of the EZ on behalf of the parties listed herein. NOW, THEREFORE, in consideration of their mutual promises as set forth herein, the parties hereby agree to the follOWing: This MOU will remain in full force and effect for the period of the initial designation of the Regional EZ, unless altered by mutual written agreement of the parties herein commencing with the notification by the California Housing & Community Development Department that the Regional EZ has been awarded final designation. The following are general actions to be undertaken through this administrative MOU by the parties named herein concerning the implementation and administration of the Regioanl EZ: San Diego will administer and coordinate all aspects of the EZ with regular input from all parties to this MOU as to the content, level of activity and participation. San Diego will coordinate business attraction and local business outreach programs with all parties to the MOU to include objectives, deliverables and expected outcomes, including quarterly progress reports concerning EZ activities. The Partnership will conduct economic development activities for the Regional EZ in mutual cooperation and coordination with all parties to the MOU in order to encourage the development of new businesses, including attracting and assisting businesses with location decisions. 4-12 San Diego will coordinate and provide ongoing, updated reports relative to the progress of implementing the Regional EZ, and will monitor various levels of benefits as generated by the businesses located in the EZ. San Diego will act as the Vouchering Agency for the Regional EZ and will provide direct staff assistance in the vouchering of all eligible new hires as submitted by businesses located within the EZ, including full documentation for verification of eligibility. San Diego will assist EZ businesses with screening, job placement, and hiring credit eligibility screening, so that individuals can be certified as "qualified employees" for vouchering purposes. Partnership will provide the required and timely staff support based upon the stated levels of commitment from each jurisdiction and as that support pertains to the assistance levels needed to serve existing and new buSinesses to the EZ. Partnership will assist the marketing efforts in the overall effort to attract and retain businesses focused on the benefits of the EZ. Partnership will provide current and relevant data as it relates to any changes in land use issues, infrastructure upgrades and planning, zoning within the EZ, fee structure, and any other jurisdictional actions that would impact the ability to assist existing businesses or new businesses locating in the EZ. Partnership will encourage elected officials to engage in active support of business development and job creation within the EZ. Partnership will facilitate the access and assistance to EZ businesses for permitting, infrastructure, expansion, and general business issues as they related to the operation and benefits of the EZ. Partnership will market the EZ to existing and prospective businesses in order to attract investment and job creation in the EZ. This MOU sets forth the intention of the Partnership and all parties herein to this agreement with respect to the Administration of the Regional EZ. It is the further intent of the parties to provide a general understanding of the levels of responsibility and interaction for each party to this agreement. This MOU is intended to serve as a guideline in accordance with the requirements of the Enterprise Tax Incentives Program, Housing & Community Development Department, State of California. This MOU is consistent with the legislative intent of the EZ Program and the Regional EZ. Upon notification by the State of California that the Regional EZ is received conditionally approved, the Partnership shall execute MOU's to distinguish areas of responsibility and regional collaboration for program administration as well as fiscal obligations for each jurisdiction for the duration of EZ designation. The costs incurred to administer the EZ will be supported by the parties as identified in the MOU. ACKNOWLEGED AND AGREED TO: City of Chula Vista City of National City City of San Diego 4-13