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HomeMy WebLinkAbout2010/07/13 Item 3 CITY COUNCIL AGENDA STATEMENT ~ \ 'f:.. CITY OF '-~~ (HULA VISTA ITEM TITLE: SUBMITTED BY: REVIEWED BY: JULY 13, 2010, Iteml RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA TO 1) SEEK FINAL DESIGNA nON OF THE SAN DIEGO REGIONAL ENTERPRISE ZONE; 2) MODIFY AND EXPAND THE BOUNDARY OF THE SAN DIEGO REGION ENTERPRISE ZONE; AND 3) AUTHORIZE THE CITY MANAGER TO SIGN AND SUBMIT ALL REQUIRED DOCUMENTS TO THE STATE HOUSING AND COMMUNITY DEVELOPME~J BEP ARTMENT ASSISTANT CITY MANAGE~EVELOPMENT SERVICES DIRECTOR ~ CITY MANAGER r 4/STHS VOTE: YES D NO ~ SUMMARY In 1992, the City of San Diego received approval for the South Bay Enterprise Zone. In 2000 and again in 2004, the South Bay Enterprise Zone was expanded to include properties along the redevelopment areas of the cities of Chula Vista and National City. In August 2006, the Chula Vista City Council approved a resolution supporting and authorizing the submittal of a joint application to the State of California Housing and Community Development Department (HCD) for a new San Diego Regional Enterprise Zone (SDREZ) designation, with the cities of Chula Vista, San Diego and National City (Partnership). The Partnership received "Conditional Approval" from HCD on November 3, 2006 and have now completed all the necessary steps for seek final approval designation. Once an Enterprise Zone (EZ) has been granted final designation, it is eligible to expand its boundary by 15%. An EZ may also modify the boundary to include areas that may have been eligible for inclusion in the original designation. This action will allow the City to submit to HCD for final designation, expand the enterprise zone, and modify the original boundary. 3-1 JUL Y 13, 2010, Item~ Page 2 of 5 ENVIRONMENTAL REVIEW Resolution No. 2006-248 adopted by City Council in August 2006, states that the City's Environmental Review Coordinator has reviewed the proposed project for compliance with the California Environmental Quality 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 was necessary from Chula Vista. In March 2009 Council accepted the certified EIR for the SDREZ, as required by the State of California HCD for final EZ designation. RECOMMENDATION Council adopt the resolution. BOARDS/COMMISSION RECOMMENDATION N/A DISCUSSION The legislative purpose of the EZ program is to "stimulate business and industrial growth in the depressed areas of the State". Other goals include the establishment of 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." Local jurisdictions must provide additional local incentives throughout the I5-year designation. These additional incentives included expedited permit processing, marketing assistance, permit fee deferrals and access to loan programs. Benefits of the SDREZ Program Businesses located within the SDREZ may receive individual or corporate state tax incentives/credits to reduce a company's state tax liability dollar per dollar. Any unused tax credits may be carried forward to reduce future tax year's liabilities. Exhibit "3" (SDREZ Fact Sheet) provides a brief description of the state tax benefits available to SDREZ businesses. The EZ program has made a significant impact on the local economy. The SDREZ program is a fifteen (15) year designation and offers tremendous business incentives and helps the region retain employers and attract new ones. In Fiscal Year 2009, local Chula Vista businesses, utilizing the Hiring Tax Credit, hired over 800 employees. Chula Vista staff and its partner agencies will continue to conduct outreach efforts to inform businesses of EZ program benefits. Enterprise Zone Boundary Modification City staff has had preliminary discussions with HCD staff regarding certain areas in western Chula Vista that were not included in the EZ boundary. These areas are adjacent to the current EZ boundary, and have created islands of commercial and industrial properties that are surrounded by similarly zoned land which was included within the EZ boundary. These areas, identified as Modification Areas in Exhibit "I", are located along 3-2 JULY 13, 2010, Item~ Page 3 of 5 Broadway between J and L streets, Third Avenue between D and J streets, along Bay Boulevard south of J Street, and along Main Street east of Beyer Way. HCO staff has indicated that some or all of these areas may be considered a boundary modification of the original EZ and will be reviewed as part of an EZ expansion approval process. For the boundary modification areas that are approved, the effective date of the designation for these properties would be the same as the conditional approval date for the Zone. This would allow eligible businesses in these areas to retroactively seek EZ tax benefits. Should HCD approve only a portion of the proposed modification areas, then staff would request to HCD that those unapproved areas be reviewed and approved as part of the EZ expansion area approval process which is described in detail below. Enterprise Zone Expansion The State EZ Act allows the expansion of the EZ up to 15% of the original acreage at any time during the tifteen year designation after final EZ designation is awarded. Expansions are effective the date HCD approves the expansion request. The exp~nsion must meet the EZ Act expansion requirements and comply with the economic strategies stated in the SOREZ application. Further, in an EZ that contains multiple jurisdictions, all of the jurisdictions must approve each others' expansion proposals. Since the conditional designation in 2006, City staff has spoken individually with and made presentations to the local business organizations such as the Chula Vista Chamber of Commerce, the South County Economic Development Council, the Third Avenue Village Association, and the Broadway Business Association regarding the City's ability to expand the EZ. Both the South County Economic Development Council and the Chula Vista Chamber of Commerce assist SDREZ with outreach efforts to the local business community on the benefits of the EZ program. City staff has also spoken with numerous individual business owners, real estate brokers, property managers and property owners about the areas for potential expansion. The expansion capacity for the entire SOREZ is approximately 5,200 acres. The proposed SDREZ expansion includes areas identitled that comply with the expansion requirements within the cities of Chula Vista, National City, and San Diego. The expansion request at this time shall not exceed 3,500 acres for all three cities. The expansion for the City of San Diego will not exceed 2,500 acres, the National City expansion will not exceed 300 acres and the Chula Vista expansion will not exceed 700 acres. The City of Chula Vista's portion of the SDREZ totals 5,002 acres. Based upon the City's total EZ acreage, the City can expand the zone by 750 acres. If the entire Boundary Modification described above is approved, the City's total acreage would increase to 5,337 acres. Under this scenario, the City could expand the EZ by 800 acres. The final expansion and modification acreages will be determined only after an extensive review by HCD. Because of this uncertainty, staff is not seeking to expand to the maximum potential acreage allowed at this time. Staff will return at a later date to seek authorization to expand to the maximum amount allowed by the EZ Act. 3-3 JULY 13,2010, Iteml Page 4 of 5 In accordance with the EZ Act, the original EZ boundary was required to consist of contiguous properties, For expansion areas, a noncontiguous area may be acceptable if HCO finds that: a. The noncontiguous area is needed to implement the EZ's economic development strategy; and b. The excluded areas between the proposed new boundaries would not, based on the EZ's economic development strategy, also benefit from the expansIOn. The expansion would include the Otay Valley Redevelopment Project Area, the Eastlake Business Park, the Otay Ranch Town Center, and those areas of western Chula Vista not approved by HCO as part of the Boundary Modification (Exhibit "2" SOREZ Chula Vista 2010 Expansion #1). The proposed expansion areas iri the Otay Valley Redevelopment Project Area, the Eastlake Business Park and the Otay Ranch Town Center are noncontiguous with the current EZ boundary. In addition to meeting the noncontiguous criteria stated above, the proposed expansion includes areas that meet some or all of the following economic strategic priorities: 1) Are within or adjacent to the City's redevelopment project areas; and/or 2) identified as "Employment Land" in the City's adopted 2006 General Plan; 3) are areas of the City's business districts that are under utilized or are experiencing high vacancy rates; and/or 4) meet stated strategic economic development goals and objectives for Chula Vista and the SOREZ. The City's expansion areas have been identified as the areas that are most vital for the City's economic prosperity. These properties are entire business/industrial business parks that include significant base sector companies, i.e., manufacturers, technology companies, distribution companies, and international trade companies, employing the region's highest paying workers. These are also the base sector industrial employers that are very mobile and frequently move out of the city and out of the state when more attractive locations are presented. The retention and expansion of these business types is essential to ensure economic prosperity for the region. Conclusion: The official designation of the SOREZ by the State HCO will allow a significant economic and employment incentive program to continue in the cities of Chula Vista, San Oiego and National City. A cooperative framework for managing this unique opportunity to provide State business tax incentives in the region is formalized in the Memorandum of Understanding (MOU) between the SOREZ Partners that was approved by the City Council in May, 2010, as well as the SOREZ Partners' commitment to the fifteen (15) year SOREZ designation. The SOREZ is a special opportunity for the City to continue to implement economic development and job creation program incentives in areas within the region with significantly high levels of unemployment and/or help residents of low and moderate income census tract communities to obtain employment. 3-4 JULY 13, 2010, Item~ Page 5 of 5 Because economic development is regional in nature, continuing the collaborative relations with other local cities and the state to offer business incentives increases the South County region's ability to compete with other regions, create new jobs and increase investment in our county, The SDREZ program otlers tremendous business incentivcs and helps the region assist employers and attract new ones as well as address employment needs of the region. DECISION MAKER CONFLICT Staff has reviewed the property holdings of the City Council and has found that Councilmembers Castaneda and Ramirez have property holdings within 500 feet of the boundaries of the existing Enterprise Zone. However, as this decision will affect ten percent or more of all property owners or all residential property owners in the jurisdiction of the official's agency, pursuant to California Code of Regulations section I 8707. I (b)(l)(B )(i), the economic effect on the public ot1icial would likely be considered indistinguishable from that of the "public generally" allowing participation in voting on this item; however, the City Attorney has recommended that a conservative approach be taken on this matter and believes that the two Councilmembers should declare conflicts. This conflict check was conducted based on Councilmember McCann's property holdings as of July 21, 2009, prior to his temporary departure from the Council for active military duty. CURRENT YEAR FISCAL IMPACT The City of San Diego administers the SDREZ on behalf of the Partnership. In addition, Chula Vista Economic Development staff expends time marketing and promoting the program to local businesses. The Partners share the administrative costs for San Diego's staff time required to administer the program, during this fiscal year. The Operating MOU requires the City to pay annually its proportionate share of for the City of San Diego's administrative costs. The Economic Development Division's Fiscal Year 2011 budget includes $48,500 for its proportional share of the costs for the current program year. ONGOING FISCAL IMPACT The operating agreement between the Partners requires re-examining the administrative costs of the program every five years. The City of San Diego recently increased the administrative fees for hiring tax credit vouchers from $50 per voucher to $90 per voucher. It is anticipated the increased number of vouchers and the fee increases will create a funding source to lower costs for all of the Partners, thus reducing the annual $48,500 impact to the City's General Fund in future years. A TT ACHMENTS 1. Moditlcation Map 2. Expansion Map 3. SDREZ Fact Sheet Prepared by Craig Rub, Principal Economic Development Specialist, Development Services epartment /Economic Development Division 3-5 Attachment 1 CHUlA VISTA ENTERPRISE ZONE 1500 3000 6000 o - --- Feet ,.;'~- j I /' " i --r--"\, ! f, ,~ , ," : I - '- - : r-t--..r , - LEGEND CZ]Enterprisezane ~MQdifICl~OnArN CZ]atyofChulaVista .......NOTE' Th'm..""".d'd",~..d,,,,~,". ,",00""''''''',,"''''''''''"''''''''''''' ''''''''''''''''''''''m...''''',"~'~''' d"",'I.'~.;_J""'<I,,,''''Th. {Jtycrl('""\".""""....,"'~",,. ~..""~""~"""."..".,,.,,.,"" ""'~"'"''"'''.....".""...."' 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'C" . , ....,." ;,: -, . :"'. ., '~; " ~ - q,:" '\ ,- Attachment 3 San Diego Keglonal Enterprise Zone www.sandiegoregionalez.org A total of$1.7 billion worth of investment has been made in San Diego-area Enterprise Zones. More than 20,000 jobs have been generated, and hundreds of businesses have received expedited permit applications. Thousands more have received technical or financial assistance. An Enterprise Zone is a geographically designated area in which businesses can receive substantial state tax breaks and other benefits. Enterprise Zones were created.in Californiato stimulate business investments and to increase job opportunities in areas of high unemployment. San Diego is home to one of 42 Enterprise Zones statewide. San Diego Regional Enterprise Zone: Establishedin 2006, the One Zone is a regional economic development program incorporating portions of the City of San Diego, signijicant portions of the City of ChuIa Vista and the City of National City. ' Advantalles of the Enterprise, Zone Program are the tax savings and other incentives including: . Sales or Use Tax Credit; A tax credit against tpe purchase of new manufacturing, assembly, data processing or communications equipment equivalent to the amount of sales or use tax, or up to $1.55 million annually. . Hiring Credit: A tax cregit on the wages to qualified new employees over a five-year period (up to 50 percent in the first year, 40 percentin the second year, etc.) This credit could exceed $34,000 per eligible employee. . Accelerated Depreciation Deduction: The option to accelerate depreciation on business property. A business may treat 40 percent of the cost of qualified property as a business expense in the first year it is placed into service fora maximum deduction of $2o,000per year, whichever is smaller. . Net Interest Deduction for Lenders: Allows lenders a deduction on the net interest earned from loans made to Enterprise Zone businesses, including business loans, mortgages and loans from noncommercial sources. Other advantages include: . No-cost job referral service'used to find qualified employees whose wages can be claimed as tax credits. . Development permit expediting and assistance, . Tax savings for Enterprise Zone employees. . Access to specialized technicaL and financial assistance programs. For more infotInation, visit www.sandiegoregionalez.org SAN DIEGO REGIONAL ~l~ ~ ~ an' Of OiUlA VJSIA ENTERPRISE ZONE ~,," ~- Unif'J.ed Port of San Diego !: , [, I' i' I; I' " :~- CA.LIFOJl:'f1~_~ ~~l\W.QTYf ~~~ h p 3-8 [; [ , , RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA TO I) SEEK FINAL DESIGNATION OF THE SAN DIEGO REGIONAL ENTERPRISE ZONE; 2) MODIFY AND EXPAND THE BOUNDARY OF THE SAN DIEGO REGIONAL ENTERPRISE ZONE; AND 3) AUTHORIZE THE CITY MANAGER TO SIGN AND SUBMIT ALL REQUIRED DOCUMENTS TO THE STATE HOUSING AND COMMUNITY DEVELOPMENT DEPARTMENT WHEREAS, in 1986 and 1992 the City of San Diego received approval for two enterprise zone designations to otler business incentives to retain employers and attract new ones to the area; and WHEREAS, in 2000 and again in 2004, the South Bay Enterprise Zone was expanded to include properties along the San Diego Bayfront redevelopment areas of the cities of Chula Vista and National City, and the cities of Chula Vista and National City, in collaboration with the San Diego Unified Port District, provided funding to the City of San Diego to support the cost of managing the program and marketing the zone; and WHEREAS, the City Council adopted Resolution No. 2006-248, authorizing submission of an application to the California Department of Housing and Community Development [HCD] for a San Diego Regional Enterprise Zone [SDREZ] designation for the cities of San Diego, Chula Vista, and National City [SDREZ Partners], which is competitive and based on economic need (e.g., distressed communities, need for private investment, high unemployment, and low- income census tracts); and WHEREAS, in November 2006, the SDREZ Partners were notified that it was awarded a conditional enterprise zone designation; and WHEREAS, the SDREZ Partners have satisfied all required designation conditions and are seeking a tinal15-year designation of the SDREZ through: (I) the execution of the necessary "Memorandum of Understanding for Operation of the San Diego Regional Enterprise Zone" between the SDREZ Partners outlining administrative roles and responsibilities; (2) the execution of the necessary "Memoranda of Understanding between the California Enterprise Zone Program and the San Diego Regional Enterprise Zone" ; and (3) submitting the two agreements to HCD, which when accepted by HCD will result in the award of final designation for theSDREZ; and 'WHEREAS, as grantee of the SDREZ designation, the City of San Diego will assume lead-agency responsibility for the administration ofthe SDREZ; and 3-9 Resolution No. Page 2 WHEREAS, California Government Code Sections 7073 and 7074 allow for each California designated enterprise zone area to be expanded contiguous to the current enterprise zone by an aggregate amount not to exceed fifteen (15) percent of the geographic area within the boundaries of the EZ as originally designated by HCD; and WHEREAS, the SDREZ, as originally designated by HCD encompassed an area of 34,380 acres; and WHEREAS, the SDREZ could be expanded by an amount not to exceed 5,517 acres; and WHEREAS, at this time the planned expansion within the cities of San Diego and National City, combined, will not exceed 2,800 acres; -and WHEREAS, at this time the planned expansion within the City of Chula Vista will not exceed 700 acres and will include portions of areas of the Otay Valley Redevelopment Project Area, the Eastlake Business Park, the Otay Ranch Town Center, and those areas of western Chula Vista; and WHEREAS, the SDREZ agrees to submit a written request to HCD to have its current enterprise zone boundaries expanded; and WHEREAS, land included in the proposed expansIOn IS zoned for industrial or commercial use; and WHEREAS, the SDREZ will provide the same or equivalent local incentives to the expanded and modified areas as those currently provided to the existing SDREZ properties; and 'WHEREAS, basic infrastructure, including, but not limited to, gas, water, electrical services and sewer systems, is available to the proposed expansion area. NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Chula Vista, as follows: I. That it adopts the Resolution approving the submission to HCD for final designation approval the SDREZ. 2. That it approves the submission of a requested Boundary Modification for the SDREZ to increase the EZ by 330 acres. 3. That it approves the submission of a requested Boundary Expansion for the SDREZ in an amount not to exceed 700 acres for the City of Chula Vista, 300 acres for the City of National City and 2,500 acres for the City of San Diego. 3-10 Resolution No. Page 3 4. That it authorizes the City Manager to execute all documents necessary to finalize the SDREZ and to modify and expand the boundary of the SDREZ. Gary Halbert, AICP, PE Assistant City Manager/Development Services Director Presented by 3-11