DEPARTMENT: Department of Planning and Community Development
DEPARTMENT HEAD: Bridgett White
COUNCIL DISTRICTS IMPACTED: 1, 2 & 5
SUBJECT:
Public Hearing and consideration of Ordinance A, Amending the boundary of the Inner City Tax Increment Reinvestment Zone (TIRZ) #11 and Ordinance B, Designating the new Hemisfair TIRZ #34.
SUMMARY:
After a Public Hearing, City Council is being asked to consider Ordinance A, Amending the Inner City TIRZ boundary and an Ordinance B, Designating the new Hemisfair TIRZ #34. The boundary amendment will reduce the size of the Inner City TIRZ by 113 parcels. The 113 parcels removed from the Inner City TIRZ and six additional parcels within the Hemisfair Park area will be used to form the new Hemisfair TIRZ.
These Ordinances will amend the boundary of the Inner City TIRZ and authorize amendments to the TIRZ Project and Finance Plans; designate and name the new Hemisfair TIRZ; create a five member Hemisfair TIRZ Board of Directors, establish effective start and termination dates for the Hemisfair TIRZ; approve the preliminary Hemisfair TIRZ Project and Finance Plans and create a Hemisfair Tax Increment Fund.
BACKGROUND INFORMATION:
In September 2009, City Council voted to establish the HemisFair Park Area Redevelopment Corporation (“HPARC”), a Local Government Corporation, to develop a plan and oversee the re-development of the Hemisfair site and adjacent areas. On February 9, 2012, City Council approved HPARC’s Framework and Master Plan as the conceptual strategy for the redevelopment of the original Hemisfair site. The Master Plan envisions balanced land use within the Hemisfair site, with mixed-use development, a blend of open space, plazas, courtyards and civic, commercial and residential uses. As part of the Master Plan, HR&A Advisors, an industry-leading consulting firm, providing services in real estate and economic development, was tasked with preparing an area market scan and financial model. A key recommendation of the financial model was the designation of a Tax Increment Reinvestment Zone which could be used as a funding source for both operating costs and capital costs.
The boundary of the Inner City TIRZ, which was designated by City Council in December of 2000, currently includes much of the Hemisfair Park area. The proposed designation of a TIRZ dedicated to the Hemisfair Park will require an amendment to the boundary of the Inner City TIRZ.
On March 21, 2014, representatives from HPARC made a presentation to the Inner City TIRZ Board of Directors requesting the Inner City TIRZ boundary be amended to remove the Hemisfair Park and numerous adjacent parcels with the intention of creating a new city-initiated TIRZ to support the Hemisfair park redevelopment. After brief deliberations, the TIRZ Board directed staff to work with HPARC to review and analyze the proposed boundary amendment and develop a proposal to bring back to the Board at a later date.
Staff’s review of the initial proposal determined that the impact to the Inner City TIRZ would be too great because the proposed boundary would remove several high value properties that generate significant tax increment for the Inner City TIRZ. Over the following year, staff in cooperation with HPARC, developed a number of different boundary scenarios in an effort to identify a boundary that would have limited impact on the Inner City TIRZ while still meeting the objectives of HPARC. Staff vetted several scenarios through numerous City Departments including the City Manager’s Office, the Center City Development and Operations (CCDO) Department, Finance, and the City Attorney’s Office. After additional discussions with City leadership including briefings to impacted City Council members and presentations to the TIF Governance Committee in April and June of 2015, TIF staff arrived at a final proposal.
On November 13, 2015, staff presented the proposed boundary amendment to the Inner City TIRZ Board. The Board approved staff’s recommendation and directed staff to move forward with City Council consideration.
In March of 2016, TIF Staff sent correspondence to the following Taxing Entities notifying them of the City’s intent to designate a new Tax Increment Reinvestment Zone - Bexar County, University Health Systems, San Antonio ISD, Alamo Colleges and the San Antonio River Authority. At this time the City of San Antonio is the only Participating Taxing Entity considering participation in the Hemisfair TIRZ.
ISSUE:
Inner City TIRZ Boundary Amendment
In accordance with Chapter 311 of the Tax Code, the “TIF Act”, the boundaries of an existing reinvestment zone may be reduced or enlarged by ordinance or resolution of the governing body of the municipality that created the zone. This action will amend the boundary of the Inner City TIRZ and authorize staff to make amendments to the TIRZ Project and Finance Plans incorporating the changes to the boundary.
The proposed boundary amendment has a minimal impact to the overall size of the Inner City TIRZ. The Inner City boundary, located primarily on the near Eastside but extending into Downtown and Southtown, is currently made up of 5,016 parcels totaling over 2,822 parcel acres. The proposed boundary amendment (see attached map) would remove 113 parcels from the Inner City TIRZ. These parcels make up approximately 89 parcel acres or roughly 3% of the geographic area of the TIRZ.
The financial impact to the Inner City TIRZ is small but not insignificant. The 113 parcels proposed for removal would represent a reduction of captured taxable value of $13,851,070 based on 2015 tax values. The current captured taxable value of the Inner City TIRZ is $740,991,422. If approved, the boundary amendment would reduce the captured taxable value of the Inner City TIRZ by 2%. The captured taxable value is the taxable value of the parcels that make up the TIRZ minus the base value of those parcels established at the time of designation. The City’s tax rate is applied to the captured taxable value to determine the tax increment to be collected. The proposed boundary amendment would reduce the tax increment collections of the Inner City TIRZ by approximately 2% annually. Based on 2015 values, this represents $77,326 out of an estimated $4,136,733 of total tax increment collections for the Inner City TIRZ.
The following table illustrates the geographic and financial impact to the Inner City TIRZ:
Designation of Hemisfair TIRZ
The TIF Act, under Section 311.003, allows a municipality to designate a geographic area as a TIRZ “to promote development or redevelopment of the area if the governing body determines that development or redevelopment would not occur solely through private investment in the reasonably foreseeable future”. While private investment will be an integral part of the future of Hemisfair; it is clear that without significant public investment, redevelopment would not be possible. Designation of the TIRZ is an essential component to the future success and long term sustainability of the park. Coupled with other potential funding sources, revenue generated by the TIRZ will help HPARC to ultimately become self-sufficient.
The TIF Act also requires, per Section 311.005, that an area to be designated as a reinvestment zone must “substantially arrest or impair the sound growth of a municipality in its present condition.” The Hemisfair Master plan, in the following statement, has made a strong case that Hemisfair Park, under its current configuration, meets these criteria.
“Currently, the Hemisfair site is disconnected from Downtown, separated by the wide streets of Alamo, Commerce, Market, as well as by the impenetrable walls of the Henry B. Gonzalez Convention Center which occupies Hemisfair’s northern edge. In addition to these factors, Cesar Chavez Blvd, the Institute of Texan Cultures and the federal properties form a barrier to the Lavaca residential neighborhood to the south. Furthermore, the elevated IH-37 highway and limited access points across the highway separate Hemisfair from neighborhoods to the east such as Dignowity Hill, Jefferson Heights and Denver Heights.
Internally, the site is fragmented and disjointed. Surviving pre-1968 buildings have been stripped of their historic context and many lay abandoned and boarded up. Several of the buildings from the 1968 Expo are large in scale and are a stark contrast to the older, historical structures. Additionally, several more buildings were added to the site since 1968 in an opportunistic way. The result is a confusing and uncoordinated mix of buildings that lacks cohesiveness.”
Hemisfair Park, currently underused and neglected by visitors and locals alike, has the potential to “catalyze the re-invigoration of Downtown.” The designation of the Hemisfair TIRZ is a key component to the success of this important redevelopment effort.
The action being requested of City Council, in addition to the amendments to the Inner City TIRZ boundary will designate the 119 parcel City-initiated “Hemisfair” TIRZ # 34. This item will officially name the zone and create and appoint a five member Board of Directors for the zone to include the following Ex-Officio members:
• Assistant City Manager over the Center City Development & Operations Department
• Director of the Finance Department
• Director of the Parks Department
• CEO or Designee of the Hemisfair Park Area Redevelopment Corporation
• Finance Chair of the Hemisfair Park Area Redevelopment Corporation
It will also establish the effective start date of February 2, 2017 with a 20 year term and a termination date of September 30, 2037. In addition it will approve the preliminary Project and Finance Plans and create a tax increment fund.
The 119 parcel Hemisfair TIRZ which encompasses approximately 121.63 parcel acres will be generally bound on the north by Commerce Street, the west by Navarro, the south by Lavaca and on the east by Interstate Highway 37. A map of the proposed boundary and a list of the parcels are attached.
The City is the only participating taxing entity, with the City’s current tax rate per $100 valuation at $0.558270. This is expected to produce an annual revenue of $6,095.60 in Fiscal Year 2018. A 3.25% growth in values is assumed based on analysis of historic and projected valuation growth. The term of TIRZ is 20 years and in its final tax year the annual revenue is expected to be $3,456,910.13. The Projected Tax Increment revenue over the life of the TIRZ will be approximately $38,702,953.00.
ALTERNATIVES:
City Council could decide to not remove the Hemisfair parcels from the Inner City TIRZ; however, this would prevent the designation of the Hemisfair TIRZ. Because of the unique nature of the Hemisfair redevelopment project it makes sense to have a TIRZ focused solely on the activities related to it. Additionally, denying the designation of the Hemisfair TIRZ would prevent HPARC from eventually becoming self-sustaining, continuing its reliance on other sources of revenue including the Inner City TIRZ and the general fund.
FISCAL IMPACT:
There is no immediate fiscal impact to the City’s general fund; however, the proposed action will reduce the captured taxable value of the Inner City TIRZ by approximately $13,851,070.00 which equates to roughly $77,326.00 in annual tax increment. Additionally, future taxes collected on the captured taxable value of parcels within the newly designated Hemisfair TIRZ will be approximately $38,702,953.00 over the life of the TIRZ and deposited in the Hemisfair TIRZ fund to be used for eligible expenses within the TIRZ boundary.
RECOMMENDATION:
Staff recommends approval of Ordinance A, Amending the Inner City TIRZ boundary authorizing staff to make necessary changes to the Inner City TIRZ Project and Finance Plans and Ordinance B, Designating the new Hemisfair TIRZ 34 which will, create a five member Hemisfair TIRZ Board of Directors, establish effective start and termination dates for the TIRZ, approve the preliminary Project and Finance Plans and create a Tax Increment Fund.