Incentive programs, cultural district framework headed back to Council after postponement

City Council appears set to vote on a trio of Economic Development Department programs that were postponed from the Sept. 12 meeting because of concerns that Council members hadn’t had enough time to review and suggest changes. The delay was due in part to the recent trend of canceling work sessions on the Tuesday prior to a full Council meeting, which for years had provided staff and the 11-member body extra time to discuss policies that were likely to come to a full vote.

The three programs are: a place-based incentive program aimed at meeting community needs and creating or preserving culturally important spaces; an expansion an adjustment of the city’s comprehensive business incentives as governed by state law; and a framework that could standardize and streamline the creation of cultural districts throughout the city.

The place-based program proposes four types of developments and businesses eligible for an annual property tax refund, aimed at compensating for reduced rents or revenue shortfalls in spaces designated for music venues, arts spaces, legacy businesses or other entities that fulfill community needs.

The four categories would include: new commercial or mixed-use developments that allocate space for priority businesses; community impact businesses providing essential services; cultural preservation initiatives where existing businesses receive incentives for support; and projects offering transformational infrastructure, particularly in city-led development efforts.

On the revision of the state’s Chapter 380 agreements, which were last updated in 2018, staff aimed to create more objective compliance metrics, improve project scoring and revise the application processes to better suit small businesses.

One significant change under consideration is the creation of a distinct small business category, since small businesses are now defined as those with 100 or fewer full-time employees. The job creation criteria for small and micro businesses could also be revised, from a minimum of five new jobs to one job or 10 percent growth of the company’s workforce, whichever is greater. For larger businesses, the job creation threshold will be scaled based on workforce size, requiring larger companies to create a minimum of 75 new jobs or 10 percent of their workforce.

Another recommendation could adjust the financial incentives, with the current housing stipend of $1,000 per job likely converted into a bonus, likely encouraging companies to offer employee bonuses as a result. Large businesses would be required to invest a minimum of $2 million in property improvements to qualify for the incentives, with the eligibility term for receiving awards proposed to 10 years for all businesses.

In response to a question from Council Member Alison Alter on Sept. 12 about low participation in some of the incentives programs over the past six years, business process consultant Arnie Jacob said rapid economic growth in the aftermath of the Covid-19 pandemic didn’t make the incentives a necessity for many businesses.

“We weren’t really aggressive with the program because we didn’t need to be. Companies were coming regardless of incentives,” he said. “We had an opportunity to unwind Category One that lumped large businesses in. … A lot of the program requirements in terms of compliance were very onerous for small businesses but made sense for large businesses. We’re unwinding, hoping that there’s more opportunity to use an alternative way which will help small businesses.”

The cultural district framework seeks to simplify the process to create new districts, while also creating uniform guidelines for how the city can fund and otherwise support those areas to enhance their cultural and economic impact. Possible city tools available would include branding support, equitable funding recommendations for cultural districts, the use of value recapture tools including Public Improvement Districts and special revenue funds to capture parking revenues from district-supported businesses and cultural venues.

Council Member Natasha Harper-Madison, who led the East 12th Street Merchants Association prior to her election to Council, said framework is necessary because most cultural organizations are challenging to organize and sustain for entrepreneurs who are already focused on running their own businesses.

“There’s the legal component, you have to form the board, follow your bylaws. … It really is a very involved process to get a merchants association started and, maybe more importantly, to keep a merchants association going because of the level of commitment,” she said. “If I’m speaking candidly, what you get in exchange for that level of commitment sometimes feels not worth all the effort, but that’s what it looks like to get a thing started.”

Photo by Djmaschek, CC BY-SA 4.0, via Wikimedia Commons.

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