HomeMy WebLinkAbout10/07/2008 11 Commercial Revitalization Deduction - Projects Approval . BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. / I
For Meeting Of: October 7, 2008
ITEM TITLE: Approve projects for the 2008 allocation of the Commercial Revitalization
Deduction, and forward to state of Washington for certification.
SUBMITTED BY: Michael Morales, Deputy Director of CED
CONTACT: Michael Morales, 575 -3533
SUMMARY EXPLANATION:
The Commercial Revitalization Deduction (CRD) is a federal Renewal Community tax incentive
that allows accelerated depreciation of newly constructed or rehabilitated commercial buildings
within the RC. The CRD is strictly a tax incentive for investment, and is not a source of grant or
loan funds. Each year, the city receives a $12 million allocation of CRD that must be awarded
within the calendar year.
The 2008 CRD application cycle was opened in the month of August with a submittal deadline
ilo of September 19. The city received over $33 million in applications, the highest amount in the
history of the program.
The City Council has appointed the Commercial Revitalization Deduction Allocations Committee
to recommend allocation amounts for projects. After a preliminary staff review for eligibility
issues, the committee reviews, scores and ranks the proposals for allocation. The committee's
priority consideration for projects is as follows:
1. Complete and in service
2. Under construction and scheduled for completion in current year.
3. Under construction, not scheduled for completion by year end.
4. Building permit approved, and construction pending/imminent
5. Permits pending
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Resolution X Ordinance _ Contract _Other (specify):
Funding Source
Approval for Submittal: .S- 7 �\ a
City anaaer
STAFF RECOMMENDATION: Staff recommends approval of the allocations.
40 BOARD RECOMMENDATION: CRD Allocations Committee and Council Economic
Development Committee recommend approval.
COUNCIL ACTION:
1
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Due to the increased demand on the program, the committee typically does not have enough
CRD allocation authority to consider projects that are not under construction. This year, the
number of projects that are either complete or substantially complete exceeded the $12 million
of CRD available. Only two projects, Holiday Inn and Neches Hotel, are not under construction,
and neither project has secured a building permit. For this reason, they were not given priority
consideration for funding.
The list of recommended projects for 2008 CRD allocations is as follows:
1. Tony Ha Steakhouse $ 1,254,087
2.* Columbia River Bank* $ 1,392,908*
3. GC II, LLC - "Sonic Drive -In" $ 900,000
4. Rothe Fruit — Jewel Apple $ 1,665,000
5. PPB & SP, LLC — "2nd Street Grill" $ 554,440
6.* Yakima Residences, LLC - Ledgestone Hotel* $ 4,044,617*
7. YMSCC "JEM Building (Great Western Bldg) $ 550,000
8. Yakima Co -Op $ 1,144,801
9. Mach V (former Petco Bldg) $ 494,147
Total recommended CRD allocations $12,000,000
* — Project received a partial award in 2007 when under construction, and is eligible for
remainder of award because the building was not placed into service until 2008.
Upon City Council approval, the list of projects will be forwarded to the state Department of
411
Community, Trade and .Economic Development for ratification. After passage of a 45 -day
appeal period, CTED will then provide a binding commitment letter and certificate to the CRD
awardees for verification with the Internal Revenue Service. Another $12 million allocation of
CRD will be available for the city to award in 2009, which is currentlyy scheduled as the final year
of the program.
The City of Yakima was designated a federal Renewal Community (RC) in January 2002, and
the current designation is set to expire on December 31, 2009. The RC designation provides a
variety of tax incentives to RC businesses located in Census Tracts 01, 02, 03, 06, 07 and 15.
These benefits include: RC Wage Credits ($1500 per employee), increased Section 179
Expensing ($35,000 annually), Zero Capital Gains Rate on qualified assets, and the
Commercial Revitalization Deduction (CRD).
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III RESOLUTION NO. R -2008-
A RESOLUTION approving projects for the 2008 allocation of the federal Renewal
Community Commercial Revitalization Deduction, and directing the City
Manager to submit the list of approved projects to the Washington State
Department of Community, Trade and Economic Development (CTED)
for ratification.
WHEREAS, economic development is a priority of the City of Yakima, and the City
intends to approach economic development on a comprehensive basis involving public, private
and community -based efforts to achieve new investment and redevelopment in the City; and
WHEREAS, the City has been formally designated a Renewal Community under the
Empowerment Zones and Renewal Communities Initiative by the federal government; and
WHEREAS, the Renewal Communities Program includes, in part, an opportunity for
Renewal Communities to participate in a Commercial Revitalization Tax Deductions plan
whereby certain local development projects (including certain rehabilitation of existing buildings)
may qualify for accelerated partial deduction of development costs by way of enhanced federal
income tax deductibility; and
111 WHEREAS, the City of Yakima retains responsibility for developing and administering
locally a Qualified Allocation Plan for evaluating eligible development activities within the
community; and
WHEREAS, the City of Yakima has an allocation of $12 million in Commercial
Revitalization Tax Deductions for the year 2008 that must be allocated by December 31, 2008;
and
WHEREAS, applications for the 2008 Commercial Revitalization Deduction were made
available to, and were received from the public; and
WHEREAS, a total of fourteen (14) applications were submitted to the City for
consideration of the Commercial Revitalization Deduction; and
WHEREAS, eight (9) project applications were determined to be eligible to receive a
2008 Commercial Revitalization Deduction allocation; and
WHEREAS, the City Council appointed Commercial Revitalization Deduction Allocations
Committee reviewed and recommends approval for the nine projects in the amount of
$12,000,000; and
WHEREAS, the City Council finds it is in the best interests of the City of Yakima to
approve and submit for federal Commercial Revitalization Deductions the following projects:
ill
1. Dr. Tony Ha — "Tony's Steakhouse" $1,254,087
2. Columbia Bancorp — "Columbia River Bank — Yakima Branch" $1,392,908
3. GC II, LLC - "Sonic Restaurant" $ 900,000
4. Aileene Roche Irrevocable Insurance Trust — "Jewel Apple" $1,665,000
5. PPB & SP, LLC — "2nd Street Grill" $ 554,440
6. Yakima Residences, LLC — "Ledgestone Hotel" $4,044,617
7. Yakima Mali Shopping Center Corporation — "JEM Building" $ 550,000
8. Yakima Cooperative Association, Inc. $1,144,801
9. Mach V Properties, LLC (former Petco Building Rehabilitation) $ 494,147
Now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA:
1. The City Council approves the projects recommended herein to receive allocations
from the 2008 federal Renewal Community Commercial Revitalization Deduction in
the amount of $12,000,000; and
2. The City Manager is hereby authorized and directed to submit the list of approved el
projects to the Washington State Department of Community, Trade and Economic
Development for ratification.
ADOPTED BY THE CITY COUNCIL this 7 day of October, 2008
David Edler, Mayor
ATTEST:
City Clerk