STATEMENT OF ISSUE
On November 20, 2007, the Community Redevelopment Agency (CRA) Board approved the second amendment to the interlocal agreement between the City, County and CRA that governs the Downtown District Community Redevelopment Area. The approved amendment included two changes:

(1) Revises the way each local government’s annual tax increment funding (TIF) contribution to the Downtown District is described/calculated; and

(2) Eliminates the requirement for supplemental contributions by the City and County to the Downtown District Trust Fund.

Following CRA Board approval, both City and County staff were to bring the changes to the City Commission and the County Commission for approval since the interlocal agreement is between the City, County and CRA. However, a recent review by both staffs determined this did not happen. Following City Commission approval, County staff will present the second amendment to the County Commission later this month.

RECOMMENDED ACTION
Approve Option 1: Approve the proposed amendments providing a formula for annual TIF contributions and eliminating the requirement for supplemental contributions.

FISCAL IMPACT
None in the long-term, although there will be a reduction in supplemental income for FY 2008 and 2009. No impact to existing programs. The Office of Budget and Policy have reviewed and concur with this agenda item.

Michael K. Parker, Economic Development Director

Anita Favors Thompson, City Manager

For information, please contact: Michael Parker, Economic and Community Development, 891-6457.

SUPPLEMENTAL MATERIAL/ISSUE ANALYSIS
HISTORY/FACTS & ISSUES
On November 20, 2007, the Community Redevelopment Agency (CRA) Board approved the second amendment to the interlocal agreement between the City, County and CRA that governs the Downtown District Community Redevelopment Area (Attachment 1). The amendment approved by the CRA Board included two changes to the interlocal agreement:

1. Revises the way that each local government’s annual Tax Increment Funding (TIF) contribution to the Downtown CRA is described in the agreement.

The current interlocal agreement contains a specific millage amount to be contributed by the City and the County each year. CRA staff recommends that the agreement utilize simple percentages to define contribution levels rather than a specific millage. This is desirable due to fluctuations in the City and County millage rates. The proposed revision would set the City's contribution as the base rate and the County’s contribution at 1.154 of the base rate. This was the methodology that was used when the interlocal agreement was originally approved and is based on the ratio of the original contributions from the City ($13,000,000) and County ($15,000,000) to the Downtown District. By using this approach, the contributions will automatically adjust if there are further changes to the City millage rate, thus eliminating the need for additional amendments to the agreement.

2. Eliminates the requirement for the City and County supplemental contribution to the Downtown District CRA Trust Fund.

As part of the first amendment to the interlocal agreement governing the Downtown District, a $1,537,657 revenue target was identified for the Downtown District Trust Fund. This amount was based on the amount of revenue that the Trust Fund received in fiscal year 2005-06, and was meant to ensure that the Downtown District would have sufficient funds to be effective during its early years. The interlocal agreement provided that both the City of Tallahassee and Leon County would provide supplemental contributions to the CRA Trust Fund if the income from tax increment fund (TIF) contributions did not meet that revenue target. The supplemental contribution option was slated to cover Fiscal Years 2007, 2008 and 2009. For FY 2007, the Downtown District’s revenue consisted of $603,744 in TIF, with Leon County contributing $331,846 and the City of Tallahassee contributing $271,898. Because the total amount did not reach the $1,537,657 revenue target, the County paid $500,577, and the City paid $433,336 in supplemental contributions.

In 2007, property tax reform measures enacted by the State Legislature resulted in a significant decrease in ad valorem revenue for both the City of Tallahassee and Leon County. As a result, during the FY 2008 budget development process, both Leon County and the City of Tallahassee elected to suspend their supplemental contributions to the Downtown District Trust Fund. In order to effect this change, it is necessary to amend the interlocal agreement to remove the requirement for the supplementary funding.

Approval of the second amendment is also needed by both the City Commission and the County Commission, who, along with the CRA, are signatories to the interlocal agreement. Following CRA Board approval, both City and County staff were to bring the changes to the City Commission and the County Commission for approval. However, a recent review by both staffs determined this did not happen. Following City Commission approval, County staff will present the second amendment to the County Commission later this month.

This is the second amendment to the interlocal agreement governing the Downtown District Community Redevelopment Area. The first amendment specified that funds from the tourist development tax, which are not needed for the payment of debt service, construction and/or operational costs for the Performing Arts Center would be returned to the Leon County Tourist Development Trust Fund. The Tourist Development funds committed to the Performing Arts Center are held by the County, and disbursed to the CRA as needed.

CHARITABLE CONTRIBUTIONS
N/A

OPTIONS
1. Approve the proposed amendments providing a formula for annual TIF contributions and eliminating the requirement for supplemental contributions.

2. Do not approve the amendments, and provide staff with alternate direction.

ATTACHMENTS/REFERENCES
1. Proposed Second Amendment to the Interlocal Agreement