STATEMENT OF ISSUE
The American Recovery and Reinvestment Act of 2009 created a number of new programs to provide bond financing for local governments to stimulate development and investment. Recovery Zone Bonds provide tax incentives to local governments that borrow money to fund projects that will promote job creation and economic recovery in specific geographic areas. The program provides for two types of bonds: Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds. The City is eligible to apply for $4,142,000 in Economic Development Bonds for public improvement projects. The City has been allocated $6,213,000 in Facility Bonds, which function as tax-exempt private activity bonds. The Recovery Zone Program requires all bonds to be issued by January 1, 2011.
To qualify for this program, the City must establish a Recovery Zone, which by definition is an area that is considered economically depressed with indicators such as significant poverty, unemployment, home foreclosures, or general distress. We have worked collectively with the Economic Development Council (EDC) and representatives from Leon County to identify a proposed Recovery Zone, which incorporates other designated improvement areas such as the Community Redevelopment Districts and the State Enterprise Zone (Attachment 1). Leon County also has Recovery Zone Bond allocations and is taking action to establish similar boundaries that will provide opportunities for the jurisdictions to pool their resources.
RECOMMENDED ACTION
Option 1. Adopt Resolution No. 09-R-39 establishing boundaries for the Tallahassee Recovery Zone.
FISCAL IMPACT
None. The adoption of the Recovery Zone Boundaries does not require any financial commitment by the City.
Thomas H. Lewis, Director, Economic and Community Development
Anita Favors Thompson, City Manager
For information, please contact: Tom Lewis, 891-6510.
SUPPLEMENTAL MATERIAL/ISSUE ANALYSIS
HISTORY/FACTS & ISSUES
The Recovery and Reinvestment Act of 2009 allocated $787 billion to new borrowing programs to foster job creation and development. The Act established the Recovery Zone Bond Program to assist states and local governments in obtaining low-cost financing for capital projects. The Recovery Zone Program provides two types of bond financing: (1) Recovery Zone Economic Development Bonds and (2) Recovery Zone Facility Bonds.
Recovery Zone Economic Development Bonds
Economic Development Bonds can be used for government projects located within established Recovery Zones. The City of Tallahassee has $4,142,000 in bond financing available through this program. These bond proceeds must be used for “qualified economic development purposes” which include expenditures for public infrastructure, construction of public facilities, and expenditures for job training and educational programs. Economic Development Bonds are issued as market rate bonds, however, the issuer receives a subsidy from the federal government for 45% of the interest paid on the bonds.
Recovery Zone Facility Bonds
Facility Bonds function as tax exempt private activity bonds and may be used for a wide variety of private improvements within the boundaries of the designated Recovery Zone. The funds must be used to finance depreciable property and cannot be used to purchase land. The funds can be used to support projects such as a manufacturing facility, restaurant, hotel, and office building or distribution facility. The funds cannot be used for: rental residential property, a golf course, a massage parlor, a racetrack, a liquor store, a hot tub facility, a suntan facility or a gambling establishment.
The City of Tallahassee has $6,213,000 in bond financing available through this program. In the case of Facility Bonds, the City would function as a conduit for the bond financing so that selected projects could obtain financing at a tax-exempt interest rate. The debt service for the bonds would be the responsibility of the private entity that received the bond proceeds and the City would not be liable for the repayment of the bonds.
Participation in the Recovery Zone Program
The deadline for issuing bonds under this program is January 1, 2011. A Recovery Zone must be established before the City can participate in this program. To be eligible for Recovery Zone bond financing, a project must be located within the boundaries of a designated Recovery Zone.
The federal government gives local jurisdictions discretion in defining its Recovery Zone, but stipulates that the zone should be an area considered economically depressed with factors such as: significant poverty, unemployment, a high rate of home foreclosures, or general distress. City staff has worked with representatives from the Economic Development Council and Leon County to identify a proposed Recovery Zone area that meets the required criteria. The proposed Recovery Zone encompasses the boundaries of (1) the Tallahassee/Leon County State Enterprise Zone, (both the 2008 and current Zone Boundaries), (2) the Downtown and Frenchtown/Southside Community Redevelopment Areas, (3) the Gum Road Targeted Planning Area (County designated area), (4) the recently created Neighborhood Stabilization Target Areas, and (5) the Southern Strategy Area (Attachment 1). All of these areas have already been documented to contain conditions that address the Recovery Zone criteria. The Economic Development Target Issue Committee reviewed and approved the proposed Recovery Zone area on August 26, 2009.
Upon creation of the Recovery Zone, it will be necessary to develop criteria to evaluate private projects that may seek City approval to obtain Recovery Zone Facility Bonds. Also, the City will need to evaluate whether it wishes to use Recovery Zone Economic Development Bonds for any pending public projects. Staff will be working through the Economic Development Target Issue Committee to develop recommendations regarding the use of the Recovery Zone Bonds.
Leon County has also received bond allocations through the Recovery Zone Program. The County has been allocated $2,388,000 in Recovery Zone Economic Development Bonds and $3,582,000 in Recovery Zone Facility Bonds. County staff also participated in the meetings with the EDC concerning the proposed Recovery Zone boundaries. The County Commission will be considering action to adopt a Recovery Zone using this same criteria. The County Recovery Zone will include areas within the City and in the unincorporated area (Attachment 2).
CHARITABLE CONTRIBUTIONS
NA
OPTIONS
Option 1. Adopt Resolution No. 09-R-39 establishing boundaries for the Tallahassee Recovery Zone.
Option 2. Do not adopt Resolution No. 09-R-39 and do not establish the Recovery Zone.
ATTACHMENTS/REFERENCES
Attachment 1. Map
of proposed City Recovery Zone
Attachment 2. Map of proposed County Recovery Zone
Attachment 3. Resolution No. 09-R-39