2019-016 Small Area GrantsDate: January 25, 2019 Report No. 2019-016
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Creation of an Economic Development Corridor/Small Area Reinvestment Grant Program
EXECUTIVE SUMMARY:
This Informal Staff Report was prepared in response to a request for information from
Councilmember Briggs on the possible creation of an Economic Development Corridor/Small
Area Reinvestment Grant Program. This ISR provides a summary of the plans underway for
possible corridors/small areas, potential funding sources and requirements, and current targeted
incentives offered under Council-adopted incentive policies.
BACKGROUND:
Plans Underway and Possible Corridors
The Department of Development Services has a work plan item in the 2018/19 Strategic Plan to
complete and develop an implementation plan for Oak/Gateway Small Area Plan. On January 15,
2019, City Council approved a resolution accepting the visions, goals, recommendations and
implementation strategies in the Oak Gateway Area Plan. The plan area is generally located South
of Panhandle Street, North of Interstate 35, East of Bonnie Brae, and West of Carroll Boulevard
(Exhibit 1).
This plan resulted from a culmination of the expansion of the Fry Street Small Are Plan and
includes the Oak Hickory Historic District, West Oak Historic District, and the University of North
Texas, spanning back to January 2016. The plan includes land use, community design, mobility,
parking and services for the three sub-areas outlined in the plan. It includes recommendations for
a number of catalyst projects involving: overlay districts, improvements to City parks,
development of a Parking Benefit District, roadway expansion, and designating historic
conservation districts. The department also has a work plan item to initiate a process to Create
Gateway/Major Corridor Design and Development Standards.
Economic Development has a work plan item in the 2018/19 Strategic Plan to initiate development
of an economic growth plan to support the implementation plan for the Oak Gateway Small Area
Plan. One of the ways that the department can help further the goals of the plan is to look at the
possibility of providing a Small Area Reinvestment Grant in the Oak Gateway area or a particular
sub-area in the plan. This grant could be modeled after the Downtown Reinvestment Grant
Program to provide façade and utility/impact fee improvements. This could possibly be funded
through mixed beverage taxes. The grant could also include real and capital improvements that
fall under the Policy for Tax Abatement and Incentives, which could be performance based on a
portion of the project’s ad valorem tax revenue.
The department also has a work plan item to leverage business parks to attract new businesses.
One of the areas the staff will be exploring is an Opportunity Zone. The Opportunity Zones
Program, created in the Community Renewal Tax Cuts and Jobs Act of 2018, is a federal economic
stimulus tool designed to assist distressed communities. The definition of “low income” or
Date: January 25, 2019 Report No. 2019-016
“distressed communities” falls under the same section, Section 45D (e) of the Internal Revenue
Service (IRS) Code, as New Market Tax Credits (NMTC). Additional rules on the program will
be released later this year.
The zones are designated by the governor of each state in the United States. A single Census tract,
206.02, is the zone identified in the City of Denton. The zone is generally located east of Bell
Avenue, South of Mingo Road and University Drive, West of Mayhill Road, and North of
McKinney Street (Exhibit 2). This tool offers a tax benefit of an investor’s capital gains into a
Qualified Opportunity Fund. This program offers a capital gains tax deferral, whereby 90% is
taxed after a period of 5 years, 85% is taxable for 7 years and the gain is excluded after a ten-year
period.1 Unlike NMTC, investment in Opportunity Zones is unlikely if additional funds -- other
than the “tax benefit” -- are not offered, according to Springsted.2 This makes an Opportunity Zone
a prime location to look at incentivizing. The federal tax benefit, combined with other local funding
sources and mechanisms such as a Small Area Reinvestment Grant and/or economic development
tools such as Tax Increment Reinvestment Zones, may make an Opportunity Zone project feasible.
Incentive Tools and Existing Targeted Incentive Programs
The City Council can use the tools of property tax abatement and property or sales tax rebate when
it decides to incentivize a company to locate or expand in Denton. A tax abatement (Tax Code,
Chapter 312) is a local agreement between a taxpayer and a taxing unit that exempts from taxation
all or part of the increase in the value of real property or business personal property. Chapter 380
of the Local Government Code gives cities the authority to provide grants or loans of city funds or
services in order to promote economic development; the City of Denton structures its Chapter 380
agreements as tax rebates based on performance in generating property tax or sales tax.
The purpose of tax abatements and Chapter 380 agreements are to assist cities in attracting new
industries, encourage the retention and expansion of existing businesses, and promote capital
investment by easing the tax burden on projects for a set period of time.
The City of Denton developed its original Tax Abatement Policy in 1989. The policy has been
updated and approved by Council 11 times since the original, most recently in March 2018.
The current Policy for Tax Abatement and Incentives includes several targeted incentive programs
outlined below.
Economic Development Investment Fund - Created in 2015
The City has the ability to offer cash incentives and grants when appropriate and necessary.
Such incentives require Economic Development Partnership Board (EDPB) and Denton
City Council action through a Chapter 380 Agreement. To be eligible for consideration to
receive an incentive from the Economic Development Investment Fund, the company must
meet at least two of the following criteria:
Be in a targeted sector for recruitment: aviation/aerospace, advanced
manufacturing, renewable energy, research and development, information
technology, supply chain for primary employers, or significant consumer of
municipal utilities;
Provide higher wage or knowledge-based jobs;
Make a substantial capital investment (minimum of $15 million)
Date: January 25, 2019 Report No. 2019-016
Based Aircraft Incentive Program - Created in 2015
This program is designed to encourage generation of ad valorem revenue with minimal
new municipal infrastructure requirements. Specific considerations for a based aircraft
incentive will include:
expansion of the tax base
annual fuel consumption
contribution to the growth and development of Denton Enterprise Airport (DTO).
Newly based aircraft may be eligible for an incentive if a minimum of $1 million in ad
valorem value will be created by the aircraft. Aircraft must be operational, air worthy, and
based at DTO for a majority of the year; values may not be combined to reach the $1
million minimum.
Downtown Reinvestment Grant Program - Created in 2007
The grant program is designed to assist downtown building and business owners with
projects, and it is tied to preserving the history of Denton through restoration.
The program is strictly for capital improvements, not operating costs. It is set up as a single-
payment reimbursement to property owners per building/business, and in some situations,
tenants. Reimbursement grants are available for the following types of projects:
Facade Rehabilitation is defined as the removal of slipcovers or non-historic/added
facades, repointing brick or replacing mortar joints, replacing or restoring cornices,
removing paint from brick, replacing windows, restoring transom windows, roof
and foundation work.
New Awnings and Signs is defined as replacing, adding or repairing awnings &
signs. Signs may include signboards, projecting signs and pedestrian signage
(includes window sign, hanging sign and awning/canopy sign).
Impact Fee Reimbursement is the reimbursement for City of Denton water,
wastewater, and roadway impact fees
Utility Upgrades include upgrades to water, wastewater and electrical service,
including interior upgrades as well as exterior service upgrades
Fire suppression, asbestos and mold remediation projects
CONCLUSION:
Economic Development staff will continue to pursue its work plan items under the City Strategic
Plan; work with the Department of Development Services to support the Oak Gateway Area Plan;
monitor the rules on Opportunity Zones; examine possible funding sources, tools and mechanisms
for new targeted incentives; and explore possible areas for a Corridor/Small Area Reinvestment
Grant. Staff will prepare information on small area reinvestment grant program options for
Council’s consideration during the 2019-2020 budget process.
STAFF CONTACT:
Caroline Booth, Director
Department of Economic Development
Date: January 25, 2019 Report No. 2019-016
940-349-7751 or Caroline.Booth@cityofdenton.com
1 Certified Development Finance Agency’s Opportunity Zone Solutions, supported by Cohn Reznick, Online
internet: https://www.cdfa.net/cdfa/cdfaweb.nsf/resourcecenters/OZ.html
2 Springsted, “Being Opportunity Zone Investment Ready,” Jan. 17, 2019.