Monday, January 26, 2015

KURA Communication Missteps   
     Urban renewal programs can be salutary for a city. They can also be abused, faultily used, and even harmful. A lot of fuzziness has accrued to the concept since its birth over 60 years ago. One observation holds true, however: urban renewal must be properly understood if it is going to fulfill its promise. Sadly, public communication about Ketchum's Urban Renewal Agency (KURA) has been poor from the start. 
     I've written previously about the bigger management missteps by the KURA: poor return on investment, favoritism to private interests, conflict of interest, unapproved changes to approved plans, backroom dealing. The KURA's less than helpful efforts to accurately inform the public of its activities are a more subtle issue. 
     It often seems that KURA's mantra has been "less is more," i.e. the less clarity about it among the public, the more likely people will ignore its operations. A signal source of information, the Mt. Express, has made frequent reporting errors (especially initially) without being corrected by the URA Board. This may not be a conscious strategy but the lack is there.
     Then there was the URA sponsored workshop in 2012, ostensibly asking for public input for the URA's future but a strangely empty exercise:
     1. There was no effort to provide meaningful group education and questioning. Instead, favorable displays of URA projects were placed around the room for public viewing. Questions could be asked of not always well-informed volunteers and staff.
     2. Nowhere was River Run's designation as an urban renewal area indicated. In fact, when asked, few citizens realized it had taken place.
     3. The URA's Assessed Value and Revenue Estimate wasn't available (having been "redone at the last minute" by the external consultant). When a staffer produced a copy, the City Administrator couldn't answer questions about apparent flaws. The estimate was withdrawn to be redone.
     4. A "URA project" on display was not, in fact, contained in the URA. An audience member pointed this out.
     Further, there has been virtually no communication by the KURA with the several other affected taxing districts or attempt to bring them onto the KURA Board (a recommended practice). Of course, one might ask why those districts have not complained about about their lost revenues! 
     Its not likely that the average resident will learn that Starbucks relies on the KURA to take care of its maintenance problems: e.g. toilet repair and cold air sweeping inside when front doors are open.
     Nor would the average resident know to pose this question for the KURA accountant: Why is there a discrepancy between KURA's stated yearly tax income for the past six years and the income reported paid to Ketchum by the County Treasurer? If there's a reason for this, why is it not clear?

Thursday, January 15, 2015

Kudos and Criticisms for URA Projects


In Idaho, the cities of Sandpoint, Eagle, Coeur-d’Alene, Twin Falls, Rexburg, Ketchum, Jerome and others, have URAs; commissioners are usually a mix of elected officials and experts in community affairs. URAs are beneficial when used properly, but often get bad bad press for abusing their expansive powers. In the end, a URA should be judged on whether it has benefited a municipality’s economic growth/job creation in the long run, or an individual’s or group’s private interests.
News reports describe positive achievements, big and small, by URAs: 

1. Brownfield sites have been cleaned up and transformed into successful mixed-use developments.  Denver redeveloped an ASARCO site into a commercial center with 1 million+ square feet of commercial space for businesses.

2. The Detroit International Riverfront project restored its polluted riverway into a 5½-mile stretch that includes a wildlife park, restaurants, retail shops, and residences. 

3. Sandpoint, ID has built sidewalks and, as money accrues, looks to extend the Sandcreek Boardwalk and rehabilitate a former mill site for mixed-use.

4. Driggs, ID has built a sewer line interceptor, improved the downtown parking lot and buried power lines.

Negative publicity arises from projects that tilt toward benefiting private developers, rather than a municipality as a whole:

1. Coeur d’Alene asked a developer to add brick walls (cost = $400,000) to his project, then reimbursed the developer with URA funds (plus interest). 

2. A Palm Desert RDA spent nearly $17 million revamping a municipal golf club that was already one of the best golf locales in the U.S.

3. Sinclair Company sought blight designation for its 28-acre parcel in downtown Salt Lake City where it planned a Grand America hotel for the 2002 Olympics. The designation was fought by one flower shop facing demolition until Sinclair gave up as the Olympics approached – ultimately foregoing its hoped-for millions in URA monies and tax breaks. 

4. Tax diversions cost Denver schools $15.4 million and other city services $10.9 million.

In addition to diverting money from other taxing districts, URAs are criticized for imposing their own vision of an area on local citizens, promoting development that would have taken place in any case, passing developer risks onto taxpayers who must cover bond defaults should they occur, and encouraging developers to invest only where a URA exists. In the worst cases, URAs subsidize renewal projects that benefit a wealthy private party who ends up with a long-term appreciating asset while the public makes bond payments over time that, with interest, are double or triple what the bonds originally sold for.

Factors that point toward successful URA activities include whether a municipality’s economy is strong enough to sustain a URA in light of the risks, whether the public is involved in URA decision-making from A to Z, if there is an accurate and detailed URA analysis of a project’s long-term risks and investment return for a community, if there are objective measurement criteria for deciding whether a project is acceptable or not (including the ROI analysis), and displaying transparent behavior that adheres to the intent of urban renewal codes. Just about any URA project can be evaluated according to these criteria, given access to the relevant documents and inclination to do the research.  

Pitfalls in Urban Renewal Area Management.  

     When managed well, URAs can transform deteriorated areas into places of economic vitality that bring jobs, enhance real estate values, and enlarge the tax base. URAs enable long-term planning, independent of yearly government budgets. They seek community participation in planning for the future and can enable lower tax levies as the tax base increases with time.

     URAs also have potential drawbacks: conflicts of interest, lack of public accountability, and poor financial management. Ultimately, a URA’s success relies on Board expertise, good faith practices, and adherence to legislative intentions. Ketchum has three urban renewal districts. Bellevue has one and Hailey recently formed one. What are possible pitfalls to be avoided by all of them, using the Ketchum URA as an example. 
    Conflicts of interest.  Idaho Code describes a URA as a legal body of as few as three and as many as nine commissioners appointed and approved by the Mayor and City Council. Commissioners should have varied backgrounds pertinent to implementing urban renewal. They must have no economic interest in the urban renewal process but they might well include representative from taxing districts whose taxes are being diverted to the URA.  

      Originally, Ketchum’s Mayor and City Council served as the URA Board, despite other suggested approaches. This led to confusion in meetings about what was a URA versus Ketchum issue as well as an insular approach lacking sufficient public input. Changes have have slowly been made, however, and the Board increasingly represents a larger slice of people with vested interests in Ketchum. The Mayor and two elected officials still sit on the Board but they are important for URA accountability and knowledge of City issues.  

     Public accountability.  Community involvement is a central tenet of URA operations since the Board is not elected and the agency controls large sums of tax money. Publicly approved URA development plans  should be followed; if not, changes require public hearings. Communications should be clear, accurate, and include an annual report.
     The primary source of information for the KURA is its website which includes 2012 and 2013 annual reports and audited financial statements from 2009 forward. The site has only two budget reports and those it has are opaque to the average citizen. Above all, there is no link to it on Ketchum’s website. You have to know what it is

     Effective and ethical financial management.  A key question is whether URA monies should be managed conservatively or aggressively. Some URA’s accrue funds before starting renewal projects; others take on debt and proceed immediately. Either way, debt amounts, project costs and a risk analysis should guide a URAs approach. As one might expect, many Idaho URAs have begun conservatively.
     Another key question is whether private enterprise should receive URA development subsidies. "Kudos and Criticisms" addresses both successful and bogus projects. For example, was including Sun Valley Company’s River Run property in a URA appropriate? Should the URA be assisting any private development that would happen on its own schedule and its own terms? Should it grant waivers to developers without evidence that there will be a reasonable return on investment for the public? 

 


A Primer on Urban Renewal Areas (and Agencies)

     State laws throughout the U.S. allow a city’s governing officials to designate deteriorated or undeveloped but problematic areas in their jurisdiction as Urban Renewal Areas. Once designated, the area becomes a focus of economic development. A URA Board is appointed by local government and expected to follow a detailed publicly-approved master development plan consonant with city codes and ordinances.
     URA's initially have a 24-year life span, although they can be terminated earlier for various reasons, including having fulfilled the plan. They are primarily funded by “tax increment financing” or TIF. With TIF, the County Assessor establishes the “base” property value for the entire redevelopment area. As development occurs, the URA’s property values (and taxes) increase. The difference between the base year’s taxes and each subsequent year’s taxes are returned to the URA for further development on URA land. Other typical taxing entities (the City, County, school and other taxing districts) continue to receive their share of taxes from the base property value.  However, they lose all tax increments over that value for the life of the URA. 
     URAs use their funds to acquire land; to rehabilitate and replace aging public buildings; to stimulate industrial, business and job growth; to improve safety, sanitation, electrical, street, and communications infrastructure; and to provide for public parking and amenities such as parks, walking paths, and urban streetscapes. They are also used to assist the private development of commercial buildings and affordable housing. Business costs for relocating or expanding are thus reduced. 
     In recent years, URAs have come under increasing scrutiny for improper management. Idaho's Legislature has twice attempted to curtail them. Therefore they must be properly established and managed. Advocates praise URAs for their success in resuscitating blighted urban areas in cities like Detroit. Critics contend that TIF hurts other taxing entities for a long period of time. They also cite public-private collusion to use URAs primarily for the benefit of private interests.