September 24 , 2017 This course has been developed by the Wisconsin - - PowerPoint PPT Presentation

September 24 , 2017

Wisconsin Economic Development Association www.weda.org 2

This course has been developed by the Wisconsin Economic Development Association (WEDA), sponsored in part by Wisconsin Economic Development Corporation (WEDC), approved by the International Economic Development Council, (IEDC), and Taught by the Madison Region Economic Partnership (MadREP)

MadREP– Positioning this Region for the Local and Global Success

• CEcD with 35+ years

experience

• Wisconsin Native
• Local, Region, Chamber,

State, I&E, International

• (Sub) Urban and Rural
• Northwestern and FSU

Graduate

New Glarus First Impression

Economic Development

• Engaging Leadership
• City Team
• Tool Box--available
• Solid School District
• Two commercial business

districts (CBD and Hwy Corridor)

• Bedroom community
• Parks, Greenspace, and Natural

Resources

Local Assets:

• Successful past commercial /

industrial land

• Highway Proximity (US Hwy 69)
• Proximity to Major MSA Markets and

employment

• Stable Employment with major

employers (New Glarus Brewery, Sausage Manufactures, Jack Lincks)

• Close to Regional Retail Assets
• Historical Swiss Village/Heritage
• New Glarus Woods State Park
• Edelweiss Chalet Country Club

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Wisconsin Economic Development Association www.weda.org 5

Now, tell me about you and your Economic Development Goals?

Name Where you live/work? What specifically about economic development do you want to learn more about tonight?

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“Cho o se Yo ur Own Adve nture ”

• 1. Overview of the session
• 2. Economic Development Building Blocks
• 3. Confidentiality, open records, Ethics, etc.
• 4. Local Business Relationships
• 5. Toolbox & Public Resources
• 6. Facilitating Deals
• 7. Wrap up

7 Wisconsin Economic Development Association www.weda.org

Purpose

• 1. Forge a common language among local

decision-makers and economic development community

• 2. Overcome “you don’t know what you don’t

know” concerns across development issues

• 3. Provide local leaders with a base for making

effective economic development decisions

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Deliverables (outcome)

• Useful development knowledge—Basics of Economic Development
• Punch list of core things to think about—Loftier Goals and how to

get started

• Clarity on the roles local leaders play—Same Page, Partnerships
• Practical tools for getting started—Strategic Doing and Not Planning
• Best practices on matters you’ll encounter—Use your toolbox

Let’s make sure there is a take away for everybody today.

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BUIL DING BL OCKS T O E CONOMIC DE VE L OPME NT

Creating a Strong Economic Development Program

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What is economic development?

• -I

nspire Ma diso n Re g io n

• -“1/ 3 o f wo rkfo rc e in 2027 will b e une mplo ya b le ”
• -Une mplo yme nt a nd unde re mplo yme nt
• -www.jo b sinro c kc o unty.c o m
• -Wa g e s a nd skills ve rsus b o die s

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De ve lo pme nt Stra te g ie s—E c o n De v’ t

Tactics Tools Issues Business Retention & Expansion Business Visitation Economic Gardening Exports Salesforce/ExporTech Incentives / Gold Shovel / Ind. Clusters Retention or Growth Business Attraction Fam Tours / Call Trips Trade Shows / FDI Website / Cert Sites Incentives / Data Targets/Sectors Partners Entrepreneurship / Start-Up’s Business Accelerator Youth / “Spaces” Local Fund/VC Angels QNBV Tax Credits Resource Intensive Workforce Development Custom Training Recruitment / Skills Inspire / Fast Fwd Tech College / H.S. Skills Gap Brain Drain Community Development Planning & Zoning CBD / Bus Corridors Fast Track Permitting Turn Key / Housing Protect and Enhance Real Estate Development Business Parks

• Res. Subdivisions

Certified Sites

LocateinWisconsin Market Risk / Partnerships Re-Development Brownfield Program EPA/State Grants Liability

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Cre a ting a L

• c a l De ve lo pme nt Pla n—

Stra te g ic DOI NG

Leverage Assets

Value Proposition Priorities & Goals

Align Resources

Budget People

Deploy Resources

Projects Initiatives

Measure Results

Dashboard Outcomes

Pick One

• Business park or

spec buildings

• Downtown Infill /

Facades and (Re) development

• Density in Housing

by Type, location, price point

• Education system

and trained talent

• Entrepreneurship

Ecosystem

• CDA, BID, Main

Street or Chamber Programming

• Export or FDI

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Wisconsin Economic Development Association www.weda.org 17

Str ate gie s – Community E ngage me nt

How is the Village Boar d e ngaging the c ommunity for busine ss de ve lopme nt? What tools or par tne r s ar e missing to make the se pr ior itie s happe n? How patie nt ar e you for the r ight de ve lopme nt? How ar e you and your e ntr e pr e ne ur s c onne c te d?

Entrepreneurial Ecosystem:

Unique Madison Region Resources

Get to Know - Integrate

Madison Region Economic Partnership (MadREP)

Innovation & Entrepreneurship

Physical Space Mentorship Capital Connections

Physical Space

→ Create financial and operational sustainability for physical innovative spaces

• Support places like Sector67, Whitewater

Makerspace, 100State, Portage Enterprise Center, StartingBlock, Janesville Innovation Center, Wisconsin Innovation Kitchen, Plain Tech Center, FEED Kitchen, Coworking Spaces, and Monroe Planned Incubator

Mentorship

→ Expansion of MERLIN Mentor Program throughout the region → Partnership with Janesville Innovation Center to broaden access in Rock County

→ SCORE → SBDC → Gener8tor and gbeta → MadREP Extended Partnerships

Capital

→ Increase opportunities to access capital necessary to successful start-up

• Use Partners to provide technical assistance in

generating investment grade documents, developing market valuation and business plans, and performing investor due diligence

• Partners—public and private sector
• QNBV—OneEvent Technologies, Mt. Horeb

Tracking our Growth

Wisconsin Economic Development Corporation, 2014

• f Wisconsin’s

Qualified New Business Ventures are from Madison Region

60%

Connections

→ Web Portal that connects entrepreneurs with resources → www.madisonregion.org → Click on "start your business” → I&E Steering Committee → Capital Entrepreneurs → ForwardFest 2017 and beyond → M+DEV Conference

Build Your Local Talent Pool— Plymouth Case Study

Is your community connected?

gener8tor 100state Wisconsin Angel Network WWBIC Sector67 Whitewater Innovation Center BioForward Madi Center for Technology Commercial- ization ACE D2P UW Office

• f

Corporate Relations Starting Block Madison MERLIN Mentors State VC Legislation Xconomy Wisconsin 4490 Ventures Brightstar Janesville Innovation Center Portage Enterprise Center MG&E Innovation Center University Research Park Governor’s Business Plan Contest WEDC I&E Division Capital Entrepreneurs FEED Kitchen Whitewater Makerspace Wisconsin Investment Partners UW Law & Entrepreneur Clinic Forward Technology Festival Wisconsin Innovation Network

E T HICS & CONF IDE NT IAL IT Y

Taking a Principled Approach

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Co nflic t o f I nte re st

• IEDC’s language related to conflict of interest:

“Professional economic developers will hold themselves free of any interest, influence, or relationship in respect to any professional activity when dealing with clients which could impair professional judgment or objectivity or which in the reasonable view of the observer, has that effect.”

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Co mmo n I ssue s

• Confidentiality with respect to business deals in

process.

• Transparency and open communication on all
• ther activities (internet impact)
• Avoiding conflict of interest
• Cooperation with peers in surrounding

communities (no poaching businesses)

• Non-discriminatory behavior

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Co nfide ntia lity

• Confidentiality is key to a development deal.
• More deals have been sabotaged unnecessarily

by a breach of confidentiality.

• Sharing confidential details could cause damage

to the prospect & the community’s reputation.

• ED professionals are trained in sharing what they

can, when they can and with whom they can.

• Transparency…is about the right information at

the right time…otherwise it’s just gossip.

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Pub lic I nte re st

• Open meetings, open records
• Public/private partnerships
• Closed sessions are necessary at times.
• Speak from the same “hymnal”, all involved

should have the same message. Trust and empower your staff and leaders.

• Take a leadership role in your priority

project.

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BUSINE SS VISIT S & RE L AT IONSHIP BUIL DING

They are Here Already…Why not Start Here?

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Busine ss Visita tio n Pro g ra m Go a ls

• Establish a baseline understanding
• Tease out trends. Find the surprises!!!
• Generate consensus on business priorities
• Set strategies and tactics. Consistent Follow Up!
• Forge an outcome orientation to service
• Coordinate activities and assistance
• Build and nurture relationships!
• International Opportunities—ExporTech

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F

• ur C’ s o f Busine ss Visits

Confidential Consistent Conversational Concise

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BRE Co nve rsa tio n T

• pic s
• Company background (employment, sales, growth)
• Business climate—International Opportunities
• Workforce training & issues--Talent
• Suppliers & customers—regional supply chain
• Financing—working capital, cap expenditures,

training

• Regulatory issues
• Barriers to growth—local or other.
• “Would you recommend…community, EDC?”

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Re d F la g s Disc o ve rie s

• Declining sales & employment
• Loss of a key customer
• Ownership change
• Expiring leases
• Duplicated facilities
• Union contract expirations
• Family owned…no succession
• Obsolete or land-locked facility
• Relocation of top management
• Loss of supplier relationships

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F ACIL IT AT ING T HE DE AL — PROCE SS T O SUCCE SS

Understanding the Toolbox and How to Use It

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Mo ving fro m Pro je c t/ I de a to De a l

Lead/Idea Definition Hurdle Negotiation Closing Closed

Day 1 Day 75

Priva te Se c to r Pla ye rs

• Chamber / Property Owners / CCEDC
• Developers—Who are your local champions and

partners? Who are the visionaries?

• Investors / Philanthropy Investors?
• Lenders—development and business lenders
• Architects, engineers, contractors, attorneys
• Property managers
• Tenants—Can you create a stable of prospects?
• Utilities—Alliant Energy / City Sewer & Water
• Market Analysts—Tier 3 City Research.

40

Pub lic Se c to r Ro le s—Ho w ro b ust do yo u wa nt yo ur to o lb o x to b e ?

(Reduced Risk)

• Regulatory
• Infrastructure
• CDB Streetscaping
• Façade improvement
• GAP FINANCING!
• Exclusive Broker

Relationship

(Participant)

• Land assembly—land banking
• Feasibility analysis &

conceptual designs

• Developer partnership
• Providing partial financing
• Selling or leasing land
• Project specific infrastructure
• Market Assessments / Retail

Leakage Study

• Industry Sector Strategies
• Utility Rate Structures

FACILITATOR Role INITIATOR Role

Wa ys to F a c ilita te a De a l

• 1. Reduce the development cost to reduce the

amount that has to be financed.

• 2. Reduce mortgage / financing costs – CDA.

Interest rate write down, Other

• 3. Reduce operating costs (wages, utilities, rent)

to improve the cash flow of a project. Ie. First three months rent free

• 4. Facilitate the process of redevelopment

through programs and policies (entitlements)

• 5. Certified Sites / Golden Shovel

City Ha ll I nitia to r Ro le Che c klist

 A strong need to develop a specific property or area where private sector is unwilling to invest with desired outcome for community  Political will to withstand the risks of development and be patient.  An agency or organization (e.g. economic development corporation) with expertise and resources to prepare properties for development  Strong Staff

DeForest Case Study – Power of Certified Sites

*All parcels zoned M-2 General Industrial Seven Certified Sites in MadREP Region, including Deforest, Westport, Fitchburg, Verona, Beloit, Beaver Dam, and Janesville

Busine ss’ So urc e s o f F ina nc ing

Debt Equity Public

Types

Loans Credit lines Bonds (IRBs) Investors Preferred stock Common stock Revolving loans Loan Guarantees Tax Credits & TIF

Return

Principal Interest Fees Utilities Dividends Annual payments Sell Shares Discounted interest Repayment Fees Tax Base / Jobs

Maturity

Stipulated date, fixed, variable, adjustable No fixed date May be callable Stipulated date

Liquidity

Varies by instrument Varies by agreement Paid after creditors Committed till maturity

Security

Varies by deal Collateralized Guarantees None Negotiated…try for 1st but often 2nd or 3rd behind lenders

T

• o ls to Se c ure the De a l

Least to most costly:

• Private sector participation
• Project Cost comparison (You versus

competing site)

• Bond financing
• Loan guarantees with lender
• Revolving loan funds (county)
• CDA’s / RDA’s
• Special Levy - BID’s
• Tax credits
• Tax Increment Financing
• Sale Leasebacks
• Grants

“Hidde n” I nc e ntive s

Smallville, WI Richmond, TX Total Annual Wages Total Annual Wages 61 2,867,915.00 $ 3,349,876.00 $ (481,961.00) $

• 16.81%

38 1,786,570.00 $ 2,086,808.00 $ (300,238.00) $

• 16.81%

19 527,991.00 $ 587,936.00 $ (59,945.00) $

• 11.35%

10 441,610.00 $ 351,180.00 $ 90,430.00 $ 20.48% 10 231,240.00 $ 225,310.00 $ 5,930.00 $ 2.56% 1 92,805.00 $ 100,120.00 $ (7,315.00) $

• 7.88%

6 331,572.00 $ 356,064.00 $ (24,492.00) $

• 7.39%

8 500,216.00 $ 694,312.00 $ (194,096.00) $

• 38.80%

6 282,264.00 $ 245,292.00 $ 36,972.00 $ 13.10% 2 94,088.00 $ 81,764.00 $ 12,324.00 $ 13.10% 2 66,128.00 $ 66,816.00 $ (688.00) $

• 1.04%

2 63,234.00 $ 65,816.00 $ (2,582.00) $

• 4.08%

165 7,285,633.00 $ 8,211,294.00 $ (925,661.00) $

• 4.58%

Annual Total / Average Office Administrator Sheetmetal Assembler Sheetmetal Fabricator Shipping Clerk Maintenance Worker Warehouse Worker Plant Manager Supervisors Manufacturing Engineers Production Coordinators Master Scheduler Quality Technician

Wage Comparison

Postion Title Total Number

• f Employees

$ Difference % Difference

Pub lic Se c to r Re so urc e s

Local

• Tax Increment

Finance (TIF)

• Revolving Loan

Funds (RLF)

• Community

Development Authorities (CDA)

• Redevelopment

Authorities (RDA)

• Business

Improvement Districts (BIDs)

• Bonding Authority
• Sales Tax Revenue
• General Revenue

WEDC

• Capital Lending
• Tax Credits
• Workforce Training
• Idled Site Grants
• Community

Development Grants

• Industrial Revenue

Bonds

• Technology

Development

• Export Assistance
• Main Street

State

• Brownfield

Programs (DNR & WEDC)

• Capital Lending,

Guarantees & Tax Credits (WHEDA)

• Community

Development Block Grants (DOA)

• Historic

Rehabilitation Tax Credits (SHPO)

• State Trust Fund

Loan Program (BCPL)

• Transportation

(FRRP/FRIP &TEA)

• Workforce Training

(Fast Forward, Tech Schools Federal

• Commerce

Department (EDA, FTZ)

• EPA
• Department of

Labor

• Housing & Urban

Development (CDBG)

• Internal Revenue

Service (LIHTC)

• National Parks

Service (HRTC)

• Small Business

Administration (SBA)

• Treasury

Department (NMTC)

• FDIC (Community

Reinvestment Act)

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Re vo lving L

• a n F

unds—L

• c a l o r

Co unty Ma na g e d?

• Primary goal is to provide gap

financing in a start-up, expansion, new development or redevelopment project

• Incentive is typically lower

interest rate than private bank

• Sources may include CDBG, TIF,

sales tax and general revenue

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Co mmunity De ve lo pme nt Autho ritie s / Re de ve lo pme nt Autho ritie s (SS 66.1335)

• a separate body politic for the purpose of carrying
• ut blight elimination, slum clearance, urban renewal

programs and projects and housing projects. Could be a finance partner in business districts

• Power to borrow money, condemn property, buy and

sell property.

• May also act as agent of city for planning and

carrying out housing and redevelopment programs

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Tax Increment Financing

Source: Vierbicher Associates

Area could be undeveloped and without public services, or it could be a blighted and under-utilized area.

Site could be intended for industrial development, blight elimination and redevelopment

• r mixed-use development.

Source: Vierbicher Associates

Na pkin Pro -F

• rma fo r T

I F

Calculation Result

Improvement Value New construction market value $1MM Adjustment Ratio Typically 70-80% of market value 70% Adjusted Value Improvement Value X Adjustment Ratio $700K Tax Roll Mill Rate Typically found on county websites 22.8 mills Nominal Tax Rate Mill Rate / 1,000 .0228 Assessment Ratio Typically found on county websites 98% Effective Tax Rate Nominal Rate X Assessment Ratio .022344 Available Annual Increment Adjusted Value X Effective Rate $15,641 Company Share

Negotiated %

35% Annual Incentive Available Incr. X Company Share $5,474

T a x I nc re me nt F ina nc ing

• Methods for funding TID projects

– City borrowing (GO Bonds)

• Increments are used to pay off the debt

– Pay-as-you-go (also called “Developer Funded”)

• Developer pays costs up front and as property taxes are paid

by developer, a reimbursement (%) is paid back to developer until incentive is paid off.

• Many municipalities like this because risk is on the

developer, not the municipality.

• Developer will ask for a premium as the cost of Money is

higher

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Jo int Re vie w Bo a rd – Ma na g ing Risk

• Made up of representation from the affected taxing

bodies and a citizen representative (City, County, S.D., VocTech, At Large)

• Must approve the district and any amendments
• Three factors for reaching a decision (statutory):
• 1. “But for” the TIF…the project would not occur
• 2. Economic benefit to area vs. costs of improvements
• 3. Benefits of proposal outweigh the investment of tax

revenue from overlapping jurisdictions

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Asse ssing Be ne fits / I mpa c t

Benchmark Impacts

• Jobs-direct, indirect and induced
• Total wages, local spending dollars
• Employee benefits
• New capital expenditure investment
• Supply Chain opportunities
• Site improvements—leverage as much as

possible

• New tax base
• New utility revenue
• Corporate citizenry (charitable donations)

Struc turing the De a l— So urc e s a nd Use T a b le

Pe rspe c tive s: T

• T

I F

• r No t to T

I F

Role Task Decisions EDO

• Assess risk
• Sources & Uses
• Project case – public
• Project case – company
• 1. Package (S&U). City Interest
• 2. Terms & conditions
• 3. Sales pitch for changing TIF plan
• 4. EIA and Big Picture

Anti-TIF Village Reps

• Assess risk
• Sources & Uses
• Public case – against changing TIF

plan

• 1. Package (S&U)
• 2. Investment vs. corporate welfare
• 3. Alternative to TIF
• 4. Eggs in One Basket / Too much

risk JRB

• Assess risk
• Articulate your interest as taxing

bodies

• Discuss 3 statutory factors
• 1. “But for” test
• 2. Economic benefit to community
• 3. ROI for taxing bodies
• 4. Amend or not?

L

• c king in the De a l: Pub lic -Priva te

De ve lo pe r Ag re e me nts

• Initial memorandum of

understanding (MOU)

• General terms
• Non-binding
• Establishes the steps and

timeline for getting to a packaged project

• Outlines particular details of

the deal

• Binding / legal counsel
• Specific performance

information

• Specific incentive

information and timing

• Conditions and limitations

stated Predevelopment Master Development

Pro je c t Ac me - De c isio n

• What is the gap?
• How well does the company underwrite?
• What are the hurdles?
• Is this a partnership?
• What does a package look like in the end?
• What’s left for the next deal?
• Where does the company choose to go?
• Is this in the best interest of the city long term?

T ip the Sc a le in yo ur F a vo r

Don’ts Do’s

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Wra p up

• Questions that were not covered?
• Follow up thoughts?

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Co nta c t Us:

Paul Jadin, President /CEO Madison Region Economic Partnership (MadREP) 608.571.0401 pjadin@madisonregion.org Brian Doudna, Executive Director Wisconsin Economic Development Association (WEDA) 608.255-5666 bdoudna@weda.org

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