To: Honorable Mayor and Members of Town Council
From: Frank Gray, CEO, Castle Rock Economic Development Council
Title
Discussion/Direction: Economic Development Office Program
Body
________________________________________________________________________________
Overview
Town Council approval is requested to update and amend the Town’s Economic Development policy. Castle Rock’s Economic Development Policy was designed at inception to be a living document that would be updated as needed in order to reflect the goals of the community. This amendment reflects the March 5th 2019 work session with Town Council that directed staff and the EDC to propose amendments to the Town’s economic development policies to address the limited office supply and desire to grow the primary employment market.
Discussion
The proposed changes to the Castle Rock Business and Development Incentive Program incorporates two significant additions to the existing Castle Rock Business and Development Incentive program. These include:
Office Loan Program - The Office Loan Program is designed to reflect and memorialize the success of “The Move” office project by formalizing a similar structure to be used for future projects within the Town’s Catalytic Projects of Economic Significance.
Objective - Attract Primary Employment by investing in new office development.
Proposed Incentive - Economic Development Fund would loan a qualifying project up to 10% of the office project’s cost not to exceed $1 Million.
Loan Terms - 1% Interest only for years 1-3 or until the project is 75% leased (whichever comes first). After year 3 (or 75% leased), the loan would convert from interest only to prime + 1% for one year, prime + 2% for the second year, and prime + 3% for all remaining years.
Minimum Criteria - 40,000SF office building, site that can accommodate at least two 40,000SF office buildings, 25% of the building preleased to a primary employer with a minimum of 25 employees, Average wage needs to meet or exceed the County average.
Comparative Criteria - If two or more proposals are being considered, projects will be evaluated based on: number of primary jobs that are a part of the project, type of jobs that are being proposed, average wages, the ability to attract additional primary employers, size (SF) of the project, financial strength of the applicant, strength of the site and its capacity (size and infrastructure) to handle additional primary office project.
Office Lease Program - The Office Lease Program is designed to mitigate risk and encourage office development in order to increase office inventory and attract primary employment. The Office Lease Program and Office Loan Program would need to meet the criteria of a Catalytic Project in the Castle Rock Economic Development Policies and would require Town Council approval on a project by project basis.
Objective - Attract Primary Employment by supporting and mitigating risk to new office development.
Proposed Incentive - For qualifying projects, the Town would lease the lesser of 10,000SF or 25% of the project. The rate would be determined based on market study and would reflect the fact that the space will remain unoccupied (core and shell). Lease term would be limited to 5 years and would phase out (accelerate) proportionately to any lease signed that would bring the project above 75% occupancy.
Minimum Criteria - 40,000SF office building, 50% of the building preleased to a primary employer with a minimum of 40 employees, site that can accommodate at least two 40,000SF office buildings, average wage needs to meet or exceed the County average.
Comparative Criteria - If two or more proposals are being considered, projects will be evaluated based on the size of the project, the number of primary jobs, type of jobs that are being proposed the financial strength of the applicant.
Background
The Town has an Economic Development Assistance Program and Policy established in 2004 by Resolution 2004 - 150 and various associated municipal code provisions.
As part of the 2011 Town budget, the Town Council established a $5 million Economic Development Fund to be used for investments to help grow the tax base, create jobs, improve the overall business climate and facilitate or catalyze priority economic development projects and opportunities.
As part of implementing the Economic Development Fund, the Town Council agreed that existing economic development assistance policies and programs should be re-evaluated and revised as necessary to better implement the purposes of the Economic Development Fund. This effort has been coordinated by the Castle Rock Economic Partnership (CREP), comprised of representatives of the Castle Rock EDC, Chamber of Commerce, Downtown Development Authority, Downtown Merchants Association and the Town.
CREP, through a process of input from all of the organizations, additional review with the EDC Policy Committee, efforts by a working subcommittee (Business Attraction Team), input from consultants (Economic Planning Systems), research of programs and policies used in other Colorado communities and other efforts, has prepared an outline of a proposed new Castle Rock Business and Development Incentive Program (attached).
CREP unanimously recommends the proposed new program and is seeking Town Council approval.
EPS Report
In an effort to continually evaluate our strategic economic development priorities and streamline our processes, Castle Rock EDC and the Town of Castle Rock contracted with Economic Planning Systems Inc. (EPS) to provide an independent third-party analysis of the Castle Rock market. The objective of the analysis is to actively engage Town Council, business leaders, civic leaders and primary employers so that Castle Rock EDC and its partners can create a shared economic development vision.
The data collected by EPS confirms that the Town of Castle Rock will need to develop a strategy that encourages additional office development in order to maintain its position as a premier stand-alone Front Range community.
Notable Findings
• Castle Rock has the lowest office square footage per capita of the 10 aspirational communities compared - See chart below.
• Castle Rock has the lowest percentage of primary employment out of the 10 aspirational communities examined - See chart below.
• Castle Rock has higher than average commercial land cost than Centennial Airport/Dove Valley and Parker.
• Castle Rock has higher development fees for large office and medical office than a competitive set of peers, Lone Tree, Parker, Centennial.
• SWOT Analysis - See chart below.
LOW OFFICE PER CAPITA
LOW PERCENTAGE OF PRIMARY EMPLOYMENT
S.W.O.T. ANALYSIS
Staff Recommendation
Town staff members including Town Attorney Bob Slentz, Finance Director Trish Muller, Development Services Director Bill Detweiler and Town Manager David Corliss have been part of the public/private team working on this proposed update.
Organizations supporting the proposed amendment to the Town’s Economic Development Policies.
Castle Rock EDC
Castle Rock Economic Partnership
It is the recommendation of the Town Manager, Castle Rock EDC and the Castle Rock Economic Partnership that Town Council approve the amendments to the Town of Castle Rock’s economic development policy for the purpose of increasing primary job creation, supporting the retention of existing Castle Rock primary employers, growing the tax base, improving the Castle Rock business environment as part of a standalone community.
Proposed Motion
“I move to direct staff to draft a resolution approving the amendments to the Town of Castle Rock’s Economic Development Policy as stated in Exhibit A.”
Attachments
Exhibit A: 2019 Castle Rock Business and Development Incentive Program
Exhibit B: Economic Planning Systems (EPS) - Executive Summary
Exhibit C: EPS Economic Development Strategic Plan