CHEYENNE – In the wake of COVID-19’s financial impacts, the diversification of Cheyenne’s economy has become a hot topic of conversation.
With a greater focus on incentivizing new businesses and attracting more developers, the Cheyenne City Council heard two possibilities for funding efforts to increase economic development at a work session Monday night.
The two financing mechanisms – Property Assessed Clean Energy Program financing and Tax Increment Financing – will still need council approval, but a number of interested developers have been pushing for the changes, according to Chief Economic Development Officer Brendan Ames.
While both funding mechanisms would take additional effort from the city, Ames said they could be valuable in the long run.
"Our toolbox is pretty limited here sometimes, but these are two programs that we would actually be able to utilize. If City Council felt like they wanted to move in that direction, it could really help promote the development in Cheyenne,” Ames said.
For many historic buildings in Cheyenne, a major hurdle to development is the upfront costs involved with renovating dated structures. According to Ames, big projects like the Hynds Building require updated lighting and HVAC, which can add up to millions of dollars.
The Property Assessed Clean Energy (PACE) program offers an incentive for making clean energy improvements on private property, but it can also help developers cover those steep upfront costs.
In a nutshell, the developer would receive funding from PACE to cover the initial costs of energy-related upgrades. Since those upgrades would increase the valuation of the property, the developer would see higher property taxes over the years. The city would then use those additional property tax dollars to repay PACE for the initial investment.
“The city is just the pass through,” Ames said, noting that city staff members would have to oversee the repayment.
The program covers a variety of improvements, including roof replacements, lighting upgrades and temperature controls.
With the program, energy improvements will be tied to the property, rather than the property owner, which alleviates the risk of losing their investments in the property if they decide to sell it. For those who opt into the program, the PACE payments can be transferred to the buyer in the case of a property sale.
“What it does do is help get developers over the hump – to get into a property to start developing, instead of facing those larger improvement costs, where they just want to walk away from the property because they can’t come up with that much cash up front,” Ames said, adding that it helps developers “stabilize the property and start generating income or operating their business.”
Urban Renewal Area
The second option Ames presented to the council is an Urban Renewal Area, which uses Tax Increment Financing as a funding mechanism to improve areas of town that need it. The city would have to declare a specific area as “blighted,” or “a slum,” to create the district and start improvements.
Looking at the age and dilapidation of buildings downtown, Ames said, “They really do start to present some development challenges."
The financing structure leverages property taxes for improvements including beautification, curb and sidewalk work, and increased pedestrian and biking trails. Ames gave the city councilmen greater detail on what this district could look like in Cheyenne.
"We can also set up an opportunity acquisition fund,” Ames said. “So, if somebody is not able to improve their property or they’re at risk of being condemned, potentially, we could utilize this fund to purchase that property, to stabilize that property or demolish it, and make it available to the general public. I think a good example where we've talked about this quite a bit is the Hitching Post site. This program could be used for projects like that on a larger or smaller scale."
Tax Increment Financing functions somewhat similarly to the PACE Program.
First, the city has to identify the district it desires to see improvements in. Then, the total amount of property taxes within the district is identified, which is the base amount.
The idea is to let private development increase the value of property in the district, therefore increasing the amount of property taxes paid to the city. With a TIF, any property tax revenue above that base amount would help pay for improvement projects in the district, thus increasing property valuation even more.
While Ames gave the example of the opportunity acquisition fund, he also mentioned it could be used for facade improvements or business expansion. Municipalities can also issue bonds backed by the expected TIF revenue, allowing them to make larger improvements without upfront payments.
To implement either funding mechanism would take some readjusting at the city, and Assistant City Attorney Alessandra McCoy Fakelman said it’s up to the council whether to move forward with either option.
McCoy Fakelman said, “We get requests from developers all the time to present these ideas to council, and that's the purpose of this work session is to get these ideas on council's radar.”