Nick's Council Connection (13 January 2014)

Council Meeting Date: January 13, 2014CityHall.jpg

Council Meeting Location: City Hall, 220 Clay St, Cedar Falls, IA 50613

I talk capital improvements, single-family conversion restrictions, and economic development. Read below for your dose of City happenings.


- Committee of the Whole (5:45pm, Mayor's Conference Room, ELECTRONIC AGENDA)-

Two items stand out for discussion. First, we review the Capital Improvement Program ("CIP"). Second, we study a proposal limiting the demising of single family homes into multiple rental units.

First, as a council, we roughly manage two major budget aspects, the CIP and an operating budget. CIP represents long-term capital investments in our city such as roads, sewers, equipment (trucks, police cars), buildings, trails, etc.  In November of each year, staff and council go through a prioritization exercise to update our 5-year capital plan. By the time the CIP document reaches council, it will have been vetted through the goal setting process and the Planning and Zoning Commission. This is certainly one of the most important functions of council - decisions today set the function and form of our city for decades to come. 

Second, I am struggling with the single family conversion ordinance.  Planning and Zoning has advanced the proposal to Council for the next order of deliberation. In essence, this will ban the conversion of existing structures into multi-unit complexes - an effort to preserve single-family neighborhood character - a noble goal. However, should this be forcibly done by the hand of government? What does it accomplish? What are the unintended consequences? The issue is near and dear to me. I live in a neighborhood that is susceptible to rental conversions. I understand the value in maintaining a vibrant mix of housing options in the name of neighborhood - both for the sake of single families and those that need an affordable, accessible place to live. 

singlefamily.jpgCedar Falls has enacted a number of ordinances and incentives to preserve single-family home character. The landlord accountability ordinance is lauded for having created a good balance between resident, landlord, and renter relations. The College Hill Renewal and Revitalization Plans have created a multi-million dollar renaissance in commercial, multi-unit residential and home-owner occupied properties. Neighborhood advocacy groups (of which I am a member) are strong as ever. Their efforts have resulted in new parks, beautification and a strong voice for neighborhood development.

Based on my query, conversions seem to favor single-family homes (multi-unit to single-family). With declining University enrollment, with the increase of new multi-unit housing, with the UNI's investment in on-campus housing, the rental market is under pressure. The prospects of conversion as a financial investment have dwindled materially.

While this is purely anecdotal, I once lived in Rock Island, IL. Rock Island's traditional neighborhood of stately houses was largely converted to multi-family in response to affordable, convenient housing demand to support the World War II industrial complex at the arsenal. Today, this neighborhood is a shining example of urban neighborhood renewal as the conversions go the other direction. Just as landlords were willing to invest in the 1940s, now families are investing because they demand neighborly, character-rich, historic, and urban housing options. A good mix of neighborhood development policies, historic preservation initiatives, ordinances and associations enabled the revival, not banning conversions.

We must think about life under this ordinance. Very recently, the beloved Merchant Mansion on College Street would have likely suffered the wrecking ball had the property owner not been allowed a multi-unit conversion. Additional homes across the city would be acquired by investors for rental property which would spread the ill impacts that rental opponents proclaim. It would increase the living costs, commute times and work against the comprehensive planning/zoning process. 

So while neighborhood dynamics ebb and flow according to demand, the market overlaid with the city's comprehensive plan and zoning are the controlling forces that determine neighborhood character. If this is advanced, there will be intended and unintended impacts. I'm certainly not opposed to exploring the ordinance, but I have a duty to understand every implication. At the moment, the choir sings enact, enact, enact, but I'm trying to read a verse or two forward.

 -Regular Council Meeting (7:00pm, Council Chamber, ELECTRONIC AGENDA)-

Old Business

E) We pass ordinance #2804, the 1% Local Option Sales Tax, on the third and final reading. This tax generates about $4 million dollars every year serving as the primary funding source for new road construction and replacement. The tax is imposed on goods and services sold in Cedar Falls. 

New Business - Resolution Calendar 

F.2.H) We adopt a resolution establishing the 2015 Goals and Objectives of city council. This 28-pager is the most comprehensive framework for policy, philosophy, and planning (and other words not beginning with the letter 'p'). It is the product Council's annual goal setting sessions. For more, give it a read: 2015 City Council Goals.

F.3) This ordinance changes the Council's meeting days to the 1st and 3rd Monday of every month. As discussed in prior posts, this change enables greater access to both City Council and School Board meetings (hopefully including eventual television broadcast of Board meetings), a welcomed change for those that wish to follow these two important local entities.

-Nick's Briefs-

Iowa Economic Development -To some, this may seem off topic. Why is a council person writing about economic development? Well, it is important. Economic development sets the foundation for our standard of living and quality of life. From the regulatory environment to incentives, every level of government influences economic development. As a city, we want to attract talented people and investment. People are the source of ideas, managers of process, and enablers of creation, while investment represents an assembly of assets that converts materials and ideas into products and services of value. 

First, I must state a premise, an indisputable fact. Government does not create jobs. It sets the legal framework by which we engage in commerce, it protects property (both tangible and intangible), it provides certain infrastructure to move goods and information. But government doesn't create jobs. Government can attract job creators by offering an environment that enables the flow of capital, ideas, and people in the name of commerce.TIFgraph.jpg

So how do we attract people and capital to Cedar Falls? For the sake of conversation, we need to limit the scope to our the immediate sphere of influence (the city) and the adjacent sphere (the state). The city controls local economic development tools like application of TIF, the allocation of certain grants and the local regulatory structure. Also, we have major influence on the living experience in Cedar Falls. Our city holds its own on workforce, cost of business and quality of life. The state is influences long-term economic development prospects more than any other level. With the aid of the Cedar Valley Alliance, the City does a fine job with economic development. However, if we really want to shift the needle in our city, we need to focus our energy on the adjacent sphere, the state.

The state influences two critical economic development pieces (I'm punting on the regulatory environment for now): (1) TIF (Tax Increment Financing - a mechanism for funding local incentives and infrastructure investment); (2) Taxes (policies for personal income tax, corporate income tax, local property tax parameters). Property tax is a baked cake for now - we won't know how it turns out until it cools down. 

TIF: TIF projects are largely financed by the Iowa taxpayer and subsidized by the county.  Since TIF is the tool nearly all cities use for economic development incentives, TIF is no longer a competitive advantage among Iowa communities, land and infrastructure give-aways are nearly equal.  The only thing that sets Iowa cities apart are local factors - efficient gov't, support services, education, quality of life, access to industry or customer, etc.  Of course, economic development personnel defend TIF because it is perceived as a valuable incentive, but only as it relates to out-of-state comparisons. The reality is that TIF incentives could and should be funded locally, at the municipalities discretion. The state could play a role as lender or co-signor on debt, but it should not fund local economic development.  Alternative tools for local communities are needed.

Taxes: personal income taxes are high (9% - 3rd highest marginal tax rate in the nation)*. This impacts decision makers - executives, managers and residents. Even well-to-do retirees flee this state to avoid the tax. Meanwhile, loop-holes are rampant, just ask the few Iowans that still do their own taxes (count me in this group). The credits, exemptions, deductions are incredible, if you are so privileged to understand them. Corporate taxes are high (12% - highest in the nation)*. This impacts the company income statement.  No matter which way you look, Iowa is a high tax state both, albeit, more so in perception than reality.

A sensible proposal: On TIF - similar incentives should and could be financed locally which assures more prudent decision making and transparency. Simple. On taxes: (1) Executive decision makers are attracted to low personal income tax states, preferably flat tax states where income tax effects can be efficiently modeled.  Iowa has an extremely high tax rate (or so it is perceived, most don't consider federal deductiblity)- implement low flat tax, around 3% with appropriate exemptions for low income earners; (2) Companies are attracted to states with low (or no) corporate tax - eliminate IA corporate tax;  (3) Companies are attracted to states with low property tax - eliminate roll-back on all properties, strive for property tax equity among ag, commercial, and residential property. Again, the cake is cooling on property tax.

The outcome: These reforms will spur economic growth. We should strive for revenue neutrality, efficiency, equity and fairness. Iowa cities would compete on merit and locally financed incentives. 

Income Tax Source: Federation of Tax Administrators


Showing 3 reactions

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  • Thomas Romanin
    Nick, I did take a look at the citie’s 2020 plan which you reference in your commentary. Discussing the single family conversion ordinance in the context of the citie’s long range plan would provide a wider context than your anecdotal observations. It has been a while since I saw a copy of the comprehensive plan but I believe even this document provides for separation between single family housing and multi resident units. There will always be unintended consequences but what needs to be evaluated are those which are intended. Thanks for your thoughtful comments on topics before the council.

    Tom Romanin
  • Kate Dunning
    I appreciate your careful examination of the ordinance ban on single family conversions. Your Rock Island example of neighborhood self-sprung preservation and beautification is laudable and a great example of one avenue toward historic and neighborhood preservation (or re-preservation, in that case). Another avenue is ordinance in tandem with neighborhood advocacy groups, beautification efforts by homeowners, etc. Iowa City offers an example of this pathway. Cedar Falls does as well: the College Hill Overlay and other examples you cited are examples of this.

    I have listened to landlords at multiple meetings explain their opposition to this single family ordinance ban, and one argument they cite is that no families will buy these older homes. I have seen my older neighborhood show otherwise: families are buying (like you stated) and more and more, understanding the value of these homes and in more ways than the dollar: the established landscape, proximity to city offerings, etc.

    So landlord opposition to this ban may be better understood if we consider a parallel issue: The State Landlord Association (which has local landlord leadership represention) proposed a bill to the state legislature last year aimed at prohibiting cities from imposing family size limitations on their rental properties (no more than 4 unrelated persons in one rental property). The proposal went nowhere but will likely be proposed again this legislative session.

    Your keen eye for and insistence on healthy consideration of intended and unintended consequences on quality of life is one of the reasons I voted for you. In this case, I agree with your statement that this city is replete with housing options for renters as it is. And yup, landlords and their role individually and on the greater market are worthy of due diligence. But if we’re able to set aside subjective disdain for regulation or de-regulation and look squarely at protecting exceptional quality of life, one of the three core values you offer us as part of your compass, then I think preserving the treasure and value of these older homes and the neighborhoods rises to the top. Opportunities for landlords to turn a better profit is not as compelling here. And we agree that our renters have ample choice in Cedar Falls.

    Looking forward, more and more families are buying these older homes, as you said. They are doing this, I think, because more understand the bigger picture value of the older neighborhoods – spanning beyond the dollar into quality of life: established landscapes, proximity to city offerings, older home workmanship, etc.

    But if landlords cannot get traction with their proposal to the legislature to lift the 4 unrelated persons law, then we will likely see more profit-driven interest in single family home conversions and the family looking to buy an older home will not be as interested if the home next door has been triplexed, with cement parking slab, rotting exterior fire escape and trash dumpster with pickup at any hour of the day.

    The exceptional quality of life question here may be answering itself.
    Thanks for considering my points.
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