STRATEGIC PRIORITY: Economic and Neighborhood Vitality
AGENDA DATE: May 27, 2020
COUNCIL DISTRICT(S): 2, 14
DEPARTMENT: Office of Economic Development
EXECUTIVE: Dr. Eric A. Johnson
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SUBJECT
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A public hearing to receive comments concerning the renewal of the Dallas Downtown Improvement District (the District), in accordance with Chapter 372 of the Texas Local Government Code (the “Act”), for the specified area of the District, for the purpose of providing supplemental public services, to be funded by assessments on real property and real property improvements in the District; and, at the close of the public hearing authorize: (1) approval of a resolution renewing the District for a period of seven-years, from 2021-2027; (2) approval of the District’s Service Plan for 2021-2027 for the purpose of providing supplemental public services, to be funded by assessments on real property and real property improvements in the District; (3) a management contract with Downtown Dallas, Inc., a Texas non-profit corporation as the management entity for the District; and (4) approval of the City’s participation in the District for a period of seven-years, from 2021-2027, at an estimated cost consideration of $8,852,696.00, subject to annual appropriations - Financing: Future cost consideration to the City (see Fiscal Information)
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BACKGROUND
On January 30, 2020, Downtown Dallas, Inc. (“DDI”) submitted petitions requesting the renewal of the District and approval of the Service Plan for a period of seven years with an effective date of January 1, 2021 in accordance with the Act. The Dallas City Council first authorized the creation of the District in 1992, and authorized its renewal in 1996, 2006, and 2013.
City staff reviewed the petitioned Service Plan, verified the signed petitions and found the renewal plan to be viable and recommended approval. City staff determined that owners of record representing more than 71% of the appraised value and 73% of the land area of the real property liable in the District liable for assessment signed the petitions, thereby exceeding the minimum requirements set in the current City of Dallas Public Improvement District (“PID”) Policy and state law. The City’s PID Policy requires petition signatures from owners of at least 60% of the appraised value of real property liable for assessment and at least 60% of the land area of real property liable for assessment.
State law requires petition signatures from owners of at least 50% of the appraised value of real property liable for assessment and at least 50% of the land area of real property liable for assessment.
Pending approval for renewal and notice of such approval is published in a newspaper of general circulation in accordance with Section 372.010 of the Act, the Service Plan is referred to as the Improvement Order.
On April 22, 2020, City Council authorized a public hearing for the renewal of the District to be held on May 27, 2020, by Resolution No. 20-0622. Notice of the public hearing was published in the Dallas Morning News and mailings sent to property owners of record in the District.
The City desires, by the calling and holding of such public hearing, to provide a reasonable opportunity for any owner of property located within the District to speak for or against the renewal of the District, the special assessment against each property owner of record of real property and real property improvements, exclusive of right-of-way, to provide funding for the District for the purpose of providing supplemental services and improvements.
The petition for the District is outlined as follows:
A. District Name. The name of the district is Dallas Downtown Improvement District.
B. District Location. The District is located wholly within the City of Dallas, Texas, a Texas home rule municipality. The boundaries of the District are shown on the attached map (Exhibit A) of the District attached to the resolution.
C. Purpose of the District; General Nature of the Services and Improvements. The purpose of the District is to supplement and enhance services provided within the District, but not to replace or supplant existing City services provided within the District. The general nature of the proposed services and improvements to be performed by the District includes safety and cleaning programs, transportation enhancements, park and public space beautification and management, economic planning, promotion of Downtown Dallas, special events, and other related expenses incurred in establishing, administering and operating the District as authorized by the Act and City Council.
D. Estimated Cost of the Services and Improvements; No Bonded Indebtedness. During the next seven-year term of the District, the estimated annual cost of services and improvements provided by the District is expected to begin at approximately $9,500,000.00 in 2021 and reach $19,426,957.00 in 2027. The total estimated revenue to be collected during the seven-year period is approximately $98,408,968.00, which includes $97,827,968.00 in net assessments, $570,500.00 in in exempt jurisdiction revenue, and $10,500.00 in interest income.
The District shall incur no bonded indebtedness. The seven-year budget detailing the estimated cost per year and total estimated costs for the entire term (the Petitioned Service Plan) is labeled as Exhibit B attached to the resolution.
E. Method of Assessment. The assessment shall apportion the costs each year among the property owners on the basis of special benefits accruing to the property. The proposed method of assessment, which may specify included or excluded classes of assessable property, shall be assessed according to the value of the real property and real property improvements as determined by the Dallas Central Appraisal District (“DCAD”). The net assessment amount for 2021 is proposed to be $9,417,000.00. The annual assessment rate for 2021 is approximately equal to $0.129 per $100.00 valuation. Once levied, this assessment rate shall not increase during the 2021 Service Plan year.
Future annual assessment rates, however, may be increased up to a maximum of $0.15 per $100.00 valuation, subject to appropriations set forth in the petition that renewed the District. Any future increase in the assessment rate would also be subject to a public hearing and City Council approval. The real property of jurisdictions and entities that have obtained an exemption from City of Dallas real property taxes pursuant to the Texas Property Code (except under the provisions of Sections 11.24 and 11.28 of the Property Tax Code) will not be subject to an assessment on that portion of the assessed value of the property exempt from City real property taxes. Property owned by tax-exempt religious organizations will be exempt from assessment as will property owned by persons already receiving and qualifying for 65-or-older homestead exemption under Section 11.13 (c) or (d) of the Texas Property Tax Code as well as railroad rights-of-way and cemeteries. Payment of assessments by other exempt jurisdictions and entities must be established by contract.
F. Apportionment of Cost Between the District and the Municipality as a Whole. The assessment is levied on the real property and real property improvements in the District according to the value of such property. Levying the assessment for the services and improvements based on the appraised value of the property results in the apportionment of the costs on the basis of special benefits accruing to the property. The City of Dallas has agreed to pay assessments against exempt City property in the District. For FY 2020-21, the City’s estimated participation is $854,603.00 assuming a 9.48% increase in District property values projected by the DID (this amount excludes an estimated $416,814.00 assessment for the Convention Center Hotel property). As a contributor, the City of Dallas will be represented on the governing Boards of Directors.
G. District Management. The District shall be managed by DDI, a Texas non-profit corporation established under the provisions of Section 501(c)(6) of the Internal Revenue Code, or its successors or assigns, as approved by property owners and the City Council. DDI will be responsible for the management of the District, development, and recommendation of an annually updated Service Plan covering a period of at least five-years (“Annual Service Plan”), and perform other required responsibilities pursuant to a contract with the City. City Council will review and approve the Annual Service Plan and Assessment Plan, determine and levy assessments, and conduct other functions as required by the Act.
H. District Dissolution. The District shall automatically dissolve on December 31, 2027, unless renewed or dissolved through the petition and approval process as provided by the Act. If the District is dissolved, the District nonetheless shall remain in effect for the purpose of meeting obligations of indebtedness for improvements.
I. Advisory Body. An advisory body may be established to develop and recommend an improvement plan to the governing body of the municipality. At this time, staff is not recommending that an advisory board be appointed but is recommending that the responsibilities for the development and recommendation of the annual service plan and other duties of the advisory board contained in the Act be assigned to DDI, Inc. or a successor entity approved by property owners and the City Council.
Following approval, DDI will implement the Petitioned Service Plan in accordance with the Act and the following contractually required, administrative provisions:
A. Service Plan Budget Modifications. The Petitioned Service Plan covers a period of seven years and defines the cost of service and improvements and new development activities in the District as projected by DDI. DDI is hereby granted the ability to modify or substitute items, upon review and written approval by the Director of Office of Economic Development or his/her designee, within the “Program Categories” of listed improvements attached to the resolution as Exhibit B authorized by the Act, if such changes serve the common interest of owners and tenants in the District and the increase and/or decrease in the amount of a Program Category does not exceed 20% of the Program Category’s total term budget. Any increase and/or decrease in the amount of a Program Category that exceeds 20% shall require City Council approval.
B. Assessment Collection Cap: The City has no power to levy and collect assessments within the District in excess of the total cost of services and improvements that property owners agreed to when they signed the District’s renewal petition. If appraised property values increase within the District, the apportionment of the cost among the property owners may change on an annual basis but the cumulative amount of assessment revenue that is generated over the District’s term cannot exceed the total cost of services and improvements projected on the Petitioned Service Plan. Therefore, no over-collection of assessments is anticipated over the District’s term. If, however, the District’s cumulative, net assessment collections will exceed the cumulative assessments budgeted on the Petitioned Service Plan, DDI shall: (1) reduce the District’s assessment rate in a subsequent year(s) to offset the over-collection, (2) return the assessment funds to the property owner, and/or (3) obtain the consent of the property owners for an increased collection and service levels/costs on a revised petition and apply for an early renewal of the District.
C. Excess Revenue and Carry-Forward. If annual revenues will exceed actual expenditures due to greater than budgeted assessment collections or lower than budgeted costs resulting from delays or cost adjustments, DDI shall be permitted to carry-forward the excess revenue to subsequent year(s), provided that the cumulative amount of all assessment revenue (inclusive of unspent carry-forward revenue) does not exceed the total cost of services and improvements budgeted on the Petitioned Service Plan and that no Program Category is adjusted by more than 20% of the Program Category’s cumulative budget.
D. Expenditure Overruns and Use of Fund Balance or Reserves. If annual expenditures will exceed revenues due to lower than projected assessments or greater than projected costs, DDI shall take measures to avoid a negative fund balance at year-end, such as: (1) reduce spending among Program Categories in a manner that best serves the interest of District property owners, tenants, and residents, provided that no Program Category is adjusted by more than 20% of the Program Category’s total term budget, (2) access amounts set-aside in a budgeted contingency reserve category as applicable, and/or (3) access excess assessments carried forward from prior year fund balance.
The term of the District upon renewal is seven years, from 2021 to 2027. Pending approval, actual operations in the District will commence on January 1, 2021.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On June 24, 1992, City Council authorized the creation of the District by Resolution No. 92-2445.
On June 12, 1996, City Council authorized the renewal of the District by Resolution No. 96-2039.
On June 27, 2001, City Council authorized the renewal of the District by Resolution No. 01-2075.
On August 9, 2006, City Council authorized the renewal of District by Resolution No. 06-2049.
On June 12, 2013, City Council authorized the renewal of the District by Resolution No.13-1015.
On September 12, 2018, City Council authorized an amended and restated management contract with the Downtown Dallas, Inc. by Resolution No. 18-1305.
City Council was briefed by memorandum regarding this matter on April 17, 2020.
On April 22, 2020, City Council authorized a public hearing to be held on May 27, 2020, to receive comments concerning the renewal of the District by Resolution No. 20-0622.
FISCAL INFORMATION
The estimated future cost consideration to the City of participating in the District is $8,852,696.00 from 2021-2027 based on the Petitioned Service Plan submitted by DDI, subject to annual appropriations and City Council approval during the District’s Annual Service Plan and assessment rate adoption process. This figure includes an estimated cost consideration to the General Fund of $5,972,179.00 and an estimated $2,880,516.00 cost consideration to the Convention and Event Services Enterprise Fund. The projected cost consideration for the Omni Hotel over proposed renewal term is $4,317 ,706.00 using the property value growth projections provided by DDI.
Additionally, this action will have a future cost consideration to others. Property owners within the boundaries of the District will pay a proposed assessment amount that is approximately equal to $0.129 per $100.00 of appraised value as determined by DCAD.
CONTACT INFORMATION
Downtown Dallas, Inc.
Amy Tharp
Chief Operations Officer
901 Main Street, Suite 7100
Dallas, Texas 75202