I have also spent a considerable amount of time critiquing our leader's performance in real estate issues. As you must know by this time, I stay almost universally in the discussions of real estate and how it effects our tax base. This whole blog site is about tax base.
I am very disappointed in how we determine the economic incentives of potential developers wanting to come to our town. Our current evaluation process seems to have little, if any, conformity. If there is a formal or official process in evaluating economic incentive to developers, I am too dense to follow it. I don't think there is one. I think the awards just "evolve" from conversations amongst the leadership. This is really not a good way to award incentives. It would lead to..........what we have, with awards all over the map in city funding and city property. It's certainly not a good program for citizens to follow.
As far as tax base goes, I think it's time to tell the king that he ain't wearing any clothes. Quit the pretentions. You're terrible at real estate. You need help. Failure to get help is a terrible disservice to the citizens of Rowlett.
As a tax paying, voting, citizen of Rowlett, I can shoot off my mouth about anything I want and anytime I want. As a responsible, sensible, open to debate, citizen, I offer the following as an idea to think about.
I think we need a Blue Ribbon Committee or Commission to evaluate all requests for real estate economic incentives. I think the committee should be made up of five members, including one chairperson. Because of the specialized nature of this committee, I think efforts should be made to find it's members among real estate development loan officers. These specialists are trained to examine real estate proposals in detail every day. They are asked to place their depositor's funds at risk every day. If they make many errors, they aren't loan officers very long. Most will hold business degrees, some with MBA degrees and some are finance majors. This specialty requirement certainly limits sources for this talent, but they exist. Every major bank, or real estate lending institution, usually has a department dedicated to this endeavor. Smaller lending institutions co-mingle real estate loans with car loans, utilizing the same officers. That doesn't mean they aren't as good, only that they are less specialized. I don't know how many live in Rowlett, but there's got to be at least five. If we have a hard time filling out the field, appraisers or commercial real estate brokers can serve. These substitutes will be less numbers oriented, but could serve if their heads are screwed on straight. The committee could serve on an "as needed" basis.
I think all developers wishing economic incentives from the city should present to the committee a business plan along with the request. This business plan should provide evidence that the applicant has the financial capabilities to finance the proposed development. The plans should also set out a fairly good cost estimate of the proposed development and evidence that they have the team to build the project. Then, I think there should be a five, ten, and fifteen year study to demonstrate the rate in which Rowlett should receive repayment of monies and kind advanced for the development. The length of the cash flow analysis would depend on how long Rowlett will wait for repayment to start and end, as agreed.
The committee should then be charged with analyzing the business plan. They should challenge every number presented to them. They must strip out all misleading or false statistics. They must reduce the business plan down to it's bare essentials. Challenge everything in the business plan. After striping down the facts, then rebuild the business plan with realistic goals and probable achievements. The developer, or it's representative, should appear before the committee to answer any questions. In this case, "credit support" does not mean the developer pays its bills. It means the entire credit package of financial strength, business capability, and management skills. This would be 50% of the analysis. The other 50% is the strength, durability, appeal, and market stability of the "hard" real estate itself. "Reusability" in the event of a failure is a plus. Hospitals might fail on this test, but they could be very strong on other criteria.
Then the committee prepares their report to City Council. In that report, the committee discusses the financial, construction, and business capabilities of the applicant. It then makes it's recommendation, along with the terms it recommends for the incentives. Now City Council has something to work with. The probability of screw ups just went down.
You have just read an abbreviated page out the development loan hand book.