Portland Downtown Expansion Feasibility Study Presented to Portland

Portland Downtown Expansion Feasibility Study Presented to Portland Downtown Board and Staff May 12, 2016 CPD 603 Sustainable Development Workshop Jared Lank, Adam Mosey, Diana Twombly, Heather Mc. Intosh, Gerry Runte, Alexia Jones, Kari Beaulieu, Taylor Burgdorf, Zipeng Liu, Howard Spetla and Professor Yuseung Kim

PD Input on Final Scope of Feasibility Study Expand projection to 20 years Limit staff increase to 1 FTE Explore Addition of India Street to PD Phase-in extent of supplemental services provided to new territory, avoiding huge increase in expenses in first year of expansion q Identify break even scenarios q Benchmark PD with other BIDs q q

Feasibility Study and PD Strategic Plan q Portland Downtown (PD) adopted a 5 -year strategic plan in 2015 outlining top strategic priorities: • • Downtown Experience Downtown Vitality Advocacy Growth Initiatives q Study addresses “Growth Initiatives” strategic priority

4 Growth Initiatives Evaluated 1. Portland Downtown (PD) – no territorial expansion 2. Incorporate India Street (IS) neighborhood into PD (PD + IS) 3. Incorporate West Bayside (WB) neighborhood into PD (PD + WB) 4. Incorporate both IS and WB into PD (PD + IS + WB)

Study Outline q For Each Growth Initiative: • • • Discounted Cash Flow Analysis Millage Rates Sensitivity Study “Other Income” required for growth initiative to break even q Benchmark PD by comparison with 7 sampled Business Improvement Districts: • • Boston, MA Bozeman, MT Burlington, VT Columbus, OH Minneapolis, MN Providence, RI Troy, NY

Revenue Expense Analysis

Assumptions q Analysis Time Frame: 20 years q Income Escalation Assumptions: q • • • Assessment income grows with property values, assumed 2. 8% annually Ordinary Income grows with median household income, assumed 1. 6% Other income grows at CPI, 2. 13% Expense Escalation Assumptions: Supplemental Services: 2. 13% Ordinary Expenses: 1. 6% Other Expenses: 2. 13% q New Staff: 1 New Full-time Employee q Discount Rate: 5% q Developments: • • India Street – India Street Sustainable Development Plan- $104, 880 Assessment Income over 20 years West Bayside – Vacant lot potential + Mid-town -$1, 675, 296 over 20 years

Analysis Cases q Supplemental Services added Incrementally • • • Year 1: 1/3 Year 7: 2/3 Year 14: 3/3 q Mill Rate Increase q Break even scenarios q Benchmark PD with other BIDs

Cumulative DCF – No Phase In of Supplemental Services - 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Thousands of Dollars (1 000) (2 000) PD+WB (3 000) PD+IS PD+WB+IS (4 000) (5 000) (6 000) Year After Implementation

Cumulative DCF - Supplemental Services added Incrementally - 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Thousands of Dollars (500) (1 000) PD+WB PD+IS PD+WB+IS (1 500) (2 000) (2 500) Year After Implementation

Cumulative DCF, PD+WB, by millage rate $/$1, 000 Property Valuation 1 500 1 000 Thousands of Dollars 500 - 0 1 2 3 4 5 6 7 8 9 10 11 12 (500) 13 14 15 16 17 18 19 20 0. 92 0. 97 1. 02 1. 07 (1 000) 1. 10 1. 12 (1 500) 1. 15 (2 000) (2 500) (3 000) Year After Implementation

Cumulative DCF, PD+IS, by millage rate $/$1, 000 Property Valuation 3 500 3 000 Thousands of Dollars 2 500 0. 92 2 000 0. 97 1 500 1. 02 1. 07 1 000 1. 12 500 1. 15 - 0 1 2 3 4 5 6 7 8 9 10 11 12 (500) (1 000) Year After Implementation 13 14 15 16 17 18 19 20

Cumulative DCF, PD+WB+IS, by millage rate $/$1, 000 Property Valuation - 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Thousands of Dollars (1 000) 0. 92 (2 000) 0. 97 1. 02 (3 000) 1. 07 1. 10 (4 000) 1. 12 1. 15 (5 000) (6 000) Year After Implementation

Additional Income Required to Achieve Break even DCF 6 000 Thousands of Dollars 5 000 4 000 PD+IS 3 000 PD+WB+IS 2 000 1 000 - 0 1 2 3 4 5 6 7 8 9 10 11 12 Year After Implementation 13 14 15 16 17 18 19 20

Additional Income Required to Achieve Breakeven DCF, Phased Supplemental Services 2500 Thousands of Dollars 2000 1500 PD+IS PD+WB 1000 PD+WB+IS 500 0 0 1 2 3 4 5 6 7 8 9 10 11 12 Year After Implementation 13 14 15 16 17 18 19 20

Net Present Value, 20 Year DCF, Millions of Dollars

BID Case Studies

U. S. BIDs By the Numbers q Over 1, 000 in U. S. California: 232; New York: 115 q 30 Different names q Only 29% of U. S. BIDs in cities with populations over 500, 000 q Budgets range from $11 k to $18 million; median $342 k q Most assessments based on tax valuation but many other methods used q Average board size 13 members q Most are 501 (c) 3(allows for tax deductible donations); few are (c) 6 and (c) 4 q Commonly Provided Services: maintenance; security; transportation; marketing; public space management; social services and business recruitment

BIDs Sampled Boston, MA Bozeman, MT Burlington, VT Columbus, OH Minneapolis, MN Providence, RI Troy, NY Portland, ME

BID Assessment & Revenue/Expense Assessment Formula Assessment Income Other Income Total Expenses Number of Employees Bozeman, MT Millage rate $1. 82/1000 FY 2015 $ 120, 000 FY 2015 $15, 900 FY 2015 $140, 800 Full-time: 2 Part-time: 2 Minneapolis, MN Assessment methodology charges properties proportionate to the costs to deliver services needed for a consistent outcome throughout the district FY 2014 $6, 190, 722 FY 2014 $0 FY 2014 $5, 900, 734 10 Burlington, VT Burlington Town Center $2. 8/sf Outdoor Gear $2. 52/sf Café $4. 28/sf Deli $ $5. 56/sf Alcohol Service $8. 56/sf FY 2015 $750, 667 FY 2015 $88, 471 FY 2015 $839, 138 3 Portland, ME Millage rate $0. 92/1000 FY 2015 $746, 307 FY 2015 $132, 000 FY 2015 $878, 307 4

BID Assessment & Revenue/Expense Assessment Formula City BID Other Income Total Expenses Number of Employees Boston, MA Millage rate $1. 10/1000 up to $70 M & $0. 50/1000 above $70 M FY 2015 $4, 891, 671 FY 2015 $1, 500, 000 FY 2015 $4, 756, 066 11 Columbus, OH 50% assessed against real property of members & improvements 50% assessed according to the front feet of each tax parcel on public streets >30 ft in width FY 2015 $2. 2 M FY 2015 $1, 013, 703 FY 2015 $3, 329, 321 Full-time: 6 Part-time: 4 Troy, NY 5% of City Tax Assessment FY 2013 $81, 373 FY 2013 $366, 156 FY 2013 $438, 028 9 Providence, RI Zone 1=(. 0011) x property value Zone 2=(. 0013) x property value FY 2015 $1, 162, 625 FY 2015 $150, 000 FY 2015 $1. 3 M BID: 3 Block by Block: 15

Services Cleaning Marketing & Promotions Beautification Safety Capital Improvement Social Services Boston * * * Bozeman * * * Burlington * * Columbus * * Minneapolis * * Providence * * * * Troy Portland * Member Services Economic Development * * * * *

Governance & Organizational Structure City Type Structure Bozeman, MT 501 (c) 6 BID provides promotion; separate BID for maintenance; TIF does urban development Columbus, OH 501 (c) 3 SID Public Services manages Capital Crossroads & Discovery Minneapolis, MN 501 (c) 6 & 501 (c) 3 BID provides promotion & services; 501 (c) 3 Minneapolis Safe Zone Collaborative Boston, MA 501 (c) 6 & 501 (c) 3 BID provides promotion/development; contracts out maintenance to Block by Block; some social services provided by Pine Street Inn Outreach Burlington, VT 501 (c) 3 Marketplace Foundation provides all services Troy, NY 501 (c) 3 BID provides all services Providence, RI 501 (c) 6 & 501 (c) 3 BID provides promotion/development; contracts out maintenance to Block by Block; comanaged by Providence Foundation Portland, ME 501 (c) 4 BID contracts out trash & snow removal; provides supplemental services that include safety, marketing & beautification

Findings q q q Current assessment income without additional sources of income insufficient to support any expansion case Phasing in supplemental services reduces expenses but not enough to make any expansion case cost effective Additional income required to make expansion case economic: • PD+IS needs ~$60 k/year with phased in Supplemental Services; $100 k/year with no phase in • PD+WB needs ~$100 k/year with phased in Supplemental Services; $300 k/year with no phase in • PD+WB+IS needs ~$125/year with phased in Supplemental Services; $450 k/year with no phase in Without additional income, an annually varying millage rate is the only way to maintain a net zero budget Conclusions: • This study’s scope assumed outside income would remain at its current level for all cases. Under this condition, unrealistic assumptions about millage rate and supplemental service phasing necessary to obtain positive cost benefit, and not for all cases • Recommend next step be a study to identify sufficient outside income to support any expansion case