Agenda Memo

City of Boulder City Council Agenda Item Meeting Date: October 9, 2025 Agenda Title Second reading and consideration of a motion to adopt Ordinance 8726, amending Title 3, “Revenue and Taxation,” B.R.C. 1981, by adding a new Chapter 3-22, “Economic Development Incentive Agreements,” and amending Section 4-20-63, “City Manager Rebate Authority,” B.R.C. 1981, expanding the city’s economic development program; and setting forth related details.

Staff Contact • •

Jennifer Pinsonneault, Economic Vitality Manager, City Manager's Office Mark Woulf, Assistant City Manager

Draft Motion Language Staff requests council consideration of this matter and action in the form of the following motion: Motion to adopt Ordinance 8726 amending Title 3, “Revenue and Taxation,” B.R.C. 1981, by adding a new Chapter 3-22, “Economic Development Incentive Agreements,” and amending Section 4-20-63, “City Manager Rebate Authority,” B.R.C. 1981, expanding the city’s economic development program; and setting forth related details.

Executive Summary The purpose of this item is to expand the city’s business incentive program approved by City Council in 2009 to strategically support and attract commercial real estate development and redevelopment, business expansion projects, and major special events, such as the Sundance Film Festival, that advance the local economy in alignment with community values, goals, and priorities to support the attraction,

expansion, and retention of businesses and significantly contribute to an economically vital community. Ordinance 8726 is attached to this agenda memorandum as Attachment A. The goal of expanding the program is to provide a much-needed economic development tool to help diversify and strengthen the local economy, enhance the city’s fiscal health, optimize commercial space utilization, advance sustainability and resilience, promote equity and inclusivity, support affordability, foster job growth, and promote tourism and local vibrancy. Expansion of the city’s business incentive program is one of the strategies included in the city’s Economic Vitality Strategy which is in alignment with the Citywide Strategic Plan and Sustainability, Equity and Resilience (SER) Framework.

Council Action Options Option

Outcome

Approve motion language as drafted

If the motion is approved, the city manager is authorized to expand the city’s current business incentives to eligible applicants and negotiate and enter into Economic Development Incentive Agreements.

Define and adopt a modified motion

Council would need to define any modifications or amendments to the draft motion language or ordinance language. This will likely require staff to bring back an amended version of the ordinance and may result in the availability of enhanced incentives to support business attraction, expansion, and retention.

Deny the motion or take no action

If this motion is denied, staff will not expand the city’s economic development incentive program at this time. This may result in the city continuing to be at a competitive disadvantage with other communities that offer more extensive financial incentives to support business attraction, expansion, and retention.

Refer back to staff

If council refers this item back to staff, expansion of the city’s current business incentives will be paused, and staff will be tasked with further related work.

Alignment with City Plans and City Council History Sustainability, Equity, and Resilience (SER) Framework and Citywide Strategic Plan Alignment SER Framework Goal Area Approval of an expansion of the economic development incentive program by adding an option for waivers of certain fees that would be used strategically to support projects with significant economic impact and community benefit aligns with the Economic Vitality goal of the SER Framework: A healthy, accessible, resilient, and sustainable economy based on innovation, diversity, and collaboration that benefits all residents, businesses, and visitors. Citywide Strategic Plan The proposed expansion of the economic development incentive program aligns with Strategy 14 of the Citywide Strategic Plan: Enhance collaborative efforts to support an inclusive, healthy, sustainable, and resilient local economy that builds on core economic strengths, promotes economic mobility, and aligns with community values and priorities. Staff Notes The creation of an additional business incentive option would expand the economic development tools available to staff to support economic vibrancy in commercial districts and other areas throughout the city. Council expressed interest in moving swiftly to address commercial vacancy rates and related impacts on businesses while ensuring that any new programming reflects community values.

Alignment with Additional City Plans Expanding the city’s current business incentive program to support economic vitality aligns with the Boulder Valley Comprehensive Plan, Economic Vitality Strategy, Racial Equity Plan, and other city plans. The creation of an additional business incentive option would expand the economic development tools available to staff to support economic vibrancy in commercial districts and other areas throughout the city. Council expressed interest in moving swiftly to address commercial vacancy rates and related impacts on businesses while ensuring that any new programming reflects community values.

City Council History Previous conversations with council related to this item include the Advancing Key Economic Development Policy Initiatives item discussed during the City Council Special Meeting on July 24, 2025, and the Economic Development Plan and Program Enhancements Update: Economic Vitality Strategy Review and Commercial Area

Connections and Quality of Life Improvements Update: District Analysis Results and Recommendations items discussed during the City Council Study Session on April 24, 2025.

Analysis To support the retention and growth of businesses in Boulder, the city’s current economic development incentive program offers financial incentives in the form of fee and tax rebates paid to the city related to facility improvements and investments in equipment and other fixed assets. The Flexible Rebate Program is open to businesses and nonprofits that meet the city’s definition of a primary employer (business or nonprofit of any size that generates more than half its revenue from outside Boulder County, excluding hotels, motels, retailers, and food service facilities) and other eligibility requirements including a demonstrated commitment to environmental and social sustainability. Flexible Rebate incentives are approved by the city manager based on recommendations by staff based on a return on investment (ROI) and other analysis. Since the Flexible Rebate Program was introduced in 2007, 85 incentives ranging from $5,000 to $100,000 have been approved and a total of $3.3 million in rebates of fees and taxes have been paid to eligible businesses that have participated in the program. An independent review by the Boulder Chamber Economic Council estimated an overall net return of $10.92 in local economic impact for every $1 paid in incentives through the flexible rebate program. In many cases, program participants considered other communities for establishing or expanding their facility and indicated the receipt of an incentive was a factor in their decision to choose Boulder. While the current program has been an effective business retention and expansion tool, it has limitations in its availability and flexibility for certain types of projects. The proposed expansion allows for more types of businesses, projects, and funding strategies to be considered based on certain criteria. A new ordinance provides the city manager more flexibility to offer different types of incentives or to tailor incentive packages to be used strategically to support projects, subject to individual application review and contract negotiation, that represent significant economic development opportunities while aligning with community values, goals, and priorities. Proposed Program Expansion The new Economic Development Incentive Program would be created by expanding the authority granted to the city manager under Ordinance 7639 (adopted on February 3, 2009) to allow for the waiver or rebate of certain fees and taxes to support and attract commercial real estate development, redevelopment, major special events, or business expansion projects that represent significant economic opportunity and align with the city’s strategic, environmental and social values. To provide flexibility for the city

manager and staff to tailor incentive packages to fit specific projects, language regarding eligibility requirements and other details would be removed from the ordinance and specified in separate rulemaking and program administration. Objectives of the expanded incentive program include: •

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Diversify and Strengthen Local Economy: Support the growth of key industries aligned with Boulder's economic vitality strategy such as advanced manufacturing, aerospace, arts and culture, biotech, cleantech, IT/software, natural and organic products, quantum technologies, tourism. Enhance Fiscal Health: Generate new sales and use tax revenue. Optimize Commercial Space Utilization: Reduce commercial vacancies and activate underutilized properties. Advance Sustainability and Resilience: Incentivize projects that demonstrate strong environmental stewardship and contribute to Boulder's climate and goals. Promote Equity and Inclusivity: Support businesses committed to diverse hiring, training, and procurement practices and other programs designed to have a positive impact on historically underserved communities. Support Affordability: Encourage the creation and preservation of affordable commercial space and contribute to solutions for middle-income housing. Foster Job Growth: Create and retain high-quality jobs, particularly those offering competitive wages and benefits. Promote Tourism and Local Vibrancy: Attract and support businesses that enhance Boulder's appeal as a destination and contribute to its unique character.

Criteria and Administration While staff will develop final program details, including criteria and evaluation, this section provides some additional details on likely general criteria and other factors that will be evaluated to determine award eligibility. General eligibility criteria are anticipated to include: • • • • • •

Licensed business, in good standing with the City of Boulder and State of Colorado. Proposed project is located within Boulder municipal boundaries. Demonstrates financial viability and capacity to complete the proposed project. Remains in compliance with city zoning, building, and environmental regulations. Agrees to maintain a facility or operation in Boulder for a minimum of five years. Applicant signs an economic incentive agreement with the City of Boulder.

In addition, applications would be evaluated based on proposed projects’ expected contributions the local community through:

Job creation and retention: Projected employment and new jobs created, location of jobs (remote vs. onsite), average wage, availability of health care and other benefits, opportunities for training and advancement, practices that support inclusive hiring and training. Targeted industry support: Direct support for advanced manufacturing, aerospace, arts and culture, biotech, cleantech, IT/software, natural and organic products, quantum technologies, tourism, or other key industries for the Boulder community. Sales and Use Tax Generation: Generation of increased annual sales and use tax revenue for city and demonstrated ability to attract new customers or expand market reach. Reducing Commercial Real Estate Vacancies: Occupation of long-term vacant office or industrial space, activating a strategically important or underutilized commercial area, or making significant investment in tenant improvements to existing commercial space. Inclusivity and Equity: Demonstrated commitment to local procurement and supply chain development; programs for workforce training, apprenticeships, or internships for local residents; diverse hiring, training, and procurement practices; resilience through data and record redundancy program, continuity of operations planning and other measures to prepare for and respond to disasters and other major disruptions; or other partnerships or programs that support the local community and provide inclusive economic opportunities. Affordable Commercial Space: Creation or preservation of dedicated below-market space for small businesses, non-profits, or startups with a commitment to long-term affordability covenants. Arts & Culture and Visitor Economy Support: Creation of new attractions or amenities such as unique retail and hospitality improvements to encourage visitor spending and overnight stays, support for local events and cultural experiences, contracting with local artists including performers, visual artists, writers and authors, design professionals, photographers, or other arts industry professionals or providing affordable studio or practice space. Contribution to Middle-Income Housing Solutions: Direct financial contribution to the City's affordable housing fund, provision of on-site or off-site middle-income housing units as part of a larger development, or partnerships with local housing providers to address middle-income housing needs. Sustainability and Environmental Stewardship and Impact: Demonstrated commitment to sustainable building practices (LEED certification, net-zero ready), sustainable business practices (energy efficiency, water conservation, waste reduction,

environmentally preferred purchasing policy, etc.), integration of renewable energy sources or green infrastructure, or support for alternative transportation for employees and customers or clients (bike facilities, employee bus passes, van pools, transit access). Administrative Review Process Staff anticipate utilizing a multi-stage review and implementation process for the Economic Development Incentive Program to ensure transparency, a thorough evaluation of incentive applications, and alignment with community values and priorities. 1. 2.

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Initial review by staff to verify general eligibility, and application completeness. Detailed staff analysis by cross-departmental team which would consider economic impact, financial feasibility, alignment with city goals, potential risks, and community benefits. Recommendation developed by staff based on analysis that would include a specific incentive amount, structure, and duration; performance metrics and targets; reporting requirements and timelines; claw-back provisions for nonperformance; and specific conditions related to sustainability, affordability, or other community benefits. Review and approval by City Manager. Economic Development Incentive Agreement negotiation and contract execution.

Reporting, monitoring and compliance Program participants would be required to submit annual reports detailing their progress against agreed-upon milestones and performance metrics. City staff would verify reports to monitor compliance with terms of incentive agreements. Incentive agreements would include provisions for addressing non-compliance which may include suspension or termination of incentives, recapture (claw-back) of previously disbursed incentive funds, or other penalties for failure to meet agreed upon performance targets. City staff would use incentive recipient reports and other information to evaluate the overall performance of the incentive program and make recommendations for adjustments or improvements as needed. Staff would provide annual updates to City Council of the overall effectiveness of the program in achieving its stated objectives, alignment with the city’s economic vitality strategy, and any plans for program adjustments or improvements.

Equity Analysis Expansion of the city’s incentive program would provide a new economic development tool that could be used to help retain and attract businesses to support a strong economic base that will support essential programs and services that benefit all residents, businesses, and visitors. Applicants for the incentive would be required to meet eligibility requirements which would include criteria that look at job quality, hiring and training practices, procurement, and other community support with special attention to individuals and businesses representing historically excluded communities. As detailed incentive program criteria are finalized and incentive applications are evaluated, staff will use the Racial Equity Instrument to evaluate inclusivity and equity to ensure support for a diverse business ecosystem, equitable access to economic opportunities and benefits of economic development and growth are broadly shared.

Fiscal Note A robust economic development program is essential for the long-term fiscal health of the City of Boulder. The proposed ordinance is a strategic tool designed to generate a positive net fiscal impact for the city by accelerating and spurring economic activity that may not otherwise occur. While the program involves a direct cost in the form of fee waivers or rebates, these expenditures are considered an investment with a high return, as the new economic activity they incentivize will generate new and additional revenues for the city. This fiscal analysis is based on the core philosophy that the city will gain more in new tax revenue than it forgoes in incentive costs. The new economic activity will generate revenue for the city through several channels: •

Sales and Use Tax: The most significant revenue source for the City of Boulder's General Fund is sales and use tax. New and expanding businesses, especially those in retail and service sectors, will contribute directly to this revenue stream. A rough order of magnitude suggests that a new large-scale commercial development, for example, could generate an additional $50,000 to $500,000 annually in sales and use tax, depending on its size and type.

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Property Tax: New construction and increased property values resulting from business expansion and investment will increase the city's property tax base. While property taxes are a smaller portion of the city's total revenue, they are a stable and consistent source.

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Permit and Licensing Fees: While some fees may be waived as part of the incentive program, the subsequent economic activity (e.g., business licenses, building permits for future expansions, etc.) will generate new fees over time.

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Other Fees: Increased population and business activity will also lead to new revenue from various city fees, such as those for utilities and parking.

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Incentive Costs: The primary cost of this program is the direct incentive itself (fee waivers, rebates). These costs are structured to be a portion of the total project value and are tied to a clear return on investment. The program's design, which emphasizes a performance-based incentive structure, ensures that the city only provides a benefit after the business has demonstrated its commitment or fulfilled its obligations, such as creating a certain number of jobs or investing a specific amount of capital.

Each project, and the program overall, will be evaluated to determine the net return on investment (ROI). The projected ROI will be included in the application evaluation. The assumption is that each project will be a net positive for the city. For example, a $5 million business expansion that receives a $250,000 incentive (a 5% rebate on investment) could generate an estimated $150,000 in new tax revenue annually. The initial "cost" of the incentive would be recouped in less than two years, and the city would then benefit from a positive cash flow for the life of the project. By selectively incentivizing projects that align with the city's strategic goals—such as those that provide living wages, high-quality jobs, and a commitment to sustainability, the city can maximize its return on investment and ensure that the fiscal benefits are equitably distributed throughout the community.

Climate, Resilience, and Sustainability Considerations The expansion of the city’s economic development incentive program aligns with the city’s Sustainability, Equity and Resilience (SER) Framework and climate goals and will be structured to encourage projects that support a more resilient and sustainable economy. Development or redevelopment in specific areas that align with the Boulder Valley Comprehensive Plan guidance can significantly contribute to broader sustainability outcomes by promoting compact, mixed-use development, reducing vehicle miles travelled, and optimizing existing infrastructure. The incentives will support projects that demonstrate strong environmental stewardship, including sustainable building practices, reduced energy and water consumption, integration of renewable energy, and support for multimodal transportation. They will also be structured to contribute to a more diversified and resilient local economy that is better equipped to withstand future environmental and economic shocks.

Community Engagement Staff plans to continue to collaborate with the Boulder Chamber and other partners to engage with commercial property owners and brokers, industry groups, businesses, and other community members to ensure that objectives for this initiative align with their needs and values.

Workplan Considerations This item is currently in the city’s workplan.

Next Steps for City Council Pending council approval, staff will finalize program administration details and begin marketing the program and accepting applications in 2025. Council will receive annual updates on the effectiveness of the city’s economic development incentive programs and plans for adjustments and improvements beginning in 2026.

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Attachments A - Proposed Ordinance 8726