Tax Abatement Committee

TAX ABATEMENT COMMITTEE CITY HALL – ROOM 302 A 10 N. DIVISION BATTLE CREEK, MICHIGAN NOVEMBER 29, 2010 12:00 PM Present: Comm. Elizabeth Fulton, Comm. Lynn Ward Gray, Mayor Baldwin, Comm. David Walters Absent: None. Staff: Ken Tsuchiyama, James Ritsema, Steven Hudson, Deidre Laser, Susan Bedsole, Eileen Wicklund Others: Karl Dehn, Doug Voshell Call to Order: Ken Tsuchiyama opened the meeting at 12:06 PM and asked Assessor Steven Hudson to present information regarding the different city tax abatement programs. Steven Hudson presented a chart of abatements and noted the purpose of the abatements is to promote economic development by attracting new businesses or helping to retain existing businesses. Some of the abatements are to renovate economically obsolete buildings. They all have their own set of rules which are set by the state of Michigan. The City Commission through the Tax Abatement Committee developed their own rules regarding IFTS and PA 328. Mr. Hudson uses the Commission and state guidelines when he reviews the applications. All of the details on the application have been reviewed prior to Commission approval. After the abatement is approved, the contract compliance office checks to confirm that compliance has occurred. Mr. Hudson stated the City monitors current IFTS and noted on the December 7, 2010, City Commission agenda, a resolution will be brought forward to revoke an IFT for Autovan LLC. Comm. Fulton asked who reviews and approves the application documents. Mr. Hudson said applications are submitted through the City Clerk’s office or through Battle Creek Unlimited (BCU). The Assessor then reviews the original application to see if the application meets the state and local guidelines. If the application does not meet the guidelines, Mr. Hudson telephones the applicant and will suggest changes. Comm. Fulton asked that a copy of the guidelines be sent to the Commission. Mr. Hudson added that sometimes the application reflects a worthy project; however, it may not meet state/city guidelines. He provided examples that were brought forward to the Tax Abatement Committee or City Commission for a recommendation. Most abatements are approved for a 12 year time frame. The IFT has been a useful economic development tool since 1974. All of Fort Custer is in an IFT district. There is a minimum requirement of a $100,000 investment or 20% of current value. For real and personal property, a 12 year tax abatement is granted. For personal property only, a 6 year tax abatement is granted. 1 Once the district is established, a business files an application with the City Clerk’s office. Applicants have 6 months to file an application from the time construction begins. The maximum amount of time is 2 years for completion. Mr. Hudson informed the committee that a new OPRA application will be coming before the Commission for the renovation of the Brown Building located at 1346 W. Columbia and noted that OPRAs are becoming more popular. Mayor Baldwin asked for a discussion regarding why it is permitted that someone can begin construction prior to filing an application. Attorney Wicklund added that the district must be established before work begins. Mayor Baldwin asked why someone would start a project not knowing they had approval for the tax abatement. Karl Dehn stated the City of Battle Creek has a history for supporting tax abatements. From a timing standpoint, existing businesses are willing to take a risk so they can meet their target date. New businesses usually apply before they start construction. Doug Voshell stated the City of Battle Creek will support a business venture. It is a leap of faith by the business to begin construction. Karl Dehn added that most could stop construction and go to another location if the IFT is not approved. A small window of opportunity exists. BCU does a lot of prescreening and educating businesses regarding the City’s guidelines. If one does not meet the guidelines, Mr. Dehn said BCU would educate the business as to the proper process. Each time the City approves a tax abatement, there is a reaffirmation of the City’s partnership with the business community. Comm. Gray asked if staff could supply copies of the resolutions and ordinances that established city guidelines as noted on the abatement chart. Comm. Gray asked how often the City educates the public regarding current incentives. Mr. Hudson said that information is available on the website, through the answering of daily questions in his office, and through BCU. Mr. Tsuchiyama said businesses must meet the criteria; therefore, the city has not made a broad reach effort. The City could hold a workshop, but it has not been done in the past. Susan Bedsole noted that the Neighborhood Planning Councils were provided information regarding the Neighborhood Enterprise Zones. Karl Dehn stated in dealing with businesses, the incentives are mentioned when the project includes the renovation of a building or it is based on need. Comm. Gray felt there may be changes needed in current ordinances or guidelines in light of the Baxter Funeral Home discussion during a recent Commission meeting. She asked when was a good time for Commission to ask questions prior to the IFT approval. For instance, the question raised was regarding granting “up to 12 years” abatement. 2 Ken Tsuchiyama stated the City has historically approved “up to 12 years” for the abatement time frame, and it has been an expectation in the Battle Creek business world. James Ritsema added that OPRAs are becoming more popular and perhaps the Committee should focus on developing more defined OPRA guidelines. Comm. Walters stated he brought up the question of approving the maximum 12 year abatement. He would like to see the city remain competitive, while at the same time, retain current businesses. Ken Tsuchiyama said the OPRA is a different animal as the criteria is less stringent and open to more businesses. Susan Bedsole suggested the Committee make the policy decision prior to the application’s approval at Commission level. Steven Hudson informed the Committee that all of the incentives have a state deadline of October 31st to be eligible for the following tax year. The OPRA does not have the same time restraint as an IFT. To be eligible for an OPRA, Mr. Hudson makes a determination if the building suffers from economic obsolescence. A district must be established for an OPRA before any work begins. Karl Dehn stated there are times when companies apply after construction because companies are not aware of the process. Mayor Baldwin asked if the City should be considering business competition. Mr. Hudson said there are no clauses precluding competition. Attorney Wicklund suggested including something in the guidelines. Karl Dehn suggested creating guidelines that would relate to all applicants. With most abatements, Mr. Hudson noted the original assessment is frozen and the City is collecting the same amount of taxes. With the improvements, a business pays only a portion of the millage rate. Mr. Hudson indicated the City has not had any Commercial Rehabilitation Act applications as the OPRA is a better deal. However, the City does qualify for the program. Mayor Baldwin asked if there was a need for more information or research. Comm. Gray would like to see a second meeting set to review the tax abatement guidelines to see if there are any changes needed. Ken Tsuchiyama said the 2006 IFT report will be updated and distributed to the Committee. A workshop could be scheduled after the first of the year. Karl Dehn said Battle Creek has commercial districts where the redevelopment of buildings is possibly the biggest economic focus. He would like to know if there is general support for the OPRA in encouraging redevelopment. Mr. Dehn said a logical step for the Committee is to work towards OPRA guidelines. Comm. Fulton asked the Assessor to elaborate more on the Neighborhood Enterprise Zone program. 3 Steven Hudson noted the Neighborhood Enterprise Zone program is an opportunity to renovate residential houses. If the property is owner occupied, there must be a minimum of a $5,000 investment. If a landlord is the applicant, there must be a minimum investment of $7,500 per unit. The property is assessed at half the state millage rate which is the incentive for residents to participate in the program. The application must be submitted before work begins. Comm. Fulton asked if the NEZ program is available for any homeowner in Battle Creek. Mr. Hudson advised that the residence must exist in one of Battle Creek’s ten neighborhood enterprise districts. Susan Bedsole added that the districts sit in Neighborhood Planning Council areas 1 through 4. Ken Tsuchiyama said he will instruct GIS to create a map of the neighborhood enterprise districts for the Committee. Comm. Fulton felt there are few incentives for homeowners to improve or invest in their homes. Steven Hudson stated normal maintenance (examples: repairing a roof, installing new windows, or replacing a furnace) does not affect home value. When someone remodels a kitchen or bathroom, it does affect home value and the assessment. Tax incentives are provided by the state of Michigan. Comm. Fulton felt there is a perception that the City does more for businesses and not enough for residents. Ken Tsuchiyama indicated Battle Creek can only use the tools the state allows. Comm. Fulton would like to see more education for residents. Doug Voshell felt it would be beneficial to have a concerted effort in educating residents by stating that Battle Creek promotes residential improvement and does so through a Neighborhood Enterprise Zone incentive tax program. Susan Bedsole said the City has done that in the past with little results. Ms. Bedsole indicated that the City of Battle Creek will be participating in a 2011 Home Forum where information will be available for residents. Ken Tsuchiyama said the biggest challenge is that homeowners don’t have $5,000 to invest in their home. Mayor Baldwin asked if the City was allowed to establish a program to provide incentives. Attorney Wicklund said that tax incentives are only granted by the state; however, there may be city programs where a certain pot of money is set aside to provide low-cost loans to citizens. Mr. Hudson said his office has lots of available information for homeowners regarding how assessments are determined. Mayor Baldwin asked if the City is permitted to set tighter guidelines. Steven Hudson stated the City cannot make them looser, just tighter than the state. Doug Voshell said when the City restricts the application requirements; you make the process less competitive. An applicant can apply in a different community and receive the abatement. 4 Ken Tsuchiyama stated the real reason for the incentives is for job creation and retention. He suggested looking at the IFT and OPRA guidelines first because they are used more. Karl Dehn suggested removing the personal property restriction of “up to 6 year’s abatement” on PA 198 guidelines. For the OPRA meeting, Mr. Dehn offered to provide a series of questions and answers to help guide the discussion for the next Committee meeting. Approval of Minutes: (February 12, 2009) A motion was made by Comm. Fulton, supported by Comm. Walters, to approve the minutes of the February 12, 2009, Tax Abatement Committee meeting. All yes. Motion carried. Public Comment: None. Adjournment: Mayor Baldwin adjourned the meeting at 1:40 PM 5