MOUNT VERNON — As an economic advisor to the city, the Area Development Foundation has experience working with Community Reinvestment Areas (CRA). On Monday, ADF Vice President Jeff Gottke shared with city council members the ADF's perspective on a proposed CRA for the city's north end.
Developer Joel Mazza is negotiating a development agreement with the city for 301 N. Mulberry St., the site of the former middle school. A 15-year, 100% CRA is one of three conditions Mazza is requesting as part of the development agreement.
The city has granted the other two conditions: a conditional use permit changing the parcel's zoning from neighborhood commercial to residential and variances on square footage, building height, and parking spaces.
The 15-year, 100% CRA would cover the area between Pleasant Street on the north, Sugar Street on the south, Main Street on the east, and Sandusky Street on the west. Other property owners interested in taking advantage of the CRA will create their own development agreement with the city. The Tax Incentive Review Commission reviews and monitors all agreements.
“This area, I would say, represents the largest blighted area in the city,” said Gottke. “Certainly a community reinvestment area in this particular area could go a long way not only on that property but particularly in the neighborhood.”
Gottke said that CRAs are a “staple incentive” for property development. Because schools and the county can potentially miss out on hundreds of thousands of dollars in tax revenue, the ADF feels CRAs should only be a “gap filler” for certain projects that are worth giving up that revenue.
“We meet with each potential project and look over the financing plan to learn how the abatement money will be used. Specifically, will it be used to fill a gap to complete a certain project, or will it serve as personal profit or increase investor margins,” he said. “None of those are necessarily disqualifying, but we want to ascertain what use this gift will be used for.”
Gottke said the ADF also bases its recommendations on length and percent of abatement on these considerations, along with financial needs and developer reputation.
Specific to the 301 N. Mulberry St. CRA, Gottke said there are several pros:
- The parcel is the largest blighted area in the city, it has been vacant for about 20 years, the fire department deems it unsavable, and in March, the Board of Property Maintenance Appeals condemned the structure for demolition.
- The city has a “bird in hand,” a willing buyer.
“Don't let perfect be the enemy of the good,” he said.
Gottke offered several cons as well:
- Schools are not “made whole.” Gottke said that it is common practice with CRAs around the county for schools to still get their share of abatement money. “It would be helpful if the city followed county precedent in this area,” he said.
- Council members have voiced concern about the reputation of the developer.
- The developer has five years from demolition to start the project.
- The developer is only committing to finishing 7,500 square feet of the project within that five years.
- If there is a lot split, the clock restarts on the CRA for each parcel.
Gottke told council members that they have to decide whether these conditions are best for the city and a good return on investment.
As an alternative to the draft agreement being considered with Mazza, the land bank could acquire the property through the foreclosure process, demolish the school, and market the property for sale. The land bank has the authority to vet buyers to identify the best buyer with the most suitable project for the property.
“The land bank has received written commitment from local philanthropic partners to fully cover the cost to demolish the structures on the property,” said Gottke, who is also president of the Knox County Land Bank. “This commitment, however, is contingent on the land bank acquiring the property.”
Gottke said the land bank is an ideal partner because it is publicly accountable, has a public board, and follows public records and meetings laws.
“This means that the public could provide input into the end use of the property along the way and be fully apprised of the project's progress,” he said. “Further, it has no other mission other than finding uses for property that will have the greatest community benefit.”
Gottke said that Knox County Prosecutor Chip McConville believes the land bank can possess the property by the end of the year. Depending on weather, demolition can be complete by spring 2020 with the property being ready for market by the end of the summer.
Council members previously said they prefer a 10-year abatement vs. 15, and a sliding percentage (decreasing each year) vs. 100% for the entire length of the CRA.
Responding to a question on abatement length and declining percent, Gottke said that a sliding scale is an incentive for things to happen quickly. He said that a developer's financing must be in place for that to happen, and noted that with a five-year window for the project to start under the CRA being considered, a decreasing percentage might be a disincentive for the developer.
Councilman Sam Barone questioned whether a CRA would help or hinder the land bank in marketing the property.
Gottke suggested that if the city pursues the land bank alternative, council should hold off on creating the CRA until the land bank acquires the property.
“Yes, CRAs are attached to certain properties, but in this situation you have a developer who's coming in and saying I would like to develop this because of a particular deal. So they're sort of inextricably linked at that point,” he said.
Council rescinded a previous CRA for 301 N. Mulberry, but the revocation was never reported to the state. No one is certain of the status of that CRA.
“The attorney we're currently using suggested, because of that question mark, the city should go ahead, if it wants to, and create a new CRA,” said Mayor Richard Mavis.
In the latest agreement from Monday afternoon, the timeline to begin demolition of the school changed from 75 days after creation of a CRA to 90 days. Mazza has 165 days after the CRA creation to complete demolition, property graded, and, weather permitting, get the property seeded in grass.
Law Director Rob Broeren asked whether the city will have as much control over property disposition through the land bank as it would through a CRA. Gottke said that the land bank is willing to listen to anyone who has advice.
“We also understand the importance of this to the city, and so they would certainly have a voice in the process,” he said.
Gottke also noted that the city engineer is a member of the land bank's board, so the city “has a seat at the table.”
Councilman Tanner Salyers pointed out that with the time needed to complete the CRA process and the time allotted in Mazza's agreement, the time frame would be similar to the land bank's estimated timeline.
Under the development agreement, if the CRA is not created by Dec. 1, the agreement is terminated.
Safety-service Director Joel Daniels said he views both alternatives as parallel projects.
“Whether it's the developer or the land bank, the goal has always been to get this building on the ground,” he said. “I'm not concerned with the redevelopment. … Nothing can be developed there until this building is on the ground. The CRA is going to benefit whomever develops that property, so I would continue to encourage council to go along the lines of putting the CRA in place, allowing us to enter into a development agreement with Mr. Mazza, and let the land bank continue to work through the courts.”
Gottke questioned whether parallel projects are doable because the development agreement is dependent on the CRA.
“It seems to me it comes down to the development agreement at this point. We can always do the CRA later,” he said. “This particular one is linked to the development agreement. So that one seems to be primary in my mind and why I say you should decide if this [development agreement] is the thing you want to do.”
Councilman John Francis, who said he wants the school building down “10 years ago,” said he is concerned about development because of Mazza's unfinished building on West High Street. Councilwoman Nancy Vail said that perhaps the land bank will “help us avoid a repeat of what we are seeing and have experienced for a long time.”
Daniels said that the West High Street building is currently in compliance with everything the city has asked for.