New house PIXABAY

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MOUNT VERNON — The City of Mount Vernon is no stranger to using tax incentives and abatements to spur investment and revitalization in designated areas. Indeed, creating a neighborhood Community Reinvestment Area (CRA) will likely play a key role in the redevelopment of the former school building at 301 N. Mulberry St.

CRAs and other tax incentive programs typically are smaller in scope, such as covering a particular neighborhood or business district. In light of the city and county's severe housing shortage, Jeff Gottke and Sam Filkins of the Area Development Foundation asked Mount Vernon City Council members to consider a city-wide CRA.

Gottke, president of the ADF, cautioned that a city-wide CRA is not yet a formal proposal, merely an idea and one particular tool for council to consider.

“The approach will not solve the housing shortage problem in the county or city, but it is one that will go toward solving it,” he said during a Monday meeting of the city's Planning and Zoning Committee.

As of July 2020, the county had a two-month supply of houses on the market.

“Currently, it's about two weeks. Realtors like six months,” Gottke said. “Waiting lists exist at local housing complexes as well.”

Compounding the problem is an increase in building material costs for new home construction due to supply chain issues during the pandemic.

“The price of lumber has increased 180%. That adds about $24,000 in cost just in lumber to the sticker price,” Gottke said.

Other factors are also affecting housing:

--The age of the city's housing stock: The average house was built in 1973, and there has been some disinvestment in renovations.

--Lack of high-quality, affordable rental options such as duplexes, condos, and apartments to accommodate seniors' and young adults' preference for walkability

--A workforce shortage: A low unemployment rate means a worker supply problem for companies looking to locate in Mount Vernon.

How would a city-wide CRA work?

In a CRA, property improvements such as new construction or rehabilitation are eligible for a discount (abatement) in property taxes. The percent of discount and length of time can vary. The abatement only applies to the improvements; the tax value on the remaining property will adjust based on normal reassessments.

For example, a property owner who adds a garage to an existing house can receive a tax abatement on the garage. He or she continues to pay the tax on the house based on periodic revaluations.

A CRA does not grant abatements for projects such as a new roof, interior or exterior painting, or repair of siding or gutters.

CRA census block groups

Property owners in census blocks that have a high percentage of low- to mid-income residents will receive a larger abatement. 

In a city-wide CRA, all properties within the city could qualify, but the type of project and location will determine the percentage and length of time. Scoring is based on the percentage of low- to mid-income residents in each census block. The higher percentage of low- to mid-income residents, the larger the abatement will be.

A new home on an infill lot could receive a 50% abatement or a 100% abatement based on location. Similarly, renovation of a historic home could receive a 75% abatement for 15 years or a 100%, 20-year abatement.

“There is disinvestment in all areas. The areas with the highest need will get the highest abatement,” explained Filkins, vice president of the ADF.

Filkins said that census block groups are reevaluated every five years. The latest evaluation will be out this month.

CRA terms based on census blocks

This graphic shows the proposed abatement terms based on project and census block location.

In addition to preserving historic structures, two target areas are new homes and multi-family construction.

“We want to see new homes on infill lots,” Filkins said. “That maintains the rural character, and the services are already there. We don't want all of our cornfields to be plowed under. If we provide high-quality rentals, we can address low-quality rentals at the same time.”

He added that incentives for landlords to invest in current single- and multi-family rentals will “make the current quality better.”

Regarding historic homes, Filkins said the city can decide whether the home must be in a designated historic district to qualify.

“Other communities let people petition for historic abatement without being in a historic district,” he said. “It's up to the city to decide."

As it already does, the city's engineering department will handle any permits required for new construction or structural improvements under the CRA. The county auditor will calculate the reassessments, and the Tax Incentive Review Commission will monitor compliance with CRA requirements.

Benefits of a CRA

ADF surveyed 23 Ohio cities that have a city-wide CRA program. Of the 13 that responded, nine agreed the CRA had a positive impact on encouraging projects (one disagreed). The oldest CRA was enacted in 1981; most of the others have existed since 2008. The newest has been in place six months.

Noting the frequently expressed desire of residents to have an Olive Garden Restaurant or Target come to town, Gottke said that “retail follows rooftops.”

“The more people, the more business, the more opportunities,” he said.

Diverse housing options, landlord investment in rental properties, a renewed effort to maintain historic homes, and an increase in the quality and availability of housing for all income levels are among the benefits Gottke said a CRA would bring to the city.

Relating specifically to new builds (single-family as well as multi-family on vacant acreage within the city), the benefits include:

--More income tax

--More revenue from new utility users

--More efficient use of water/sewer/stormwater lines already in place

--Reduced load on existing homes for city services as more users come online

--Reduced conversion of single-family homes to multi-family

--Greater affordability for low- and mid-income residents to buy a home

CRA hourly salary needed

Abatement of property taxes can make a new home more affordable for lower-income residents. ADF President Jeff Gottke said the expectation is that when the abatement expires, the homeowner is more established and able to manage financially when the property tax payments begin.

Indirect benefits include workforce expansion, job creation, potential construction jobs, increased local sales tax, and more consumers for local businesses. Another benefit is civic involvement.

“The more people who work local and live local, the more they will get involved and make a difference,” Gottke said.

Calling CRAs and tax incentive programs “but for" money, Gottke said that the longer it takes for property owners and builders to get through city red tape, the greater the likelihood they won't do the project.

“Without this financing, the projects won't happen,” he said.

How does a CRA affect the schools?

The majority portion of property taxes go to the local schools and the county. If a property receives a tax abatement, less money goes to the schools.

Since abatements only apply to the improved value, schools will continue to receive what they are already receiving. Gottke noted that since the CRA incentive is covering “but for” money and the projects would not happen otherwise, the schools would never get any improved-value payments.

He also pointed out that if 15 new homes are built, once the abatement ends, the schools will receive new tax money it did not have before.

CRA income revenue

This graphic shows that the city could potentially receive an overall net gain from a city-wide Community Reinvestment Area.

Mayor Matt Starr believes the time is right to consider something like a city-wide CRA.

“People aren't going to move to a city because of a franchise, but a franchise will move to a city because of the people,” he said. “”A city-wide CRA gives everybody a chance to reinvest in their property.

“This is an investment,” he continued. “There are no huge dividends short term, but long term we will see more revenue … and increased quality of life in terms of walkability. I don't really see too much risk. For me, it's a no-brainer. Timing-wise, it's the right time.”

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