City approves new tax incentive
The Allegan Downtown Development District was designated as the district for a new tax incentive in the city after a public hearing June 26.
The designation was needed to utilize tax incentives under the Obsolete Property Rehabilitation Act (OPRA) to encourage redevelopment of functionally obsolete property.
Currently the city offers tax incentives to developers through the Commercial Rehabilitation Act; however, city manager Joel Dye said OPRA better serves rehabilitating downtown’s mixed use of older buildings for commercial uses and housing projects.
The city has already received two requests from developers to utilize the new incentive.
The tax incentives essentially freeze the local property taxes for up to 12 years, exempting all real property improvements.
Written notice by certified mail was sent to the owners of all real property within the proposed OPRA district.
Downtown building owner Denny Sturgis wanted to know why he wasn’t included in the mailing. It was discovered his letter was one of several that were returned in the mail as undeliverable.
During the hearing, residents wanted to know what an obsolete property was. An example given was a second- or first-floor building that was vacant.
Downtown building owner Cindy Langhorst questioned a sentence in the first paragraph of the nine-page act, reserving the right to levy and collect a specific tax upon the owners of certain facilities in the district.
She was concerned it opened a window for the state to levy more taxes onto property. Another building owner agreed; John Watts said, “Is it another avenue to tax property downtown or beneficial to us?”
Dye explained that it wasn’t an avenue to add additional taxes the act reserved the right for the city to levy and collect typical taxes on such millages as roads, schools, senior services or the library.
The state treasurer has the ability to exempt one-half of the school millage for up to six years if an OPRA exemption certificate is approved locally.
Building owner Bruce Waligora wanted to know if being designated as an obsolete property would have an effect on his property values.
Dye said appraisers establish the value by the condition of the structure. “It’s not valued less because it is in a special district.”
Council member Mike Manning said, “It’s not condemned—it’s repurposed.”
Dye explained OPRA gives the district more potential for development.
“It basically allows more residential use and the state has made it more streamlined with an upgraded version, “ he said.
Commercial properties may apply that are functionally obsolete or blighted as described in the brownfield redevelopment financing act. Functionally obsolete means that the property is unable to be used to adequately perform the function for which it was intended.
Building owner John Hanse wanted to know if he could get back some of the $20,000 he invested into a downtown building.
Dye said the rehabilitation cannot be retroactive.
Dye also said the remaining years of a tax exemption can be transferred to new property owners if the initial investor sells the property.
The owner of obsolete property in the district may file an application for an exemption certificate with the clerk. The application must include a general description of the obsolete facility, a description of the proposed use of the rehabilitated facility, the nature and extent of the rehabilitation to be undertaken, a descriptive list of the fixed building equipment that will be a part of the rehabilitated facility, a time schedule for undertaking and completing the rehabilitation of the facility, a statement of the economic advantages expected from the exemption, including the number of jobs to be retained or created, including any construction employment.
A public hearing is scheduled on a case-by-case basis with notice to the applicant, assessor, a representative of the affected taxing units, and the general public.
The city has 60 days after receipt of the application to approve or disapprove it.
If approved locally, it must be sent to the State Tax Commission which has 60 days to approve or deny the request.
Peter Hanse of Hanse Environmental asked what tax incentives would do to the city budget.
Dye said his staff has talked about this. He said either way, taxes would be frozen. The city would receive the same amount of taxes from the building without the investment as they would with the investment because of the tax freeze. If it means losing the investment by not offering the incentive, the city loses out on a building full of life and future tax increases.
Virginia Ransbottom can be contacted at vransbottom@ allegannews.com or at (269) 673-5534.