By Lois Mittino Gray
Former Evansville Mayor Jonathon Weinzapfel, representing the firm of Faegre, Baker, Daniels in Indianapolis, met in a special session of the Mount Vernon Common Council on June 3 to explore Economic Development Tools for Municipalities. The Council would like to increase residential and commercial development and wants to see what tools are out there for developers to help grow the city. Weinzapfel told the Council they need to think first if they want to set a precedent in any action they choose to do. “After all, Council is accountable for how they spend the city’s tax dollars.” he reminded them as he began his information session.
To set the stage for the meeting, Town Attorney Beth McFaddin Higgins stated the Council received a request for $330,000 from builder Charles Lawrence as half the money needed to put in a new street and water and sewer lines near Country Club Estates for proposed new homes. The Council is aware that the city has incredibly tight purse strings since tax caps have been imposed and money is needed for routine services. She added the council needs to be creative, which is very difficult in tough economic times so Weinzapfel’s role will address available tools out there. Weinzapfel stated he is aware this particular property is located outside the city limits, which will constrain the opportunities for the city to get involved. He added TIF (Tax Increment Financing), or a redevelopment area, will not be an option. The County would have an opportunity for incentives like TIF, as the property is in Posey County. He stated there could be voluntary annexation of the area, but that would take some time. Involuntary annexation, where the annexation can be challenged in court, would take an even longer time.
Weinzapfel explained that when a city allows a tax phase-in, it is usually for industrial development and rarely for residential development. The redevelopment commission determines if the area qualifies for tax phase-in, then that is brought before the City Council. Tax phase-in may not be approved for residential areas, unless at least 20 percent of the housing is for low income or a residentially distressed area. Some examples of declaring an area a residentially distressed area would be a finding of unimproved dwellings, unoccupied dwellings, and parcels that have been sold and not redeemed. He does not believe this fits into the request they have before them. He added this is called tax abatement, and for example, over 10 years, the taxes would be phased-in with full tax being due by year 10.
Councilman Bill Curtis stated if this was done on a home then the benefit would be for the developer. Once the home is purchased, the homeowner pays taxes which Councilman Fuelling noted is the only income to the city at that point. Attorney Higgins stated for rehab on the residential side, an area would have to meet these tests established in the ERA (Economic Revitalization Area). Curtis asked if the council looks at annexation, it does not seem to him that this would meet any of these criteria and Weinzapfel agreed. Councilman Steve Fuelling questioned if apartments were involved and Weinzapfel replied a percentage would have to be low to moderate income to qualify for this tax phase-in.
Weinzapfel then discussed TIF as contrasted with tax abatement. Both set a specific area in question, but TIF is more of a geographic area. A baseline of taxes is set in the designated area and the redevelopment commission can collect all tax above that threshold to go to the city, and earmark it for development. He added in Evansville this was done in the Central Business District. It was declared a TIF area, as well as Mead Johnson. For residential TIF, there are strict definitions of criteria to be met, and Evansville did this in the Arts District/Haney’s Corner area. The criteria are that not more than 25 acres are annexed in five years, if there are remonstrators, they have to wait another five years; there can be no private enterprise; one-third of all parcels must be vacant; one-third of units must be built before 1941, and more as these were examples.
EDIT money and utility funds can be used, especially within the city limits. Weinzapfel stated that as Council goes forward, they need to ask themselves some tough questions. What is the city policy on city money being used for private developments? Who pays for the infrastructure improvements, because once that is set, it is hard to deviate from precedent. Have they looked to the County Council for help on this as the property is located in the county? If the city does help, what strings will be attached ? Does city money come free?
He said most developers would love to have public assistance with their projects, but Council is the protector of the treasury. He suggested challenging the developer to show the gap of why they can’t afford to do the project on their own.
Ken Johnson of Shrode Agency stated he realizes that Evansville differs from Mount Vernon, but asked the council what is Mount Vernon’s policy when water and sewer run along the property in question. Who extends the lines and puts in the streets? Weinzapfel replied typically, with water and sewer lines, the developer is responsible for extending the city service and then the city would take over the operation and maintenance of the lines.
Attorney Higgins stated that is the city policy now. The developer extends the lines on their own dime, per the city water and sewer service agreement. The Council has sized facilities in hopes of getting more customers. They have made improvements and water and sewer services are readily available. She added it is imperative that water and sewer be made available for future growth, and Council has done that and is proactive. Curtis added they also have a surcharge in place for folks with water and sewer service that are outside the city limits.
Johnson stated from the realtors prospective, the city has a shortage in “inventory” of homes all across the price ranges, especially homes of the $250,000-plus range. Lawrence has been a positive presence in the county and has carried the cost of the lots in Country Club Estates for years. Johnson feels Mount Vernon needs new homes built and the real estate market needs comparable sales. It hurts folks’ ability to finance homes and have home appraised for their value when there are no comparable properties in the area. In three to five years, if 300-600 jobs come to the area, Mount Vernon will really miss out as buyers will go across the county line where there are comparable homes for sale, according to the realtor. Lawrence stated SABIC workers who come into the area want to go to Evansville because there isn’t the kind of homes here they want. Johnson stated they need resale homes in the $300,000 – $500,000 price range and in Mount Vernon there are only two choices, so people go to Warrick County where they have numerous choices, too.
Johnson also questioned the use of EDIT money – that was to be used for economic development he thought, though he has seen numerous signs throughout the county stating that this road or that was paid for by EDIT money. How is that economic development? Curtis said it can be used in many ways.
Following discussion on changing current policy for one developer and setting precedent, Attorney Higgins stated she was sure Lawrence would like an answer. Councilman Curtis moved Council deny the request for assistance for putting in the infrastructure for a new subdivision, as requested by Lawrence. The motion passed. Attorney Higgins stated water and sewer are there and they are in close proximity to the development. The developer can bring a request for water and sewer service out of the city limits to the Council and that can be presented per the city’s current policy. She added she has all of the required paperwork at her office, and again, all lines must be constructed per city standards.
Lawrence summed it all up and stated he would be getting no financial help from the city. Attorney Higgins replied that is correct.