TAX ABATEMENT PROGRAM UPDATE

Transcription

1 TAX ABATEMENT PROGRAM UPDATE Public Presentation, August 19, 2015

2 Process for Amendment Program expires December 31 st, 2015 Staff research and analysis Summer 2015 Public meeting held August 2015 Gather feedback to present to City Council Amended staff recommendations City Council decision on how to proceed Fall 2015 Implementation January 1, 2016

3 Goal Statements for Program Stabilize, improve, and raise value of existing housing stock Support high quality, sustainable new construction Reduce blight in neighborhoods and along corridors Encourage housing product options in targeted areas that market may currently lack Target development in areas where existing infrastructure is already in place

4 Considerations for Recommendations Multi-family property tax rollback by State Current real estate market momentum Future municipal budget considerations Abatement has not increased single-family housing starts Continued emphasis on housing rehabilitation

5 Considerations for Recommendations Target abatement to coincide with development & housing plan initiatives: PlanDSM Capital Crossroads Tomorrow Plan Polk County Housing Trust Fund Des Moines Strategic Plan

6 Current Abatement Schedules Residential Rehabilitation Schedule 1: 10-year, 115%, capped at $20,000 in abated value Commercial & Industrial (outside the downtown) Schedule 2: 10-year declining Schedule 3: 3-year, 100% Residential & Multi-Family Schedule 4A: 10-year, 100% (targeted area only) Schedule 4B: 5-year, 100% (Citywide)

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8 Residential Tax Abatement is NOT AVAILABLE in most of Ankeny, Clive, Grimes, Johnston, Urbandale, Waukee, West Des Moines, or Windsor Heights. Residential Tax Abatement: Other Metro Cities Municipality Abatement Type Maximum Amount Abated (Capped Value) Percentage of Value Abated Des Moines-10 yr. Full 10 year None 100% Des Moines-5 yr. Full 5 year None 100% Des Moines Rehab Full 10 year $20, % Des Moines (Graduated) Graduated 10 year None 80%-20% Altoona Full 5 year $75, % Ankeny (Uptown Area Only) Graduated 10 year None 80%-20% Bondurant Graduated 5 year None 80%-20% Carlisle Graduated 5 year None 90%-20% Pleasant Hill #1 Graduated 5 year None 75%-15% Pleasant Hill #2 (rehab) Full 10 year None 90%

9 Number of Applications by Schedule 4,000 3, ,500 3,000 2,688 3,010 2,500 2,000 1,964 2,181 2,046 1,868 1,500 1,204 1, Schedule yr. 115% 1under Schedule 10 yr. Declining 2 - $20, yr. 115% - Sched 1 Sched 2 Rehab 10 yr. Declining Residential/ Commercial Schedule 3yr /100% 3-3 yr. Sched 100% 3 Commercial Schedule Dtown 4A 10 yr./100% 100% - Sched Targeted 4a Area City Schedule 5yr./100% 4B - 5 yr. Sched 100% 4b Citywide

10 Residential Applications by Tax District- Rehabilitation ABATEMENT APPLICATIONS - REHABILTIATION District District District District District District District District District District Tax District # Apps $Amt. $Avg $3,503,110 $13, $360,600 $13, $640,450 $13, $453,500 $13, $988,780 $12, $3,440,950 $12, $1,945,880 $12, $1,335,660 $13, $3,214,490 $13, $4,364,800 $12, $1,944,390 $13, $3,043,560 $15,688 District District Consistently used across the city Average value is similar city-wide

11 Residential Applications by Tax District- New Construction/Major Rehabilitation ABATEMENT APPLICATIONS NEW CONSTRUCTION (4A & 4B) District District District District District 110 District District District District District Tax District # Apps $Amt. $Avg $20,673,960 $157, $135,475,510 $147, $71,211,970 $173, $33,083,190 $116, $7,689,730 $89, $25,620,680 $187, $1,539,270 $64, $17,594,960 $49, $32,089,520 $140, $7,277,260 $97, $185,260 $61, $37,155,230 $119,470 District District Highly utilized in areas with significant new construction

12 Tax Abatement Data Number of projects receiving abatement have decreased by 50% since 2008 DM Register article: 3.5% of new homes in DSM area cost less than $200,000, the market for first time homebuyers. The average price of a newly constructed home is $316,000. Average 2014 Schedule 4B new construction application value: $165,000 Total taxable value abated in 2014: $482 million Represents about $3.9 million in city property tax revenues in 2014

13 Metro Residential Permit Data: Single-Family/Townhome Single-Family Building Permit Totals Single-Family Building Permit Totals Ankeny Des Moines Urbandale Waukee West Des Moines Source: DSM Homebuilders Association & DSM Permit Data

14 Metro Residential Permit Data: Multi- Family Dwelling Units Multi-Family Units Permitted Ankeny Des Moines Urbandale Waukee West Des Moines Multi-Family Units Permitted Source: DSM Homebuilders Association & DSM Permit Data

15 Multi-Family Rollback Year Assessment Rollback Reduction in Assessed Valuation Assessed Valuation Property taxes paid 2014 $1,500, $ 1,500,000 $69, $1,500, % 13.75% $ 1,293,750 $59, $1,500, % 17.50% $ 1,237,500 $56, $1,500, % 21.50% $ 1,177,500 $54, $1,500, % 25.00% $ 1,125,000 $51, $1,500, % 28.75% $ 1,068,750 $49, $1,500, % 32.50% $ 1,012,500 $46, $1,500, % 36.25% $ 956,250 $43,988 Same as 2022 Single Family

16 Recommended Tax Abatement City of Des Moines Tax Abatement Staff Recommendations

17 Single-Family Residential: New Construction/Rehab Current: 5-year, 100% citywide Proposed: Reduce to 5-year declining schedule, Keep 5-year, 100% for rehab/additions Effective 1/1/16

18 Single-Family Residential: New Construction in Targeted Area Current: 10-year, 100% in targeted area Proposed: Reduce to 5- year 100%, then 5-year declining schedule Keep 10-year, 100% for rehab/additions Extend full eligibility for one additional year Effective 1/1/17

19 Single-Family Rollback Year Assess ment Rollback Assessed Valuation After RB Tax Rate % Abated Property Taxes Abated* Property Taxes Paid* 2014 $175, $97, $4, $175, $97, $3, $175, $97, $2, , $175, $97, $1, , $175, $97, $ $3, *After 5 Years of No Tax Abatement Property taxes paid would be $23, **After a 5 Year 100 % Tax Abatement Schedule property taxes abated would be $23, ***After using a 5-Year Graduated Tax Abatement Schedule property taxes abated would be $13, and taxes paid would be $9,299.46

20 Single-Family Residential: New Construction Basis for Recommendations: Brings abatement more in line with what other metro communities offer Abatement not shown to increase single-family housing starts over multiple years Recommend modifying targeted areas with future land use plan update (PlanDSM)

21 Single-Family Residential: Rehabilitation Current: 10-year, 115% Citywide, (capped at $20,000 project value)* Proposed: No Change Seek increase in maximum value allowed from State *Currently at the maximum benefit allowed by law

22 Single-Family Residential: Rehabilitation Basis for Recommendations: Schedule 1 is a popular choice for small housing rehabilitation projects and most frequently used citywide Maintains emphasis on rehabbing existing housing stock Seek increase in maximum value allowed from State to give more incentive to make housing renovations

23 Multi-Family Residential: Rehabilitation Current: 5-year, 100% Citywide. 10-year, 100% in targeted area. Proposed: No Change Effective 1/1/16 Citywide

24 Multi-Family Residential: Rehabilitation Basis for Recommendations: Maintains incentive to rehab existing properties Bring existing properties into conformance with current design guidelines for significant rehabilitation (for projects with construction value 50% or more of current assessed building value)

25 Multi-Family Residential: New Construction Outside the Targeted Area Current: 5-year, 100% citywide Proposed: Eliminate tax abatement for all multi-family new construction outside of Targeted Area Effective 1/1/16

26 Multi-Family Residential: New Construction Outside the Targeted Area Basis for Recommendations: Property tax reduction already provided by state rollback (phased in from ) Recommend amending multi-family design guidelines for site plan approval to leverage higher construction standards

27 Multi-Family Residential: New Construction Inside the Targeted Area Current: 10-year, 100% Proposed: 5-year, 100%, then 5-year declining Keep 10-year, 100% schedule in place for one additional year for projects currently in process Includes residential conversion of commercial buildings Effective 1/1/17

28 Multi-Family Residential: Inside the Targeted Area Basis for Recommendations: Numerous phased or large-scale projects currently in planning phases (Riverpoint West/Gray s Landing, The Bridge District, East Village, Wilkins Building, Two Rivers District) Developers need certainty of tax abatement for project pro formas on current projects Keep reduced abatement schedule as a tool to help offset higher redevelopment costs in urban core

29 Commercial Tax Abatement Current: 3-year 100% abatement or 10-year declining schedule (outside of Downtown Overlay District) Proposed: No change Minor amendments to design guidelines for Industrial projects Effective 1/1/16

30 Commercial Tax Abatement Basis for Recommendations: Current design guidelines need minor adjustment, but standards are working to incent higher quality development

31 Schedule Existing Proposed Schedule 1 (rehabilitation) Residential 10-year, 115% - Citywide No changes Summary of Recommendations Seek increase in maximum value allowed from State Schedule 2 Residential, Commercial 10-year, declining - Commercial outside the Downtown Overlay Eliminate for residential, Keep for commercial outside Downtown Overlay District Schedule 3 Commercial 3-year, 100% - Commercial outside the Downtown Overlay No changes, amend design guidelines for industrial Schedule 4A (new construction/significant rehabilitation) Residential 10-year, 100% - Targeted Area Reduce to 5-year, 100% then 5-year declining for new construction Keep 10-year, 100% for rehabilitation Keep current schedule in place for 1 additional year in Targeted Area Schedule 4B (new construction/significant rehabilitation) Residential 5-year, 100% - Citywide Reduce to 5-year declining for new construction of single-family & townhomes Keep 5-year, 100% for rehabilitation Eliminate multi-family eligibility for new construction only (keep for rehabilitation)

32 Schedule/Type of Project *See accompanying handout High Priority Medium Priority Low Priority Multi-Family New Citywide X Multi-Family New Targeted Area Multi-Family Rehab Citywide X X Multi-Family Rehab Targeted Area X Single-Family New Citywide X Single-Family New Targeted Single-Family Rehab Citywide Single-Family Rehab Targeted Area X X X Commercial/Industrial X

33 Implementation Considerations Any new construction or rehabilitation commenced under a building permit by December 31 st, 2015 and diligently pursued to completion may receive abatement under current schedules One year extension for projects in targeted area would allow abatement under current schedule for building permits obtained by December 31 st, 2016 Suggest 3-year program extension (2016 through 2018)

34 Tax Abatement Final Considerations Suggest follow up once PlanDSM is completed Consideration may be given to future redevelopment needs in select neighborhoods and corridors LIHTC applications given bonus points for local funding contribution, tax abatement counts as contribution Monitor effects of reduced abatement on development projects, new housing starts, market conditions Next step: Present feedback received to City Council, with Staff recommendations on how to proceed

35 Questions?? City of Des Moines Community Development Department