Development agreement to abate taxes for 500 N. Grand building presented to council
By Kelly Terpstra, email@example.com
A signature on the dotted line.
That may be all that’s left to begin reconstruction on the 500 N. Grand building in Charles City.
A draft agreement between Charles City and a Johnston developer to abate property taxes for the 1930s portion of the 500 N. Grand building to build market-rate apartments was discussed at a City Council planning session on Monday.
Shawn Foutch is owner of JMAE LLC., a construction company that specializes in historic rehabs and property management. Foutch purchased the old middle school building at 500 N. Grand for $1 at a Charles City School Board meeting on Monday. In order to move forward with design work and engineering on the project, he’ll need the consent of the council in order to meet his tax abatement demands for the project.
The proposed abatement agreement would be for 10 years and at 100 percent. This would save Foutch over $589,000 in property tax dollars over a 14-year plan laid out by Floyd County Assessor Gary Vander Werf.
The $589,000 in taxes that would be abated is an increase of approximately $45,000 after the city’s last council workshop meeting when the agreement was discussed. The wrong consolidated levy rate figure for a tax rebate ($32.66) was used in the 14-year plan instead of the correct number for an abatement, which is $35.72.
Foutch would pay property taxes once construction was started in the fiscal year 2021. The 10-year tax abatement would start in 2025 and last until 2034.
The property was assessed at $3 million and the total amount of property taxes due over the time frame was over $659,000 – meaning Foutch would only have to pay $70,000 in property taxes. Just over $589,000 would be abated. Only the new redeveloped assessment can be abated, not the base value of the property. Foutch pays taxes on the property once the building is purchased, which equates to roughly $5,281 annually.
There were are also developer’s covenants included in the agreement that Foutch would need to purchase the building and complete his company’s work by Dec. 31, 2022.
“My goal is to not get this half finished. My goal is to get this thing completely done within that window,” said council member Keith Starr. “If it’s six months late, do we take away one year of abatement?”
There was also a stipulation that Foutch would have to build 35 apartment units as part of the residential reconstruction project and no less than 14 stalls to provide adequate parking.
“We talked about a personal guarantee that makes sure this project gets started and completed,” said Diers.
Diers said there cannot be a clause in the agreement that would stipulate the contract to be non-transferable – meaning the abatement would still be awarded no matter who owned the property or was in charge of the construction.
Per the terms of the contract, the city would agree to act in good faith to consider the establishment of an urban revitalization area and make changes to parking requirements.
Diers said the plan is start to start construction on the project in the summer of 2021.