DECORAH — Whether to continue the city’s residential property tax abatement program in its current form was debated by the Decorah City Council Monday night.
An economic development and community betterment committee meeting has been scheduled to continue that discussion.
In January, the council reinstated the program that had been in effect for three years, with no cap on improvements eligible for tax abatement and no end date or “sunset” clause. However, the program was on Monday night’s agenda for the council to assess the goals and accomplishments of the program.
City Manager Chad Bird reported to the council that over the last four years the program had resulted in 57 new units of housing at a market value of $21,900,000. That created $12,400,000 worth of taxable value for the city and about $175,000 in general fund revenue for Decorah, Bird said.
The current tax abatement program provides residents a five-year, 100 percent property tax abatement for new residential construction and on renovations to existing homes that increase the home’s assessed value by 10 percent. Taxes also are abated $40,000 per unit for multi-family homes/apartments.
Council member Randy Schissel said he’d like to see a cap on the improvements; it had previously been set at $400,000. He said the city’s goal was to increase the availability of affordable housing, but instead the program is encouraging construction of $300,000 to $400,000 homes making Decorah “unaffordable.”
Council member Johanna Bergan said she also is interested in placing a cap on the program.
“We’ve largely had more expensive homes built (with the abatement program),” she said.
A cap would encourage “the houses we want to see built,” she said.
Mayor Lorraine Borowski said when residents build larger houses, their smaller homes become available.
Council member Dan Bellrichard said he doesn’t see offering abatements as an “affordable housing initiative” but as something that increases taxable value within the city.
“If the goal is to increase affordable housing through this program, I don’t know that it’s ever going to do that,” he said.
“I’d like to see the city’s investment go toward affordable housing as a priority,” Bergan said.
Council member Steve Luse suggested increasing the abatements offered for apartments and multi-family housing to provide some “relief” for the developers of such projects.
Bird said the council might want to consider providing incentives for multi-family projects on a case-by-case basis, similar to what was recently approved for the Echo Development apartments planned for the Decorah Business Park.
Council member Kirk Johnson asked the rest of the Council to keep in mind “there are a lot of places in Iowa with no construction going on of any kind.” He also said if the program is going to be changed, it would be smart to phase those changes in over a period of time so developers who were counting on the program aren’t caught off guard.
Bird said he knows someone who debated whether to build within city limits and ultimately decided to build in the city because of the tax abatement program. Their home won’t be completed before the end of the year, so the portion that’s not completed would no longer be eligible for abatement if the council decides to end the incentives or reduce the amount eligible before the end of the year.
Bellrichard, who chairs the city’s economic development committee, said there are enough “shared concerns” among council members to warrant a closer look at the abatement program. He said if changes are going to be made, it should be done before the New Year.
Bird said the program stays as is until the council agrees to any changes. He said the council might want to consider working with an ad hoc committee of builders, developers and business groups.
Decorah resident Dennis Magnuson said he was glad to hear the council discussing the abatement program.
“Somebody does pay for them (the incentives). The infrastructure – the public is paying,” he said.
Bird said taxes are low on empty lots where streets and utilities have already been provided. Through the residential abatement program, taxes are deferred on homes built on lots that have been underutilized.