Decorah and Winneshiek County have a need for additional housing, and tax abatement appears to be the best incentive for encouraging it, according to representatives of Decorah Jobs.
Winneshiek County Development Inc. Director Randy Uhl, secretary of Decorah Jobs, addressed the Decorah City Council about the issue Monday night. He said local economic groups have been looking at housing needs for more than a year and last year decided professional assistance was needed. RDG Planning and Design of Omaha was contracted to do a Community Housing Assessment Team (CHAT) study.
Decorah Jobs is a nonprofit group formed in 1960 to promote economic betterment in Decorah and the surrounding area.
RDG did extensive background work and conducted site visits in November, according to Uhl. RDG’s Housing Specialist Marty Shukert presented the firm’s findings in January.
Uhl said for him the report identified three major issues:
• The need for 300 new housing units in Winneshiek County over the next 10 years, with 210 of those in Decorah alone
• If affordable housing isn’t available, other aspects of community life will be affected
• Public participation is essential to providing additional housing.
If the city pursues abatement, taxes would not be paid on improvements (new homes) made to property for a set period of time.
Uhl said Decorah doesn’t have a large open space available for housing, but there are about 18 lots for sale at $50,000 or less. Some lots are unsuitable for housing, while homes could be built on others, with incentives, he said.
Decorah Jobs President Ben Grimstad said people want to live in Decorah and find a home where they can walk or bike to work or businesses.
“We need apartment buildings, condos, town homes and higher density (housing) so we can fit more units in limited space. We need affordable homes and average priced homes. We need all those types of things,” Grimstad said.
He said he’s talked to downtown property owners who could develop second story apartments above their businesses if the right incentives were available. There is some hesitancy to do so now because their real estate taxes are already high, Grimstad said.
Housing developments are risky, he added and home builders are often lucky to break even.
“We’d like to encourage the Council to consider tax abatement,” Grimstad said.
City Manager Chad Bird said tax abatement was used as an incentive to increase housing in Adel, where he was formerly city manager.
“It was well received. You’re foregoing taxes temporarily – there’s not a lot of risk to the city. It takes some of the risk away from building,” Bird explained.
Uhl said the nine largest employers in the area were surveyed last summer for their opinions. Several said it was hard to attract employees due to limited housing.
“Housing really is a function of economic development,” Bird said.
Council member Chuck Lore said the Council has heard from property owners concerned about the amount of property taxes they pay.
“How will it look if we start giving tax abatement?” he asked.
“We have to start some place,” Decorah Jobs member Keith Bruening said, adding he thought the CHAT survey was conservative in its estimates for housing needed in Decorah.
“Eventually those (property tax) revenues will come,” Grimstad said.
Bird said the taxes are only abated on improvements to the property for the life of the program.
“Eventually it is taxable property,” Bird said.
Only about two or three homes are currently being built each year now, he said.
“Tomorrow, if we get 20 homes, we’re getting something … we’re just deferring those tax receipts,” Bird said.
“We’re not taking any off the tax base (by abating taxes on new homes),” Council member Jody Niess said.
Lore asked what type of abatement schedule might be considered.
Bird said an aggressive schedule would be to offer 100 percent abatement for five or seven years and give builders three years to take advantage of the incentive.
He said that would amount to roughly $2,800 per year of abated taxes on a $200,000 home. In addition to the city of Decorah, the Decorah School District and Winneshiek County property taxes would be abated.
Council member Tade Kerndt asked Uhl if the Winneshiek County Board of Supervisors also would be asked to consider tax abatement to encourage housing and Uhl said it would be.
Kerndt said an abatement program would help the city’s housing situation “tremendously” and that citizens would be “jumping out of the woodwork” to take advantage of it. He also said it would free up existing houses as new houses are built.
“This is one tool for housing that’s no risk to the city,” Bruening said.
“I agree 100 percent,” Kerndt said.
Fortunate for past
Mike Huinker of Decorah said the city has been fortunate with the housing developments that have taken place in the past. But because costs and risks are so high now, he questioned who would create a new subdivision.
“It doesn’t look like it pencils out,” he said.
Because the city is extending municipal water and sewer service to the Decorah Business Park on the east edge of town, Grimstad said “ideally” the city would annex nearby property for housing that could take advantage of those services.
Bird said in Adel the abatement program had a “green component” that required builders to incorporate at least seven of 42 green initiatives identified by the city to be eligible for abatement.
“All 90-plus homes built in Adel (through the abatement program) met these green standards at some level,” Bird said.
In addition, Adel offered the abatement to commercial development if it included 75 percent of its square footage for residential use.
“It’s a way to look at mixed-use properties by offering similar abatement incentives,” Bird said.
Adel also offered abatement for existing homes when improvements of 15 percent or more of the home’s value were made.
Kerndt said it would be beneficial to offer abatement to everyone, not just someone building a new home.
The tax abatement proposal was referred to the Council’s economic development and community betterment committee chaired by Council member Randy Schissel. The committee is scheduled to meet Monday, April 21, at 6:30 p.m. or immediately following the Council’s regular meeting, which starts at 5:45 p.m.