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HomeMy WebLinkAboutA007 - Council Action Form dated September 26, 2000 ITEM# t " DATE: September 26,2000 COUNCIL ACTION FORM SUBJECT: REQUEST FROM DEVELOPERS OF SOMERSET VILLAGE FOR TAX ABATEMENT BACKGROUND: On April 8, 1997, the City Council approved a Zoning Change Agreement between the developers of the Somerset Subdivision and the City of Ames. You will recall that the developers of the Northridge Subdivision (who are represented by almost the same individuals as the Somerset Subdivision) had requested the Council to approve the removal of multi-family units from the final phases of their site plan for Northridge and approve an annexation and rezoning of the land that would become the Somerset Subdivision for single family and apartment uses. At the time of this request, the City was contemplating the use of a new technique --the" village" concept-- to assure efficient growth as the City expanded to accommodate the population goal of 62,000 as stated in the Land Use Policy Plan. The City Council approved the Somerset developers' request for annexation and the inclusion of both single and multi-family uses in return for a commitment to build the City's first "village." Since no approved regulations were in place to guide this new type of development, a rather lengthy and complex zoning agreement was created. The approval of the new Land Use Policy Plan and Zoning Ordinance subsequently made it clear that the village approach was the preferred form of development in the undeveloped areas of the city. However, the zoning agreement recognized that this planning concept was an experiment that was subject to alteration if there appeared to be a lack of acceptance by the consumer. Consequently, the agreement allows the developers to: "Seek or request a change in the zoning and plan development for the Site if the following conditions have occurred: 1. Three years have passed from the issuance of the first building permit for the Site. 2. The Developers have demonstrated to the satisfaction of the City that during the said three years the Developers have continuously made their best bona fide efforts at marketing the project and seeking home sales or tenants for rental dwellings on the Site. 3. Despite the best efforts of the Developers, home sales and tenancy of rental dwellings have not occurred at the same rate as in other subdivisions containing similar housing opportunities." While City staff has not verified whether any or all of these conditions have been met, the developers are indicating that we are reaching a critical time in the development of the village. Infrastructure has been extended to nine phases in the subdivision and land is now available to construct all five housing types (Row houses, Country houses, Village houses, Villages cottages, and Village apartments) planned for in the village. However, the developers emphasize that an imbalance now exists between the detached single family units and the attached single family units and apartment buildings, since there are significantly more attached units. They believe it will be more difficult to market the remaining unattached single family units that are planned adjacent to the apartments and attached homes in the phases that have already been started. The developers are concerned that a slow response by the market for these single family units will impede the timely build out of this project. Given the extra costs associated with the development of a village as compared to a traditional suburbanlresidential subdivision, they fear further delays will jeopardize the success of our first village and force them to request that the remaining portion of the subdivision be converted to a more traditional suburban/residential development. Originally, the developers requested tax abatement for all units in the development. The Council rejected this broad request and decided to offer this incentive in return for specific uses desired in the village. Consequently, the existing agreement specifies that the City Council will consider providing tax abatement in accordance with the process stipulated in Chapter 404 of the Iowa Code for any building used for a grocery store,for any building used for a sit-down restaurant,for any building used for retail on the first floor and for apartments on subsequent stories leased at a rate not to exceed 30% of 80% of the median family income for Story County. The Council did that. The designation of Urban Revitalization Area#7 and an approved urban revitalization plan for that area was inacted as a result. The developers are now asking for further tax incentives beyond those provided under the current urban revitalization plan for Area #7. The developers have indicated that they are willing to make extra efforts to market the Somerset Village. As a result they are: (1) building and making available at least ten single family detached or attached housing units at all times; (2) offering special financing terms for all single family home buyers in the form of interest write-downs or cash bonuses equaling, at a minimum, $3,000 up to $6,500 -- depending on the mortgage amount; (3) providing approved house plans that meet the village guidelines free of charge to prospective home buyers; (4) granting an additional $1,000 bonus to real estate agents who sell property in Somerset; (5) conducting informational meetings for all real estate agents in town to explain the village concept and to showcase the completed inventory available for sale; (6) working with a marketing firm that specializes in neo-traditional developments to implement a marketing strategy in accordance with the suggestions from this firm; and (7) allowing civic groups to use the Somerset clubhouse free of charge. In return for these initiatives, the developers are requesting that the City: (1) grant tax abatement on unoccupied new construction; (2) grant tax exempt status on park, open space areas, and common areas; and (3) keep, if legally possible, the undeveloped lots at the undeveloped tax rate until they are transferred to a builder or home owner. ALTERNATIVES: 1. The City Council can support the request from the developers of Somerset Village to grant tax abatement to all new unoccupied construction and set a date of hearing to amend Urban Revitalization #7 to allow for a three-year 100% abatement for all properties shown on the attached map. The Council would have to instruct the staff to explore the possibilities of granting park, open space, undeveloped lots, and common areas tax exempt status. 2. The City Council can support the request from the developers of Somerset Village to grant tax abatement to all new unoccupied construction and set a date of hearing to amend Urban Revitalization #7 to allow for a three-year 100% abatement for all properties shown on the attached map. 3. The City Council can support the request from the developers of Somerset Village to grant a three-year 100% year tax abatement on all single family lots shown on the attached map and set the date of hearing to amend Urban Revitalization #7. 4. The City Council can support the request from the developers of Somerset Village to grant a three-year 100%tax abatement on all multi-family lots shown on the attached map and set the date of hearing to amend Urban Revitalization #7. 5. The City Council can support the request from the developers of Somerset Village to grant a three-year 100%tax abatement on all commercial lots shown on the attached map and set the date of hearing to amend Urban Revitalization #7. MANAGER'S RECOMMENDED ACTION: The Land Use Policy adopted by the City Council emphasizes that the village concept is the preferred development alternative in all undeveloped areas in the city. A great amount of time and money have been invested by the developers on our first village, The total development includes 195 acres with 250 single family detached units, 150 single family attached units, and 450 apartment units planned for the village. To date, approximately 100 acres have been developed with 40 single family detached units, 52 single family attached units, and 158 apartments having been built or in the process of being constructed. Therefore, much has been accomplished! However, according to information provided by the developers of Somerset, we have reached a critical stage in the development of this project. It is their opinion that extraordinary efforts, not contemplated in the original agreement, are now needed on the part of the City and developers in order for Somerset Village to succeed. The staff cannot support the request to grant exempt status to park and open space, to grant tax abatement for the common areas, or to retain undeveloped lots at the undeveloped tax rate until sold. The arguments made for this action transcend this development and serve as a precedent which can't be supported. (In fact, we are not certain we could legally accommodate these requests.) The staff, however, does believe some expansion in the tax abatement concept is justified to assure that the momentum gained in the initial years of the development is not lost during this crucial period. The argument for tax abatement for the remaining undeveloped or unoccupied single family units that are adjacent to multi-family units in areas currently platted is persuasive. It will be up to the City Council to determine whether or not abatement should be extended to the commercial and multi-family lots in previously platted areas. The Somerset development is the City's first"village" and, therefore, it is crucial that the project is successful if we hope to convince other developers to undertake our preferred alternative. Toward this end, it would seem appropriate to make one final push to guarantee the success of this new development model. Therefore, it is the recommendation of the City Manager that the City Council approve Alternative #2 and amend the existing Rezoning Agreement to allow for a three-year tax abatement on the properties in the existing platted phases identified on the attached map, and set the date of hearing to amend the Urban Revitalization#7 Plan. This recommendation is contingent on the developers: (1) building and making available at least ten single family detached or attached housing units at all times; (2) offering special financing terms for all single family home buyers in the form of interest write-downs or cash bonuses equaling, at a minimum, $3,000 up to $6,500 -- depending on the mortgage amount; (3) providing approved house plans that meet the village guidelines free of charge to prospective home buyers; (4) granting an additional $1,000 bonus to real estate agents who sell property in Somerset; (5) conducting informational meetings for all real estate agents in town to explain the village concept and to showcase the completed inventory available for sale; (6) working with a marketing firm that specializes in neo-traditional developments to implement a marketing strategy in accordance with the suggestions from this firm; (7) allowing civic groups to use the Somerset clubhouse free of charge; and (8) continuing to develop the project as a village as prescribed for in the current zoning agreement. The City Council should understand that the incentive which is being considered will benefit the property owners and not the developers directly. The offer to expand the tax abatement opportunities should not be viewed as setting a precedent. It is being recommended for the City's initial village only to stimulate a more timely build out of the project. However, if this recommendation is followed, the City Council should anticipate a negative response from those individuals who purchased land prior to the initiation of this new incentive. Any discussion to retroactively apply this incentive would be ill-advised. COUNCIL ACTION: