Should Parkview Apartments receive a tax break and tax deferral so it may make improvements like adding new doors, stoves, fire suppression systems, air-conditioning, windows, carpet and more?
BY BENJAMIN J. GOHS, NEWS EDITOR
Boyne City officials are considering whether the owners of Parkview Apartments in Boyne City should get tax breaks to improve their business.
According to Parkview Apartments owners’ attorney Joseph Quandt, a Payment In Lieu Of Taxes (PILOT) agreement would benefit the city as much as his clients.
“[T]he city will achieve a greater rate of revenue under the proposed ordinance and MSA than it currently receives under ad valorem allocations and distribution,” Quandt stated in a Sept. 28 letter to Boyne City’s Civil Counsel James J. Murray. “In fact, over the proposed course of the PILOT, the city actually earns over $200,000 more (the figure is closer to $192,000) under the PILOT/MSA than it would receive from ad valorem tax allocations, even considering projected tax revenue growth through foreseeable property value increases.”
He further stated, “This additional $200,000 is the money that would repay the city for any additional expense that it would incur as part of the resolution of the impounded stormwater problem adjacent to Parkview Apartments.”
Boyne City Manager Michael Cain introduced the proposed ordinance and agreement to the Boyne City Commission during the commission’s regular Tuesday Oct. 13 meeting.
“A number of years ago, we received a(n) earlier request from Parkview Apartments for a PILOT and I recommended to deny that request at that time,” said Cain. “One of the major concerns was the financial implications to the city. To their credit, Parkview has provided us a proposal that addresses the city’s financial concern with regard to that through the use of a side agreement that basically makes us whole.”
He added, “It doesn’t make everybody that levies taxes whole but it does take care of my first responsibility, which is the City of Boyne City itself.”
Cain said several other issues are being addressed through the side agreement as well.
The city would get its tax revenue back but Boyne City schools, Char-Em ISD and Charlevoix County would lose hundreds of thousands of dollars in tax revenue as the plan is currently proposed.
Due to Boyne City statutory requirements, the earliest the city could make a decision on the matter is at its Nov. 24 meeting.
According to Cain’s Oct. 9 memo to the city commission regarding the PILOT agreement, the city would have to first enact a PILOT ordinance before entering into an agreement with Parkview Apartments.
Park View Apartments owners have most recently paid $45,069.92 to taxing jurisdictions other than the city, and $17,870.62 to Boyne City on the three parcels it owns.
Parkview’s point of view
Quandt, who attended last week’s meeting with Parkview Apartments owners Bob and Pam Brooks, explained to the city that this proposed agreement began as a way to deal with flooding near the apartment complex, which Parkview officials have previously claimed is the fault of the city.
The PILOT would also help the apartment complex’s owners make improvements to the low-income housing units.
“The applicant would still be paying about 60 percent of their current tax burden … for municipal services or through the PILOT,” Quandt told commissioners. “There would still be about $9,000 that would be paid to, out of the current tax burden, to the county.”
Boyne City officials have denied that the city is responsible in any way for the flooding which has been occurring in that neighborhood.
However, the city recently completed a project to help improve drainage of water which continues to accumulate near the apartments and has been flooding numerous area residences for years.
“We’ve tried to solve a lot of problems with this,” said Quandt. “By adopting this PILOT, not only do we further the social and philosophical objectives of providing affordable workforce housing in your community but, also, the PILOT addresses reimbursement of the city’s expenses that incurred in undertaking the fix to the groundwater system. It reimburses Parkview for the cost it will incur to restore its property as a result of some of those damages. And, it also will continue to provide a funding mechanism to allow for continued affordable workforce housing in the future by rehabilitating the improvements that are existing there now.”
Quandt said that, for this project to be eligible for MSHDA low-income housing tax credits, the PILOT must exist a minimum of 15 years. Quandt’s clients propose a 35-year PILOT program.
Quandt’s proposal offers a flat fee of $21,000 annually to the city over the life of the PILOT to reimburse the city for construction and administrative costs.
Boyne City Mayor Ron Grunch said he wants to see the city fully reimbursed and expressed concerns that the city would not be made whole until late in the agreement time-line.
Boyne City Commissioner Tom Neidhamer said he has no problem with the PILOT ordinance or with moving forward but expressed concern with the reduction in tax revenue to other local taxing authorities.
“For 35 years, we’re telling the schools and the county and the library and Char-Em … you’re taking a hit,” he said.
Quandt said that is always true of a pilot.
“The PILOT doesn’t put money in anybody’s pocket. The PILOT provides a mechanism to allow for … a deferral so the investment can be made to foster the same social, philosophical, economical goals,” he said… “Without it, you don’t have that.”
Parkview currently pays the city $18,200 annually in taxes.
The PILOT program will also allow Parkview Apartments owners to apply for a lower mortgage interest rate and a mortgage over a longer period of time.
Quandt said some taxing entities may lose out on revenue but the tradeoff is that the local government will not be responsible for providing affordable housing.
Neidhamer said it didn’t “match up” that Parkview officials are simultaneously claiming they have been damaged by the stormwater but are willing to settle the matter if they get the PILOT program to improve the apartment complex.
Boyne City Commissioner Derek Gaylord said the whole conversation is operating on the incorrect premise that the city owes Parkview Apartments for the groundwater issue.
“There’s been no assignment of liability at this point,” Gaylord said. “I think those are two totally separate issues.”
Cain said he agreed that the issues are separate, adding that he wants to focus on whether the PILOT program makes sense at this time.
“Under this proposal, as it’s currently proposed, there are some losers,” Cain said, adding that the plan could be tweaked to reduce the city’s return in order to increase the amount of tax revenue going to the other affected taxing authorities.
“How much of any type of a haircut is anybody gonna take to make this thing work?” said Cain. “I think the liability, we can talk about that until we’re blue in the face, but that’s a red herring at this point.”
Quandt said the real issue is whether Boyne City wants to invest in affordable housing.
Gaylord said there is a difference between Parkview’s owners asking for a PILOT program, and owners claiming the city owes them financially for the damages they claim.
Quandt said the whole issue at hand is the need to rehabilitate Parkview Apartments.
Boyne City Commissioner Laura Sansom asked if rents would go up after the improvements are made. Parkview officials said they cannot raise the rent without approval from the authority which oversees affordable housing.
Sansom then said she had heard Parkview officials threatened to raise their tenants’ rents if the city facilities millage was approved in May.
“That’s my job,” said Bob Brooks. “I have to inform my tenants that, if our taxes stay the same and the vote went through, property taxes of Parkview are going to go up, which means your rent is going to go up.”
He added, “I didn’t tell them to vote ‘yes’ or ‘no.’”
Charlevoix County Commissioner Chris Christensen (R-District 2) said he would like to see all the taxing entities receive some moneys instead of only Boyne City being made whole.
Christensen also said Parkview Apartments only addresses a very specific portion of the area’s overall affordable housing needs.
Boyne City Commission candidate and former Boyne City Main Street Program Manager Hugh Conklin asked what would happen to the property if the improvements are not made.
“It might just fall apart at the seams,” Bob Brooks said.
Conklin also asked how many families with students live there.
Brooks said he did not know how many students live there but that he has seen an increase of people 60 and older who want to live there.
Boyne City Public Schools Superintendent Peter Moss said he is torn on the issue because he understands the need for affordable housing.
Moss then listed what some local taxing entities would lose annually under the proposed agreement as presented:
• Boyne Public Schools – $24,500
• Char-Em ISD – $31,050
• State education tax – $7,000
Over the 35-year PILOT, Moss said Boyne City Public Schools would lose nearly $850,000.
The long list of improvements on the 25-year-old apartment system, listed in the Parkview proposal, includes carpeting, tile, interior and exterior doors, vanities, windows, boilers, hot water heaters, fire suppression systems, bath fixtures, counter tops, cabinets, smoke alarms, ovens, refrigerators, and HVAC systems.
Where it stands now
Grunch said an agreement of some type would make sense, and the matter should be investigated further.
Cain suggested a meeting be held among the stakeholders to fine-tune the agreement.
The proposal was fastracked when a motion was made to consider the Oct. 13 meeting the first reading of the ordinance and to set the second reading of the ordinance for 7 p.m. on Nov. 24.
The meeting had originally been scheduled for noon but was unanimously changed to the evening time.
The motion to hold a second reading of the proposed ordinance passed 4-1 with Gaylord being the lone “no” vote.