Council approves tax abatement ordinance
Polk County Enterprise - November 2007
LIVINGSTON — City Council members unanimously approved on Monday a resolution and ordinance creating Reinvestment Zone 3 in the downtown Main Street district and offering property owners tax relief for improvements to property that create or retain local jobs.
Main Street Director Bob Zeigler told council members that one of the obstacles his committee ran into when developing an abatement plan was the common misconception of what tax abatements do.
“It’s not a plan for getting five years off scott-free with no taxes,” Zeigler said. “It’s just an abatement on the increase in value.”
“If your building is worth $100,000 and you do renovations that make it worth $200,000 this gives you up to give years before that value goes up on the tax rolls,” he said.
Business owner Robin Babb cited the importance of such a plan in encouraging development.
Babb said in her efforts to encourage other business owners to make improvements she frequently hears the objection that if they do something with their building, their taxes will go up.
“That’s what happened to me. When I got my assessment, it went up significantly,” Babb said. “With the timing of when that occurred, it was very painful. I went to appraisal district and we got some adjustment.”
“If you spent a lot of money on your building, that’s an outlay of a lot of cash that you need to operate a retail business,” she added. “You don’t get an immediate in increase in customer volume, it takes some time.”
Zeigler added that the recent jump in tax appraisals was “Main Street kryptonite.”
“It stopped a lot of projects in their tracks,” he said.
The abatement is part of an incentive package to encourage investment in new business that will create jobs.
The abatement ordinance provides for three formats:
• Two-year abatements for $25,000 in construction cost and creation or retention of one job in the reinvestment zone. The base value will be assessed as of Jan. 1 of the year preceding the agreement and include improvements up to the date of the agreement.
In year 1, 100 percent of the value of improvements will be abated. Year 2 provides a 50 percent abatement.
• Three-year abatements require an investment of $50,000 and creation or retention of two jobs. Owners receive a 100 percent abatement in year 1; 66 percent in year 2; 33 percent in year 3 and returning to the full tax in year 4.
Owners who make $100,000 in improvements and create or retain three jobs can be eligible for a five-year abatement, with 100 percent in year 1; 80 percent in year 2; 60 percent in year 3; 40 percent in year 4; and 20 percent in the final year of the agreement.
The abatement plan will be in effect for two years, unless 3/4 of the council votes to repeal the program.
Final decisions on each abatement will be at the discretion of council, according to City Attorney Gaffney Phillips.
Other elements of the incentive package include sign grants, waiver of permit fees and low interest loans.