Tax Rebates Down.Historic BldgsMEM
ORANDUM
April 29, 2002
TO:
FROM:
SUBJECT:
The Honorable Mayor and City Council Members
Michael C. Van Milligen, City Manager
Proposed Policy for Tax Rebates for Downtown Historic Buildings
This past year the City Council has financially supported redevelopment of Dubuque's
Historic Main Street area. Projects such as the Town Clock Building, Cooper
Development, Pepper Sprout, the Iowa Inn and the Grand Opera House are good
examples of what can be accomplished through a private-public partnership. The most
recent project involves the Heartland Financial USA proposed redevelopment of the
Walsh Store properties in the Upper Main Street area. The City Council has assisted n
these projects with loans from either the Downtown Tax Increment Financing Loan Pool
or the Community Development Block Grant program, and in the case of the Walsh
Store, a 10-year property tax rebate. As a result of the City Council commitment, the
private sector investments, and the America's River project, Downtown Dubuque ~s
experiencing a true renaissance.
One of the difficulties facing property ownei-s in the rehabilitation of these historic
structures is the cost of rehabilitation compared to the construction of a new facility at a
"Greenfield" space in one of the commercial or industrial parks. The City was keenly
aware of this gap in negotiations with Heartland Financial USA officials for
redevelopment of the Walsh Building.
The County Board of Supervisors is allowed to provide a Property Tax Exemption for
the new taxable value of properties rehabilitated according to guidelines of the State
Historic Preservation Officer (SHPO). This is a 100% exemption for 4 years, then a
three year phase in exempting 75%, 50%, 25% until the eighth year when no exemption
is provided. However, the Dubuque County Board of Supervisors has a policy that they
do not get involved with a project if it is in an Urban Renewal District. and the City of
Dubuque supports that policy.
To create incentives to rehabilitate historic downtown structures, the City could make
available a tax rel~ate program to property owners that meet the Secretary of the
Interior's Standards for the Treatment of Historic Properties. In applying for the rebates,
the property owner would need to provide the City with an approved application for
cer[ified substantial rehabilitation from the State Historic Preservation Officer.
These incentives would be similar to the system permitted under the State Code, but it
would be through a TIF tax rebate program, as they would have received through the
County under Chapter 427.16. The program would be 4 years of full rebate, followed by
3 years phased in rebates referenced above.
Economic Development Director Bill Baum is recommending approval of an Historic
Property Tax Rebate Program, which would provide property tax rebates to owners ~n
the Downtown Urban Renewal District who have restored historic buildings to certain
standards. The Historic Preservation Commission has reviewed the proposed policy
and recommends adoption.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
MiChael C. Van Milligen
MCVM/jh
Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
William Baum, Economic Development Director
CITY OF DUBUQUE, IOWA
MEMORANDUM
Apd126,2002
TO:
Michael Van Milligen, City Manager
FROM: William Baum, Economic Development Director
SUBJECT: Proposed Policy for Tax Rebates for Downtown Historic Buildings
INTRODUCTION
This memorandum transmits, for review and approval, a policy providing for property tax
rebates to owners in the Downtown Urban Renewal district who have restored historic
buildings to certain stanc~ards.
BACKGROUND
This past year the City Council has financially supported redevelopment of Dubuque's
Historic Main Street area. Projects such as the Town Clock Building, Cooper
Development, Pepper Sprout, the Iowa Inn and the Grand Opera House are good
examples of what can be accomplished through a private-public partnership. The most
recent project involves the Heartland Financial USA proposed redevelopment of the
Walsh Store properties in the Upper Main Street area. The City Council has assisted in
these projects with loans from either the Downtown TIF account or the CDBG program,
and in the case of the Walsh Store, a 1 O-year property tax rebate. As a result of the
City Council commitment, the private sector investments, and the America's River
project, Downtown Dubuque is experiencing a true renaissance.
DISCUSSION
One of the difficulties facing property owners in the rehabilitation of these historic
structures is the cost of rehabilitation compared to the construction of a new facility at a
"Greenfield" space in one of the commercial or industrial parks. We were keenly aware
of this gap in incentives for redevelopment in negotiations with Heartland Financial USA
officials, as well as Cottingham & Butler (Town Clock Building).
One of the solutions is to assist property owners who restore Dubuque's downtown
historic structures by providing incentives other than loans to help with the project. For
example, the City has approved the concept of offering tax rebates to Heartland
Financial USA on the new value added to the tax roles at the Walsh building. In that
case, the value of the rebate will exceed this recommendation because it was already
negotiated at 100% for 10 years. My opinion is that the City should provide similar
financing to any property owner restoring historic properties to certain standards.
One option my staff and I have reviewed is contained in Iowa Code Section 427.16.
This section provides a Property Tax Exemption for the new taxable value of properties
rehabilitated according to guidelines of the State Historic Preservation Officer (SHPO).
The County Board of Supervisors are allowed to provide these exemptions, which are
100% exemptions for 4 years, then a three year phase in exempting 75%, 50%, 25%
until the eighth year when no exemption is provided.
The County recently had a request for such an 9xemption from Cottingham & Butler for
the value added to the Town Clock building. The County's policy is to not provide the
exemption in an Urban Renewal Area. The County consulted with our office concerning
the request. After review of the State law, I am of the opinion the City should provide the
equivalent of these exemptions, on a case-by-case basis.
For example, Cottingham & Butler has provided the City with information on the cost of
the rehabilitation project. The company has previously been assisted by the State
through the CEBA and Enterprise Zone programs. The application for the programs
indicated the Company's budget for the rehabilitation was $2,000.000. However, in
completing the work to meet the "Secretary of Interior's Standards for Treatment of
Historic Structures", change orders have resulted in the cost now toppin§ $2,800 90Q In
discussing the increased costs with the Company, the State Historic Preservation
Officer suggested the exemption under Chapter 427.16.
We have also received a request for a tax exemption from Cooper Development, the
company currently restoring the old Cooper Wagon Works into the Bricktown Brewery
and Restaurant. Again, the cost of rehabilitation of this facility has exceeded the original
estimates by a considerable margin.
The solution to the problem is to offer the same financial incentive to the owners,
through a TIF tax rebate program, as they would have received through the County
under Chapter 427.16. The program would be 4 years of full rebate, followed by 3 years
phased in rebates referenced above.
This tax rebate program would be available only to property owners that meet the
Secretary of the Interior's Standards for the Treatment of Historic Properties. In applying
for the rebates, the property owner would need to provide the City with an approved
application for certified substantial rehabilitation from the State Historic Preservation
Officer.
The City is already authorized through the ordinances adopted in the Downtown Urban
Renewal District, to offer tax increment financing loans, grants, or rebates to property
owners. Therefore, the adoption of a policy on this proposed Historic Property Tax
Rebate Program is the only initial action required of the City Council. After approval of
the policy, individual businesses would need to apply, and execute a Historic Property
Tax Rebate Agreement with the City Council.
The City's Historic Preservation Commission has reviewed the proposed policy, and has
made a recommendation for adoption. A copy of the Commission recommendation is
attached to this memorandum.
RECOMMENDATION
I recommend the City Council approve the attached policy on a Historic Property Tax
Rebate Program.
CITY OF DUBUQUE POLICY
HISTORIC PROPERTY TAX REBATE PROGRAM
General Policy: The policy of the City Council of Dubuque, Iowa is to encourage
property owners to preserve, rehabilitate, restore, and reconstruct historic properties
in the City's Downtown Urban Renewal District.
Incentive Program: Since owners of histodc properties often need financial
incentives in order to complete property improvements, the City will provide tax
incremental financing (TIF) tax rebates on the new taxable valuation added to the
assessment roles, according to the following schedule:
· Year1: 100%rebate
· Year 2: 100% rebate
· Year 3: 100% rebate
· Year 4: 100% rebate
· Year 5: 75% rebate
· year6: 50% rebate
· Year 7: 25% rebate
· Year 8: 0% rebate
The tax rebates will not include property taxes levied for debt service or other levies
of taxing jurisdictions not reimbursable to the City through TIF.
Requirements for Incentive Program
· The property must meet the definition of a "historic property" as defined in
Chapter 427.16(7.) of the Code of Iowa 2001.
· Applications in the form of a letter requesting property tax rebates shall be
filed with the Economic Development Department, no later than October 1 of
the calendar year.
· The properties must meet the Secretary of Interior's Standards for the
treatment of Historic properties.
· The application for property tax rebates shall include an approved application
for certified substantial rehabilitation from the state historic preservation
officer.
· The application for property tax rebates shall include information on the
anticipated or actual cost of the rehabilitation.
· A proposed Historical Property Tax Rebate Agreement will be submitted for
approval to the City Council after public hearing as required by the Iowa Code
Chapter 403. Prior to City Council action on the proposed agreement, the
Historic Preservation Commission shall review the application and provide
comments and recommendations to the Council.
F:\USERS~WBaum\Gen ED\Policy on tax rebates for historic properties to MVM.doc
April 26, 2002
Honorable Mayor and City Council
City of Dubuque
City Hall-50 W. 13th Street
Dubuque IA 52001
Subject: Proposed Policy for Tax Rebates for Downtown Historic Buildings
Dear Mayor and Council Members,
At our April 18 meeting, the Historic Preservation Commission reviewed the
proposed Policy for Tax Rebates for Downtown Historic Buildings.
With the development of the America's River Project at the Port of Dubuque. we
have seen a significant reinvestment in the downtown. Recently the Commission
has reviewed and approved funding through the Fagade Grant program and the
Downtown Rehab Loan program for the Grand Opera House, Iowa Inn, Town
Clock Building, Pepper Sprouts and the Cooper Wagon Works Building.
The proposed Policy for Tax Rebates for Downtown Historic Buildings is another
funding source that can help offset the additional cost sometimes associated with
rehabilitating historic structures.
The Historic Preservation Commission is in full support of the proposed Policy for
Tax Rebates for Downtown Historic Buildings and recommends the City Council
approve the policy.
Sincerely,
Terry Mozena, Chairperson
Historic Preservation Commission
Cc William Baum, Econ Dev Director
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