City Beat: Council grants Brewery District tax abatement

Despite concerns previously voiced by two council members, Springfield City Council on Nov. 4 unanimously approved a 25-year tax abatement plan in support of a redevelopment project next to Springfield Brewing Co.

The Brewery District Lofts Redevelopment Corp. requested the abatement as it plans to demolish 535 and 527 W. Walnut St. to build a three-story retail, office and banquet facility with 28 residential apartments on the top two floors. Plans also include renovation of the 521 W. McDaniel St. building into shell space for SBC production expansion and events, as well as remodeling the 507 W. Walnut St. building into a distillery.

The council action freezes property taxes within the redevelopment area for 10 years and allows up to a 50 percent increase on taxes due in years 11 to 25. According to a tax impact analysis required with the request, the city would collect $517,580 of additional property tax revenue during the abatement period, based on the proposed improvements that would be taxed after the first 10 years.

During an Oct. 21 public hearing of the abatement plan, Councilman Craig Hosmer said the city might be issuing developers tax abatements too often, and Councilwoman Cindy Rushefsky echoed his concerns. With last week’s vote, council has approved 12 redevelopment projects with tax abatement plans the last two years. During the preceding 47 years, the city approved only 26 blighted areas, or one roughly every other year.

After registering his approval for the Brewery District abatement plan, Hosmer said he’s not strictly against property tax incentives.

“I just think it is something we should be looking at a little more closely (so) not everyone who asks for them gets them,” Hosmer said, adding the job creation potential in the Brewery District plans make it a better fit for tax incentives than projects such as the Heer’s building that are designed only to create new housing.

City staff members currently are compiling cumulative data on the net effect of tax abatements in the city.

Attorney Shawn Whitney, who represents the Brewery District development group, said the unanimous vote indicates the proposal contained all the necessary parts. The developers include Donald Babb, CEO of Citizens Memorial Healthcare in Bolivar, and his daughter, Christina Chanter, one of six partners who purchased Springfield Brewing Co. in November 2011.

“We spend a great deal of time developing the information to submit in the application,” said Whitney of Husch Blackwell LLP. “What a unanimous vote tells me is that the case was made in the application, and council did its job and reviewed the application and supported it based on that information.”

According to the information submitted to council, the current redevelopment area is valued at $785,000, and after rehabilitation, the area could be valued at more than $6 million.
 
Hotel Vandivort
Following introduction of a redevelopment plan at the Sept. 23 council meeting, developers of a downtown boutique hotel pulled a request for up to $9.9 million in industrial revenue bonds due to a complication in securing historic tax credits, according to Springfield Economic Development Director Mary Lilly Smith.

At the Nov. 4 meeting, the proposal was reintroduced to council with adjustments made to appease an Internal Revenue Service code.

“The tax-credit recipient must either be the property owner or have a lease that is commiserate with the IRS recovery period for the asset,” Smith said. “The IRS recovery period for the hotel is 39 years. Our lease in the original bill was for 25 years, which is the term of the abatement.”

Chapter 100 bonds allow for tax abatement on real property and equipment purchases, where the city actually owns the property while the developer pays back the bond debt. The current request extends lease terms to 39 years, but not the abatement period, Smith said.

“The city has the right at the end of 25 years to transfer that property back to the developer, which would terminate the abatement,” Smith said. “Or if we continue to own it through the end of 39 years, the developers would be required to make payments in lieu of taxes equal to the taxes that would be owed.”

Through MBH LLC, siblings Billy and John McQueary are remodeling the 107-year-old building at 305 E. Walnut St. into a $13.4 million, 50-room boutique property dubbed Hotel Vandivort. The McQuearys are asking council to approve 100 percent property tax abatement for 10 years and at least 50 percent tax abatement for the next 15 years.

The terms mimic Chapter 353 abatement, but the area itself is not being declared blighted, a requirement for that state incentive. Though the Chapter 100 bonds allow for abatements on personal property or equipment, Smith said the developers are only interested in the property tax break.

According to the proposal, the property tax savings would amount to $2.8 million and as much as $3.5 million should the building secure Leadership in Energy and Environmental Design Silver certification when renovations are complete.

No members of the public spoke against the tax-incentive request, and the measure is scheduled for a vote Nov. 18.

Noting the Vandivort building was coming off a 25-year abatement from the 1980s when it was converted into an office complex, Hosmer said he was awaiting a city staff report on the impact on the taxing district before he determined his vote.

“That’ll be the first time the city of Springfield has ever gone back-to-back on abatements,” Hosmer said. “I’m not critical of this development. I think this is probably a good idea, but our processes and procedures need to be looked at differently because if we do another abatement in 25 years, then the taxing entities might get no benefit.”