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Springfield City Council mulls whether to remove a sunset provision on the city’s workable program.
Photo provided by city of Springfield
Springfield City Council mulls whether to remove a sunset provision on the city’s workable program.

Council split on future of tax abatement program

Posted online

Last edited 9:33 a.m., Feb. 12, 2020

The two-year sunset is looming for the city’s workable program for property tax abatements, and Springfield City Council is split on the future of the program.

At the Feb. 10 council meeting, Economic Development Director Sarah Kerner recommended amending the city code for the workable program to continue proportional distribution of payments in lieu of taxes, or PILOTs. Kerner suggested council should remove the sunset provision from the bill language and continue to distribute the PILOTs to the taxing jurisdictions, ahead of the sunset scheduled to take effect on March 25.

Approved in 2018, the program established a plan to deal with blighted areas in Springfield and created a framework for evaluating the redevelopment proposals for those sites submitted through the Land Clearance Redevelopment Authority. It requires a but-for test, which means it’s a project that would not be developed but for certain incentives, and an analysis of a scorecard that determines the level of tax abatement, according to the city’s website.

The program hasn’t gone as expected so far. The taxing jurisdictions are currently not receiving money from the program because of a lack of development activity in the last two years, Kerner said. She also pointed to the length of time between approval of a redevelopment plan and a completed project going onto the tax rolls.

If no action is taken by March 25, the sunset expires and future developers’ tax abatement goes to 100%, she said.

“The taxing jurisdictions wouldn't get any money but neither would the city,” Kerner said in an interview this morning.

Councilman Abe McGull last night moved to table the bill until the sunset clause expired to allow time to reconsider how the program operates. His motion failed in a 4-4 vote, with Councilman Richard Ollis absent.

“We only have one participant who really took advantage of this program, and I don't see the merit of it as it exists right now,” McGull said.

Kerner said four development plans have gone through the program, but only one project has qualified to benefit the taxing districts. That project has yet to incur taxes, she said. The remaining three projects comprise one development that was grandfathered into the 100% tax abatement, and two projects that were in multiproject redevelopment areas where the level of abatement is based on 100% of the assessed value.

The development is the Cherry Street Cottages, which is currently under construction at East Cherry Street and South Kickapoo Avenue, according to past Springfield Business Journal reporting reporting. Developer Hake Holdings GP LLC – an Austin, Texas-based real estate development company – will receive 65% tax abatement. That means that once the project is taxable, 35% will be collected and distributed to the taxing districts, Kerner said.

Dan Scott, representative of the LCRA who spoke as a resident, asked council to table the issue and let the program sunset.

“I'm not sure why we’re arguing about this anyway. The impact on Springfield as a taxing entity is almost nil,” Scott said. “That one project, the Cherry Street project – if you assume it’s an average project – would make up about a $1,200 hit on the city’s budget … so there’s not much reason for us to be too concerned about this.”

Regina Greer Cooper, executive director of the Springfield-Greene County Library District, spoke in support of the amendment. She said the library district relies heavily on tax money.

“Eighty-seven percent of our money comes from property tax levies, and we need to continue to receive the money,” Cooper said.

Megan Short, executive director of the Springfield Contractors Association, asked council to consider a framework that won’t deter development.

“These incentives encourage developers to develop in these areas,” Short said. “The market for developers is very competitive, and they ultimately get to work where it makes the most sense."

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