Tax abatement legislation put on hold after concerns

CELINA - Legislation that would enable 100% tax abatements on new residential structures for 10 years has been put on hold after city councilors learned it might have a greater impact on the school than initially thought.

Councilors earlier this month moved to table the ordinance on its final reading once new revelations materialized. They'll likely keep it tabled when they meet at 7 p.m. Monday as further research into state law pertaining to Commercial Reinvestment Areas (CRA) is ongoing, according to mayor Jeff Hazel.

The tabled legislation would amend Celina's CRA of 1981 to include tax exemption for the construction of residential structures. This would be the second and final change allowed under state law, Hazel said.

The intent of the legislation is to incentivize the development of new housing in Celina. Residential tax abatements exist in other communities, including St. Marys' CRA that encompasses most residential neighborhoods, according to St. Marys Public Service and Safety Director Greg Foxhoven.

"Where we have struggled … for a number of years now is the housing shortage," Hazel said earlier this month. "We know that our immediate neighbor to the east does have residential abatements. There's been at least two people that I'm aware of that moved there because they got a tax abatement."

City officials had intended to make the tax abatement available only for new homes.

However, since it was introduced in January, Hazel said he learned the ordinance as it now stands would apply to homes built over the last decade. The number of years of tax abatement would be calculated by subtracting the age of the home from 10 years.

"If a house was built nine years ago and you passed (the ordinance) tonight, that owner …. would have the ability to get one year of abatement," Hazel noted. "It can't go retroactively, (but) they could do the balance of the 10 (years)."

City safety service director Tom Hitchcock said 134 residential building permits were issued over the last 10 years. That doesn't include any homes rebuilt after the 2019 tornado as the city waived building permits at the time, he added.

"It does concern me if we're talking over 130 homes that's been paying and now that's going away," said councilman Eric Baltzell.

City law director George Moore was asked to look into modifying the language of the ordinance so the tax abatement would apply only to new construction.

Hazel also brought up that Celina City Schools, the main beneficiary of property taxes, would have no say in residential tax abatement, another fact that has come to light since the ordinance was introduced.

During a special school board meeting earlier this month, board member Adam Schleucher said he understands the idea of a tax abatement to spur growth but thinks the timing is terrible, in light of soaring property values and taxes.

Total real estate taxes to be collected this year for tax year 2023 amount to $65 million, $13 million more than last year's billing cycle for tax year 2022.

Residential property owners can expect to see a tax increase between 25% to 30% based on new real estate valuations determined by a reappraisal undertaken every six years. Actual tax payments, though, vary based on where a property owner lives in the county.

Some property owners may question why they have to bear such an onerous tax burden while others stand to pay no taxes on new homes for 10 years via residential tax abatements.

Hazel said he understands concerns about the fairness and equity of tax abatement, but ultimately supports the ordinance as a catalyst for housing development.

Property owners would still be contributing to the community, Hazel stressed.

"It's not designed to be unfair to anybody," he said. "Those folks, it would just be the improvements on their property. If they have children and they put them in school, they're still going to get the state funding. They're still going to spend money here. They're going to earn money here. They're going to pay income tax here. They're going to shop locally here."

Baltzell relayed a concern he fielded from a constituent.

"I had a comment from one citizen about making sure that people are paying for services they're getting from the city," he said. "Mr. Mayor, maybe you could comment. We really don't receive a large percentage from property tax going to the city for services."

That statement is correct, Hazel said.

"We don't really get much from property tax," Hazel said. "About 75% does go to the schools. So from that standpoint, it will not impact our city services."

Hazel believes the overall benefits of new housing construction to the community outweigh the temporary loss of property taxes, equating tax abatement to an investment or annuity that begins paying out in 10 years.

Celina's CRA was established in 1981 to encourage job growth and home improvements. It allows for tax exemptions for 15 years on the construction of industrial structures and 10 years on the remodeling of dwellings containing no more than two family units upon which the improvements cost at least $2,500.

Then in 2013, city councilors added a provision - the first allowable change by state law - enabling 12-year tax abatements on the construction of commercial structures and the remodeling of commercial and industrial properties upon which the improvements cost at least $5,000.

Various community stakeholders agree Celina and the surrounding area are in desperate need of new housing, a problem that if left unaddressed will hinder economic growth.

"I love the fact that we can have another tool in our toolbox for the developers, for the builders to go ahead and build a house," Hazel said. "I love it when people are building houses here. I think it's great for the community, it's great for the subdivisions. I would hate for them to just stop. They need to continue on there. We're one of the few communities in the state over the last census that actually gained in populations."