City Unveils New Policy for Incentives and Tax Abatements
The City of Columbus today unveiled a new set of policy guidelines that would change the way tax abatements are awarded for development projects and formalize the system of tax breaks offered for new businesses promising job growth.
In response to a growing chorus of opposition to the existing tax abatement policy – in which any new development in one of 16 designated neighborhoods is eligible for a 15-year, 100 percent property tax abatement – the city commissioned a study last year to examine the issue.
The study found that some of the projects that were awarded tax abatements, particularly in the Short North, would have probably happened even without the incentives.
“For low-rise construction, abatement is not necessary anymore, the market is taking care of that,” explained Steve Schoeny, the city’s Development Director, “so, we’re not going to do low-rise, multi-family abatement anymore in the Short North and areas like it.”
Taller buildings – which will likely be defined as anything over six stories, according to Schoeny – will still receive an incentive, but with a catch.
“Today, in the Short North, to get an abatement all you have to do is build the building,” said Schoeny. The new policy would require developers of taller buildings to include some lower-priced units in their project in order to get the abatement. The abatement itself would also be reduced in the last five years, with an increasing percentage of the amount owed paid to Columbus City Schools each year.
The number of affordable units required would break down like this – 10 percent of units “affordable and rented to” households making up to 80 percent of the average median income (AMI), and another 10 percent of units would go to households making up to 100 percent of the AMI.
If a developer doesn’t want to provide those more affordable units – often referred to as workforce housing – there are other options, like providing a significant amount of office space instead, or paying into a fund that goes to the Affordable Housing Trust.
“You would pay a pretty hefty premium,” said Schoeny. “We set that purposely high because we want affordable units in places like the Short North and Fifth by Northwest…that’s our preference; we want it to generate units, not money.”
The public has spoken loud and clear about the importance of affordable housing, said City Councilmember Elizabeth Brown.
“We did four public meetings in different neighborhoods, when the (Department of Development) was looking to fine-tune the recommendations of the consultant,” said Brown. “What we heard from residents most of all – nearly solely – was about affordable housing.”
New single family houses in areas like the Short North would not be eligible for abatements under the new policy (although renovations of existing homes would be), and renovations of buildings that are listed on the Columbus Register of Historic Properties would be exempted from the affordable housing requirements.
Each of the abatement-eligible neighborhoods would be sorted into one of three categories – Market Ready, Ready for Revitalization, and Ready for Opportunity. The actual grouping of the neighborhoods will happen later, but the general idea is that the Ready for Opportunity areas will retain the full abatements, without any strings attached, while the middle category – Ready for Revitalization – will have some affordability requirements, but not as much as the Market Ready areas.
“In the opportunity areas, the tools will remain the same, and we know that (the abatement) on its own is not necessarily enough to make a project happen,” said Brown. “It takes a very explicit partnership between the city and the private sector – or groups like Homeport or PACT – to come together and figure out what a developer needs to make a project work.”
The new policies – which will likely be voted on by City Council this spring, with an eye towards implementation in the summer – will not apply to Downtown development.
Schoeny explained that because the Community Reinvestment Area (CRA) for Downtown was established before 1994, the rules governing it are different than the CRA’s that were established later.
“The state changed the law in 1994, so once we absorb the changes (for the other neighborhoods), we will look at how do we extend those policies to (Downtown),” he said.
“We have to keep our eye on Downtown,” added Brown. “It can be the hardest place to develop because of the urban environment, but we also have to make sure that development there is equitable.”
Apart from changing the rules for tax abatements, the new policies will also reform the process used to award job creation tax credits and job growth incentives.
A scorecard will be published before the incentives are awarded that breaks down the considerations for each project, and the minimum wage that new jobs will need to offer to be eligible for the credits or incentives will be raised from $12 an hour to $15.
“That was one of my personal goals from the outset,” said Brown. “I really believe that city should only be incentivizing good-paying, living wage jobs, so I was thrilled to see that in the recommendations.”