Spencer city staff have been moving forward with a residential tax abatement program for housing upgrades since the city council directed them to do so Sept. 20.
The program allows for tax abatement for homeowners adding at least 10 percent value to their home through improvements to qualify for a five-year tax abatement for taxable valuations, up to $75,000.
Members of the Progress and Development Committee, consisting of councilmen, debated Monday evening who should qualify for the program.
City staff recommends that only properties in residential zoning districts, not all residentially-assessed properties, should qualify for the program. Furthermore, federal regulations restrict the improvements that can be made on homes in the 100-year flood plain.
Ultimately, the committee agreed to have City Planning Director Kirby Schmidt return with a count of the properties affected by those distinctions, which he estimated to be about 400.
City Manager Bob Fagen explained the first part of the issue.
"There's a reason why we zoned it as we did," Fagen said of the 1991 rezoning plan. "Opening it up for new residential development is contrary to what the city said."
Councilmen Ed Krebs and George Kruger agreed with that recommendation; Ron Hansen, Steve Bomgaars and Randy Swanson disagreed; and Councilman Dave Scott was undecided.
Much of the discussion revolved around homes in the Central Business District.
"I'd dissolve the CBD tomorrow if I had the chance," Hansen said, and Swanson later added, "The business district goes too far from Grand Avenue."
Swanson contested that business owners do not want to build off grand, to which Krebs gave the example of the rehabilitated building that now hosts MaeB Coffee and More.
"Why wouldn't we want people to improve their properties?" Bomgaars asked.
"When we made the rezoning, we were discouraging people from doing anything residential," Fagen said. "By offering tax abatement to that area, we kind of did away with what the intention was then."
Fagen later said the intentions are not necessarily the same in 2011 as they were in 1991. If that is the case, the city would have an opportunity to change those intentions and priorities.
Assistant City Attorney Brad Howe referenced numerous properties in the CBD that he has seen people want to buy as starter homes to improve and sell.
"Those are properties that could use some cleaning up and I don't think we're going to tear them all down and make them all commercial," Hanson said. "I think we want to incentivize that area to do the remodeling. They're entitled; they're paying taxes, too. I'd just as well see them benefit from it as well."
Schmidt said allowing the program to be used in a commercial district would be encouraging the continuation of nonconformity.
"Wouldn't we be incentivizing people to upgrade their property rather than allow it to deteriorate into something that's dilapidated? And I don't think any of us want that," Bomgaars argued. "On the other hand, in the CBD, if (businesses) want to expand, we have other tools they can use to expand and rejuvenate their property, whereas the homeowner doesn't."
Krebs believes bad homes should be demolished and businesses should be encouraged to take those places.
"We can't spend money to have comprehensive zoning throughout the entire city and now we're saying, 'Let's ignore all that,'" Krebs said. "It's just a difference of opinion. I think residential homes should be in residential areas."
Mayor Reynold Peterson agreed the CBD was created for a purpose and homes should be zoned properly, and Kruger agreed, but Hanson said doing so would be "isolating people that are part of the community and separating them and saying, 'Just because you bought this home in this area, you're ineligible.'"
Scott mentioned the lack of "a real, long-range strategy for improving the CBD" and cautioned against being too broad and degrading the zoning concept.
As for the flood plain debate, Hanson suggested the city could negotiate to remove properties from that designation, but City Engineer Jim Thiesse said the properties that could be removed from the flood plain have been.
Furthermore, Peterson added the example of a business that received a variance from the Department of Natural Resources to expand, but for every foot it expanded into the flood plain, the insurance cost would multiply by 10.
Schmidt clarified that properties located in flood plains cannot have substantial improvement, due to federal regulations, so many home owners in that area would not be able to make an improvement of 10 percent or more to qualify for the program.
"The area is going to be self-regulated, because no one wants to go past that (level) or you'll have to elevate your home or lose your basement and nobody wants to do that," Schmidt said. "They're going to stay smaller automatically just to avoid what's called a substantial improvement."
* Decided to revoke a $750,000 Iowa Department of Economic Development grant for the railroad spur program, because Morton Building does not want to stay in the railroad business and the city does not want to enter it. Krebs said he has been contacted by adjacent property owners with interest in the railroad.
* Decided to revoke a $600,000 grant for the $720,000 tornado safe room and tunnel project under West 18th Street at the Clay County Fair, upon request of the fair board, which said the fair's $120,000 portion of the cost was no longer affordable. Both the committee and the fair board questioned how the project would be maintained throughout the year once completed.
* Learned 63 $100 tickets were written for vehicles on streets while the city's snow ordinance was in effect, and an estimated 200 stretches of sidewalk had yet to be scooped. Police Chief Mark Lawson said fines would not be refunded because city staff believes the ordinance was well communicated and the council agreed. Snow not removed from sidewalks by noon today will be removed by a subcontractor, with the fee and a $25 administration fee charged to the resident.
* Unanimously approved contracts and performance bonds for a total of $7.9 million, $7.35 million after change orders expected to be approved Dec. 19, for phase one of the combined sewer overflow project. S.M. Hentges and Sons, of Jordan, Minn., will be paid $3.4 million, $3.18 million after a change order, for the sewer interceptor and force mains; Minger Construction, of Chanhassen, Minn., will receive $1.78 million, $1.1 million after change order, for the flow equalization basin; and Rice Lake Construction Group, of Deerwood, Minn., is contracted for the $3.31 million, $3.07 after change order, for pump station and CSO modifications. Construction is slated to begin in December and January.
* Unanimously approved a development agreement with William J. Muller Revocable Trust and authorized tax increment payments up to $360,000 or June 2019, whichever comes first. Muller has indicated anticipating approximately $2 million in taxable valuation to the former Ace Hardware Store.
* Unanimously adopted the Vantage Care Retirement Health Savings Plan, through ICMA RC, for department heads to be able to put unused sick leave and vacation reimbursements into a tax-free fund for medical expenses after they retire. Other city employee groups did not unanimously agree to use the program, but may elect to do so in the future. The city will save 7.65 percent in Federal Insurance Contribution Act costs.
* Unanimously approved a $6,306.37 professional services supplemental agreement with Kruse, Cate and Nelson for the 2010 Spencer Safe Routes Sidewalk Improvement Project for the Fairview and Middle School area.
* Learned of a new scam in which individuals are contacted by someone posing as law enforcement and told they must purchase expensive gift cards and read the numbers to the individual to avoid punishment.