The Marshalltown City Council approved moving forward with a 10-year tax abatement for the developers of the Iowa Wholesale building Monday night.
A resolution providing for notice of public hearing on abatement of the building, 201 E. Main St., passed by unanimous decision at the Marshalltown City Council's weekly meeting.
Plans to create a sub-district that would make two other properties - 135 and 129 E. Main St. - eligible for abatement fell by the wayside because of confusion about the difference between Tax Increment Finance (TIF) and tax abatement.
Article Photos
T-R PHOTO BY DAVID ALEXANDER
Curt Ward, city attorney, left, explains to Mayor Gene Beach, right, and the rest of the Marshalltown City Council the difference between tax increment financing (TIF) and tax abatement at the council Monday night meeting. The council adopted a resolution to proceed with a 10-year abatement of the Iowa Wholesale building, which is slated to be renovated into low-income housing later this year.
Curt Ward, city attorney, was absent from the council's Committee of the Whole meeting last week when the council discussed the matter.
"A tax abatement such as this does not involve a specific agreement with the property owner," he said. "It is a decision by the council concerning whether or not to tax a property. Once you make the decision, that is the agreement."
Ward said the council can determine what percent and how long to abate a property. Once that is done, he said, it becomes cumbersome to have multiple properties involved.
The difference between TIF and tax abatement is that, with TIF, the owner is reimbursed for the taxes he or she pays while with an abatement waves them up front, he said.
"TIF is a lot more flexible because TIF allows for an agreement to be made," he said. "You can target specific dollar amounts, you can reimburse the cost of a traffic signal, a new lane of pavement."
He said the concern with the Iowa Wholesale building was primarily a cash-flow issue, which is why the developers, Cohen-Esray Affordable Partners LLC, sought the abatement.
The language adopted in a discussion of the Iowa Wholesale building would come about because of the specific needs of that building, he said.
"It didn't make sense to bring all three of those properties before you," Ward said.
The council has no information about what is to be done with the other two properties, he said.
The abatement, adopted by unanimous decision, provides full abatement for the first five years and decreases by 15 percent over the subsequent five years bottoming out at 25 percent during the final year.
Cohen-Esray plans to renovate the building into low-income housing. In a memo to the council, the company stated the abatement would help keep rent low and prevent the Iowa Finance Authority from halting the $5 million construction.