What Is Hovey's PILOT and Is It Good For The Area?

EDITORIAL - Saturday, December 6, 2008 - On Monday, Ironwood's City Commission will be voting to either approve or deny a request from Hovey Companies, LLC of DeWitt, Michigan for a PILOT (Payment In Lieu of Taxes) Ordinance on their proposed $5 million plus, MSHDA-financed, Towering Pines Low-Income Apartment Complex.

Hovey claims there is a dire need for rental apartments in the Ironwood area. The Michigan State Housing Development Authority (MSHDA) will be assisting the developer by financing the project as well as providing the developer with an income after construction. There will be 48 units in the complex. All but two will be MSHDA subsidized.

MSHDA will not finance the project unless the City of Ironwood agrees to accept a PILOT (Payment In Lieu of Taxes) that is equal to 2% of the project's income. In other words, instead of Hovey paying their fair share of real estate taxes -- based on the value of their property -- they will only have to pay 2% of their rents, less utilities and losses due to vacancy to the City.

In simple terms, instead of paying nearly $190,000 per year in property taxes, they will only have to pay $9,400 (or less, depending on vacancy & cost of utilities) to the City. $6,000 of the PILOT is for the subsidized units and $3,400 is for two "market rate" units that will be ineligible for the tax abatement.

The video that accompanies this article demonstrates how a PILOT works. Although the example they use relates to "big box" retail vs. "mom and pop" retail, the principle is essentially the same. Hovey's Towering Pines is the equivalent of the "big box" store and local landlords and taxpayers are the "mom and pop" equivalent.

Local landlords and taxpayers have heavily protested the proposed PILOT for the Towering Pines Complex stating that it is unfair taxation. According to the protesters, why should local landlords and other City taxpayers be forced to pay FULL taxes, no matter what their financial situation looks like, when Hovey is only required to pay NO MORE than 2% of their income. Taxpayers can't subtract their utility bills from their property tax bills. Taxpayers can't have their property taxes reduced when their hours get cut at work!

Opponents of the Hovey project claim there is no need for additional apartments in Ironwood. Census and real estate data back up their claims. According to www.neighborhoodscout.com there are 3,347 houses and apartments in Ironwood, and 15.15% of them are vacant. The population of Ironwood is approximately 6,291 and steadily declining.

Hovey's claim is that there definitely is a housing shortage in Ironwood. Their claim is based on a Marketing Survey their company paid to produce. Their reasoning is, although there are currently over 500 vacant homes in the Ironwood area, and dozens of empty apartments, most housing in Ironwood was built PRIOR TO 1970. This implies that older homes are somehow unfit for living. Many of this nation's most valuable properties are homes built prior to 1970. Few Americans pity our Presidential family for having to suffer life in the 200+ year-old White House. 

PILOT's and tax abatements, at times, can be beneficial to a community. Companies that provide quality employment, for example, benefit the community by increasing the standard of living for their employees. These employees buy homes and become taxpayers, which helps to increase the community's tax-base. They spend money at the local stores and shops -- developing a thriving economy. Opponents of the Hovey Project are quick to note that the Towering Pines Complex, according to the developer, will create only 1 to 1.5 full-time jobs.

It is puzzling to see WHO is supporting this project.

• MSHDA, the very same entity that is financing the Hovey project, has 10 listings for 12 vacancies in the Ironwood area on their housing locator website.
• At Thursday's DIDA meeting, Vice-Chairman Joe Karius, publisher of the Ironwood Daily Globe, heavily lobbied for the Hovey Project claiming the need for additional housing in the area. Yet, there are 13 classified ads representing over 20 available rental units currently listed in his paper's classified ads.
• At the same DIDA meeting, Karius made a statement about the taxes his building pays. The building he was referring to was the Globe building that his employer, Bliss Communications owns. It's easy to favor an unfair tax abatement when you don't pay taxes at all!

I urge all taxpayers and concerned citizens to attend Monday evening's City Commission meeting, and voice your opinions on this issue.

Jim Albert