Citizens Group Unites to Oppose Hovey Project

HURLEY, WI - Saturday, September 06, 2008 - A group of citizens concerned about the proposed Towering Pines Low-Income Ayer Street Housing Project met at 6:30 PM yesterday evening at the Villa Maria Conference Room, Hurley, Wisconsin.

A BRIEF HISTORY OF THE TOWERING PINES PROJECT

According to City records obtained by the Chronicle through the Freedom of Information Act, the Hovey Companies, LLC, DeWitt, Michigan, first contacted the City of Ironwood back in September of 2006. The out-of-town firm expressed an interest in building a housing project on Ayer Street. The firm was interested in building on a parcel of land that the City had previously deeded to the Gogebic-Ontonagon Community Action Agency (GOCAA).

The Action Agency originally planned on building an office complex on the site. However, after having a site survey done, the Agency decided it would be too costly to build on the land. According to documentation obtained by the Chronicle, the land would only support a one story structure without a basement.

On November 16, 2006, City Attorney Dennis Cossi drafted a Quit Claim Deed that released the property back to the City. In a cover letter the City received with the deed from Carolynne Carlson, Executive Director of the GOCAA, she wrote, "During discussion at the Board meeting, it was reiterated that should the property be sold for development, the Agency is requesting to recoup our expenses for the survey and borings that were completed by Coleman Engineering."

Back in 1998, the Lighthouse Faith Center requested the parcel of land to build a new church complex. According to an October 8, 1998 office memo from Will Andresen, the City's former Community Development Director, "The City has no intention of developing this area due to concerns of future cave-ins."

On the Consent Agenda for the December 11, 2006, City Commission meeting, a public hearing was scheduled for January 8, 2007, to introduce Ordinance No. 459, Book 4, an Ordinance to provide for a service charge in lieu of taxes (PILOT) for a proposed multiple family dwelling project, located on Ayer Street - Hovey Companies.

On December 20, 2006, the Ironwood City Commission agreed to enter into an option agreement with the Hovey Companies, LLC, to sell the firm eight acres of City-owned property located on the north side of Ayer Street, east of May Street.

According to the minutes of the December 20, 2006, meeting:

Mr. Timothy L. Hunnicutt, spokesman for the Hovey Companies, LLC, gave a presentation to the City Commission noting the history of his company. He stated the mission of the Hovey Companies is to work with communities similar to Ironwood to try and make a positive impact. Mr. Hunnicutt noted this development he is proposing will run through the Michigan State Housing Development Authority (MSHDA) and is their Cadillac program called HOME Team Advantage. He further noted he would be able to build a high-end market rate development diversifying the rents with no subsidies. This program is heavily grant funded through MSHDA and there are only four or five developments that will be funded per year.

Mayor Noren questioned the need for additional housing. Mr. Hunnicutt did a preliminary profile for this community from Hurley, Ironwood, Bessemer, and Wakefield and the Hovey Company would only be absorbing 3% of the market, well below what is targeted leaving more room for other developments.

Further comment was taken from Mr. Hunnicutt. City Manager Erickson mentioned the Planning Commission previously rezoned the property and City Attorney A. Dennis Cossi reviewed the Option Agreement. Mr. Erickson's recommended the City of Ironwood approve the option agreement with The Hovey Companies, LLC to purchase eight (8) acres of City owned property located on the north side of Ayer Street east of May Street for the purchase price of $80,000.

Then, on January 8, 2007, the City Commission held a Public Hearing to hear comment on Ordinance No. 459, Book 4, an Ordinance to provide for a service charge in lieu of taxes, more commonly known as a "Payment In Lieu of Taxes" (PILOT) for a proposed multiple family dwelling projects located on Ayer Street – Hovey Companies.

According to the minutes of the January 8, 2007 meeting:

Commissioner Toth commented on the fact she had talked with several residents in the community over the last few weeks regarding this project and had received overwhelming support.

Mr. Tim Hunnicutt, of Hovey Companies, LLC addressed the audience and the City Commission stating his company is a Multi-Family Development Firm providing housing throughout the rural community. He further stated their projects range from 50 down to 18 units. Mr. Hunnicutt is proposing to develop a project that would hopefully help with revitalization efforts and the comprehensive planning efforts the City of Ironwood already has in place to encourage growth. The project is in a Brownfield Development Site, close to the high school, industrial park and downtown. Further comment was taken from Mr. Hunnicutt.

Mayor Noren asked Mr. Hunnicutt to share with the audience his market study of rental properties. Mr. Hunnicutt noted there was little in the City of Ironwood similar to the Towering Pines project and there was a strong market for this type of housing according to the demographic study.

Mayor Noren had several other questions in anticipation of what the audience was going to ask. Mr. Hunnicutt informed the City Commission that payment in lieu of taxes is a mandatory element of this project and the State looks at it as the City's investment in the project. He mentioned in order for MSHDA to tie up its funds for a long time they expect community support for the PILOT.

Commissioner Koivisto questioned if the project would generate any new jobs. Mr. Hunnicutt answered Commissioner Koivisto by stating that a manager and maintenance person are typically hired. Mr. Hunnicutt also indicated that plans would be available for local contractors to bid. Commissioner Koivisto questioned if the City of Ironwood would be required to pay for any utility extension. Mr. Hunnicutt noted that the project will fund any necessary utility extensions. City Manager Erickson noted the utilities would be coming off of Washington and Ayer Street.

Commissioner Adams questioned the rent structure. Mr. Hunnicutt noted rents would range from $300 to $850 and incomes from $15,000 to $38,000 depending on household size.

Jim Albert, of 133 W. Aurora Street questioned the in lieu of taxes. Mr. Hunnicutt mentioned this is MSHDA's Home Team Advantage Program which is their way of helping communities with diversified incomes. Mr. Hunnicutt noted if he wanted to do a straight tax credit lottery 9% project he would make more of a profit and would need only a 10 to 15 year PILOT. These projects are usually for Housing Commissions or people who are collecting a lot more money in rents. Mr. Albert questioned where the profits go. Mr. Hunnicutt further addressed him stating the tenants pay the mortgage and the rents are kept at a low rate as part of the project. He noted his company is capped on rents to equal just about what the City of Ironwood gets for payment in lieu of taxes for 35 years. He further noted he doesn't know of any developer who would take a small portion of rents for that period of time.

Scott Sergelia (Sturzl), of 511 Bundy Street questioned payment in lieu of taxes of 2%. The City can receive more than 2%, but utilities need to be upgraded. He noted every dollar goes into that project and it really depends on the community.

Mark Silver, from Silver Properties questioned who did the market analysis. Mr. Hunnicutt informed him they work with a market analyst by the name of Woods Consulting and the market data showed they would be capturing only 3% of the market divisions leaving 97% for others to build their apartment complexes. The Market Analyst shopped for properties in Wakefield, Bessemer, Ironwood, and Hurley.

Mayor Noren summed up the public hearing stating the property is not currently on the tax roll today. The Hovey Company, LLC currently has an option to purchase the 8 acre parcel for $80,000. Several Commissioners requested the money received from the sale of the property and the PILOT be used for other City improvements and not be lost in the General Fund. Further comments were taken.

Commissioner Koivisto requested through the water department how many residences are vacant.

Following the January 8, 2007 meeting, City staff solicited "letters of support" from several local businessmen, educators, and social workers. These letters, all dated between January 12, 2007 and and January 22, 2007, were required as part of Hovey's MSHDA financing request. The "letters of support" included endorsements by: Gary Wheeler, President of Gogebic Community College; James O. Rayner, Superintendent of the Ironwood Area Schools; Tim Kolesar, Luther L. Wright High School Principal; Michelle Kanipes, Middle School Principal; Bob Jacquart, Owner of Jacquart's Manufacturing; Carolynne Carlson, Executive Director of the GOCAA; Angelo Lupino, President of Angelo Lupino Construction; Bob Schonberg, Owner of HumiDirect, Inc. and member of the Planning Commission; and two letters from John R. Garske -- one as President of Coleman Engineering and one as the Chairman of the Ironwood Industrial Development Corporation (IIDC).

On January 22, 2007, the City Commission approved a resolution adopting Ordinance No. 459, Book 4, to provide for a service charge in Lieu of taxes for the proposed Towering Pines Development.

According to the minutes of that meeting:

Steve Frank, of 212 East Oak Street questioned if there would be any other costs to the City of Ironwood, stigma of low income housing, and if there will be a ripple effect. Mayor Noren noted there previously was a public hearing on this Ordinance.
City Manager Erickson addressed Mr. Frank noting the City of Ironwood is not anticipating any other expenses. The developers will be responsible for extending the utilities to their site. The City of Ironwood has been working with the developers to include some amenities for the community.

Tim Hunnicutt, Vice-President of Hovey Companies mentioned their developments are considered upper scale. Their projects contain generous square footages, high amenity packages, and aesthetics.

Jim Albert, of 133 West Aurora Street expressed his concerns with all of the rental units in the newspaper for rent.

Mayor Noren requested Mr. Albert to make his statement within the allotted time. Attorney Cossi reiterated Mr. Albert has a legal right to make a statement to be heard but is not entitled to cross-examine anyone.
Mr. Albert felt in his opinion there would be no benefit to the City of Ironwood to have another apartment complex in an area where there is so many vacancies. Further comment was received.

Tim Kolesar, from the Luther L. Wright High School addressed the City Commission stating with the decrease in enrollments in the Ironwood Area Schools anything that creates new enrollments would be good for the schools. He felt Towering Pines was in a good location and would be appealing to individuals moving into our area. He noted the housing recently built at the college increased their enrollment. He further stated new housing is only a plus to our community and fully supports the project.
City Manager Erickson has received very positive feed back from other communities who have a Hovey Company Development in their community. He mentioned the City has received many letters of support. In the redevelopment efforts for Ironwood this is just one piece of the puzzle to help.

Mayor Noren clarified the developer has included two units at market rate adding approximately $3,400 to the (2%) $6,000 for approximately a $9,400 per year payment in lieu of taxes to the City of Ironwood. Further comment was received.

At the May 29, 2007, City Commission meeting, this reporter questioned the legality of the sale of the Ayer Street property to Hovey. According to the minutes of that meeting:

Jim Albert, of 133 West Aurora Street expressed his dismay with being charged $40.20 for a Freedom of Information request. He also felt the City of Ironwood did not follow the ordinance in selling property.

City Manager Erickson felt it was Mr. Albert's interpretation was different than what the ordinance reads. He further stated there have been several pieces of property that have been sold in the past and the property was sold well above the market.

City Attorney Cossi addressed Mr. Albert pointing out the words "may" and "shall" in the ordinance and felt it was up to the City Commission to sell the property. Further discussion of this matter took place.

At the August 27, 2007 City Commission meeting, Lou Bonugura, of 247 Pine Street requested the survey conducted by the Hovey Project justifying the need for this type of rentals. He also filed Freedom of Information Act request for the information from the City and MSHDA, and has never received the documentation.

LAST NIGHT'S MEETING

Several local apartment owners as well as a number of other concerned citizens attended last night's meeting. Several issues and concerns were discussed.

Caving Land - Many people in attendance expressed their concerns that the property Hovey intends to use is unstable and will not support the structures proposed.
Low-Income Subsidized or High-End Market Rate Housing? - When Hovey representative Tim Hunnicutt first presented the concept of the 49-unit Towering Pines Complex to the City Commission he stated that the rentals would all be market rate.
On December 13, 2006, at a Planning Commission meeting, former Community Development Director Pat Merill stated that the project was not Section 8 housing, however, he noted it would "involve mixed incomes."
On January 22, 2007, Mayor Bruce Noren noted that "the developer has included two units at market rate."
Most of the documents submitted by Hovey to MSHDA indicate that the majority of the 49 apartments proposed for the project would be "low-income" and subsidized by MSHDA.
Brownfield Development Site - Oddly Hovey is applying for Brownfield funding on the Ayer Street site. Planning Commission Vice-Chairman Bob Schonberg as an option on the land that abuts the Hovey property, and he claims he had the land inspected and there is no contamination or Brownfield issues on his portion of the parcel.
Utilities - Hunnicutt told the Commission that Hovey would pay the cost to have all of the utilities brought to the site. All paperwork submitted to MSHDA indicates that the City will be paying for such expenses.
City-Funded Amenities - City Manager Scott Erickson has stated several times that "special amenities" would be added by the City to the project -- including bike trails and tennis courts. How is it possible to build City-owned tennis courts on private property? Hovey has an option on half of the 17 acre parcel, and Schonberg has an option on the rest.
Misguided Support - It is obvious that many people that signed letters and stood up at meetings supporting the Hovey project, don't fully understand the impact of the project. Many of the "supporters" of the project will actually be hurt if the Hovey project is allowed.
Market Survey - Mr. Hunnicutt informed the Commission on January 8, 2007, that Hovey worked with a market analyst by the name of Woods Consulting to determine the need for more apartments in Ironwood. Not a single landlord at last night's meeting said they ever received a phone call or a questionairre.
Records indicate that a half-hearted attempt at a market survey was done AFTER January 8, 2007. And most of the work on the study was done by a City employee, using City equipment and on City time.
Payment In Lieu of Taxes (PILOT) - Of all the issues discussed at last night's meeting, this was the one that seemed to upset people the most. Hovey locked the City into an agreement where they never have to pay real estate taxes on their $5 million project. Instead of paying traditional property taxes, the City of Ironwood has agreed to allow Hovey to pay 2% of their yearly income to the City. If all of the apartments stay full throughout the year, the most the City will ever collect on the $5 million project is $9,400. If, however, Towering Pines isn't able to keep all units occupied, they only have to pay taxes on those that are occupied.
This PILOT Program cheats every tax supported entity in the area. If Hovey paid their fair share of taxes, over $178,000 would be paid each year. If Hovey were forced to pay the same taxes everyone else does:

City of Ironwood - The City would get $76,000/year NOT only $9,400.

City Operations - Hovey would pay $49,000 for City operations.
Police & Fire Pensions - $17,000 of Hovey's money would go to the pension fund.
Memorial Building - $8,000 would go towards the Memorial Building.
Civic Center - $2,500 would go to the Civic Center.
Carnegie Library - $2,500 more would be available to the Library.

Ironwood Area Schools would get roughly $72,000/year instead they will get nothing.
The Gogebic Community College would get almost $7,000/year instead they will get nothing.
Gogebic County would have added $16,500 to their budget, instead they will receive nothing.
Senior Programs would have benefited to the tune of $1,500, but they will get nothing.
Gogebic Medial Care Facility will not get the $2,200 from Hovey they should get.
Gogebic County Transit Authority would have gained almost $1,000, instead they get nothing.
Gogebic County Animal Control would have gained approximately $500 per year, now they will get nothing.

Higher taxes for the Everybody - Since Hovey will require a number of infrastructure improvements by the City, everybody's taxes will need to raise to make up the difference.
Harder to Sell Your Home - Why would anyone buy a new home when they can rent instead?
Lower Property Values - Hard to sell homes lose their value fast.
No Jobs - The Hovey Project will, at best, create one or perhaps one and one half new local jobs. Does this deserve a tax break like this one?
No Local Contractors - Hovey has their own contractors and their own subcontractors.
Property Sale Was Illegal - City-owned real estate that is over $3,000 in value is required to be appraised by a licensed appraiser. Advertising for competitive bidding is also required by law.

The group decided last night to start a media blitz to let people know the TRUTH about the Towering Pines Hovey project. Another meeting will be scheduled in two weeks. The Chronicle will post the time and place of the next meeting when that information becomes available.