Overwhelming Opposition to Hovey Project Voiced to Commission

IRONWOOD, MI - Tuesday, June 23, 2009 - Last night's Public Hearing to discuss, for the third time, the Hovey PILOT agreement began with Mayor Bruce Noren's lecture to the citizens on how they are supposed to behave when addressing the Commission. He urged audience members to be civil and not to make matters "personal." After Noren finished his lesson on civility, he turned the floor over to City Manager Scott Erickson who gave a brief history of the Hovey project and the reason the Public Hearing was being held.

Tim Hunnicutt, representative for the Hovey Companies, LLC, was then given the opportunity to explain his company's position on its proposed Towering Pines Low-Income Subsidized Housing Project and the associated PILOT agreement. According to the PILOT (Payment In Lieu of Taxes) agreement, Hovey's 49-unit Ayer Street apartment complex would not be assessed property taxes. Instead the company would have to make a payment to the City that equaled 4% of their rental revenues (less vacancy losses & cost of utilites). In other words, instead of paying an estimated $88,000 in real estate taxes annually, they would only have to pay a maximum of $19,200 per year.

According to Hunnicutt, the project would consist of three buildings with 16 units in each building. Since 49 is not evenly divisible by 16, one may wonder how this is even possible. He said the development is designed to house people of mixed incomes. He said that the project was considered the "Cadillac" of the MSHDA programs, and that the aparments cost approximately$120,000 each to construct. He told the Commission that the development would be something the community would really be proud of. He said all of the communities he has worked with have been very pleased.

"We've always been invited back!" Hunnicutt said, "So I don't need to say a whole lot more about that!"

This could be due to the fact that the majority of Hovey's projects have been located in the Lower Peninsula where employment opportunities are much greater than they are in the U.P. It's not unusual for people to live in one town and commute to a nearby town for employment. It could also be due to the fact that, virtually all of the previous Hovey projects were built in communities that are experiencing population growth and/or have a REAL housing shortage. Ironwood's population has declined over 11% since the last census; there are over 600 vacant houses in the City; and it is estimated that apartment vacancies in the area are as high as 25%.

Hunnicutt then went on to highlight what he called the positives of the proposed Towering Pines Apartment Complex. He said in other communites they do (1) pancake suppers to raise money for firefighters; (2) car washes to support women's shelters; (3) "Green Apartment Development" essay contests for the students; (4) report card awards for "A's" in school ; (7) referral programs; (6) student tutoring by senior residents; (7) residents will sometimes volunteer to take students on field trips; (8) financial and credit counseling and they "try to help people become responsible citizens"; and (9) flower/herb vegetable gardens on site as well as planting trees and bushes.

He went on to say that these are some of the postive things that can be said about the project instead of all the facts and figures of the PILOT.

Hunnicutt warned if Hovey doesn't locate in Ironwood: (1) there will be no PILOT money generated; (2) there will be no additional utility dollars going to the City; (3) no new families will be attracted to the community; (4) there will be no land sale; and (5) there will be no new housing choices in the area.

He ending his address by threatening if Hovey doesn't to locate in Ironwood, they will build in a neighboring community -- more than likely Hurley. He said that the Ironwood market is the strongest market he's ever developed in and that he has been discussing financing options with a local investor. He said that MSHDA raised their rents so that they wouldn't be in "competition" with another area housing complex that was having occupancy problems.

When Mr. Hunnicutt completed his presentation, Mayor Noren opened the floor to citizens wishing to express their support for or their opposition to the project. The Commission Chambers were standing room only, and there wasn't a single person in attendance that spoke out in support of the project.

The first citizen to address the Commission was Attorney Marvin Marks.

"Pancake breakfasts, car washes, and tours of museums do not pay bills!" Marks said. He then asked City Manager Scott Erickson how much the Hovey project was going to cost Ironwood taxpayers. He said that nobody knows the exact costs of anything, and without knowing that information it is very irresponsible to even consider any proprosal. Marks went on to question Hunnicutt's claim that the project would locate in Hurley if Ironwood refuses it. He asked if there was any evidence that this is so.

LeRoy Johnson then gave a presentation that clearly showed significant subsidence continues on the proposed building site. He produced document after document, photos, charts, maps, etc. that showed, without a doubt, that the land is not stable.

Roy Ahonen was the next to address the Commission. He made if very clear that he was strongly opposed to the Hovey project, and he highlighted the reasons for his opposition: (1) Hovey will not create jobs; (2) Hovey's market study is inaccurate and failed to establish a NEED for additional rentals in the area; (3) the project is unfair to existing, taxpaying, apartment owners; (4) MSHDA's own local representative believes there is an abundance of available rentals here; (5) the PILOT will not generate any significant revenue for the City;  (6) there are 147 units downtown and the apartment owners are struggling;  and (7) Ironwood's hands, through the PILOT, will be tied for 35 years and it's not fair to the taxpayers.

Next to speak was Peter Tacconelli. He said that he believes and supports progress, but that the PILOT will "not perform the necessity in progress." He explained that he owns an apartment building in downtown Ironwood. He said he has vacancies, and other buildings have vacanies as well. He said it is next to impossible to get $375 for a one bedroom apartment. He compared the Ironwood Hovey project to a similar project in Houghton that has proven to be a big set-back for that city. He said there are too many apartments as it is for the people we have. Tacconelli was quick to point out that he would be the first to cheerlead for the project if there really was a need for it. He ended by saying, maybe in the future there may be a need, but for not it would be a set-back for the community.

Arlene Zott explained to the Commission that she and her husband pay real estate taxes on their home. She said her daughter and a son who also own a homes and pay taxes in Ironwood.  She said her biggest problem with the project is that it will house 49 units and pay next to nothing in taxes. According to Zott, people in Ironwood are already struggling, yet they still pay taxes and as needs increase so do their taxes. She brought up the new school millage that just passed and she was quick to point out that Hovey will be tax exempt for the next 35 years. She said if Hovey paid their fair share of taxes, it would help out the community immensely. Zott said that, according to her calculations, Hovey would be less than 5% of the taxes they should be paying.

"Are you going to give me a 95% discount on my taxes because I'm low-income?" Zott asked. She pointed out that nobody is going to give her a break on her taxes, and if she doesn't pay them, she doesn't have a house. She also mentioned that she will be fined for blight if she doesn't cut her grass. She correctly stated that Hovey is a for-profit company that claims it will build here whether the people of Ironwood approve the PILOT or not. She said that shows Hovey values our community. She went on to say if they value the community so much, then they need to help support it. She explained that for-profit corporations can deduct expenses from their income tax anyway. She questioned why the project had to short-change the City since this is the case. Zott said Hovey is getting so many benefits as it is -- through the State and Federal government -- that getting a break from the City is "almost double-dipping."

She said the Blueprint Compromise revenues from Hovey will be next to nothing.

"If you get four to ten thousand dollars, how far does that go in your downtown?" Zott said. She said if Hovey was paying the substantial taxes that they should be required to pay, the City wouldn't have to worry about generating funds for their downtown. She told the Commission she understood the lost taxes would amount to about $80,000 per year.

"I think it's an injustice to give them a freebee," Zott said, "Then charge me 100%."

Louise Demasi spoke up and said she basically agreed with all of the previous speakers who oppose the Hovey project. She suggested that the taxpayers, unite and place their tax money in escrow if the City approved the Hovey PILOT. Demasi went on to point out all of the inconsistencies that Hovey has represented to the City. She said it is impossible to know what the real deal is because there have been so many changes in the plan since it was first introduced. The number of units has changed. The complex was originally touted as being "market rate" only with "no subsides." Then it became a 50/50 mix of market rate and no subsides. Then it changed again to become primarily low-income with 2 market rate units.

Ken Yashus, then addressed the Commission stating that he believed the entire project was ridiculous. He said that there are enough low-income people currently living here, and questioned the logic of attracting more low-income people.  He said when he drove to the Memorial Building to make it to the meeting he had to navigate around the holes in the street because the City doesn't have the money to fix the streets. He said we need to build our tax base, and the way to do that is with jobs.

"Does wish to speak in favor of the project? Opposed to the project?" Noren said, before calling on this reporter. "Yes sir!"

"Are you talking to me?" I said, "You called me sir!"

"My mistake," Noren quipped, "Sorry!"

I explained that I had originally calculated the approximate tax on the project based on the project development costs. Tim Hunnicutt sent a memo to the Commission stating that the "income approach" is the better way to calculate taxes on the type of project he proposed. So, I told the Commission that I recalculated the estimated taxes based on Hunnicutt's own figures. I explained that Hovey, if they were to pay their fair share of taxes, they would pay approximately $88,239.32 annually. I pointed out that, if the PILOT were approved, the most they could ever pay in a year would be $19,200.

Richard Michaels then addressed the Commission in opposition to the plan. He explained that everything he knows about the project he has either read in the newspaper or has been told.  He asked what the exact figure the Payment In Lieu of Taxes would generate.

Mayor Noren said the figure he's heard the most is $12,000.

Michaels then asked if any knew the exact amount of taxes Hovey would have to pay if they didn't get the PILOT. Noren explained that the figures were just presented. Erickson pointed out that the $88,000 figure was all taxes, not just City taxes. I explained that the City taxes alone would total $39,279.50 according th Hunnicutt's figures. Michaels explained that he read that part of the Hovey profits could be used to revitalize the downtown. He went on to say that he read an editorial from Mr. Joe Karius, publisher and general manager of the Globe, which claimed the project would draw young people to the area and it would help bring new customers to the downtown.

Michaels scoffed at the idea stating that nobody is going to move to a town without a job.

"If building apartments will lure people to the City, we should flood the City of Ironwood with apartments." Michaels said. "Money that we would generate from the complex amounts to the same thing as if you were to raise the water lever of Lake Superior with a rain  drop."

Dr. Stan Gresham then approached the podium. He explained that he was asked to circulate a petiton against the Hovey project. He explained that he gathered approximately 250 signatures in a very short time, and that only two people refused to sign it. He explained that he spoke with many property owners -- landlords -- and he said that many of them believe that this project will drive them out of business. He pointed out to the Commission that forcing all of these existing businesses out of business will further devalue existing properties, and also reduce the City's tax base, as more and more of these properties go up for tax sale. 

Gresham pointed out that MSHDA has currently put a freeze on new applications to the program. Until October, no new tenant applications will be acted upon -- applications can be made, but no new vouchers (subsides) will be granted. He asked where money is going to come from to subsidize  this new complex. Gresham said very plainly that Michigan is broke.

Tom Ahonen said that if Mr. Hunnicutt were coming to the Commission with a proposal to develop his project without tax exemptions, he'd welcome it. But he pointed out that this was not the case. Hovey is requesting a huge tax break. He then highlighted the reasons the Commission so vote down the PILOT: (1) the DIDA opposed the idea; (2) overwhelming citizen opposition; (3) the market study doesn't mention drawing new people to Ironwood; and (4) if existing apartments need work -- go that route -- help out those who pay taxes here. Help existing apartment owners fix their apartments.

Dave Martin explained that he was also circulating petitions. He said that he, too, had very few people refuse to sign. He said he loves change and improvements, but that this project would be incredibly unfair to those people who currently own rental properties. He pointed out to the Commission that NOBODY voiced support for the project at last night's meeting. He told the Commission that the same people who are signing petitions are those who voted them into office. He suggested that the Commission do the right thing and refuse to approve the PILOT agreement.

Tom Wasley asked the Commissioners -- as citizens -- who was for the complex. Noren explained that it was "not appropriate" for the Commission to do that.

"You got to have an opinion!" Wasley said.

Mark Silver pointed out two red flags with what was said by Mr. Hunnicutt: (1) rents were raised on the Hovey project so as not to compete with an existing property that was already having occupancy problems and (2) the project will have an impact on the community. Silver suggested that there would be an impact on the community, but he doubted if it would be a positive one. He also stated that the very fact that an existing property is having occupancy problems should suggest that there is no market for additional apartments. Silver then listed a series of things that aren't going as well as people had hoped due to lack of funding within the City. He said he spoke with a local property owner who said that 29% of his apartments are currently vacant.

Jackie Powers warned that the project, by Hunnicutt's own definition, will be low-income, and she cautioned how the City's tax base would be negatively affected by the development of the project.

According to Roy Ahonen, Bruce Noren met with Tom Ahonen following the first public hearing on the Hovey project. Before the meeting ended Ahonen reminded Noren that he promised he would never support any project that would cannabalize existing businesses. He told Noren that supporting Hovey is doing just that.

This issue is scheduled to be voted on by the City Commission at their next meeting -- Monday, July 13, 2009.