Has the city’s retail incentive program gotten off track?

Has the city’s practice of approving Development Agreements and granting participation in its Retail Incentive Program grown beyond it’s original intent?

The Clear Lake City Council will hold a public hearing at 6:30 p.m. Monday night, Oct. 16, to review two requests for development agreements and property tax incentives.  Each request has its own unique issues for the Council to consider- one being the high cost of property tax rebate, and the other being a second request for building improvement.

Council members voted 5-0 to hold the hearing, however At-large Councilman Mike Callanan indicated he is “struggling” with the requests.

Callanan was newly elected when the City Council passed its Retail Incentive Program in 2008.  That plan has since expired; the recent requests are being made through the City’s Downtown Urban Renewal Plan.  Callanan said the most he remembers awarding to a building owner through property tax rebates was approximately $35,000.

The most recent request, coming from VSA, LLC, doing business as K&B Emporium at 8 N. 4th St., would have the City enter into an agreement to provide property tax incentives in the form of annual property tax payments in a cumulative amount not to exceed $250,000.  The amount would be payable over six years.

City Administrator Scott Flory said the amount of tax abatement is based upon the assessed value of the property.  In the case of K&B,  which has a current taxable valuation of about $200,000, the projected new value is approximately $1 to $1.5 million.  Flory said he estimates annual property taxes will be $35,000 to $40,000.   

The City typically bases its amount on 90 percent of taxes for five to seven years.

“This is one of the best projects I have seen in my career,” said Flory, who toured the business with owner Vicki Sukup, along with other elected officials prior to its Wednesday, Oct. 4, opening.  “It is a destination attraction for our community.  Remarkable.”

“I’m struggling with making the leap from $5,000 to $250,000,” said Callanan.  “It’s

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almost a Catch 22.  I wonder if we aren’t kind of skirting around the original intent of the agreement here… I’m not sure the intent was to just create more money for building improvements.”

The second development agreement and property tax rebate request is being made by Michael and Kristi Pedelty, who have purchased the retail property at 308 Main Ave. where Emerson’s is currently located.  The couple is seeking tax increment payments in a cumulative amount not to exceed $22,000.  Under terms of the agreement a retail business will continue to be located in the ground-floor of the building for a period of not less than six years.  The rebate payments will consist of 90 percent of the property taxes paid by the owners over a five year period.

Callanan questioned whether the building should be eligible for more property tax rebates since a former building owner benefited from the program when Emerson’s located on the ground floor.

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