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Developer Seeks Reduction As It Tackles ‘Challenges’
Lexington City Council held a public hearing on a request by Echelon Resouces Inc., the company that has purchased and plans to develop several parcels of land in the city for apartment buildings, for a 50% abatement on the property taxes for the property on Spotswood Drive for the first 15 years that the building is operating.
Edwin Gaskin, the project manager for Echelon, made the initial request for the tax abatement in January in an email to City Manager Jim Halasz.
In the email, Gaskin explained that, while Echelon remains committed to the project, several current economic factors, including high construction costs and elevated interest rates, “continue to pose challenges” for the development. “As a result,” he wrote,” it has been challenging to identify viable sources of conventional financing that would provide a feasible path forward for the Spotswood project.”
Gaskin went on to explain that Echelon had begun working with Virginia Department of Housing and Community Development for potential financing for the project which could, if successful, help advance the project “on an accelerated schedule.”
One of the conditions of the loan would be a requirement that 20 percent of the units in the development be reserved for residents earning 80 percent of area median income or below. For the proposed 62-unit development on Spotswood drive, that would mean 12-13 units would be designated for lower income individuals and families, as opposed to the market-rate apartments slated for the remaining Gaskin said that Echelon was “excited to provide these workforce units for Lexington’s nurses, teachers, city employees, etc.” but that the lower rents for those apartments would result in a “reduction in potential income” that would add “feasibility challenges that need to be solved for the project loan application to be considered viable.”
That was the reason Echelon was asking the city “to consider a partial property tax reduction on incremental assessed value of the property to assist with offsetting the reduction in revenue caused by the affordable workforce units.”
Several members of the public spoke during the public hearing, many speaking in opposition to the proposed tax abatement.
“The purpose of developing it was to have tax revenue, and now to give half of it back seems counterproductive,” said Margaret Kirkby. “Often in town, we complain about other entities not paying their fair share of taxes and now it seems like we’re on the verge of doing that to ourselves.”
“I think you were honest with them [about] what the taxes would be from the start,” added Mike Lowry, “but now you’re now saying they get a tax break, but the rest of the city doesn’t? That doesn’t seem extremely fair to me.”
“Approval means taking a big hit to anticipated revenues that would go to paying for our community’s roads, pipes, emergency services and schools,” said former City Council member Patrick Rhamey. “This is a fundamentally bad deal, despite the subsidized housing units that don’t do much to improve it.
“If you want to actually help people, rather than sit up there and engage in empty rhetoric, your goal should be making the developer pay their full, fair share of their property taxes and use that new revenue to improve the pay for our hardworking city staff most in need,” he continued. “Otherwise, you’re just doubling down on poverty.”
Rhamey also advocated for putting out a new request for proposals for developers to see if any better offers might be available.
“To simply do nothing and accept what is before you without knowing whether a viable alternative currently exists would be negligent and a betrayal of the Lexington taxpayers,” he said.
Mark Reed spoke in favor of the proposal’s inclusion of affordable housing units.
“I’m convinced there is a need for more affordable housing here in Lexington,” he said. “I wish we’d had an opportunity like this from the get-go … but if you ask me, I think it’s a wonderful opportunity, not just to have a good looking property – albeit, in a later time frame – but also an opportunity to have 20 percent of the people [living there] who otherwise wouldn’t be able to afford it. So I’m all for it, and I urge you to vote for it as well.”
As part of his report on the proposal, Halasz presented City Council with a cost benefit analysis of the project’s potential revenues over the next 20 years, which estimates that $2,083,932 would be generated from the proposed development of the property with the 50 percent abatement factored in. Halasz also pointed out that, while Council was not obligated to approve the proposal, agreeing to the proposal would allow the project to move forward rather than leaving the site undeveloped while waiting for costs and interest rates to go down.
“There is, I believe, a real advantage in starting a project today as opposed to trying to see if there’s someone out there who might do a project a year or two or four years from now,” he said. “No one knows what those costs are going to look like tomorrow … so there is an advantage to starting today. It’s sort of back to that old parable of a bird in the hand as opposed to two in the bush. There might be something out there [that’s] better, [but] there may not be and do you want to risk waiting?”
He also noted that the city has consistently listed increasing housing, and specifically affordable housing, within the city as a priority over the past five years.
“I think this is one of the few opportunities we have in the near future to bring that kind of housing to the city,” he said. “Stopping and waiting to see if it might happen in two to four years from now undermines that goal you’ve set for yourself.
“I can understand the concerns of others who might be worried about how it looks to give an investor a tax break of any sort, but there’s a lot that’s coming to the city from this project,” he added.
Mayor Frank Friedman asked Council members David Sigler and Leslie Straughan, as the city’s finance committee, to meet with Gaskin and Echelon to “talk about the numbers and understand the rudiments of this and see if we can get to the finish line.”
At the city’s Planning Commission meeting last Thursday, Straughan, who serves as the Council’s representative on the Commission, reported that initial meetings had taken place, and that the discussion was ongoing.
