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City Attorney Says State Law Doesn’t Allow It
After several months of discussion, the Lexington City Council is tabling discussion of offering Echelon Resources Inc. potential financial incentives to begin developing property on Spotswood Drive.
“They’re not in a position to move forward with the project at this time, and so there is no reason for the city of Lexington to offer an incentive, because the project wouldn’t move forward even if we did,” City Manager Tom Carroll told Council during his report. “So, in addition to the fact that we can’t offer them what they’ve requested, I wouldn’t recommend that we offer them any incentive at this point.”
Echelon first reached out to then-City Manager Jim Halasz in January to request consideration of a 50% tax abatement on the property for the first 20 years of operation of the apartment building they plan to build there.
The request stemmed from Echelon’s plan to pursue funding from Virginia Housing to help fund the project, one of the conditions for which would require 20% of the housing within the development be affordable housing, which would impact the amount of revenue Echelon was projecting to make on the project.
Halasz brought the request to City Council in March, at which time Mayor Frank Friedman appointed Council members David Sigler and Leslie Straughan, as the city’s finance committee, to meet with Echelon and discuss the details of the request.
At its regular meeting last Thursday, Tom Carroll updated City Council on the discussions, noting that City Attorney Jeremy Carroll had informed Council that the proposed abatement is not permissible under Virginia law. Virginia does allow for abatements like the one proposed in situations where a property that has been declared a blight is being restored or renovated, but since the Spotswood Drive development would be a new development on a green space which has not been declared a blight, an abatement such as the one Echelon requested is not permissible.
Tom Carroll told The News-Gazette that the city considered other financial incentives for Echelon, such as a grant or forgivable loan, but that even with those, current cost of materials and labor don’t make the project feasible for Echelon at this time.
“It’s got to make money for the developer, otherwise they won’t do it,” he said. “That is something that is critically important. In order to attract an investment dollar, they have to show that this project will generate a profit satisfactory to their investor, and until that happens, they don’t have [that] dollar.”
The city’s current contract with Echelon to develop the Spotswood Drive property, as well as the former VDOT property on Waddell Street, extends through April of 2025. Carroll said that the city is going to continue working with Echelon to figure out how to move the project forward.
