Developers willing to build commercial or mixed-use projects in Palm Coast’s Town Center could be eligible for property tax rebates of up to 90 percent between now and 2034, depending on the size and timing of their investment. The bigger the project, the bigger the rebate.
Getting somewhat desperate for more investment in Town Center before a special tax status for the economic zone expires in 2034, the Palm Coast City Council on Tuesday approved the generous tax-forgiveness program to encourage more immediate construction.
Town Center was once 2,000 acres of scrubland but for a few clusters of homes and businesses. Palm Coast established the Town Center CRA, or Community Redevelopment Area, in 2004 as an economic redevelopment zone. A CRA locks in all but a fraction of the property taxes generated within it for reinvestment inside the CRA, until the CRA expires. In Town center’s case, expiration is in 2034.
Town Center was to be Palm Coast’s downtown—vibrant, full of shops, offices, apartments and houses. Redevelopment hasn’t gone as planned. The majority of the expected commercial, office and retail space has not been built. The CRA should have generated $7.6 million in property taxes last year. It generated only $2.9 million, a 62 percent shortfall. Over the life of the CRA so far, the shortfall is closer to 80 percent of expected tax revenue: $33 million against a projected $162 million. The CRA has about $6 million in debt.
Of most concern to the city, while most of the 4,000 residential housing units planned have been built, 3 million of the projected 5 million square feet of office, retail, commercial and institutional space, or 60 percent, has yet to be built.
A few unfair swipes at previous councils aside (in Tuesday’s meeting and at workshop a week before, as if previous councils had sat on their hands and let Town Center slide, which was not the case), the city is in a bit of a panic mode. The CRA expires, by law, in 2034, at which time all the property tax revenue generated will be redistributed to the city’s and the county’s general funds. So the city is looking for different ideas to make the CRA pay. Or, more literally, not generate taxes in the short term, to encourage investors.
The incentive program is one of those ideas. John Zobler, the city’s community development director, presented the plan to the council on Tuesday. The council approved it unanimously, with notable changes.
The plan isn’t just a reimbursement of property taxes. It applies various “multipliers,” “compressions” and other extra incentives, including deferments of certain impact or utility connection fees. (The plan as presented to the council lacked clear definitions of the terms and lucid explanations of the incentives’ application, but for a single example. It has a clunky name: “Vertical Development Incentive Grant.” More precisely, it is a construction-incentive and tax-rebate plan.)
Projects with property values below $3 million would not be eligible. Projects valued between $3 and $7 million would get a 50 percent rebate. Projects valued between $7 and $15 million would get a 65 percent rebate. And projects investing more than $15 million would get an 80 percent rebate. “Multipliers,” “compressions” and “area activation bonuses” then compound the tax savings.
The example Zobler provided is a $10 million property at the time it is occupied. Assuming that happens in 2030, the property would normally generate $120,838 in property tax revenue to the CRA. Between its base rebate and other factors, it would be eligible for 89.5 percent in rebates, and would have to pay just under $13,000 a year in taxes. Its tax savings over the four years that it is eligible for the rebate would be $432,600.
A property valued at more than $15 million would theoretically get 100 percent tax reimbursements, using the same calculations.
The CRA would suffer a short-term hit on its tax revenue, but would presumably make up the loss in the long run (when the CRA no longer exists).
Zobler wanted the tax incentives to apply to all development with investments of $3 million and more, including housing. Council member Theresa Pontieri immediately killed that. “I won’t support incentive grants for residential,” she said. “And I certainly wouldn’t support impact fee relief for residential.”
Mayor Mike Norris said likewise. “I do not want to incentivize building any more single family homes in this area. I don’t want to do it because we have a lot coming online now,” Norris said. He is not opposed to mixed-use buildings where residential is built on top of commercial space (as with the Promenade in Town Center),
“You can go higher than three, but a minimum of three stories, because the whole point of the CRA and this vertical incentive is density,” Norris said. “The whole point of this is to go vertical instead of horizontal.” The Promenade, for example, a $79 million investment, is expected to generate more tax revenue than a Target or a Walmart. It is not clear if the Promenade will be eligible for the program.
Pontieri and the rest of the council also opposed incentives to include impact fees, which the Zobler plan would have forgiven–with the exception of the deferment of utility connection fees. Pontieri was also opposed to exempting eligible companies from paying into the public art fund the council approved last year.
“If you look at the enthusiasm and the positivity, and I think a tourist spot, that Bunnell has created with its mural, it has been fantastic,” Pontieri said, referring to the new, large mural on the side of the SMA building on South Church Street. “They got the Minutemen to do that actual piece of art, and then they got the muralist to go out and replicate it on the wall, and it has generated a lot of publicity for them. They’re actually trying to get on the actual trail for those types of murals now, and I think Town Center is a perfect place to try to replicate that type of project. So I don’t want to see the Arts Fund fee go away, and it’s a very small amount. So I wouldn’t support those incentives.”
Those exemptions were removed. Pontieri was also opposed to putting a minimum floor on the incentives, though it isn’t clear whether the $3 million floor was removed: the council appeared so eager to move forward with the plan–“let’s move out on this,” Council member Charles Gambaro said, declining to wait for a new version of the proposal before approval.
“Whatever we’ve done to incentivize has not pushed those developers to build,” Norris said. “It’s just beyond me why they haven’t taken the initiative to move forward and start going vertical with things in this area. This is like the hub of the city.” He was also eager to get the program started. “I’m going to do everything I can to give you the tools to make it happen,” he told Zobler.
Leave a Reply