City grants tax breaks to spur 'tornado lot' development
Vacant lots, some with driveways to nowhere, dot Wadena's southwest side, eerie reminders of the darkest day in the city's history.
Almost exactly four years after the tornado ripped through town, city leaders approved a tax abatement to encourage development on 29 properties where houses once stood. The policy grants a full 10-year break on city property taxes for improvements to the eligible lots in 2014, 2015 or 2016. The abatement applies to residences valued at $75,000 or greater. It allows for multi-family housing up to four units.
"If we do nothing, what can we expect? Four more year of empty lots," Mayor Wayne Wolden said at a joint public hearing with the Wadena-Deer Creek School Board and Wadena County Board at city hall June 10. "We are trying to make a bold statement to try to get people to move to our community."
Wadena Development Authority Director Dean Uselman said the longer the lots sit vacant, the lower the value goes.
"This is a very progressive action," he said. "We will see new property value and tax value there and we will see a lot of positive growth long term."
The city's action only affects its portion - 28.4 percent - of the total local property tax. Owners of a $150,000 single family home (County Assessor Lee Brekke's predicted average value) would save $550 per year or $5,500 (at current valuations) over the life of the abatement. Developers of a four-plex would save $816 per year, according to Brekke's figures.
After the tornado destroyed her house, Janet Lehmkuhl moved to the country. She still owns the lot and is planning to rebuild within the three-year tax abatement window if she can get out of her current home in time, she said. "It's a good incentive."
City officials hope the school and county boards also enact the abatement, because it would make that incentive much sweeter.
"If the city's the only one that has this, it's going to be a lot less attractive to buy a lot," said City Administrator Brad Swenson. "It's going to have a lot more impact if all three bodies come up with one policy."
The county collects the largest portion of local property taxes - 57.8 percent - while the school district's share is 13.9 percent.
Both boards are scheduled to consider the policy at meetings in July.
If they both enact it, owners of a $150,000 single family home would see an additional $1,213 in annual tax breaks. The annual benefit for four-plex apartment developers would increase by $2,058.
Two members of the public spoke at the June 10 hearing.
Wadena township resident Sheldon Monson, a candidate for county board, said he's worried about the loss of tax revenue and potential devaluation of other lots.
"I don't think it's fair to the other owners in town who have been trying to sell their lots for years," he said.
Ralph Miller, a former county commissioner who lives in Aldrich Township, said he's concerned the policy will continue the shift in tax burden from commercial and agricultural properties to residential.
Wolden said total tax revenue will not go down.
In 2013, the vacant lots yielded a total of $6,788 in property taxes. Because the abatement is only for improvements, not for the land itself, that money will continue to flow in.
"There would be no shift," Wolden said. "The growth in the tax capacity would bring a tax decrease."
Brekke said the value of the abatements would be added to the total property tax levy, spread among all property owners. That means if $150,000 single-family homes were built on all 29 lots, county property taxpayers would have to pay a total of $32,381 more per year - or the county could reduce its levy accordingly.
All five county commissioners attended the public hearing. A couple of them expressed reservations about the city's proposal.
"The issue of fairness does come up - has come up - and if you're going to have an abatement, maybe you need a broader abatement policy," said Commissioner Bill Stearns.
County Coordinator Curt Kreklau said he's exploring various abatement policies and looking closely at the impact of the city plan ahead of the July board meeting.
The local government bodies should consider offering some sort of abatement to all undeveloped properties, Commissioner Ron Noon said.
"I would go a step further," he said, "and reach out to everyone in our community, if they want to build."
That's a whole separate project, Swenson responded.
"The council is asking for consideration of a very specific policy...," he said. "All that's being asked is your votes on this particular policy. You're making it too complicated as far as what we're asking."
Councilwoman Jeanette Baymler said the council isn't precluding the policy from expanding in the future. "But we can start with this and see how it goes."
The four WDC school board members who attended the public meeting didn't say much.
Neither did Superintendent Lee Westrum, who won't be offering a recommendation to the board due to a conflict of interest.
Westrum and his wife bought one of the 29 properties, a small parcel adjacent to his house, when they moved to town last summer. It will remain undeveloped as a part of his yard, he said.
Reached by phone last Thursday, School Board Chairman Steve Techam said he'll vote for the district to join the tax abatement, although he has reservations about "the equity part."
Ideally, the incentive will bring new families into WDC classrooms, he said. "That's what we're hoping for."