2004-04-12 Regular Meeting and Workshop Meeting Minutes

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City Council Regular Meeting and Workshop Meeting - April 12, 2004 - Page 6 C. John Joerns gave direction on the Texas Department of Housing and Community Affairs regarding notifications for housing tax credit projects in La Porte. There have been three from the state, with two more which are a little different. There are two separate programs; the first three projects are Bay Forest Ranch, which is within our Tax Increment Reinvestment Zone; Fair Mist Apartments, proposed for future Canada Road area, and Alexander Ridge near Spencer Highway and Sens Road. Tonight, House Bill 3546 will be discussed regarding taxation issues. Bay Forest and Fair Mist include proposed funding and ownership by Harris County Housing Authority, if that were to occur, and the projects progressed through the system, with Harris County being the owner, they would be removed from the City's tax rolls. One of the property's is in TIRZ, the combined tax increment ($2.73/per $100/evaluation) with the Bay Forest Ranch project proposing 104 bedroom units and the estimated value being $8.5 million. For this project, all things remaining consistent, with taxing structures remaining in place, that would amount to over $5 million for the remaining 23 years life of the TIRZ. For the project on Canada Road, with the City increment only, would amount to $60,350/per year. House Bill 3546 establishes an appraisal process to be used by the Chief Appraiser, indicating the Chief Appraiser will include the income approach in developing future appraised value of these projects. We have been led to believe that will be a lower value than what would be land evaluation of buildings and improvements and may lower the anticipated tax revenues generated from these types of projects. Harris County and the Housing Authority are discussing a program where the Authority guarantees and makes payments in lieu of taxes to make those entities whole again. David Turkel, Administrator of Harris County Housing & Economic Development, provided information of the Harris County Housing Authority and welcomed questions from Council and Staff, and encouraged development of new properties. Councilmember Meismer questioned that Mr. Turkel alluded to payments in lieu and that type of thing, thinking one of our biggest concerns is, there is no doubt in the way this is proposed that we are going to lose the ability to have the taxable value of those properties on the Tax Roll to some degree or ifnot in whole. We are still going to have the responsibilities for providing services for those houses and facilities; which will be very much an uphill battle. For someone to consider that if that's not a plan upfront, what is that proposed shared entity, what is that going to be, what does that mean in dollars and cents. Nobody is willing to sign a blank check and that's what we are being asked to do at this point. Mr. Turkel responded that at this point all we are really asking Council to approve, in this case, are two new affordable housing developments. Now, it is true that all across the country that tax credit housing works and provides the most modem and up-to-date housing with all the amenities. The finest apartment projects around can be at rates that are below market, simply because of the tax credits that the developers receive from the Internal Revenue Service, allowing them to build the project for something less than normal construction costs. Since the developers have to agree to long term rent controls, the cash flow of the projects are restricted. This is the reason the appraisal districts are appraising them based on income rather than reproduction costs, because ultimately all of these types of projects are only worth the amount of money that they will bring in. If you have a rent control project, it will mean ifit were sold on the open market with those controls in place, it would not bring the same amount as such a project would without the controls. Mr. Meismer stated that he understands that, but given that, if this property was developed in another format without those, we quite possibly would not only see a higher tax base, but a substantially higher tax base, so we are being asked to give up on the front end.