Traverse City commissioners will consider two tax abatement requests tonight (Monday) designed to bring more affordable housing to the city.

The Woda Group and Hollander Development Corporation are both seeking payment-in-lieu-of-taxes (PILOT) agreements with the city in order to offer low-income housing units. The Woda Group hopes to build 64 units in the proposed River West development at the corner of Pine and Front streets, while Hollander is seeking an expansion of a PILOT already in place for its Bay Hill apartment complex off Veterans Drive.

In lieu of traditional taxes, Woda is seeking to pay six percent of rental income – or an estimated $20,000 annually at full occupancy – for its 64 units, plus a $12,500 fee for city services. Compared to that $32,500, traditional property taxes for the $10.5 million project would amount to $297,000, according to City Assessor Polly Cairns. While the city would agree to receive an estimated $67 per unit instead of $1,100 under a PILOT, the tax break would make it possible for Woda to offer low-income rather than market-rate apartments, according to Senior Vice President Craig Patterson.

“Once completed, this development will have restricted but affordable rents to help working singles, families and seniors obtain quality, safe and energy-efficient housing in downtown Traverse City,” Patterson wrote in a memo to commissioners. “The PILOT helps ensure the long-term financial stability of the property, plus helps the developer increase their chances of receiving funding for the project.”

Should commissioners approve the PILOT, Woda plans to apply for Michigan State Housing Development Authority (MSHDA) funding for the project in April. 

Though the River West project has generated local controversy over its proposed height, Commissioner Ross Richardson – one of two commissioners who opposed granting the development a special land use permit (SLUP) in December – says the PILOT request is a separate issue from the SLUP. Richardson supported the PILOT proposal when it first appeared before commissioners this summer, and says he intends to do so again.

“Obviously I have problems with the project as far as size,” Richardson says. “But I got outvoted on that, and I’m not going to try to block the affordable housing component. It doesn’t have any effect one way or another (on the height issue) to deny a PILOT. If this thing is ever built, I’d prefer it have some affordable housing.”

Commissioner Gary Howe says he expects “some people who will try to use the PILOT as a way to stop the nine-story building.” Howe says he “would caution people not just to focus on the idea we’re giving up this tax money,” because such dollars wouldn’t exist without the project moving forward.

Commissioners will also consider a PILOT-related request for Bay Hill Apartments, a 150-unit complex constructed in 1996 off Veterans Drive. Ninety apartments in the complex are covered by a PILOT agreement now and are rented to individuals who earn no more than 60 percent of the area median income level. 

Hollander is seeking to extend that PILOT to 2065, and also to reduce the percentage of rental income it pays to the city from 10 to 6 percent. The company noted that as part of a recent ownership change, the development’s taxable value was uncapped. Accordingly, “the feasibility of the development” and its ability to continue offering low-income units “may be dependent upon the establishment” of an amended agreement, the company wrote to the city.

The amended terms would reduce the development’s payment to the city from roughly $248 to $155 per unit for the 90 low-income apartments, according to Cairns.

Though commissioners will be in study session tonight – and will not officially vote on either PILOT request – having both items on the agenda provides an opportunity to look at such agreements in big-picture terms, says Howe.

“PILOTs are an important tool...to implement goals like affordable housing," says Howe. “But it’d be wise of us to have a strategic vision around them. We need a plan so we can ensure they’re not the only tool we have, and also that we’re not overusing that tool.”