Grand Traverse County commissioners are close to finalizing a policy to guide how and when tax breaks are extended to workforce housing developers under payment-in-lieu-of-taxes (PILOT) agreements. Commissioners discussed some of the likely conditions Wednesday – including the desired income range for tenants and a requirement that housing only serve permanent and not seasonal residents – ahead of a likely vote to approve the policy next week.

Recent changes in state law offer more flexibility to communities to enter into PILOT agreements with developers as an incentive to build workforce housing. Instead of normal property taxes, under a PILOT agreement a developer pays a defined percentage of net shelter rents to the local municipality where the project is located (such as the City of Traverse City or Garfield Township). The PILOT agreement remains in place for a certain number of years – often 15. The municipality then splits the annual PILOT payment up among the different taxing jurisdictions that would normally receive a share of property taxes.

However, if the amount counties receive through a PILOT is less than the full amount of taxes they’d otherwise receive, they can require property owners to make up the difference. That amount is calculated as the difference between the PILOT payment to the county and the operating millage rate multiplied by the current taxable value of the housing project. Alternately, counties can waive their right to collect that additional amount if they want to support the housing project and can outline the conditions under which they’ll do so.

With Grand Traverse County already receiving three PILOT requests – two in the City of Traverse City for Innovo projects on Garland and Hall streets and one in Blair Township for a Wallick Communities housing project on US-31 – commissioners agreed they should have a consistent policy to handle PILOT agreements rather than reviewing them on a piecemeal basis. An ad hoc committee of commissioners helped draft a policy – with input later provided by county legal counsel – and discussed it with the whole board at Wednesday’s commission meeting.

The policy states Grand Traverse County will “always” default to collecting the additional amount owed under PILOT agreements. However, the county will consider a request for abatement – waiving that amount owed – if four conditions are met. The first requires developers to complete an application with Grand Traverse County, which commissioners said would be a relatively straightforward document outlining the proposed project.

Another condition would require developers to submit the PILOT request and supporting documentation to Grand Traverse County at the same it’s submitted to the local municipality. Once the county treasurer receives official notification that a PILOT has been approved for a local project, it starts a 45-day countdown in which Grand Traverse County must assert its right to collect the additional amount owed. That timeline is “really challenging” in practice, said Commissioner TJ Andrews, giving commissioners a tight turnaround to review PILOT requests. Because PILOT applications are often going to the city or township months earlier, copying the county at the same time so commissioners have more notice shouldn’t be a difficult requirement to meet, Andrews said.

The third requirement to receive a county abatement is that the developer provides proof the housing will be the primary residence of tenants in the development. That’s to prevent tax breaks from going to housing that ends up as seasonal or second homes for wealthier residents. PILOT agreements should be used for year-round, permanent housing and “addressing people who are in the workforce,” Andrews said.

The most debate among commissioners related to the fourth requirement, which would set the maximum income level for tenants in a housing project in order for a developer to receive county abatement. PILOTs in Michigan are typically geared toward projects with tenants earning between 80 to 120 percent of the area median income (AMI) – or lower. Some commissioners recommended lowering the maximum threshold from 120 to 100 percent AMI. Andrews said that local examples of projects with a 120-percent-AMI threshold had studio apartments starting at $1,800 per month, which she said was “above the needs of the workforce.”  

Other commissioners noted that housing is in demand across the income spectrum. Even supporting 120-percent-AMI projects could help alleviate demand at one level that could then free up units at lower levels, some maintained.

“The more housing we have and we’re able to support overall, it puts less pressure on some of the other housing,” said Commissioner Ashlea Walter. With it now being so “expensive to build,” Walter said she was “hesitant to not support everything we can do to encourage housing in the county.” Commissioner Darryl Nelson agreed, saying that “inventory is always the answer” to the housing crisis. “I think 80 to 120 percent (AMI) makes a lot more sense,” he said. “I wouldn’t support this if it stays at 100.” Housing North also wrote commissioners in support of providing abatements to housing projects with a maximum threshold of 120 percent AMI.

Commissioners did not resolve the AMI debate Wednesday but are expected to discuss it in more detail next week, when they could vote to approve the final policy language.