Council approves tax break for under-construction downtown lofts

On Monday, Springfield's city council unanimously approved a half-a-million dollar tax break for developers building lofts near downtown and Missouri State campus.

Located near the intersection of Cherry and Kimbrough, council previously approved a redevelopment plan for the "Beverly Lofts" in 2018. Since then, developers have rehabilitated and conversed a three-story building into a 22-unit, multi-family residential apartment building.

The second ongoing phase of the development is the imminent construction of an 18 to 28 unit multi-family residential apartment building on the vacant portion of the lot.

The property tax abatement for this second phase will last 25 years — for the first 10 years the lofts' owners will pay no property taxes and will only pay 50 percent for the remaining 15 years.

Over that 25 year period, developers would pay $506,200 less in property taxes, or an average of $20,248 less per year.

City managers approved the tax break based on the "but for" test, which means they believe the development would not go forward without the tax break.

"To approve this for the area that has been found blighted, the proposed redevelopment must provide a measurable public benefit and it must be found that (the development) would not occur but for the abatement," said Economic Director Sarah Kerner at a city council meeting earlier this month.

By comparing the income and expenses of the project with and without the tax break, city administrators determined that the project could not go on without the proposed tax abatement.

"This is one method of determining whether the project can provide a return on investment necessary to attract developer capital. So, essentially if the cash on cash return is not high enough, then a developer wouldn't want to do the project because they wouldn't make any money doing it," Kerner said.

Speaking to the News-Leader, Beverly Lofts owner Jason Murray said the project would not be "financially feasible" without the tax abatement.

"With the cost of new construction materials and labor shortages and so on, now more than ever tax abatements are important because of the high cost of construction projects," Murray said.

If the project does not go forward, the empty lot would only generate $29,601 over the next quarter century, according to city administrators. Alternatively, the property would generate $757,033 in taxes for the city if it does go forward.

With the $506,200 abatement, the development would generate a lot less revenue for the city, but still more than as a vacant lot. According to city calculations, the completed development with the abatement would still generate $250,813 for the city over the next quarter century.

"What I'm saying is we are getting an additional $221,213 because the project is occurring, as opposed to it not occurring," Kerner said.

While not dismissing their calculations, Councilman Craig Hosmer raised a concern of whether Springfield should incentivize rental properties at all given the city's low rates of home ownership.

"It seems like as a city we've got a 60 percent rental rate in Springfield and from everything I've looked at that is a dangerous number for a city to be at. It’s not good to have 60 percent of the people living in your city to be in a rental property rather than a single-family home that you own," Hosmer said.

Near both downtown and Missouri State campus, Kerner said this particular property would not be appropriate for single family homes.

"This is downtown. This is a place you would expect to see high density housing," she said.

This article originally appeared on Springfield News-Leader: Council approves tax break for in-construction lofts in downtown