Commissioners Approve Eighth St PILOT, Brown Bridge Project; Delay Housing Incentives

Traverse City commissioners voted Tuesday to approve a payment-in-lieu-of-taxes (PILOT) agreement for a planned workforce apartment complex on Eighth Street and a contract for a new trailhead project at the expanded Brown Bridge Quiet Area. However, commissioners delayed action on establishing a new Attainable Housing District - a designated area where property owners can apply to receive tax incentives in exchange for providing rental housing - following extensive public confusion and criticism over the proposal.

Commissioners approved a Traverse City Housing Commission request for a PILOT for a development on the former Copy Central property on Eighth Street. The site is planned to host a four-story building with 43 low-income units, including 29 one-bedroom and 14 two-bedroom units. Offered as an incentive to encourage workforce housing, a PILOT typically sees a developer pay a defined percentage of net shelter rents to the local municipality instead of normal property taxes. The four percent PILOT agreement for the Eighth Street project is for 45 years, which would lock in the income range for tenants - 30 to 80 percent of the area median income (AMI) - for the duration of the contract.

Commissioners also voted to approve a not-to-exceed contract of $92,782 – which includes a 15 percent contingency – with Gourdie Fraser for design and engineering work for a new trailhead project at the expanded Brown Bridge Quiet Area (BBQA) along Hobbs Highway. Planned improvements include “parking, restroom facilities, a universally accessible trail, a viewing platform overlooking Spring Lake, and connections to the expanded trail system,” according to the city’s Bay Brief. Construction is set to start next spring.

The dominant topic of discussion Tuesday was the city's plan to establish an Attainable Housing District. That topic drew an overflow crowd to the Governmental Center and over an hour of public comment. Much of the public comment reflected confusion over the proposal, which was exacerbated by a certified mailing the city was required to send under state law to notify eligible property owners about the program.

Such a mailing is unusual for the city and appeared to arouse confusion and suspicion in many residents who received it. City Manager Benjamin Marentette expressed "regret" over the way the mailing was worded, saying it failed to clearly articulate how the program would work. 

"There could have been better communication and explanation of what this program is all about," he said, addressing the audience. "In the future, these types of mailers will go through our communications department to ensure that when they're sent it's clear to you what the aim of the program is and the substance of the matter that you're being notified of."

The term "district" in Attainable Housing District also appeared to create confusion, with some residents believing it was establishing a new zoning district or changing the zoning density in their neighborhoods. City officials emphasized the program had nothing to do with zoning and would not change the allowed density. Rather, the program simply establishes boundaries in which property owners are eligible for tax incentives for providing between one and four rental units. Those units must meet existing zoning rules, meaning a triplex could not be built in a neighborhood that doesn't already allow triplexes, for instance.

Property owners must meet several eligibility standards, including being in the R-1a, R-1b, or R-2 neighborhoods and making a new investment of more than $5,000 into the rental property. That can't just be for aesthetic upgrades but rather improvements that bring the property into code compliance, the city's legal counsel explained. 

The goal of the Attainable Housing District program in Michigan is to incentivize owners to fix up their properties to provide rental housing. Tenants of those units cannot earn more than 120 percent AMI. Cities can also choose to cap that AMI at a lower level, which commissioners discussed doing Tuesday. In exchange, owners can qualify for up to 12 years of property tax reductions. Each application under the program will be required to go to the city commission for a public hearing, as well as to the State Tax Commission for review.

Including Tuesday's meeting, city commissioners have discussed the proposal six times over the last year. However, given the public confusion commissioners heard before and at the meeting, they decided to delay action until their September 21 meeting. Staff are expected to bring a package to that meeting that will also include a proposed implementation policy, which will outline the criteria by which commissioners will evaluate applications, such as the AMI cap for tenants.