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HomeMy WebLinkAboutProperty Tax Abatement for Historic Properties Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Wendy Thomas, Director of Community Development SUBJECT: Property Tax Abatement Program for Historic Properties MEETING DATE: February 3, 2014 AGENDA ITEM TYPE: Action RECOMMENDED MOTION: I move to direct the Historic Preservation Advisory Board and City Staff to prepare amendments to Chapter 2 Article 6 Division 3 of the Bozeman Municipal Code to amend the Tax Abatement provisions to improve the process and facilitate the utilization of the program by owners of historic property. Or I move to direct City Staff to prepare an ordinance repealing Chapter 2, Article 6, Division 3, Tax Abatement in the Bozeman Municipal Code. ISSUE: After a policy discussion on October 22, 2012, the City Commission directed staff to develop an ordinance to suspend the Tax Abatement program for historic properties and to work with the Historic Preservation Advisory Board (HPAB) to develop a program to recognize historic properties that have undergone noteworthy restoration, preservation or rehabilitation. I came on board in April, 2013 as the Director of Community Development. The tax abatement Commission directive was passed on to me by the City Manager. In an effort to understand the directive to better implement it, I gathered information by: • Reviewing the Bozeman Municipal Code (BMC) and Montana Code Annotated (MCA); • Viewing the policy discussion of October 22, 2012; • Consulting with: the State Historic Preservation Officer (SHPO), HPAB, the Bozeman Historic Preservation Officer, the Commission Liaison to the HPAB, and the Montana Department of Revenue; and • Considering my experience with historic preservation tax abatement programs. Upon review and consideration it is my recommendation that the City Commission direct staff to amend the tax abatement program so that it will be an effective, efficient tool to encourage the restoration, preservation and rehabilitation of historic properties within the City of Bozeman. 170 UPDATE: Upon review, the conversation between the Commission, the HPAB, and Staff regarding the program centered on whether the program was an effective tool in encouraging preservation and whether the program was an efficient use of Board and Staff time. I agree that the program as it is currently structured is not an effective use of Board and Staff time; however, the program would be an effective tool if it were applied primarily to multi-household or commercial projects. Based on my research, it appears that program has only been applied to residential projects in Bozeman in the past. The tax incentive for a single dwelling residential project can be minimal; however, on commercial projects or multi-household residential projects the result will be a measurable tax savings, based on my experience with other local governments where the program has been utilized. We have a good tool, but we have not encouraged the right applicants to use it. To date, the HPAB has not yet fully developed a program to recognize exemplary preservation/restoration/rehabilitation of buildings. However, the Board continues to work on this issue and anticipates being able to bring a program to the Commission in the spring. Often, over the course of the last year, the Board has not had enough members in attendance to have a quorum which has delayed their efforts in recommending preservation programs and policy to the Commission. Recent appointments and existing members’ commitment to the mission of the HPAB have resulted in a re-energized board. Montana law, MCA 15-24-1601, authorizes a local government to adopt, by resolution, a program that allows for the abatement of local taxes for properties located within a historic district. The City of Bozeman Municipal Code (BMC), 2.06.350, outlines the process and criteria for granting tax abatement on a qualifying property. The BMC states the program “...is to reward extraordinary efforts in preservation and not minimal compliance with mandatory standards.” The program is one tool to encourage preservation along with education efforts, certificates of appropriateness, and a recognition program. State statute allows the Commission to appoint an advisory board, or ask the State Historic Preservation Officer (SHPO) to act as a recommending authority regarding qualifications and design standards. The HPAB was clear in stating that the current members, at that time, were not interested in acting as the advisory board to the Commission regarding the tax abatement program. An amendment to the ordinance allowing either the HPAB or the SHPO as the recommending authority would relieve the HPAB of this obligation, at this time, and allow the program to continue. This change would give future HPABs the option of taking back the role of being a reviewing and recommending authority. In November, the SHPO attended the HPAB to discuss the tax abatement program and to review the US Department of the Interior standards for Historic Preservation. During his presentation, the SHPO recommended that the City revise the tax abatement ordinance in order to develop a better program and process. He stated that tax abatement programs across the state are an effective tool to encourage restoration of buildings, particularly commercial buildings. I agree with the SHPO. Based on my experience, a tax abatement program can be effective in encouraging deliberate and exacting restoration and rehabilitation of historic property, commercial or residential, and as such I recommend that the program should be allowed to continue. The SHPO also told the HPAB that although he was reluctant to take over a recommending role, that he feels is best suited to a local body, he would be willing to undertake this role on a temporary basis while the HPAB and the City Commission considered a revised tax abatement ordinance. The HPAB has already taken a look at the Tax Abatement Ordinance and has developed a working document with recommendations to amend the ordinance. This worthwhile work started in 2011 and has not been revisited, to the best of my knowledge. A draft of that 171 ordinance is attached to this memo. If directed, staff will work with SHPO and HPAB to revisit the valuable work that has already taken place and bring ordinance revisions to the City Commission for consideration in 2014. At this juncture, the Staff and HPAB are seeking direction from the City Commission on whether the Commission desires to end the tax abatement program, or if the Commission would like for Staff to continue to work with the HPAB to develop a revised ordinance. FISCAL EFFECTS: Either directive would result in the utilization of Staff and HPAB time to develop a revised ordinance. Future utilization of the program, through Commission approval would phase in tax increases over a five year period thereby marginally reducing property tax revenue. Attachments: October 22, 2012 City Commission Meeting Minutes, Draft Tax Abatement Ordinance prepared by HPAB 172 - 1 - ORDINANCE NO. 1744 AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA, PROVIDING THAT THE BOZEMAN MUNICIPAL CODE BE AMENDED BY CREATING TITLE 3, CHAPTER 30 TO PROVIDE FOR STANDARDS FOR TAX CREDITS FOR HISTORIC PRESERVATION AND IMPLEMENTING THE TAX ABATEMENT AUTHORIZED BY §15-24-1601 MONTANA CODE ANNOTATED ET SEQ. FOR HISTORIC RESIDENTIAL AND COMMERCIAL PROPERTIES UNDERGOING REHABILITATION, RESTORATION, OR EXPANSION MEETING THE CRITERIA ESTABLISHED BY §15-24-1605 AND/OR §l5-24-1606. WHEREAS, the built environment of a community provides a history of the community and is an indispensable component of the community’s sense of place and character; and WHEREAS, preservation, restoration, and rehabilitation of existing buildings recognizes the embodied energy in them and reduces actions identified as negatively effecting climate change; and WHEREAS, the City of Bozeman has adopted a growth policy identifying historic preservation as an important community character and economic development policy; and WHEREAS, the City has already established a Certificate of Appropriateness review procedure for buildings in the Neighborhood Conservation Overlay District; and WHEREAS, Chapter 424 of the laws of 1989 of the State of Montana, as codified by §15-24-1601 et seq. Montana Code Annotated (MCA), authorized the governing body of each city or county to confer the tax benefits described by §l5-24-1603 MCA to qualifying historic commercial or residential properties by resolution establishing the process for the use of the tax abatement provisions described therein; and WHEREAS, the City Commission determines that it is in the public's interest to encourage the preservation, rehabilitation, restoration or limited expansion of certified historic, commercial and residential properties by conferring said tax benefits on improvements from those restorations, rehabilitations, or expansions involving certified historic properties and districts. NOW, THEREFORE, BE IT ORDAINED BY THE BOZEMAN CITY COMMISSION: Section 1 3.30.010 Intent. The intent and purpose of the Tax Abatement is to encourage the appropriate rehabilitation, restoration, or expansion of historic properties in accordance with the Secretary of Interior's 173 - 2 - Standards for Rehabilitation of Historic Properties and standards adopted by this ordinance. It is recognized that a grant of tax abatement is a discretionary act by the City Commission. Tax abatement is to reward extraordinary efforts in preservation or restoration and not minimal compliance with Bozeman City Planning Office's standards. Section 2 3.30.020 Authority. Pursuant to §15-24-1601 through §15-24-1608 MCA, the City Commission by this ordinance approves the tax benefits as set forth in said statutes for those improvements made by restoration, rehabilitation, or limited expansion of certified historic commercial or residential properties during the construction period, which is not to exceed twelve (12) months. A. The tax abatement is limited to one hundred percent (100%) of the increase in taxable value caused by the rehabilitation, restoration, and/or limited expansion for up to five (5) years following completion of said rehabilitation, restoration, or limited espansion, in those situations where such improvements preserve certified historic commercial or residential properties architecturally compatible within the historic districts and certified individually listed historic properties. Credits may only apply to those properties which do not receive any other tax exemption or special evaluation provided by Montana Law during the period of abatement. Section 3 3.30.030 Definitions. A. "Construction period" as used herein shall mean a period of time from the date of issuance of the required building permit until the project is substantially completed or a period of twelve (12) months from the date of issuance of said building permit, whichever period is shorter. B. “Rehabilitation” as used herein means the process of returning a property to a state of utility through repair or alteration that makes possible an efficient contemporary use while preserving those features of the property that are significant to its historical, architectural, and cultural values. C. "Restoration" as used herein means the process of accurately recovering the form, details, and setting of a property as it appeared when it was originally built or constructed by r emoving later work or replacing missing earlier work. D. "Limited expansion" as used herein means any addition to a structure, as limited by Section 5 of this ordinance. E. "Certified" and "certification" as used herein describe a building that has been approved by the City Commission for a tax abatement under this ordinance. Section 4 174 - 3 - 3.30.040 Procedures. The owner of the property must comply with the provisions and standards of Sections 3.30.040 Procedures, 3.30.050 Standards, and Chapter 18.28 B-1 Neighborhood Service District, BMC in order to be considered for tax abatement. Failure to demonstrate successful compliance with the requirements disqualifies a property from being awarded Tax Abatement, but does not prohibit development with a Certificate of Appropriateness otherwise approved under Chapter 18.28, BMC: A. The owner of the property is solely responsible for supplying to the Bozeman Historic Preservation Advisory Board and the City Commission all information and documents necessary to evaluate the project. If sufficient information and documentation is not supplied by the owner for consideration to make an informed decision, the application will be denied. B. The Bozeman City Commission hereby designates the Bozeman Historic Preservation Advisory Board as its local review board and hereby directs said board to establish an application and review processwhich must include, but is not limited to, the design review criteria based on the Secretary of Interior's Standards for Treatment of Historic Properties or other standards approved by the State Historic Preservation Office. The applicant must demonstrate eligibility. The established review process shall be integrated with the Certificate of Appropriateness review authorized in Chapter 18.28, BMC. C. The local review board shall approve or deny any application for the tax abatement and report its recommendation to the City Commission which shall then either approve or deny said recommendation by Resolution. D. All taxes, assessments and SID obligations on any property proposed for tax abatement must be current before any tax abatement will be considered. E. Following certification, and during the period of tax abatement of the property, if the property is altered in any way that adversely affects those elements that qualify it as historically contributing, it must be disqualified from receiving the tax abatement. If the historic property has received a tax abatement under this part is disqualified, the owner is liable for back taxes, interest and a penalty. These investments must be extended against the property in the next general real property tax roll, to be collected and distributed in the same manner as the currently assessed real property tax. The back taxes, interest and penalty must equal the sum of the following: 1. The difference in the total real property taxes due during the years the tax abatement was in effect and the total of real property taxes which would have been due had the special assessments not been in effect for those years; 2. Interest on the amount calculated in subsection 2a. at the rate for delinquent property taxes provided for in §15-16-102 MCA; plus 3. A penalty of 15% on the sum of subsections 2a. and 2b. Back taxes, interest or penalty may not be imposed on a property transferred to an ownership that makes the property exempt from property taxation or if the property is destroyed by fire or force majure. Section 5 3.30.050 Standards. 175 - 4 - To be approved as a Tax Abatement the following requirements shall be met: A. The property is located in and contributes to a National Register Historic District or Individually Listed on the National Register of Historic Places. B. All projects shall meet the Secretary of Interior's Standards for Rehabilitation of Historic Properties, and also shall meet City of Bozeman Certificate of Appropriateness requirements per 18.28, BMC, or its successors. C. Any of the following which are affected by the restoration, rehabilitation, or expansion shall comply with these further Tax Abatement requirements: 1. Additions to existing structures: a. Additions which increase the size of the footprint are limited to no more than a 10 percent increase of the structure’s footprint b. Additions must not exceed the height of the existing roofline c. Additions are limited to secondary facades and evaluated in the context of the façade on which the addition is applied d. Due to the limited size of the addition, no specific similarity or differentiation of material is required. 2. Roof: a. Shape of the existing roof must be preserved, and the shape of the roof of any addition shall be consistent with the existing architectural style. Restoration to an earlier documented form is permissible. b, The material of the existing roof should be preserved or replaced in kind unless it can be demonstrated that a different material is equally or more historic and appropriate for the structure. 3. Materials: a. Windows: (1) Rehabilitation of surviving windows through repair, restoration and reconstruction, is required.(2) Historically appropriate storm windows may be applied. b. Cladding: (1) If historic cladding is intact it shall be preserved and restored. c. Foundation: (1) Repair and stabilization of existing foundation materials is encouraged and a primary goal. (2) Foundation replacement is allowed at the current sill plate height, or up to 1.5 feet higher. (3) If replaced, the exterior of the new foundation shall match the historic foundation in appearance. 4. Accessory Building: the same parameters apply to accessory buildings as for primary structures on the property. Demolition of viable accessory buildings 176 - 5 - during the period of the tax abatement shall disqualify the property per Section 4. E of this ordinance. The City shall take action to collect back taxes and penalties owed. Section 6 Repealer. Commission Resolution 2766 and all other resolutions, ordinances and sections of the Bozeman Municipal Code and parts thereof in conflict herewith are hereby repealed. Section 7 Savings Provision. This ordinance does not affect the rights and duties that matured, penalties that were incurred or proceedings that were begun before the effective date of this ordinance. Section 8 Severability. If any portion of this ordinance or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions of this ordinance which may be given effect without the invalid provisions or application and, to this end, the provisions of this ordinance are declared to be severable. 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