By Meg Peters
Review Co-Editor
The new owner of the Champagne property located at 120 Broadway St. plans to build a mix-use development worth $3.7 million and is requesting the Village of Lake Orion to provide tax relief in order to do so.?
Owner Jeffery Schmitz approached Orion Village Council Monday evening with a presentation on his proposed four story development. The multi-story mixed-use building would consist of retail space on the first level and about 36 apartments on the upper three if final approval is granted.’Conceptual plans have been created, however must be approved by the Planning Commission and possibly the Board of Zoning Appeals because the site is not zoned for four story buildings.
Schmitz is the founder and owner of J.S. Capitol Construction. He has more than 20 years of experience developing and manufacturing a variety of facilities including retail, corporate office, healthcare, commercial, residential and hospitality. ?
Schmitz argues that construction costs have increased 30 percent in the last two years, according to a report prepared exclusively for his project. Topped with an increase in market rents in Lake Orion, he maintains that cost increases would not make the project financially feasible, unless the village establishes a tax abatement program for his project.?
‘You’re looking at a nine to 12 percent return on investment, and that’s with the abatement. If you add another $60,000 on property taxes outside of the school tax, your return is four or five percent. As a developer you just can’t come in that low,? he told council.?
After discussion, council voted 6-0 to move forward with preparing a tax abatement district for Schmitz’s mixed-use project. The project should be back on councils? agenda’in one month, and if the process continues to move forward, there would be at least two public hearings before ultimate approval.?
Although council established a tax abatement program for Lockhart’s BBQ’the commercial redevelopment district’because Schmitz’s development includes multi-family units he cannot qualify.?
Instead he is proposing that council establishes a Commercial Rehabilitation District.?
If established, and Schmitz is approved for a Commercial Rehabilitation Certificate by the State Tax Commission, he would be exempt from all normal property taxes’apart from school operating taxes and the State Education Tax’and instead would pay a Commercial Rehabilitation Tax.?
The commercial rehabilitation tax would freeze the taxable value of the proposed building and exempt all new investments from local taxes. Land and personal property, however, would not be certified under this tax. All money collected from the rehabilitation tax would be distributed back to the local and state taxing authorities according to the proportions levied under the general property taxes.?
The Commercial Rehabilitation Certificate is good for a period of up to ten years as defined by the local government.?
Unlike the commercial redevelopment district established for Lockhart’s, which only applies to commercial projects, the commercial rehabilitation district allows tax abatements on commercial enterprises and multi-family residential facilities.? Lockhart’s owner Drew Ciora will approach council in March to continue the next 11 years of his tax abatement program, which was established as part of Ciora’s conditions to open the barbecue restaurant. If his program is continued for the next 11 years, altogether Ciora will have saved about $760,000 in abatements on a net increased taxable value of $969,000.?
No calculations for Schmitz’s savings have been tallied at this point. While the taxable value of his property would be about $3.7 million, total construction costs would exceed $5 million, Schmitz said.?
Like the previously established commercial redevelopment program, the commercial rehabilitation program would be consider for different projects on a ‘property by property basis,? Village Manager Darwin McClary said, or separate districts for each project.?
Council member Christian Mills has several properties in downtown Lake Orion that would qualify for either tax abatement district, however, council voted to allow his discussion at the meeting Monday night.?
Mills said the village is lucky professional developers like Schmitz are attracted to the downtown.?
‘We get to tax the property’ten years from now’at $4 million, or $5 million, and that’s a pretty significant tax bracket for the future of Lake Orion,? he said.?
Five-million dollars is about one-sixth of the total taxable value of the Downtown Development Authority (DDA) district, which is valued at about $30 million.?
‘Really, it’s putting money in the bank.’Ten years from now’if we continue to attract people developing in our community we will be strong.?
DDA Director Suzanne Perrault brought up another point.?
‘You have created an incentive program [commercial redevelopment district] that everyone is eligible for, not just cream of the crop developments. Mr. Schmitz’s is a cream of the crop development, which we do want to incentivize. So if we do look at creating a new program, I would like to see stricter criteria.??
There are currently four other projects that would be eligible for tax abatements.
One is the Elizabeth St. School, or the old Ehman Center, of which Mills is a partial owner. The other three include Anita’s Kitchen on Flint Street, an upcoming project for the old Wagon Wheel site, and a project at 20 Front St.?
‘I would really love to have a broad look at how much money we are forgoing in order to get these projects into the downtown.??
President Ken Van Portfliet agreed.?
‘The criteria is really the important part that we would utilize as a continuous model.??