Tom Kacich: Urbana's tax-savings program paying off

Tom Kacich: Urbana's tax-savings program paying off

Carl Hill remembers the days — during the comparative boom times of the Build Urbana program — that the community's second city would challenge Champaign for the most single-family housing starts in a year.

Build Urbana, which was in effect from 2001 to 2012, was a property-tax-rebate program that turned around the city's homebuilding business. In the 13 years before Build Urbana, the city had an average of 30 home starts a year. In the first year of the program, 87 homes were built, and between 2001 and 2010, the city averaged 100 home starts.

But homebuilding in Urbana has lagged in recent years, dropping to 21 starts in 2015, far behind Champaign (74), Mahomet (71) and Savoy (68).

"Champaign seemed to be having a lot of building permits going while Urbana was at a standstill," Hill, the owner of Hillshire Realty and Development, said of the early 2010s. "I believe part of it was all the word about Carle Hospital and the loss of the property-tax base and that kind of thing. People were saying, 'Oh, here we go again. We're going to have higher taxes to deal with.'"

In fact, Champaign's property-tax rate, on taxes paid this year, was $8.48 per $100 of assessed valuation, while Urbana's was $10.74 per $100 of assessed valuation.

"So we thought that some kind of program was needed," Hill said. "This was not the kind of program we had in mind, but (taxing district officials) told us they had an idea and that we should look it over."

The idea, which required the cooperation of the school and park districts in Urbana, plus the county and the Champaign-Urbana Mass Transit District, was to virtually eliminate all property-tax payments in the first year of a new home, then step them up in increments of 20 percent per year. By the sixth year, the new homeowner is paying the full amount.

During those five years, the taxpayer saves about 55 percent of taxes, and the front-loaded tax savings are so great that it takes about a dozen years before the homeowner has paid more in Urbana property taxes than the Champaign bill would be.

"It's fantastic," Hill said of the new program, which is called "Think Urbana." "Last year, I had no closings on my lots. This year, things have started moving, and we've had three closings. I already have commitments for seven, maybe eight, for next year. Things are looking really good."

Think Urbana has started quietly — there have been 42 single- and two-family building permits issued in 2016 — but it's gaining momentum as individual developers sweeten the deal even more, said Mike Monson, chief of staff to Urbana Mayor Laurel Prussing. One developer has lowered lot prices. Another is offering credits to lower property taxes even more.

The Think Urbana incentives are available on new construction of single-family, duplex and townhomes valued at more than $80,000 that are built within the city's new enterprise zone. It includes large portions of Urbana, especially on its north and southeast sides, and extends into unincorporated areas.

The idea is for residential development to also be a catalyst for commercial development.

"What we hope happens is that this stabilizes the Philo Road business district, which is increasingly neighborhood business," said Brandon Boys, Urbana's economic development manager. "And Menards has 300 acres along High Cross Road (Illinois 130). Most of that is for residential development. They're perfectly willing to move forward with residential development if there's a willing developer who comes forward.

"As with Meijer (which built in Urbana once their store was surrounded by residential development), they have owned that property a long time before they put in the investment for a store. We believe that Menards and other retailers are going to be looking for that as well. Ultimately, this is a strategy to strengthen some of our commercial investments in southeast Urbana, too."

Boys said Urbana needs to become competitive with homebuilding in other Champaign County communities.

"We stepped back and looked at the patterns of residential growth in the community. We know that bedroom communities that have lower tax burdens are always going to be more competitive. It's like that everywhere," he said. "But we have to become more competitive. The school district supported this because they need more students to fill the schools. And the park district wants more users for the parks.

"We just want to make sure we get our fair share of growth. We're not under the illusion that people are just going to move to this community because of this deal, but they're going to choose to build in Urbana more frequently than they have."

Hill, who has about 100 lots left in his South Ridge subdivision in Urbana, called Think Urbana "a lifesaver" for residential development in the city.

"I'm trying to retire from building, so what I'm doing now is trying to bring other builders in to promote the subdivision," he said. "This is going to take care of my retirement. But I'm wondering how I can slow it down a little bit."

Tom Kacich is a News-Gazette reporter and columnist. His column appears Wednesdays and Sundays. He can be reached at 351-5221 or kacich@news-gazette.com.

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Pointblank wrote on December 21, 2016 at 8:12 am
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Illinois property taxes are some of the highest in the country, and we're getting close for a tax cap, so high are these taxes. So if this is the route to attract development- tax breaks- how much does the city of Urbana lose in tax revenue with this program? 

 

The argument that subdivision development creates commercial development explains the Twin Cities' willingness to sprawl. 

aantulov wrote on December 21, 2016 at 10:12 am

 I would rather see the the council give property tax rebates to small business out of homes of a health professional  nature- Dentists, GP Doctors. Or small businesses that rival Carle hospitals easy profit margin- dental Labs, blood work labs, alternative cancer treatment, nutrition treatment or  Box stores that offer clinics. 

Giving tax breaks to investors produces wealth that does not stay or multiply here.

 

aantulov wrote on December 21, 2016 at 10:12 am

 I would rather see the the council give property tax rebates to small business out of homes of a health professional  nature- Dentists, GP Doctors. Or small businesses that rival Carle hospitals easy profit margin- dental Labs, blood work labs, alternative cancer treatment, nutrition treatment or  Box stores that offer clinics. 

Giving tax breaks to investors produces wealth that does not stay or multiply here.