At Monday's City Commission Meeting, Commissioners considered Consider a request from the Overland Property Group to have Phases II and Ill of the Lee Lofts project (renovation of South building and warehouse building) designated by the City Commission as a Project of Exceptional Community Significance making it eligible for a 95% property tax rebate for 15 years.
BACKGROUND: Overland Property Group owns the entire former H.D. Lee Hardware Company complex of buildings at the southeast corner of Santa Fe Avenue and Elm Street and plans to convert them into a total of 135 loft apartment units (53 units in Phase I, 50 in Phase II and 32 in Phase Ill).
The Overland Property Group completed Phase I (renovation of the north [Mercantile] building) in 2020 and those units are occupied. They are now proposing to convert the south [Hardware] building at 250 N. Santa Fe and the Lee Hardware warehouse addition at 248 N Santa Fe into loft apartments. The renovation of the south [Hardware] building at 250 N Santa Fe will occur first. Overland Property Group is proposing to create 50 apartment units on floors 2-5 of the south [Hardware] building with mostly commercial space on the first floor. Most of the apartment units would be one bedroom units but there would be a handful of two and three bedroom units. They are proposing to create an additional 32 units in what is referred to as the Warehouse building at 248 North Santa Fe.
Overland Property Group has obtained the required Board and Commission approvals for both Phase II and Ill and a building permit has been issued for renovation of the South [Hardware] building into loft apartment units. Along with their building permit application, Overland Property Group has submitted a Neighborhood Revitalization Tax Rebate application. As part of their application they are requesting that the City Commission designate Phases II and Ill of the Lee Lofts project a "Project of Exceptional Community Significance" making it eligible for an enhanced property tax rebate. Under the standard Neighborhood Revitalization Program, the renovation of a historic building would be eligible for a 100% rebate for 5 years and a 50% rebate in years 6-10. Projects designated as Projects of Exceptional Community Significance are eligible for a 95% rebate for 15 years.
In 2018, in the course of discussions and negotiations about potential financial incentives for Phase I of the Lee Lofts project, Flint Hills Holdings Group (Tony Krsnich), the lead developer on the project, requested as one of the incentives that the City of Salina amend its Neighborhood Revitalization Plan to include a 95% proeprty tax rebate for a 15 year team for eligible projects. Flint Hills Holdings Group indicated that they had received such an incentive from the City of Lawrence as part of their Pohler Lofts project. The City Commission authorized staff to prepare four amendments to the Neighborhood Revitalization Plan, including the increased tax rebate percentage and term for projects that met the criteria for a "Project of Exceptional Community Significance."
Nature of Current Request: As part of the incentive package approved for Phase I's 53 apartment units in the North building, the City Commission determined that Phase I of the Lee Lofts project met the criteria to be a "Project of Exceptional Community Significance." Phase I has an approved 95% tax rebate for a term of 15 years beginning in tax year 2021. The scope and timing of Phase II and Phase III was unknown at the time the incentives for Phase I were discussed and approved and no determination of eligibility for Phases II and III was made at the time. Overland Property Group has submitted a Neighborhood Revitalization Tax Rebate Application for Phase II of the Lee Lofts project which is renovation of Building 2 (the South building). Overland Property Group is requesting the enhanced 95% / 15 year rebate for Phases II and Ill as a Project of Exceptional Community Significance. Staff informed them that this determination must be made by the Salina City Commission.
FISCAL NOTE:
In terms of fiscal impact, if this request is approved, the City of Salina and other taxing entities will forego the increase in property tax revenue attributable to the increase in assessed value resulting from the construction improvements in Phase II and Ill. That increment will be rebated back to the property owner. The portion of property taxes based on the base or pre-construction value of the property will still be retained by the taxing entities. Only the portion attributable to the increase in assessed value will be rebated back to the property owner for a period of 15 years. Once the 15 year rebate expires the full amount of assessed property taxes will go to the City and other taxing entities.
The motion passed 5-0.
