Jasper Common Council vote split as it moves forward with residential TIF

The Jasper City Council debated modifications to a tax increment financing (TIF) agreement for a new housing development at Wednesday’s regular meeting.

Developer Ruger Kerstiens requested changes to allow for a utility reimbursement for wastewater and water infrastructure that the developer would construct in the Northridge Estates housing development.

The development has been a focus in several council and commission meetings recently since it is the city’s first foray into residential TIF. Kerstiens Custom Builders is planning a 155-unit neighborhood in the recently annexed area northwest of the Jasper Elementary School. Those units will consist of 127 single-family homes and 28 villas.

Creating the residential TIF for the development means that the current assessed value of the property would freeze for normal taxation. As the development proceeds with housing construction, the increased assessed value will be captured by the district to support it.

Kerstiens is asking for $1.1 million of that increased incremental assessed value to be used to offset the cost of development, which includes more than $6 million in infrastructure costs.

At Tuesday’s Utility Service Board meeting, the board granted a reimbursement to the development not to exceed $459,000 for installing the water and sanitary sewer.

The question before the council was to modify the ordinance establishing the TIF to remove the language that precluded Kersteins from being reimbursed for the infrastructure in addition to the $1.1 million in TIF funds.

He reported to the council that the homes’ starting price point had increased based on new estimates and the notification the development was not awarded a READI 2.0 grant from the state. However, Kerstiens has maintained that the price point of the homes will be lower with the TIF in place. Though higher than initially planned, the current cost of the homes is less than that of similar homes in other communities, which he stated were starting at around $300,000.

Considering the price point, Kerstiens has to create a product that will sell or the company won’t be reimbursed by the TIF.

“If I don’t perform, none of this conversation even matters the main extension, or the TIF itself,” Kerstiens told the council. “So to be able to provide a project like this, that’s going to provide housing at the most attainable price we can and deliver 155 new housing units at essentially no risk to the city, I think it’s an incredible deal all the way around, and it’s a good win-win situation for everybody, and that’s the reason why we structured that way from the beginning.”

In a phone interview Friday morning, he affirmed there was a lot of interest in the homes since it was the only neighborhood like it under development.

Steve Lukemeyer, a local realtor and member of the Greater Jasper Consolidated School Corporation Board of Trustees, voiced concerns over the impact the TIF will have on the school corporation.

Lukemeyer told the council that he believed the development would occur regardless of whether or not a TIF was in place. He noted that with the amount the developer paid for the land, they wouldn’t just farm it, as Kerstiens stated in a previous meeting.

“We all know that that development is going to take place; whether there’s a TIF or not,” he told the council.

“So the question is, if this is reducing the cost to the homeowner, that’s great for the homeowner, but who’s paying for it,” Lukemeyer said. “I would say, … your constituents because there’s no downward pressure on the tax rate and lower taxes for your constituents.”

At a previous meeting, Matt Eckerle with Baker Tilley, the city’s financial advisory firm, told the council that based on current assumptions, if the development were completed without the TIF, it would save a property owner about $0.45 cents annually based on the median (according to the Census Bureau) home value of $185,500.

He noted it was a rough estimate at the time.

Lukemeyer also explained that the TIF will impact the number of students at the schools. Though funding for educational services is applied based on the number of students, property taxes pay for infrastructure and operations to support the growing student population.

“This neighborhood is potentially going to bring 50 more students plus or minus based on the state averages,” Lukemeyer said. “The residential TIF is negatively impacting the school because it’s increasing the student body count but not increasing revenue for the school.”

He requested either eliminating the residential TIF or reducing its term from 20 to 10 years and implementing a pass-through provision for school funding.

“If you want to continue with the residential TIF, I would request there be a pass-through that basically carves out, for the school, money that would have gone to the school due to the increased AV (assessed value) is [sic] automatically given to the school,” he said.

Councilman John Schroeder stated the pass-through request could be considered by the Jasper Redevelopment Commission in the future.

The council was split on their support of the TIF. Though requested in previous meetings, the ordinance did not include language sunsetting the TIF at ten years. Councilwoman Nancy Eckerle said she would like to have the ordinance amended and the council consider it at the upcoming meetings rather than approve the current ordinance. Council members Paul Lorey and Kevin Manley disagreed with her.

Manley pushed back, saying they shouldn’t hamper future councilmembers’ decision-making ability. “If you don’t trust anyone, then why move forward with anything,” he said.

He pushed for the development based on the need to support housing construction for community growth and workforce development.

“If we want to support growth in our community, then we want to support housing for that group (workforce) so that we can get people to move here,” Manley said.

Mayor Dean Vonderheide acknowledged the complexity of the housing issue and the need for compromise as the city considers adding the new tool. He emphasized the council’s focus on voting to remove the “in lieu of” language regarding utility reimbursements.

“I do think that what is proposed here is not out of line. It’s not unreasonable,” he said.

The council ultimately voted 4 to 3 to affirm the existing TIF agreement as presented while removing the “in lieu of” language regarding utility reimbursements. Eckerle, Lueken and Vince Helming were the three nays.

The decision allows both the TIF incentives and utility reimbursements to proceed.

By the way, under Senate Bill 1, the property tax relief bill, TIF areas, which are considered taxing units, will remain unimpacted by any potential tax relief, according to a study by the Department of Local Government and Finance.