Mayor reverses position, clears way for housing project
UPDATE: After lengthy questioning of the city's bond counsel during a hastily called special meeting Thursday, Mayor Mary Olson reversed her earlier opposition and voted to approve altered lease terms on a private housing project to be paid for with industrial revenue bonds — a complicated financing technique that effectively eliminates city responsibility for loan repayment. Details in next week's issue. Earlier story follows.
Plans to develop duplexes and remodel September Apartments on the east side of Marion hit a roadblock at Monday’s Marion City Council meeting when council members rejected altered terms requested by property developer Tom Bishop of Homestead Affordable Housing.
Opposing council members may attempt to resolve their differences at a special meeting later this week.
Deadlocked at 2-2, the council failed to agree on increasing to 65 years the term on 30 year bonds planned to finance the project.
Sarah Steele of Gilmore Bell, a financial law firm representing the city at Monday’s meeting, said the change would not affect repayment, but if the city did not pass the extension it could permanently derail the project.
A similar threat was made in April when Bishop asked the city to grant a full property tax exemption for 10 years for both September and duplex projects.
Homestead plans to construct 10 duplexes off Eisenhower Drive and to rehabilitate 20 September apartments at a total cost of $4.2 million.
According to Bishop, the change has to do with federal borrowing guidelines. He said it would allow the bonds to be more appealing to investors.
Mayor Mary Olson said she wanted to see the proposal in writing before taking official action. Councilman Jerry Kline voted “no,” saying he has been against the project since it was proposed in 2012.
“I don’t see why they would need to put the loan out for 65 years,” Kline said. “Changing terms makes me suspicious.”
Kline said the city could be held liable for repayment of the loan if Homestead Affordable Housing went out of business.
“I don’t want to hurt development in the town,” he said, “but I don’t want another Arlie’s building situation on our hands.”
The city had to take back a building constructed for Arlie’s Paint and Body when the business went bankrupt and could not fulfill its lease-purchase agreement with the city.
A 15-year lease-purchase would be used on the Affordable Housing project. Supporters contend that agreement, rather than the 65-year bond term, would ensure repayment of the bonds.
Central National Bank reportedly has agreed to purchase $2 million of the bonds.
Councilman Todd Heitschmidt, who abstained from voting because of his job as president of Central’s Marion branch, said that if the project were to go south, that the bondholders would own the building and be responsible for the loan repayment, not the city.
“The city will not be liable for debt,” he said. “The city is merely loaning the bonds for tax abatement. If the project fails all liability will fall on Homestead and the investors.”
A fact sheet handed out at Monday’s meeting by Economic Development Director Roger Holter listed the potential income for local tradesmen for refurbishing a rapidly declining September Apartments in the community.
Real estate agent Lori Heerey said Tuesday she has had several inquiries from senior citizens about when Homestead Affordable Housing duplexes will be completed.
“I have a lady right now who would love to go into one of those,” she said.
Heerey, Kline, and Holter agree that construction of 10 duplexes for senior citizens would result in more family-size homes being for sale in town. But Kline and Holter disagree on whether that would be a good thing.
Holter estimated construction would result in an infusion of $1.1 to $1.8 million into the real estate market as senior citizens downsized and families purchased those homes. Kline said that unless there was an influx of people, additional homes would sit empty.
Heerey said Marion occasionally suffers from a shortage of attractive family homes. The most sought-after homes have three or more bedrooms and two bathrooms, Heerey has said in the past. Unfortunately, Marion has an abundance of three-bedroom, one-bathroom homes.
Last modified Aug. 10, 2013