ROCK SPRINGS — A request to waive more than $200,000 in city fees by a housing developer was tabled Tuesday night after a representative from Overland Property Group spoke with Council members about the project.
The request would forgive $219,165 in fees for a housing development.
Austin Kack, the director of development for the Kansas-based Overland Property Group, spoke to the Council before their vote. He said the company focuses on deed-restricted affordable housing and builds a majority of its projects by seeking federal and state funds for the work. He said the company has applied for similar funding for its 48-home Gardens at White Mountain subdivision, which will be located at the corner of Foothill Boulevard and Arthur Avenue. He said the information sent as part of the applications is transparent, which include the costs, rent figures, costs and other information.
Kack said the company hoped the city would help with its budgetary problems, saying the company’s original application was based on bids coming in at around $10.5 million. However, the actual bids the company received were around $12.5 million.
“And so, we’ve got a pretty substantial gap that we’re trying to close,” Kack said.
He said the company is “committed to effectively doing this” at no cost to it due to its desire to close the funding gap and wants to see the housing built in Rock Springs. He said Overland Property Group requested some of the city fees to be waived to help close their funding gap, adding that it is willing to pay for meters at the individual houses. He said the tradeoff is the city knowing the project will be done.
Kack said the amount being requested won’t entirely make or break the project, but said “it’s a portion.” Kack described the city’s tapping fees as being on the higher end for cities in similar size to Rock Springs, saying the company often sees total permitting fees of between $50,000 and $100,000. He also said he understands the city’s constraints for certain infrastructure within the city. He said they’re solving half of the funding gap by giving up what would be earned on the development itself, which reduces the gap to about $1 million. He also said First Bank of Wyoming has stepped in and helped out with low-rate construction financing.
“And then we’re leaning on our contracting partners to help reduce costs,” he said.
However, Kack warned that if the company can’t close that funding gap, it can’t follow through on development.
The Office of Policy Development and Research lists the U.S. Department of Housing and Urban Development’s area median income in Sweetwater County at $103,400. Overland Property Group participates with the National Housing Trust Fund program, which sets housing units built with NHTF funds at 30% of the median household income, while some will be restricted to people at 50% of median income. Kack said other homes will participate in a housing tax credit program at 50% of the area’s median income, while a quarter of the homes will be priced at 80% of the area median income. Kack also said the prices are deed restricted for a minimum of 40 years.
Kack said his company makes money by being both developer and general partner in the housing development. The housing requires a minimum 15-year ownership commitment from Overland Property Group, which has investors that purchase tax credits without having what Kack described as material involvement in daily operations. A third party company manages the properties, which includes setting up leases and collecting rent, with Overland Property GRoup still owning and operating the housing development at the top of the management structure,
Councilor Rob Zotti said his concern with the request is that allowing a tax break because a developer’s project is too expensive for it sets a precedent for the Council and the next developer initiating a project in Rock Springs saying they can finish a project if it has a tax break.
“That is a tough pill for me to swallow,” Zotti said.
A recent rate study for the city concluded the city needs to increase water and sewer fees to cover the future costs of maintaining those systems. Mayor Max Mickelson said city is looking at spending $100 million in major equipment purchases and maintenance in the next 10 years
Zotti said the fees charged to developers are for the future maintenance of water and sewer systems and without those fees, the city is forced to increase rates. Zotti asked Kack how he would sell that to his constituents as a good idea. Kack said the request is difficult for his company and it tries to address problems without city involvement. He said the company’s processes are 100% transparent, which gives the Council a chance to see the problems they’re facing in building “market rate housing.” Kack also said the property is vacant land that has a minimal property tax value associated with it. Once homes are built, the value of the land and the property taxes associated with the homes on that land would increase. Kack also said the project would create a full-time property manager job, along with temporary jobs associated with landscaping and maintenance.
“I think the trade-off is … if it doesn’t exist, you get zero, and if it does exist, yes, there is a temporary tradeoff up front, but there are long-term benefits of increased property tax bases and jobs,” Kack said.
Councilor Eric Bingham echoed Zotti’s concern about the public subsidizing a housing project, asking if Kack could disclose how much his company received in state and federal funds.Kack estimates Overland Property Group received between $2 million and $2.5 million home investment partnership funds, along with another $1 million in National Housing Trust funding, and approximately $13 million in housing tax credit funding. With the tax credit funding, Kack said the company has to “syndicate it with federal partners that have income tax liability,” leaving the company with 80 cents for every dollar. At 80 cents per every dollar of the $13 million amount cited, the true amount would be $10.4 million.
One resident spoke against waiving the fees Tuesday night,
Frankie Volcic agrees with Zotti in that allowing the fee waiver would set a bad precedent for future developers to make similar requests. Volcic also voiced concerns about property values due to a low-income housing development being built near his home and claimed a large gas line exists under the land, which could cause a catastrophe should a large fire break out.
Volcic claimed the traffic on the street is horrendous, saying there are instances where 12 vehicles are stopped at the stop sign at the Foothill Boulevard intersection – which he said causes his wife to call her employer and their children’s school to explain they will be late.
We’d hoped it’d get better with Stage Coach and the bigger intersection. It has not,” he said.
With the future Rock Springs High School and catholic center being built in the area, Volcic believes traffic will “become a nightmare,” saying the stop sign doesn’t deter drivers from driving down the street at 30 mph.
Mickelson said the development would have been denied outright if Overland Property Group were a private developer, but said the reason for bringing the waiver request forward was due to it being a project backed by state funding. He said the city needs a process to consider fee waivers. Mickelson also explained the agenda note about it being a request from the mayor’s office, saying that’s just the process the city has and isn’t him unilaterally deciding to bring the request forward. He said the proposal was a serious request, saying while there is a necessity for having affordable housing in the city, the request is for city residents to offset the revenue that would come from the fees.
Councilor Larry Hickerson moved to table the issue to give other Council members a chance to learn more about it and hear from constituents. That proposal was unanimously tabled for further discussion during the Council’s Sept. 1 meeting.
