The Hillsdale City Council took steps to establish the city’s third Neighborhood Enterprise Zone during their Feb. 6 meeting. If adopted in April, this NEZ would offer 10-year tax abatements to 17 property-owners on West Street south of M-99 if they chose to rehabilitate their houses.
A public hearing on the proposed NEZ is scheduled for the March 20 council meeting.
“We’re hoping that by being able to create this NEZ and have the taxes frozen for a period, it will incentivize some of those property owners to actually improve the properties,” City Manager David Mackie said during the meeting.
The new NEZ can now be adopted with a resolution at the April 17 city council meeting.
The creation of new NEZs was one of the proposed actions in the city’s 2015 master plan, along with measures to adopt form-based code and historic preservation tools, considering zoning changes that better manage multi-family housing, and working to preserve single-family housing where appropriate.
“I hope this will help. There’s some potentially beautiful homes out in that area that could get a little bit of a boost,” Councilman Matt Bell said during the meeting.
While properties within an NEZ don’t automatically receive a tax abatement, Mackie said during the meeting that the state law allows the city to withhold tax abatements from property-owners who apply for them and then never make any changes to their house.
Hillsdale Economic Development Director Mary Wolfram reaffirmed and clarified Mackie’s words in an interview with the Collegian.
“Homeowners don’t ever get anything. They don’t ever get any money throughout the process,” Wolfram said. “The city isn’t giving anyone anything. All we’re doing is not raising their taxes.”
According to Wolfram, the new NEZ is directed at improving the neighborhood surrounding Davis Middle School. She also said the city has never approved a tax abatement for a home renovation within an NEZ under the city’s 2007 and 2015 NEZ zones.
Under the NEZ Act of 1992, which was originally drafted by Gary Wolfram, former Governor John Engler’s deputy state treasurer for taxation policy. Local municipalities can create NEZs where new houses only pay half the statewide average as determined by the state tax commission for ten years.
Additionally, owners of refurbished houses only have to pay taxes on their previously assessed property value before the improvements for ten years. Before this law passed, local municipalities could only make changes to property taxes that affected all the properties in the municipality.
The City of Hillsdale created its first NEZ in 2007 when it created one of these zones for the 22 lots in the Three Meadows subdivision off Hallet Street. According to Mary Wolfram, the NEZ was created in hopes that the promised tax abatements would encourage new housing developments.
Ten years later, with 13 of the 22 Three Meadows parcels sold, the NEZ attracted enough buyers to meet expectations.
“There are definitely new houses out there, but there are not tons of new houses because we’re a small rural community,” Wolfram said.
City Planning and Zoning Administrator Alan Beeker said he believes parcel sales were affected by Michigan’s economic drop in 2008.
The city adopted its second NEZ in 2015 to encourage property owners to rehabilitate the houses in College Park along Manning Street.
According to Beeker, College Park is still too new to say whether the NEZ has attracted new buyers to the market.
According to Hillsdale City Assessor Kim Thomas, once an NEZ has been established, homeowners within the zone have to apply in order to receive the tax abatement for their home renovation project. Once a homeowner applies, they have to be approved by the city and the state tax commission before they can receive the abatement. The city tax assessor then does a pre-rehabilitation assessment and a post-rehabilitation assessment after the rehabilitation project has been completed. At this point, the approved homeowner within the NEZ doesn’t have to pay additional taxes on the added value to their house.
According to Thomas, the houses within the newly proposed NEZ are sorely in need of renovation.
“This neighborhood is part of the original village of Hillsdale, so we’re dealing with some of the oldest houses in the city,” Thomas said.