New NEZ zone will poten­tially relieve property owners of new taxes.
(Photo: Wiki­media)

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.

The pro­posed location of the new NEZ. Courtesy City of Hillsdale

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.

  • disqus_odKVC5cL1k

    Are there a lot of investor owned houses in this area? If a home­owner could actually afford the $40 – 80k to make the improve­ments, the delta of $200 – 300 a year that this would be isn’t much of an incentive. Average income in the town doesn’t support improving property values, who are you going to sell to? There are far too many vacant houses/business store­fronts, indus­trial space to build any­thing. If the city wants to increase home values, start tearing the excess, bad inventory down. HUD is still effec­tively giving away homes they have in the county.