CADILLAC — Cadillac West, Cadillac East, Cadillac Lofts.
The Lofts project inspired it all.
During the process of planning to re-develop the site where the old Oleson’s grocery store was, city officials started to wonder whether creating commercial redevelopment zones throughout the city might help Cadillac.
“I would say in going through the process of developing incentives and working closely with (the Michigan Economic Development Corporation) and working on ways of incentivizing the Cadillac Lofts development ... we determined that overlaying our core commercial area with these two districts was a way to create new opportunities for businesses looking at doing significant investment,‘ said Cadillac City Manager Marcus Peccia.
In October, city council approved creating both a commercial redevelopment district and a commercial rehabilitation district in Cadillac West; the two districts “stack‘ or “overlay‘ covering the same geographic area. Now, the city is in the process of moving to approve another stacking commercial redevelopment and rehabilitation district in “Cadillac East,‘ most of which is downtown.
The city of Cadillac is moving quickly with these tools because the clock is ticking. If the city doesn’t create these commercial improvement districts before the end of 2020, they may lose their chance.
That’s because commercial redevelopment and rehabilitation districts have a “sunset‘ under Michigan law.
HOW IT WORKS
It’s all about taxes. Commercial redevelopment and rehabilitation districts are designated parts of town where, if property owners make property improvements and meet some other standards (like age of the building and minimum investment amounts), they can get a tax break over the course of a number of years (up to 10 years for a rehabilitation district and up to 12 years for a redevelopment district).
The districts are allowable under two Michigan laws; Public Act 210 of 2005 is for commercial rehabilitation districts and Public Act 255 of 1978 is for commercial redevelopment districts.
Both of those laws have a pending sunset of Dec. 31, 2020; hence, Cadillac’s scramble to create the districts.
It’s not a given that commercial property owners within these districts will get tax abatements on their improvements; one application in Cadillac West, from the new owners of the former Cadillac Sands, now Lake Cadillac Resort, is already in process.
The state has to agree to it and grant the “tax certificates.‘ And property owners have to spend a certain amount of money to qualify, as well as meet other standards.
Cadillac has set the threshold at $150,000 for rehabilitation projects and $250,000 for redevelopment projects.
Commercial rehabilitation projects are commercial or multifamily residential buildings that are at least 15 years old. “Rehabilitation‘ means changes that will restore or modify the property “to an economically efficient condition.‘
Commercial redevelopment, on the other hand, is the “replacement, restoration and new construction of commercial property,‘ according to an MEDC factsheet. It applies to obsolete property.
BENEFITTING GENERATIONS TO COME
The tax breaks are supposed to help make it more affordable for property owners to invest in commercial property.
“The city would like to provide an opportunity for those looking at investing a minimum amount of money to qualify for incentives,‘ Peccia explained.
Assuming the city approves the Cadillac East commercial redevelopment and rehabilitation districts (a public hearing is set for Monday, Nov. 18), there will be five commercial redevelopment and rehabilitation districts in Cadillac, though just two geographic areas. One geographic area is Cadillac West, where the commercial redevelopment and rehabilitation districts “stack‘; the other geographic area will be Cadillac East, where there’s a redevelopment district and rehabilitation district “stack‘ through downtown and some other nearby commercial areas, as well as the site-specific redevelopment district for the Cadillac Lofts project.
Peccia said it’s possible the city could look at other areas for tax incentives, but since these district types are specifically for the improvement of commercial property, there’s few other areas that would qualify.
“We’ve covered about as much of it as we can,‘ Peccia said.
The districts should help keep Cadillac moving forward, according to Peccia.
Municipalities use these incentives “essentially as a way of paying it forward,‘ he explained. The city will be here for quite awhile, but the incentives are just a blip in time.
If the incentives are the catalyst that prompt property owners to improve their commercial property, “There’s an incredible benefit to that,‘ Peccia said.
Ideally, the abatements will pay for themselves in time because under-used, aging properties lose value.
“You have to look at the overall value of taking a value of commercial property that is otherwise sitting stagnant,‘ Peccia said. “Over time, without reinvestment or activity or upkeep, the value will ultimately go down as well.‘
While Cadillac is working to create these districts before the sunset on the Michigan laws that permit commercial redevelopment and rehabilitation districts, others are working to extend them.
The Michigan Senate is due to consider a sunset extension. The sunset extension passed out of the Economic and Small Business Development committee last week.
Cadillac’s state senator, Curt VanderWall, (R-Ludington), is on the committee and told the Cadillac News that he supports the extension in part because of its value to historic communities like Cadillac and Manistee.
“I think some of those regions, what we call our historic regions, this was a great way we could incentivize people to keep those properties, to make them beautiful they way we’d like them to be,‘ VanderWall said.
He said he expected the full Senate to approve the bills to extend the sunset.