The Jefferson city council walked away from an opportunity to borrow $1 million at 1 percent interest to facilitate development of the 44-unit Water Tower rental housing project.
The council at its regular meeting Oct. 27 passed a motion not to approve the loan application to the Iowa Finance Authority (IFA) for a loan through the new Workforce Housing Loan program.
Ken Paxton and Sid Jones addressed the council at its Oct. 13 meeting on behalf of Greene County Development Association asking the council to approve moving forward with the application. The proposal from JCorp, developer of the Water Tower project, was that the city would provide the entire $1 million to the company, with $650,000 as a grant and $350,000 as a loan. The funds would fill in a shortfall in JCorp’s financing caused by the appraisal of the completed project coming in lower than construction cost.
The council did not agree at the Oct. 13 meeting to approve the loan application, but referred it to the housing committee for more information. The deadline for applications is Nov. 2. (See Oct. 14 GCNO post.)
The city sought advice from financial consultant Piper Jaffray, which has previously worked for the city. Managing director Tim Oswald sent an email to the council last week and was present at the Oct. 27 meeting to provide input on the decision.
Oswald said there was not time for a detailed analysis of the project and the proposed IFA loan, but he offered observations. He noted that if the city accepted a loan there would be an expectation that the city would issue a general obligation bond for repayment, requiring an increase in property tax if the developer was unable to make payments.
He also mentioned the council’s policy-making process. He suggested that the council step back from an immediate decision, do a detailed study of all needs (including housing), and then prioritize those needs and determine a course of action.
There was discussion at the Oct. 13 meeting of submitting the loan application and deciding after hearing if it had been awarded whether or not to accept it. Oswald advised against that, saying he had been told by someone at IFA that the loan program will be highly competitive and there will be an expectation that all cities or counties that are awarded loans will accept them.
Information Oswald provided last week showed a total project cost of $2,215,000 for the Water Tower development and an appraised value (by Rally Appraisal) of $1,590,000.
Jones addressed the council again Oct. 27. He had provided earlier that day to city administrator Mike Palmer a housing needs assessment done by Rally Appraisal specific to the Water Tower development. The assessment was done as part of the IFA loan application. The city council had not yet seen the information.
According to that assessment, Jones said, there is a need for the housing the Water Tower project would provide. He said the project could cash-flow and be revenue neutral to the city. He said he understands a concern over the city’s debt load. “Those are tough decisions. I’m not saying what’s right and what’s wrong. But if the application doesn’t come through you, we are going to try and pursue other avenues and see if we can’t move forward on it,” Jones said.
Council member Lisa Jaskey serves on the council’s and GCDC’s housing committees. She noted that it would be important to know what part of the debt the developer would pay, that to date all claims of a housing shortage are anecdotal and not yet verified, and that the city has already committed “significant resources” to the project by providing up to seven years of tax rebates and a new sewer line, as well as staff time.
Jaskey also said another developer has expressed interest in completing a housing project targeted for low to moderate income households and that developer has said he would seek the same assistance from the city as JCorp receives for the Water Tower project.
“As much as I hate to because I feel like I’m part of this project, too, I think the time period is too short, and that I haven’t seen any guarantees on the debt payment and I don’t want to get into a situation at this time with the potential of raising taxes… after looking at everything, I’ll be the one to make the motion to not approve the application,” Jaskey said.
The motion was approved unanimously, with council member Gary Von Ahsen absent.
Council member Shannon Black added after the discussion that with voters defeating a proposed tax increase to fund school construction, she was confident the council made the right decision.
