520 N Market St

The site of the workforce housing project at 520 N. Market St.

Plans to renovate a vacant downtown Frederick building as mixed-income workforce housing will generate some new tax revenue for the city and county, but it will be less than the full amount determined by tax rates on the property value.

The city’s Board of Aldermen on Wednesday reviewed a proposal in which the property owner at 520 N. Market St. would pay a set rate instead of property taxes for the 53 income-restricted apartments planned for the renovated building. Both the city and the county can enter into agreements under payment in lieu of taxes, or PILOT, programs for low- and moderate-income housing projects.

The project proposed through a partnership between developer PIRHL and Interfaith Housing Alliance calls for a total of 59 one-, two- and three-bedroom apartments. A majority, 53, would be rented to individuals or families making 20 to 60 percent of the area median income, equal to about $20,000 to $60,000. The remaining six apartments would be rented at market rates.

Under the draft PILOT agreement, the city and county would collect $400 per income-restricted apartment. The proposed payment translates to a discount of roughly 50 percent when compared with the taxes that would otherwise be collected based on the property’s assessed value.

Exactly how much less the city and county will receive under the PILOT has not been determined because the property’s value will likely change based on the improvements planned for the renovation. The property was valued at $2.04 million as of July 1, according to state property records.

Based on the current assessed value, the city would collect $28,340 in property taxes, according to Gerry Kolbfleisch, city finance director. The city could expect to collect about $13,000 of the total payments made under the PILOT agreement, according to C.J. Tyree, PIRHL’s vice president of development.

Any payment would still be more than what the city and county now collect in building property taxes, which is nothing because the building is owned by the county.

The Frederick County Council in September approved sale of the former school building to Interfaith Housing Alliance. But the property would technically be owned by a private entity, likely a corporate investor such as Bank of America or JP Morgan, Tyree said.

Interfaith Housing Alliance will serve as the general managing partner of the project.

Tyree said in an interview after the meeting that he could not name the investor that has signed on to the project.

Several aldermen on Wednesday highlighted the additional revenue under the proposed PILOT as one of several benefits to the project.

“Anything would be more than what we’re getting now,” Alderman Michael O’Connor said. “We’re just not trying necessarily to get the maximum.”

Alderwoman Kelly Russell also expressed support for the project.

“Are you looking at doing more projects in the city?” she joked.

Alderwoman Donna Kuzemchak questioned the rents proposed for the apartments — about $500 to $1,100 per month depending on the number of bedrooms, as estimated by Tyree.

Those rates are significantly lower than most of the housing options downtown, and could create a concentration of poverty contrary to the intent of the mixed-income project, she said.

“At any point in time when we concentrate poverty, it’s been shown over and over again, then you start to concentrate crime, you start to have other issues,” she said.

Tyree emphasized the extensive screening process, including background and credit checks, in conjunction with a zero-tolerance policy, as ways to prevent crime and other negative effects.

With a waiting list anticipated by the time the project is completed, “people that are committing crimes won’t remain in our project,” he added.

Tyree anticipated securing the final approvals and building permits by August, with plans to break ground in September. Construction is expected to last through 2017, with move-in dates for tenants starting in January 2018.

The proposed PILOT agreement, which requires city and county approval, would take effect when all apartment units have been leased, according to Tyree. As drafted, the $400 payment per unit would be split between the city and county in proportion to respective tax rates — currently 73 cents per $100 of assessed value in the city and $1.06 per $100 in the county.

In each subsequent fiscal year, the tax obligation on the 53 income-restricted apartments would increase 2 percent, the agreement states.

The PILOT agreement does not include other city or county taxes and charges such as those for fire and rescue, sewer and water, and building excise tax, as drafted.

About $15 million of the $20 million project would be funded through the Low-Income Housing Tax Credit, a federal credit distributed through the Maryland Department of Housing and Community Development. The remaining cost would be covered through a $2.3 million mortgage, additional DHCD loans and other financing options that are still being finalized, Tyree told The News-Post previously.

Follow Nancy Lavin on Twitter: @NancyKLavin.

Nancy Lavin covers social services, demographics and religion for The Frederick News-Post.

(2) comments


Cheers to all of the participants of this project. This is a challenge for all of the folks involved in making this happen. It would be fantastic to see full-time working individuals have access to good housing. Perhaps a percentage of the assessed value would be more appropriate than a flat fee. Anyway, good luck with the project.


here's a thought, how about giving the residents a tax break once in a while, we are the ones who actually live here and support the community.

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