BROOKINGS – The Brookings City Council approved a reassessment for land in the Christie Heights and Christie Springs additions this week, but the vote was split 4-3 and there were a lot of questions from the audience.
The original assessment for Oakwood Equity Group was for infrastructure upgrades made by the city along Main Avenue South, including a new lift station, force main and a water main, said Mike Struck, community development director. Christie Heights is west of Dakota Prairie Elementary; Christie Springs is north of the school.
The city’s agreement to develop land along 20th Street South was made with Oakwood Equity Group and Prairie Hills. They were to make annual payments to the city for five years. Oakwood made the first payment but not the second. Prairie Hills has made the first two payments, Struck said. The reassessment only includes Oakwood.
The reassessment will not lose the city any money, Struck said after the meeting.
“We’ll still receive the same money; it just comes from a different source,” he said.
Many moving parts
One of the many moving parts of this situation is that Christie Heights and Christie Springs are part of a Tax Increment Finance (TIF) district, which uses taxes from increasing property values to help reimburse the city for the infrastructure work along Main Avenue South, which has been started, and 26th Street South, which has not.
It has a total eligible cost of $7.335 million. That includes capital costs like infrastructure, professional fees like engineering and legal counsel, and discretionary costs like change orders, which are up to the council to decide, Struck said.
Another part is the city is working against a deadline.
“Eligible costs with a TIF district is you have five years to do (infrastructure) improvements,” Struck said. “We’ve got a little bit of time left to get started on 20th Street South. We have until February 2019, basically one construction season (2018).”
$445K outstanding
A memorandum of understanding outlining payment criteria for Oakwood was dated May 5, 2014, and the original levy was assessed in September 2015, according to an attachment to the agenda available on the city’s website.
The outstanding principal balance for the 28 lots in Christie Heights with interest from Jan. 1 to March 28, 2017, is $359,472.22. The outstanding principal balance for the five parcels in the Christie Springs with interest from Jan. 1 to March 28, 2017, is $86,043.54.
The total outstanding balance is $445,515.76, Struck said.
The reassessment breaks the number down:
Taxpayers shouldn’t worry, he said.
“The city paid cash for this project on the front end, so we’re reimbursing the city so that money is available to be used for other capital items around the city (such as future parks or street improvements),” he said, adding without going through the TIF district, they wouldn’t recoup the investment.
Avoiding bankruptcy
One of the reasons for the reassessment was to avoid bankruptcy negotiations, Struck said. Bankruptcy litigation can take years, there could be multiple parties seeking money, and the city doesn’t know how high on the priority list it might be, or even if it will get any money.
“That’s up to a judge,” Struck said.
Avoiding those delays can help keep the development moving forward, which is the city’s priority.
Right now, Christie Heights has several houses already built or going up. Struck expects that to continue. There is no construction in Christie Springs yet.
Most of Christie Heights, Christie Springs and Prairie Hills used to be farmland, which generates the least amount of money for the city, Struck said. The city needs houses out there because the city gets more money for rooftops than if the land is grass. The city gets even more money from commercial development and wants houses around to support the commercial development.
“Every year it sits idle, that’s (TIF) increment that we’re losing. If it sits vacant, nothing’s being generated,” Struck said.
To avoid delays, a local development team is willing to acquire the Christie Springs and Heights property contingent upon financial restructuring with existing creditors. That deal has not been completed yet. The identity of that team will be public “once it closes the property transfers,” Struck said.
The city wants to maintain the integrity of its TIF district, and it took several months to work through the process and come up with the reassessment deal, Struck said.
Fair deal?
While the city should get all its money back through the reassessment, there were questions about fairness among developers and home buyers.
The deal didn’t set well with Jacob Mills of Prairie Hills, LLC, which is developing land on the east side of Main Avenue South. He said during the council meeting Prairie Hills was assessed $320,000 and has been paying it. The 45 lots in Prairie Hills will be paying taxes in the fall, and that will help fund the TIF district, he said.
“It should be equitable in the same manner it was assessed,” Mills said. “I believe there are legal obligations of an assessment.”
Mills asked a few of what he called “transparency questions,” including why the council was intervening in the bankruptcy process, and wanted details on the restructured payments and the zoning of the property.
“I’m not opposed to this going forward, as long as it is equitable for every acre of this assessment,” Mills said.
He pointed out that Prairie Hills donated its right of way and might have been the only one to do that. “Could have stalled the project,” he said. “Frustrating when history is so quickly forgotten.”
Action now or wait?
Councilor Dan Hansen asked several questions about the total amount of debt and private assessments.
The city invested about $3 to $3.5 million in the area, Struck said.
Struck said the council will have to take action for the process to move forward, but Prairie Hills can’t be part of the resolution that was up for discussion Tuesday because the legal notifications did not include them.
“We need to deal with this. A new deal with Prairie Hills is a whole new game,” Councilor Ope Niemeyer said. “We need to get some roofs up on this land.”
“This needs to get done,” Councilor Mary Kidwiler agreed. “Bankruptcy, we have no idea how much money we’ll get. If we want to do something with Prairie Hills down the road, we can, but not tonight.”
“A big piece is the fairness to the buyers,” said Andy Johnson of Mills Development, which is developing Prairie Hills.
Developers pass on assessments to buyers, and he’s worried about the home lots across the street being built for less, even though the lots are comparable products.
“It’s important for us to get those rooftops, so we don’t end up in the same spot (extended too far financially),” Johnson said.
He pointed out it wouldn’t just affect Prairie Hills, but also other developments in the area.
“The dollars that you’re talking about come from somewhere,” Johnson said. “I’d love to see that development move forward; I’d just like to see it equitable.”
Minimizing effect
Councilor Nick Wendell asked what the consequences will be if they put off the vote on Oakwood’s reassessment to a later time.
It’s all contingent on each party, City Attorney Steve Britzman said.
“We’re just trying to minimize the effect on the city,” he said.
Everybody might have to start over from the beginning, he warned.
Hansen thought it unlikely everyone would walk away if the council deferred the issue for a few weeks. He was worried the council was creating two different sets of circumstances between plots in the same area of development.
“It’s leveling the playing field, and we have to stay out of private competition,” Hansen said.
“I’d prefer to see it done all at one time,” said Councilor Holly Tilton Byrne, adding they needed to set a precedent for being equitable.
Voting in favor of the reassessment were Hansen, Kidwiler, Niemeyer and Mayor Keith Corbett. Voting no were Wendell, Tilton Byrne and Councilor Patty Bacon.
Contact Jodelle Greiner at jgreiner@brookingsregister.com.
