Next try in works for Central School funds
IRON MOUNTAIN — The Wisconsin-based developer looking to convert the former Central School into low-income apartments believes the project will be more competitive in its next attempt to secure tax credits for the renovation.
Commonwealth Development of Fond du Lac, Wis., failed to gain the Michigan State Housing Development Authority funding in the first round in January.
The deadline for applying for the second round is April 3, with the tax credits awarded in July, said David Ritchay, vice president of development for Commonwealth.
Before the next application, the company hopes to have a Payment in Lieu of Taxes, or PILOT, agreement with the city, Ritchay recently told the Iron Mountain City Council’s Infrastructure Committee.
Commonwealth’s plans call for 28 apartments in the former school building and construction of 12 new townhouses across the street.
The Iron Mountain School Board in August accepted Commonwealth’s offer to buy the 78-year-old school for $445,000, along with four lots on West Hughitt Street and two lots on West Ludington Street. But that purchase hinges on gaining the MSHDA tax credits.
The city council in September approved rezoning for the development but tabled action on the PILOT. Since that time, the committee has been in contact with Ritchay about a variable PILOT that would allow the city to capture more revenue during the first 10 years of the development.
It was not surprising the project fell short in the first funding round, Ritchay told the committee last week. Commonwealth wants $686,000 in low-income housing tax credits for the project.
“We self-scored at 116.5 and the three projects that received funding in the same category had scores of 125, 126 and 129. We will meet with MSHDA this week to go over the actual scoring they gave the project,” he said.
But the MSHDA doesn’t expect more rural projects to be filed for the April round, which could leave the Central project as the only candidate, Ritchay said.
The developer has spoken with the Dickinson-Iron Community Services Agency about being a co-general partner in the project, which would allow DICSA to offer classes and services to eligible residents in the building.
The apartments would mostly be for low-income senior citizens along with veterans, which they would work with the VA to identify, Ritchay said. Low-income families would be placed in the three- to four-bedroom townhouses.
The idea of partnering on the Central School project has brought to the DICSA board, said Sandie Essendrup, executive director.
“But the board is in the process of further discussion with Mr. Ritchay. They have a few questions and would like to clarify things before a decision is made,” Essendrup said.
“No matter if we do or do not come to an agreement to become co-general partner,” she added, “we would still provide services to the residents that qualify.”
Commonwealth still would be property manager, responsible for the day-to-day operations, Ritchay said.
In addition to applying for MSHDA tax credits, Ritchay said they have $1.023 million in tax credits available through the state Historic Preservation program. Those will be received the first year after Central building renovations are completed as long as they meet the standards set by the program, Ritchay said.
Another change in the project is the amount that can be charged for rent. A market study through MSHDA wasn’t received until after the October application was filed, and it indicated rents were undervalued.
“This will increase revenues by $20,000 when we make that adjustment to rents,” Ritchay said.
The city will need some of the new figures from Commonwealth to work out the variable PILOT soon, council member Kyle Blomquist said.
“We need to cover certain things — additional infrastructure costs and possible increases in police/fire protection, since there are going to be 40 units in that location. Moving forward, it has to be something that works for both of us,” Blomquist said.
Ritchay agreed but noted they can’t work with a PILOT that’s too tight to its projected profit margin.
“We need to have some wiggle room,” he said.