HUNTINGBURG — Paragus’s tax abatement package for a workforce housing development project in Huntingburg is being redone to remove the abatement cap.
In explaining the new request to the Huntingburg Economic Development Commission Wednesday, it was also announced that the project will now cost Indianapolis developer Paragus $8 million to construct, which is more than last year’s estimate of $5.8 million.
The project is still the same: a 56-unit workforce housing development on the former Wagon Works site, located at 419 N. Washington St.
The city granted the project a 100 percent abatement for 10 years last year, but the total abatement was not to exceed $325,000. “It was anticipated that the annual taxes on the property would be around $32,500,” City Attorney Phil Schneider told the commission.
But the investors would not agree to the financing with the caps. “They indicated that based on similar caps that have been used in other developments, those caps were exhausted before the end of the 10-year abatement term,” Schneider said. “As a result, there were property taxes that were payable within 10 years. And that’s not the model the investors are willing to invest in.”
Gary Ritz of Paragus and attorney David McGimpsey of Bingham Greenebaum Doll, explained the challenge with getting an investor with the abatement having a cap.
“We’ve come to find out that the other project blew through its abatement in about three or four years,” McGimpsey said. “So we’re having trouble with the purchaser of the tax credits, who is not going to proceed with financing this deal unless the abatement goes through as uncapped.”
The other project referenced is the Lofts at St. Joseph’s, Mayor Denny Spinner said.
Paragus decided to submit a new abatement application to avoid possible statutory issues down the road, McGimpsey said.
The project is now estimated to cost $8 million, which is more than last year’s amount of $5.8 million. The increase comes because of increases in wages and construction, Ritz said Wednesday.
Paragus conducted an environmental study last year. The soil report it received in early October stated that the soil bearing capacity was poor. So with a typical 2.5-foot-deep foundation, the soil would not have the bearing capacity to hold up the buildings. A thicker foundation is needed, Gary Ritz of Paragus told The Herald in December. So the project had to be redesigned to make sure the buildings would not sink, which meant that the project’s overall cost increased. The changes also meant that the project’s start would be delayed by an additional 90 to 120 days, Ritz explained in December.
Once completed, the development will have 28 studio, 24 one-bedroom and four two-bedroom apartments in three housing units. There will be an additional building on the site that will have a community room. The site will have bike racks, a fenced dog-walking area, a picnic area, a parking space for each apartment and on-site management. Each apartment will have curtains or blinds; a porch, patio or balcony; a garbage disposal; dishwasher; and hookups for cable and for a washer and dryer.
The Indiana Housing and Community Development Authority granted the development $794,541 in rental housing tax credits. The abatement change will not affect the credits, Ritz said.
The economic development commission agreed to recommend to the Huntingburg Common Council that an economic revitalization area be established and the requested tax abatement be granted.
The next step is for the common council to consider a declaratory resolution for the revitalization area and abatement. If that is approved, a public hearing will be held, and then the council will consider confirming the revitalization area and giving final approval to the abatement.