Downtown DeLand CRA throws big incentive to apartment developer

A Downtown DeLand apartment project came one step closer to being built when DeLand’s Downtown Community Redevelopment Agency narrowly approved a hefty incentive package for the developer. 

The incentive was almost denied, but City Attorney Darren Elkind saved the day, calling for a two-minute recess, which he used to negotiate a compromise with Atlantic Housing Partners, who ultimately received a tax break that could be worth $3.5 million.

The developer wants to build 178 units of housing — 173 single family apartments and five town homes —  and a minimum of 5,000 square feet of retail space on a Downtown plot of land that includes the former Save-A-Lot grocery store at 221 S. Woodland Blvd.

The project would not be possible without a 90-percent rebate of taxes that will be due on the property’s increased value, once it’s developed, Scott Culp of Atlantic Housing said at a Downtown DeLand CRA meeting Jan. 18.

The goal of the project is to offer “attainable workforce housing,” he said, and to do that, they need the tax break.

“We’re basing it on workforce rents; quality development that will bring people, a workforce, Downtown,” Culp said. “With this incentive, we have the ability to make this work with our own resources. I can’t say the same without it.”

Tax increment?

The tax incentive given to Atlantic Housing Partners is not a break on all the taxes that would be due on DeLand Commons, just a chunk of the total.

The developer — whose company plans to maintain and operate the apartment buildings once they are constructed — has promised to pay the taxes already coming into city coffers from the mostly undeveloped property. That’s about $23,000 a year.

By building apartment buildings and retail space on the land, though, Atlantic Housing will be improving it and raising the taxable value. Where the company is getting a break is on that increase in value — taxes on that amount would normally flow into DeLand’s Downtown Community Redevelopment Agency, or CRA.

Under the approved agreement, the developer will pay only 10 percent of the ad valorem tax increment, or the difference between the tax on what the land was worth and what it will be worth once the apartments and retail space are built. 

This agreement will come to an end in 2036, or when the value of the tax break reaches $3.5 million, whichever comes first.

DeLand has been trying for 30 years to get more housing Downtown, to provide merchants with a built-in market of shoppers and diners. 

One of the stumbling blocks that has kept apartments from being built, city officials said and Culp agreed, is that there is no existing project to prove that Downtown housing will be a financial success.

Another reason his company needs the tax break, Culp said, is rising construction prices that make the true cost of the project unknown. Atlantic Housing expects to spend about $40 million to build the apartments.

The tax breaks will last until 2036, or until the benefits outpace a cap of $3.5 million.

With the incentive package, the CRA fund will reap new revenue totaling around $22,000 annually. If Atlantic Housing were to build the project without the tax break, the CRA fund would reap about $200,000 a year over the next 14 years. 

But building Downtown apartments with a goal of maintaining workforce rental costs is a gamble. Some on the CRA, including Mayor Bob Apgar, feared if the city doesn’t provide incentives to lessen the risks of the first apartment project, the city’s goal of more housing Downtown may never materialize.

“For the long-term economic viability of Downtown, having heads in beds and feet on the street is, to me, a big part of the equation for the long-term success of Downtown,” Apgar said, later adding, “If we don’t move forward with a project like this with the incentives at this time, I’m not sure when we’ll ever see residential living in our Downtown.”

Not all of the commissioners were so keen. 

Commissioner Charles Paiva feared it would be difficult to measure how successful the project was, something he said was important if the project was receiving a tax incentive. Commissioners Jessica Davis and Chris Cloudman were concerned about the affordability of the rental units. 

Culp said Atlantic Housing is aiming to serve the “missing middle” market of people whose household income is between $32,000 and $91,000, but no specific language in the tax-break agreement specifies this. That’s because earmarking a housing project as “affordable housing” can add federal hoops to jump through, and those add additional costs Culp did not want to incur if Atlantic Housing could avoid it.

One DeLand resident, Frank Schnidman, took issue with the tax break. Schnidman, a DeLand resident of two years and the former chair at Florida Atlantic University’s School of Urban and Regional Planning, said the incentives should be handed over only if they were really necessary. Schnidman said the city probably can’t afford to deprive the CRA budget of so much needed money.

“Before you give a percentage number, think about the other demands that you have on your Downtown to improve the quality of life and to provide an atmosphere where incentives may, in fact, not be needed from the perspective of the alleviation of slum and blight, because the market is there,” he said.

While in favor of the project, Schnidman also raised concerns about other factors, including the lack of specific language related to affordability.

When the CRA — composed of the five-member DeLand City Commission and two representatives from the Downtown DeLand business community — voted on a motion by Commissioner Kevin Reid to grant the incentives, it failed 3-3. CRA Commissioner Ella Ran was absent.

For some of the dissenting commissioners, concerns over the lack of a definitive end date for the tax break overshadowed a desire for Downtown apartments. As originally proposed, the benefits could continue annually if DeLand’s CRA was extended after its 2036 expiration date. 

Mayor Apgar and Commissioners Reid and Bill Budzinski voted in favor, while Commissioners Davis, Cloudman and Paiva dissented.

After Apgar announced that Reid’s motion to approve the incentives had failed, City Attorney Elkind asked for a two-minute recess to negotiate with the developer. Elkind returned with an agreement from Culp to end the benefits definitively in 2036, or earlier if the $3.5 million cap on incentives is reached.

Paiva’s motion based on those new terms passed on a 5-1 vote, with only Cloudman opposed. Cloudman still wanted a way to hold the developer to his promise of workforce, rather than luxury, rents.

With approval of the proposed tax incentive by the CRA, which was also endorsed later in the evening by the DeLand City Commission, Atlantic Housing Partners plans to move ahead on building apartments and retail space at DeLand Commons.

Apartments in the works

DeLand Commons isn’t the only apartment project that has been proposed for Downtown DeLand. Two others are in various stages.

• DeLand Commons — 178 units along Woodland Boulevard between East Voorhis and East Howry avenues near the DeLand Regional Library. The project includes commercial space on the property.

• Woodland Boulevard Apartments — Not much information is available yet for this project, but early plans call for around 300 apartment units to replace the Bank of America building at 230 N. Woodland Blvd. in Downtown DeLand.

• Putnam Estates — Construction hasn’t begun yet, but work is already underway to fix up DeLand’s historic Hotel Putnam and construct 64 one- and two-bedroom apartments inside.