Local developers form a band of builders

Developers have voiced concerns about the city’s building permit process.

Developers have voiced concerns about the city’s building permit process.

As the City of Richmond reviews an important real estate rehabilitation tax abatement program, local developers are getting organized.

Several of Richmond’s most active apartment developers have joined the fledgling multifamily council of the Home Building Association of Richmond, a move designed to band the competitors together and gain sway in raising concerns about development in the City of Richmond.

“We really need to be involved and unified as a group,” said Tom Dickey, a principal at Monument Companies. “We need a group that’s out there speaking for us that can help keep everybody organized.”

The show of solidarity took shape at a meeting last week at Plant Zero, an apartment complex in Manchester owned by Fountainhead Properties. In attendance were between 30 and 40 people who, according to one developer who was there, represented at least 80 percent of downtown Richmond’s ongoing multifamily development. Local developers individually have been members of the group in the past, but the full-scale alliance is new in Richmond.

The developers’ meeting took place a day after the Richmond City Council approved an ordinance to amend part of the city’s longstanding tax abatement program, which prevents taxes on a renovated property from increasing based on the consequent rise in the property’s assessed value.

The ordinance, approved at the Oct. 28 city council meeting, added a condition that states a residential rehabilitation may not exceed the total square footage of its original structure by more than 100 percent to qualify for abatement.

The program has been under fire after developer Louis Salomonsky was denied the tax exemption on a new 131-unit complex in Shockoe Bottom. Salomonsky relocated an old 220-square-foot home to the site in an attempt to qualify for the exemption program, which currently requires improvement on an at least 20-year-old structure.

Under the current abatement program, developers do not pay real estate taxes on a property’s improved value for the first seven years after redevelopment. In the eighth year, the property owner is on the hook for 25 percent of the difference between the current assessment and the pre-rehab assessment. That number increases 25 percent in each successive year until the full improvement value becomes taxable beginning 11 years after the original development.

Now sweeping changes could be in store for the program that developers have said is as important to redevelopment in the city as the state and federal historic tax credits system.

A task force made up of City Assessor James Hester, Assistant City Attorney Tabrica Rentz and council members Kathy Graziano and Parker Agelasto is reviewing the abatement program.

Rehabilitation tax abatements “aren’t going away,” Hester said in a September interview, but the committee will be making some changes.

In an Oct. 21 Facebook post, Agelasto said the team had a “comprehensive re-write” of the abatement program in the works.

“That’s something that we believe we’d like to understand better and have a voice in,” said Robin Miller, a principal with Miller and Associates. “We want to have a paid professional, meaning the [HBAR], who has a paid staff monitor that so if it bubbled up we would know about it in time to go to the hearings and comment.”

While at the meeting, developers also voiced concerns about the city’s building permit process and employee turnover within the planning department. Messages left for the planning department, city assessor’s office, Agelasto and Planning Director Mark Olinger were not returned by press time.

Developers complained of what they call a staff shortage at city hall that has made it difficult to get inspections performed and permits issued in a timely fashion.

This isn’t a new problem, Dickey said. Developers have been paying higher permit fees over the past decade with the idea that they’d get better service from the inspection department.

Now, Dickey is worried that the city isn’t holding up its end of the deal.

“By the time we get through the permits, we’re spending $30,000 or $40,000,” he said. “They just don’t have enough staff. The people that work at the city do a good job. They do the best they can with the resources they’re given, but they don’t decide what their budget is.”

Tom Papa of Fountainhead Properties said about a third of those in attendance signed on to the Home Building Association at the Plant Zero meeting.

The multifamily council was launched in January, said Bruce Milam, a broker with Colliers International, but has just begun a concentrated membership drive this month.

“The builders see an opportunity, I think, to have a voice together, a focal point that they can address issues with the city,” Milam said. “Instead of 30 or 40 voices squawking about a problem, there will be once voice squawking about it, a little bit louder.”

Developers have voiced concerns about the city’s building permit process.

Developers have voiced concerns about the city’s building permit process.

As the City of Richmond reviews an important real estate rehabilitation tax abatement program, local developers are getting organized.

Several of Richmond’s most active apartment developers have joined the fledgling multifamily council of the Home Building Association of Richmond, a move designed to band the competitors together and gain sway in raising concerns about development in the City of Richmond.

“We really need to be involved and unified as a group,” said Tom Dickey, a principal at Monument Companies. “We need a group that’s out there speaking for us that can help keep everybody organized.”

The show of solidarity took shape at a meeting last week at Plant Zero, an apartment complex in Manchester owned by Fountainhead Properties. In attendance were between 30 and 40 people who, according to one developer who was there, represented at least 80 percent of downtown Richmond’s ongoing multifamily development. Local developers individually have been members of the group in the past, but the full-scale alliance is new in Richmond.

The developers’ meeting took place a day after the Richmond City Council approved an ordinance to amend part of the city’s longstanding tax abatement program, which prevents taxes on a renovated property from increasing based on the consequent rise in the property’s assessed value.

The ordinance, approved at the Oct. 28 city council meeting, added a condition that states a residential rehabilitation may not exceed the total square footage of its original structure by more than 100 percent to qualify for abatement.

The program has been under fire after developer Louis Salomonsky was denied the tax exemption on a new 131-unit complex in Shockoe Bottom. Salomonsky relocated an old 220-square-foot home to the site in an attempt to qualify for the exemption program, which currently requires improvement on an at least 20-year-old structure.

Under the current abatement program, developers do not pay real estate taxes on a property’s improved value for the first seven years after redevelopment. In the eighth year, the property owner is on the hook for 25 percent of the difference between the current assessment and the pre-rehab assessment. That number increases 25 percent in each successive year until the full improvement value becomes taxable beginning 11 years after the original development.

Now sweeping changes could be in store for the program that developers have said is as important to redevelopment in the city as the state and federal historic tax credits system.

A task force made up of City Assessor James Hester, Assistant City Attorney Tabrica Rentz and council members Kathy Graziano and Parker Agelasto is reviewing the abatement program.

Rehabilitation tax abatements “aren’t going away,” Hester said in a September interview, but the committee will be making some changes.

In an Oct. 21 Facebook post, Agelasto said the team had a “comprehensive re-write” of the abatement program in the works.

“That’s something that we believe we’d like to understand better and have a voice in,” said Robin Miller, a principal with Miller and Associates. “We want to have a paid professional, meaning the [HBAR], who has a paid staff monitor that so if it bubbled up we would know about it in time to go to the hearings and comment.”

While at the meeting, developers also voiced concerns about the city’s building permit process and employee turnover within the planning department. Messages left for the planning department, city assessor’s office, Agelasto and Planning Director Mark Olinger were not returned by press time.

Developers complained of what they call a staff shortage at city hall that has made it difficult to get inspections performed and permits issued in a timely fashion.

This isn’t a new problem, Dickey said. Developers have been paying higher permit fees over the past decade with the idea that they’d get better service from the inspection department.

Now, Dickey is worried that the city isn’t holding up its end of the deal.

“By the time we get through the permits, we’re spending $30,000 or $40,000,” he said. “They just don’t have enough staff. The people that work at the city do a good job. They do the best they can with the resources they’re given, but they don’t decide what their budget is.”

Tom Papa of Fountainhead Properties said about a third of those in attendance signed on to the Home Building Association at the Plant Zero meeting.

The multifamily council was launched in January, said Bruce Milam, a broker with Colliers International, but has just begun a concentrated membership drive this month.

“The builders see an opportunity, I think, to have a voice together, a focal point that they can address issues with the city,” Milam said. “Instead of 30 or 40 voices squawking about a problem, there will be once voice squawking about it, a little bit louder.”

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Scott Burger
Scott Burger
8 years ago

I would like to see more attention paid to the actual issues of the tax abatement program. This program was designed to encourage the renovation of Richmond’s older buildings, but has morphed into a program where the city tax payers are subsidizing extensive new construction.

http://www.oregonhill.net/2013/10/18/letter-on-proposed-tax-abatement-ordinance/

Walter Parks
Walter Parks
8 years ago
Reply to  Scott Burger

The ordinance allows for an abatement on replacing buildings as well as renovating and reconstructing them. (paragraph (b) of Sec. 98-135) If the ordinance were strictly about rehabbing older buildings it would not offer an abatement for razing them and building new structures in there place. It is very clear that there is a disconnect between what the ordinance says and how it has been recently represented.

John Zacharias
John Zacharias
8 years ago

Great job Bruce. This will be nothing but positive for Richmond.

Rick Jarvis
Rick Jarvis
8 years ago

If you want less of something, then tax it. If you want more of something, then do not tax it.

As tax abatement directly impacts renovation and redevelopment, then you can see the implications to Richmond.

Bruce Milam
Bruce Milam
8 years ago

Burl, thank you for keeping this positive. That’s the sole intention of HBAR’s new Multifamily Council. There is so much good that can come from the City and its builders working hand in hand to improve the cityscape, but it has to be done in concert. It cannot afford to be contentious. I’ve been in Richmond just 18 years and in that time I’ve witnessed a phenomenal turnaround in nearly every neighborhood. The tax abatement program and the historic tax credit program have played significant positive roles. Most of these builders believe that Richmond has just turned the corner and… Read more »

christopher Branch
christopher Branch
8 years ago

The Rehab Tax program is great for saving old historic buildings. And it has no doubt single handedly revitalized the older neighborhoods.The problem is that either the city or the developers have lost the spirit of the law. When a building can be moved to a site to qualify for the credit, or when 99% of a building can be destroyed, and only 2 short sides of a corner are saved,for example the warehouse on Brook Rd next to the Main Post Office, then the program is broken and everybody ends up subsidizing projects that the program was not intended… Read more »

Bruce Milam
Bruce Milam
8 years ago

Chris, If this is the project underway for students apartments for VUU, I don’t believe historic tax credits were used for it. I’m not sure I’m right about that by any means. Your point is a good one about abuse of the program; we’ve seen our share of it in Richmond and Norfolk, and those developers are paying the price. But overall, you must agree that its been a wonderful program for the City.

christopher Branch
christopher Branch
8 years ago
Reply to  Bruce Milam

Bruce- Yes the Rehab Tax program has been a great program. It certainly has helped to revitalize all areas of the city. But do not confuse the rehab tax program run by the city with the historic tax program run by the State and/or the Dept. of Interior. I may be wrong about the building on Brook, but I suspect that the only reason to leave the corner is to qualify for the city tax abatement program which seems to me not what the abatement program was designed to do. It would be interesting to find out but the point… Read more »

Jeremy Weiland
Jeremy Weiland
8 years ago

There is so much good that can come from the City and its builders working hand in hand to improve the cityscape, but it has to be done in concert.

I do not agree. I think there’s already too much one-hand-washing-the-other in the relationship between the city and the tax credit harvesting industry calling itself developers. Where are the citizens in all this? Conveniently swept to the side while one institution does business with another.

Thanks to RBS for shining some light on this.

Joshua Bilder
Joshua Bilder
8 years ago

Hey Bruce I wasn’t invited to the event? Hands down this program from the city has been the reason downtown Richmond has seen its renaissance. Its not only large developers who use this program, its the people buying smaller properties and single family homes too. This is something that works. For the city to haphazardly “get rid” of the program is absolute folly. And to say, ” oh well we don’t want the abatement to apply to additions,” is a statement made by some one who has never done a historic renovation. I would say that 90% of the historic… Read more »

Michael Dodson
Michael Dodson
8 years ago

Folks the City has no say on the federal or state historic tax credits any more that it can tax a meal in Chesterfield. The historic tax credits are not changing This issue is the City Assessor’s Office and the Real Estate Abatement Program. Abuse and mismanagment were there to the point it was pushing criminal acts by staff. It has been discussed in audits by IG office. The program needs to be reworked and monitored better. Come one a 220sq ft building approved as credit for all improvements on a 131-unit new building; no taxes on the new building… Read more »