Columbia offers 50% tax break to lure non-student rental properties to downtown

The same tax-credit incentives that Columbia began offering in 2014 to private student housing properties now apply to market-rate rental properties – but not for long.

Columbia City Council recently approved a resolution to extend the 10-year, 50 percent property tax reduction available to some student housing developments, and now to some market-rate rental housing developments, too, if they meet certain criteria. Market rate apartments are not targeted to students.

However, the window to qualify for the tax credits, both for student and market-rate developments, will close at the end of this year, council decided.

City Council chose to extend the credits to market-rate rental developments after hearing from some non-student-housing developers that they would like to take advantage of the same tax breaks, Mayor Steve Benjamin said.

“It recognizes that we’ve seen significant success in the program,” Benjamin said. “We think we’ve done a great job in helping to incentivize private-sector capital to come into downtown Columbia.”

The same criteria apply to market-rate developments as student housing developments to qualify for the tax credit:

▪ A minimum investment of $40 million in total project costs, including land acquisition and expenses associated with engineering, legal and other development services. No use of state Jobs-Economic Development Authority (JEDA) funds can be applied.

▪ A minimum of $5 million per usable acre.

▪ A minimum tax bill of $750,000 per year in annual property taxes before all tax credits have been applied.

▪ Use of the property will pay more in taxes after all credits have been applied than any other likely use.

▪ Structured parking and infrastructure with no use of public funds, other than bonds or obligations payable solely from taxpayer funds, used in construction costs.

Project plans must be submitted to and accepted by the city before Dec. 31 to apply, at which point the tax credit will sunset. At that point, Benjamin said, council will step back and reassess the program and the need for possible development incentives moving forward.

So far, according to assistant city manager and Columbia chief financial officer Jeff Palen, no plans for market-rate rental developments have been submitted to apply for the tax credit.

The planned Kline City Center development, which is reviewing site plans with city staff, appears it could be a potential candidate. As many as 350 market-rate apartment or condo units aimed at adult professional residents are included in the development plans.

Recent plans submitted to the city Planning Commission indicate construction on two residential buildings and parking structures could begin this winter. Developers have said total investment in the planned four-building, mixed-use cluster could approach or exceed $100 million.

The tax credits are designed to attract high-quality development within city limits and bring new properties onto the city’s tax rolls, Benjamin said.

In a year since enacting the 50 percent property tax cut, which applies for 10 years to qualifying properties, five student housing developments have qualified for a total of $3.1 million in annual tax breaks. The developers are Peak Campus Development, Park7 Group, Arnold Properties, Edwards Development and EdR Development.

Columbia faces a unique challenge in that a large proportion of its properties are tax-exempt, Benjamin said, which creates a need for creative ways to source revenue to support city functions. The tax credits have helped attract taxable development on properties that otherwise might have drawn less revenue for the city, Benjamin said.

“Everyone wins,” Benjamin said. “It’s not just development for development’s sake. ... It really is about creating a real tax base in the city so that we can prosper for the next 50 years.”

This story was originally published August 2, 2015 at 6:53 PM with the headline "Columbia offers 50% tax break to lure non-student rental properties to downtown."