In a 4-to-3 vote on Tuesday, the Wicomico County Council approved legislation that would allow tax abatements for large-scale residential projects in Downtown Salisbury.
At-large council members John Cannon and Bill McCain, joined District 1 Councilman Ernie Davis and District 4 Councilman Josh Hollowing in backing the measure.
Councilwoman Nicole Acle joined Council President Larry Dodd and Council Vice President Joe Holloway in voting no.
The seven members had staked out their positions in a series of lead-up votes held over the summer.
Already given the green light by the city of Salisbury, the so-called Horizon program -- an acronym for “Hotel or Residential Incentive Zone” -- would provide tax abatements to financially encourage residential development projects costing more than $10 million to build.
The city has already accepted a project to be included in its part of the tax program -- The Ross, a multi-story building planned on three commercial parcels Downtown.
While no residential projects in the $10 million cost scale now exist in Salisbury -- let alone in Downtown -- five such projects (and possibly two others) are considered to be in the developmental pipeline.
The total assessed value of the five is more than $70 million.
The program doesn’t either reduce or forgive property taxes, but delays their collection along a 20-year calendar. The idea is that potential developers would have their up-front costs reduced, but would be expected to pay the tab once the project is fully functioning financially.
The theory is that a developer can attract more investors with better early-year margins, while also avoiding massive tax assessment hikes that might prove profit-prohibitive.
Under the city’s program, a qualifying development would receive a 20-year tax abatement, with credits changing over blocks of years.
During the first five years, developers would receive a 100 percent city property tax credit. In years six through 10, the credit would be 80 percent. After that it would gradually be reduced to 40 percent in year 20.
In return, the city would recoup taxes from a boost in Downtown commerce, as the city’s center adds residents to its inventory of private office buildings and municipal complexes, including the two courthouses, the Government Office Building, old post office and Health Department.
The benefits to the county government, however, aren’t as obvious -- which made the Horizon program controversial for those who live outside of Salisbury. Opponents see the program as potentially detrimental to the county’s immediate revenue needs.
Concerns were also raised that more residential development would impact public schools enrollment, and add to government costs.
Proponents have portrayed the program as a “no-brainer” that will both send a pro-business message while encouraging residential growth in the urban core.
On Tuesday, the County Council’s most-aggressive opponent of the measure, Holloway, read a lengthy statement into the record detailing his opposition.
He couched his argument as he has in previous debates on the matter, insisting the county -- by allowing a tax abatement program -- would be losing potential tax revenues at a critical time.
He also worried aloud that developers might come back to the county asking for more.
“Will they be back at the table if this project starts to fail?” Holloway asked of The Ross specifically. “Should they not be required to stand on their own as projects have in the past?”
Acle said the council had never received enough reliable information on which to base a decision.
“There has been no economic impact study to tell us how this will affect the community,” she said. “I have asked that, citizens have asked that -- there has been no answer. This is why I do not support this bill.”
The city has recently spent $16 million upgrading streets, sidewalks, drainage and sewer. Developers and investors have credited the city with building a stage on which big-ticket projects can be built -- and succeed.
According to Deputy City Administrator Andy Kitzrow, the city’s point man on the Horizon initiative, those looking to invest in municipalities all over the country look for locations with tax abatements and municipalities with a pro-business mindset.
Horizon is only targeting residential development, not commercial development. State-backed Enterprise Zones are already in place to encourage commercial development.
Salisbury has a strong inventory of commercial development Downtown, but is lacking residential development. The renovation of the Powell Building on West Main Street quickly added to the center-city population -- it was completely rented out in a short time -- but it’s an accepted strategy that more people should be living in the urban core.
Brad Gillis of Gillis Gilkerson, the Powell Building’s developer and owner of the huge Downtown parking lot his company has slated for development, cited the Powell’s rapid rental of 20 upscale apartments as proof of potential.
“Wicomico County will benefit from real property increases, accessible base increases, and income tax increases as well,” Gillis said. “Lot 1 is not (currently) on the tax rolls -- the county and city are currently collecting zero tax income on them.
“Our project will be an exponential return on investment with this moving forward,” he said. “I see the positives outweighing any negatives.”
Cannon has been the council’s most-forceful proponent.
“This is an economic development driver,” he said. “If you see these buildings go in, you’ll see the jobs created, you’ll see people coming down, you’ll see a vibrant Downtown.
“Salisbury has gone a long way in improving Salisbury and this is just one more tool that we’ll have to benefit Wicomico,” Cannon said.
From the beginning, Horizon has had the backing of both the Greater Salisbury Committee and Salisbury Area Chamber of Commerce.
Ross developer Nick Simpson’s project at 130 and 132 East Main St. would be made up of a 12-story apartment building; neighboring 144 East Main St., the former Salisbury Area Chamber of Commerce office, would be developed as an eight-story structure.
When both buildings are completed, the complex will have 79 apartments. The taller building will have an open-air rooftop event center, offices and a ground-floor eatery.
On Tuesday, Simpson reminded council members there would be no negative effect on existing tax revenue flows.
“We’re never going to take away an existing tax dollar that’s (currently) collected,” Simpson said. “That stays the same. It’s only on increased assessment.”
Simpson also pointed out that numerous city-owned tracts await development that will increase tax receipts.
“We’re talking about projects on city-owned land that will be moved onto tax rolls and will begin immediately earning tax dollars for Wicomico County and Salisbury,” he said.