A PILOT is a payment in lieu of taxes made to compensate a local government for some or all of the tax revenue lost due to tax exempt ownership or use of a particular piece of real property. Jay Magee, director of asset management for the Jonathan Rose Companies, said at the meeting Burton Place was built in 1978 by Forest City Enterprises, and the property has been an affordable Section 8 building ever since then. It has been overseen by the Michigan State Housing Development Authority (MSHDA).
“Being a Section 8 elderly building, residents pay only 30 percent of their net income,” Magee explained.
Magee said the average resident income at the building is $10,600 annual net income. He added that although 43 residents of the building are under the age of 62 and disabled, the building is primarily for those 62 and over.
In March of this year, the property transitioned to the Jonathan Rose Companies as a management property only, and the property is expected to transition solely to the Jonathan Rose Companies by the end of the year, according to Magee.
He said the property was “built like a tank,” but it needed renovation, and a tax credit was going to help bring new life to the building.
The fire happened two days before the property was to transition to Jonathan Rose, and the nine units which had water damage from the fire-fighting were being repaired.
David McCarthy, president of Heritage Housing, Inc., said the current overall construction budget for renovation of the property is $5.3 million.
Councilwoman Tina Conley, who said she had a soft spot for seniors, asked if the rent of the residents would be raised due to repairs.
Magee said a rent increase from HUD was expected, but residents would continue to pay 30 percent of their net income, adding that every unit was covered by a Section 8 contract.
Council Vice President Duane Haskins said he was concerned because the original PILOT was adopted in 1978. He said he didn’t think the tide had turned with everything else that was going on in the city with the taxes that are being paid for the facility.
McCarthy said over the past 4 years the pilot payments had been approximately $43,000 a year, but it was projected to increase to approximately $67,000 in 2018 due to the rent increase on the Section 8 contract. The pilot extension would require a payment of four percent of the revenue of the building, he added.
Council President Steven Heffner said it would be good if local contractors could be used for the renovation project. McCarthy said he would provide a list of how many subcontractors were local.
When Councilman Thomas Martinbianco asked if the property could be used for other purposes once the PILOT was extended, Attorney Steven Rypma said the property would be committed as affordable housing for 35 years. He said the only thing which could undo that regulatory agreement would be a foreclosure, eminent domain or something of that sort.
Councilman Steven Hatfield said it was kind of a no-brainer to lock in affordable senior housing for the length of the mortgage. Despite council’s concerns, the members voted unanimously to approve and authorize the resolution.