Townhomes proposed for Schilling subdivision
By Kevin O’Brien
Plans for building 11 townhomes over three years in the Schilling Subdivision will come before Abbotsford’s city council on April 5 after the planning commission voted last week to recommend a developer’s agreement and land sale.
The developer, Straight Shot Investment Group of Spencer, has agreed to a undertake a two-phase construction project that will begin on July 1 of this year and take no longer than 36 months to complete.
In exchange, the city will sell the company 11 lots along Swamp Buck Drive and Porcupine Lane for $1 apiece, under the terms of a developer’s agreement recommended by the commission. If this deal goes through, the city will have just two remaining empty lots on the corner of Fourth Avenue and Porcupine.
The first phase of the project will include the construction of six buildings, with four to six townhomes per building, over the course of no more than two years. Phase two will add another five buildings, with four to six townhomes units apiece, over another year.
Each constructed townhome will be deemed to have a fair market value of at least $700,000 plus the value of the land, according to the agreement. The minimum assessed value of each lot will be $600,000, allowing the city to collect a guaranteed amount of taxes.
Because the development will be located inside a tax-incremental financing (TIF) district, the city will keep 100 percent of the property taxes generated by the new construction. Normally, it would be split with the local school district, county and technical college system.
City administrator Dan Grady said the taxes generated by one $600,000 building would be $17,500 per year based on the current tax rates. Once all 11 townhomes are build, the city’s TIF district would be collecting $192,500 per year in taxes.
Under a plan developed by the commission in 2018, the city had been offering each lot for $5,000, on the condition that the buyer builds a home worth at least $175,000 within a year of the purchase. However, the city also wanted to offer potential developers flexibility on the price per lot in order to encourage proposals.
Last year, the city sold five adjacent lots north of Swamp Buck Drive to the owner of Abbyland Foods, at $1 per lot, so he could build two additional apartment buildings for his employees.
The terms of this latest deal were first made public at a March 25 planning commission meeting. Prior to that, commissioners had met in closed session with representatives of Straight Shot over the course of three previous meetings dating back to December.
Noel Felix of Straight Shot Development attended the meeting, along with Anthony Morice NAE Pfefferle, a real estate agent hired by the city to market the subdivision’s empty lots.
Commissioner Gerry Anders raised several questions about the proposed developer’s agreement, with a particular interest in what would happen if the developer “walked away” from the project before it’s completed.
Anders took issue with a provision in the agreement stating that “all unfi nished and/or undeveloped lots” will revert back to city ownership after 36 months. He wanted to know what would happen if the developer abandoned the project before the three years was up.
Anders also noted that the agreement would allow Straight Shot to sell any undeveloped lots to another developer, as long as they are not a tax-exempt entity like a housing authority.
Commissioner Jim Jakel didn’t have any problems with that idea.
“If he wants to sell a lot and somebody wants to build their own house, I don’t see anything wrong with that,” he said.
“The thing is, we gave it to him for a dollar,” Anders responded, noting that the deal calls for a “block” development and not individual houses.
Felix disagreed with Anders’ interpretation of the agreement, pointing to a provision that requires him to build at least $600,000 worth of property value on each lot. He said anything else would be a breach of contract.
“So, my only option is to do what I’m saying I’m going to do or give them back,” he said.
In response to Anders’ concerns, commissioners considered adding a line to the agreement stating that the lots would be returned to the city at any time the developer decided to walk away.
Grady, however, said that could result in Straight Shot abandoning the project at any time without much consequence.
“You’re giving him an open invitation to walk away after 12 months,” he said. “Then, all he has to do is turn the lots back over to the city.”
Eventually, the commission decided not to add another provision.
The agreement does require the developer to obtain a letter of credit from a bank as a way of guaranteeing that the townhouses will be completed in the designated three-year period.
Originally, the city was going to require that he present $8 million worth of credit to cover the entire two-phase project, but that amount was lowered to $4 million to cover one phase at a time.
If the city was willing to cut the credit requirement in half, commissioner Jim Weix wondered if the city should only agree to sell half the lots right away.
“That way, the city could retain possession, and if somebody else comes along and wants to build on one, we could sell it to them because you haven’t put the letter of credit for $8 million out, like we talked about to begin with.”
Mayor Lori Voss also pointed out that the city will be paying $2,000 per lot to NAE Pfefferle for selling the land to Straight Shot, and she wondered if the developer should have to pay that fee back if he fails to complete the project.
“If he walks away, at least the taxpayers get their money back, because they’ve already bought it once,” she said, referring to the city’s original purchase of the Schilling property in 2018.
Jakel, however, objected to adding any more provisions to the agreement, arguing that Felix is taking most of the risk by buying the lots that no one else wanted and agreeing to build on them.
“There’s nobody standing behind him at the auction,” he said. “He’s the only guy there, and he’s willing to make a hell of a commitment.”
If the deal were to “go south,” Jakel said Felix would have more to lose than the city.
“There’s a risk in everything, but he’s taking more of a risk than we are,” he said. “And all we’re doing is poking holes in it.”
Ultimately, the commission voted unanimously to recommend approval of the developer’s agreement with a few minor changes that everyone agreed to. A land purchase agreement was also recommended for approval.
According to the purchase agreement, the terms of the deal will become binding on April 7, two days after the city council’s next meeting. The sale will offi cially close on May 28.
Felix said he will use the time between April 7 and May 28 to pre-market the lots to interested buyers. The plan is to sell a mix of fourplexes with more floor space and five and six-unit townhouses that are more likely to be rented out. The market will ultimately dictate how many of each type of unit he will build, he said.
“It doesn’t matter what I want; it’s what the buyers are interested in,” Felix said. “They’re going to tell me what to build. We’ve given them three different options.”
Felix said the overall footprint of each building will be about the same, regardless of how much units each one has. The overall goal is flow from multi-family units on one end of the block to owneroccupied homes on the other.
As part of the purchase agreement, the city will allow Straight Shot to use a room at city hall for a pre-sale promotion event this spring.
However, until the city council approves the developer’s agreement and land sale on April 5, Felix said he can’t do anything to promote the project.
“I can’t sell these until we’re under contract,” Felix said. “Right now, I can’t do anything until I at least have an accepted offer to purchase.”
AN OVERVIEW -A bird’s eye view of the proposed townhouse development, showing one possible mix of four, five and six-unit townhomes on Swamp Buck Drive and Porcupine Avenue. The plan includes garages, either attached or detached, for each unit.SUBMITTED GRAPHIC
HAMMERING OUT THE DETAILS -Noel Felix of Straight Shot Development speaks to Abby’s planning commission last Thursday while commissioner Gerry Anders reads over a proposed developer’s agreement. STAFF PHOTO/KEVIN O’BRIEN
