The Blaine County commissioners stumbled to wield their newest tool for stimulating affordable housing on Thursday, as a series of public hearings on development tax exemptions stirred up more questions than answers about the underlying ordinance.
The seven hearings determining tax relief for housing projects provided an array of test cases for the board’s logic, demands on the applicant and legal language underpinning the exemption process. Applications ranged from Sun Valley Co.’s $26.5-million, 170-unit employee-housing projects to ongoing renovations at the 12-unit Diamond Sun Apartments in Ketchum that skimmed against the $500,000 minimum threshold, with a wide variety in between.
Under state law, the county has until May 15 to approve tax relief for commercial projects—including rental housing. The board adopted a version of it last month, with a resolution limiting applications to affordable housing.
The state law took effect Jan. 1, 2018, dropping the investment required to qualify for an exemption from $2.5 million to $500,000, while opening the invitation beyond heavy industry to “nonretail” uses, including so-called “commercial housing” developments maintaining five or more rentals. Counties can implement the measure as they see fit, with the commissioners deciding which projects qualify, for how much they’re exempt and for how long, up to five years.
While the commissioners maintain broad discretion in granting those exemptions, during their first shot this week they remained unsure about how to wield it. Questions remain about what constitutes what Commissioner Angenie McCleary called a “small-‘a’ affordable” project, and even which projects qualify under the rules.
So far, none have passed muster.
Most were dismissed straightaway following an interpretation from the Idaho State Tax Commission barring exemptions for projects already underway.
“A retroactive exemption is not possible under state statute, once a project period begins,” commission representative Kathlynn Ireland told Commissioner Jacob Greenberg in an email.
“Project period” starts with work on the site, or hiring the first contractor in the state of Idaho, Ireland wrote.
That eliminated Sun Valley Co.’s Alpine and Aspen buildings, one of which is open, and the other well underway. Cold Springs Crossing, completed in 2012, withdrew its application after learning the rule. It also disqualified Diamond Sun, and posed a serious hurdle for another continued application for the first of two KETCH apartment buildings on the corner of First Avenue and Sixth Street in Ketchum. There’s already and excavator on site, following a formal groundbreaking on April 22.
The Tax Commission’s interpretation surprised applicants, as well as the board.
“We pushed hard to get this in place by the deadline,” McCleary said. “We’re still learning. I personally didn’t know about that element of Idaho code until a few days ago.”
If ironclad, the language could severely limit the effectiveness of the exemption, according to Bob Crosby, government affairs director for the Sun Valley Board of Realtors.
“It’s virtually impossible for someone to figure out what to do with a property without engaging someone, whether it’s an architect or for a feasibility study,” he told the board.
Greenberg believes the board may have some latitude to determine how far into the development process is too far to qualify.
“We’re still deciding what it means,” he said. “Does it start with entitlements? When you engage an architect? We’re working that out.
“This is meant to be an incentive—it’s meant to draw people in.”
After almost four hours Thursday, the board decided it needed more time. The hearings were continued until Thursday, May 9, at 9 a.m.
At that meeting, they’ll revisit applications from a trio of projects in various states of progress in Ketchum: both KETCH projects and city-mandated employee housing on First Avenue in Ketchum, tied to developer Jack Bariteau’s stalled hotel project on Main Street. Both applicants will need to provide estimated rents and demonstrate how the tax break would benefit future renters.
That raises another crucial question: What counts as “affordable,” as the board intended it? For some, it’s a moot point.
“What’s really important is you guys provide some clear rules for the road to developers about when the timeline is too late, and when it’s too early,” Sun Valley Economic Development Executive Director Harry Griffith told the board. “The kinds of questions you guys are asking—rental rates, square feet—you can’t come forward with that unless you’ve done some work. ...
“Housing is housing is housing. If it meets the standard, and its long-term, let it go. Because you need some fast wins—we all need some fast wins in this space.”