CORUNNA — Individuals looking to renovate damaged or outdated commercial property in downtown Corunna can now apply for a property tax abatement for up to 10 years.
The city council Monday unanimously approved a Commerical Redevelopment District encompassing the entire downtown, making such requests possible.
After approving the district, the city council also unanimously approved its first applicant, Michael Luongo, owner of the former Dunchock buildings, 223/225 N. Shiawassee St.
“I think it’s great, and I’m glad it was unanimous too,” City Planner/Assessor Merilee Lawson said. “It gives me tools as a city planner. I get people coming to me, you know, wanting to invest and they ask ‘Are there any programs out there?’ This allows us to help promote people who are actually interested…they don’t come along that often.”
The establishment of the redevelopment district falls under Michigan’s Commercial Redevelopment Act. Once a city or village establishes a district, property owners with obsolete or vacant land within the boundaries can apply for tax abatements.
If an individual property owner’s application is approved, he or she will receive a commercial facilities exemption certificate.
According to Lawson, applications go through the city council for approval. If accepted, they then must obtain approval from the state.
Under an exemption certificate, property taxes would essentially be frozen at the current assessed value prior to renovations for up to a decade. The precise length of the abatement depends upon the individual application, Lawson said.
To be eligible for an abatement, an applicant must demonstrate that the building investment will result in a 20 percent or more increase in the property’s State Equalized Value (SEV), i.e. the investment must raise the taxable value of the property.
Furthermore, the city reviews the type of use, the amount of capital investment and the proposed amount of jobs created in a given application when determining the eligibility and length of an abatement.
Points are awarded for each attribute on a scale, with one point representing one year of abatement.
There are three types of use that qualify for the abatement: commerical businesses (4 points), qualified retail food establishments, such as grocery stores and markets (6 points) and multi-family housing of five or more units (2 points).
The amount of capital investment is also evaluated on a scale: $50,000-$100,000 (1 point); $100,001-$250,000 (2 points); $250,001-$500,000 (3 points); and $500,001 or more (4 points).
One point is awarded for every one to two full-time jobs created as a result of renovations. Additional points are awarded if the full-time positions pay two times the national minimum wage or more, City Manager Joe Sawyer said.
“We wanted to try to make criteria so that not everybody that comes in the door maxes out and gets ten years,” Sawyer said. “At the same time, you have to do a certain amount of investment in order to get anything. We don’t want people coming in here, asking just because they’re going to spend $5,000 to replace their furnaces.”
Luongo purchased the Dunchock buildings in an online tax auction in October 2017. Since then, he has been working steadily to revitalize the space.
Between labor and materials, Luongo projects he will have invested upward of $350,000 in the buildings by the time renovations are complete. He said he expects to have the work done by April 2023.
Monday night, the city council granted Luongo a seven-year abatement, citing his commerical business use and his capital investment of over $250,000.
Luongo said the district is mutually beneficial.
“I think it’s in both of our interests, for the city and for me. The city wants to see the building done,” Luongo said. “When I get closer to being finished, the taxes would keep going up and I’ve looked at like the building that’s down the road, their taxes are $4,500 a year, so that becomes a big burden when you’re not making money, you know, until you get to the point where you can actually rent the space out, until it’s finished, so it’s a huge benefit, it’s very nice.”
Luongo’s seven-year abatment takes effect Jan 1. 2020, but he could potentially receive an extension.
“If someone was granted under 10 years, they have the right to come back to you and ask for an extension to get up to the 10 years, but you have to spell out in your resolution on what grounds,” Lawson said. “For us, it’s job creation, so if Michael gets the building completed in the middle, lets say he’s four years into his seven years and he gets it completed and he comes to us and says I’m hiring two people two times or three times the national minimum wage, he could get up to three more years, the full ten years.”
Sawyer said the work Luongo is doing is phenomenal.
“We thought that building was lost to the city, obviously, no question about it, we had very little hope that anybody would buy that out of tax sale, it was just so dilapidated and had such issues with it that we didn’t really see much future for it other than a demolition,” Sawyer said. “It was kind of like the fire we had back in the late ’80s where we lost half a city block. We were about to lose that half a city block. Not only is he saving those historic buildings but he’s saving the buildings next to them too.”
Dunchock, a former attorney, once had his law office in the buildings. However, over time the buildings fell into disrepair, resulting in multiple court battles with the city over their condition. Eventually, the buildings were sold by the state after Dunchock failed to pay the property taxes.
In the meantime, the roof developed a hole, resulting in interior damage, and the west wall partially collapsed and had to be barricaded off to prevent injury to passersby.