Terre Haute nixes tax abatement for Annex 41 student housing project

Those voting against were George Azar, Todd Nation, Curtis DeBaun, Martha Crossen and Amy Auler. Those voting in favor of the five-year abatement were Earl Elliott, Karrum Nasser, Neil Garrison and Don Morris.

After the vote, Kyle Bach, CEO of Annex Student Living — the project developer — was asked his reaction to the vote and had no comment. When asked if the project will still go forward, he said, "That's yet to be determined.'" When asked if he might not move forward with the project, he answered, "Correct."

During the meeting, council member Debaun asked if the project would be pulled without the abatement. Bach said without the abatement, the project would have to be scaled back and it would diminish overall quality. "We will need to scale back our amenities. The quality of cabinets may shrink, flooring may change, appliances may change, which would then diminish the overall quality of the facility to make the numbers work."

Bach said without the abatement, "We will have to value 'engineer out' some aspects of the project."

But after the vote, when asked as he left City Hall about scaling back the project, Bach said, "It could be significant."

For the second week in row, the Annex 41 tax abatement drew much discussion and debate, and representatives of the Apartment Owners and Managers Association of Terre Haute spoke against it because they believe it provides the developer with an unfair competitive advantage — one they didn’t have — a subsidy in the form of a tax abatement.

Attorney Rick Shagley, representing the developer, re-iterated the project's many benefits: the $25 million investment, the $230,000 to be paid in property taxes annually after the abatement period; economic support to the Terre Haute Boys and Girls Club; and a catalyst for additional development in the area. 

Shagley suggested a no vote would send a negative message to those from outside the community who might  have considered making an investment here. "This is a project you won't see come your way very often," he said.

Under a five-year abatement, about $700,000 in property taxes would be abated over the five years; by the second year, the company would pay $46,000 in property taxes, and by the fifth year, $184,000 in taxes. In the sixth year, the full amount of $230,000 would be paid.

But apartment owner Jim Hellmann maintained, "They can do it without public support." He said the local apartment association welcomes the new apartment complex, but it should not benefit from a tax abatement. He also stated that since the developer is from Indianapolis, most of the student rental income would leave the Terre Haute community.

Prior to their vote, several council members explained their position.

Nasser said he would support the abatement because of the property tax revenue the project would generate; currently, because the property is owned by the non-profit Terre Haute Boys and Girls Club, it pays no property taxes.  

Elliott also pointed out the project would benefit the city, county and school district because of the property taxes generated. He had concerns that a "no" vote would send a bad signal to outside investors.

Crossen emphasized that she welcomes the Annex 41 project, and her vote was related specifically to the abatement.

After the meeting, DeBaun said it was a difficult decision, one he based on Bach's answer after he asked whether the project would be pulled without the abatement. Debaun said, based on Bach's response, "I felt this development would go through with or without the abatement."

In a separate matter, by a 6 to 3 vote, the council approved a nine-year tax abatement for a proposed La Quinta Inn and Suites to be located at 451 E. Margaret; the project is estimated to cost about $7 million. Voting in favor were Morris, Auler, Crossen, DeBaun, Garrison and Nasser; voting against were Elliott, Azar and Nation.

Gurukrupa Hospitality Inc. plans to build the La Quinta, an 80-room, four-story hotel that would sit between Fairfield Inn and Cracker Barrel.

The tract has been vacant for many years, according to Heidi L. Slinkard, the petitioner’s legal representative. The petitioner has a conditional purchase and franchise agreement — the franchise agreement is for 20 years.

The abatement serves to delay the full amount of property taxes paid, but the project would still generate an estimated $563,580 in property taxes over the nine-year abatement period. By the 10th year, it would generate at least $139,500 per year. Over 20 years, the hotel would generate $2.1 million in property taxes, Slinkard said.

Slinkard said the project will not be built without tax abatements. She said a tax abatement phases in property taxes, and the city will still benefit from added property taxes it wouldn’t otherwise have.