(a) Purpose, City Authority and Findings of Fact. It is determined that a proper public purpose of the State of Michigan and its political subdivisions is to assist in the provision of housing for its residents of low income and to encourage the development of such housing by providing for a service charge in lieu of property taxes in accordance with State law. The City of Battle Creek is authorized to establish or change a service charge to be paid in lieu of taxes by any or all classes of housing exempt for taxation under the Michigan State Housing Development Authority Act of 1966, as amended, at any amount it chooses, but not exceeding the taxes that would be paid but for the Act. It is also found that housing for persons of low income is a public necessity and as the City will be benefited and improved by such housing, and that the encouragement of same by providing certain real estate tax exemption for such housing is a valid public purpose. It is further found that the continuance of the provisions of this section for tax exemption and the service charge in lieu of taxes during the period contemplated in this section are essential to the determination of economic feasibility of the proposed housing development which is to be rehabilitated and financed in reliance on such tax exemption. The City acknowledges that the Sponsor, Battle Creek VOA Affordable Housing Limited Partnership, has offered, subject to receipt of an allocation under the Low Income Housing Tax Credit program administered by the Michigan State Housing Development Authority, to purchase, renovate, own and operate a qualifying housing development on certain property located in the City to serve persons of low income and that the Sponsor has offered to pay the City on account of this housing development an annual service charge for public services in lieu of all taxes.
(b) Definition of Terms. All terms in this section shall be defined as set forth in the Act, except as follows:
(1) "Act" means the State Housing Development Authority Act, being Public Act 346 of 1966, as amended.
(2) "Annual shelter rent" means the total collections during an agreed annual period from all occupants of the development representing rent or occupancy charges, exclusive of the portion of said charges attributable to gas, electricity, heat or other utilities furnished to the occupants by the Sponsor.
(3) "Authority" means the Michigan State Housing Development Authority.
(4) "City" means the City of Battle Creek, a home rule municipality organized pursuant to Public Act 279 of 1909, as amended and located in Calhoun County, Michigan.
(5) "Development" means the multiple family housing development located in the City of Battle Creek on certain unplatted land at 180 Carl Avenue and known as Knollwood Townhomes.
(6) "Housing development" means the development which contains a significant element of housing for low income persons or families and such elements of other housing, commercial, recreational, industrial, communal and educational facilities as the Authority has determined improves the quality of the development as it relates to housing for low income persons or families.
(7) "Low income person or family" means a household composed of one or more persons whose household income is 60% or less of the area median income as adjusted for family size and who are determined to be eligible to move into the development under the provisions of Section 42 of the Internal Revenue Code of 1986, as amended, the units of which shall be rent restricted.
(8) "Mortgage loan" means a loan made by the Authority to the Sponsor for the rehabilitation and permanent financing of the housing development.
(9) "Section 42" means Title 26 United States Code Section 42 of the Internal Revenue Code of 1986, as amended.
(10) "Sponsor" means Battle Creek VOA Affordable Housing Limited Partnership, a Michigan Limited Partnership, which has or will apply to the Authority for a mortgage loan to finance a housing development under this section.
(11) "Utilities" means fuel, water, sanitary sewer service and/or electrical service that are paid by the Sponsor.
(c) Applicable Class of Housing Developments. It is determined that the class of housing development to which the tax exemption set forth in this section shall apply and for which a service charge shall be paid in lieu of such taxes shall be a housing development which has or have received a low income housing tax credit allocation from the Authority pursuant to Section 42. The tax exemption provided by this section shall apply, notwithstanding any language in Section 882.01 to the contrary, and the language in this section shall govern any conflict between this section and section 882.01 so long as this section is in effect. Based on representations and warranties of the Sponsor, it is determined that the development subject to this section is a housing development eligible for tax exemption provided by Section 15a of the Act.
(d) Establishment of Annual Service Charges.
(1) The development and the property on which it is located shall be exempt from all property taxes from and after the effective date of this section until the section terminates. The City acknowledges that the Sponsor and the Authority have established the economic feasibility of the development in reliance upon the enactment and continuing effect of this section and the qualification of the development for exemption from all property taxes and payment in lieu of taxes as established by this section, and in consideration of the Sponsor's offer, subject to the receipt of a low income housing tax credit allocation from the Authority, to purchase, renovate, own and operate the development, agrees to accept payment of an annual service charge for public services in lieu of all property taxes.
(2) The annual service charge to be paid in lieu of taxes shall be equal to 2.5% of annual shelter rents.
(3) Nothing in this section shall be construed to exempt the development and property on which it is constructed from any special assessment for street or other public improvements or as a result of its location within a business improvement district authorized by 1999 Public Act 49, as amended.
(4) The determination of when each housing unit in the development is occupied by a low-income person or family shall be made for each year as of December 31 of the immediately preceding year.
(e) Contractual Effect of Section. Notwithstanding the provisions of Section 15a of the Act to the contrary, the contract between the City and Sponsor with the Authority as third party beneficiary under the contract, to provide tax exemption, accept payments in lieu of taxes, as previously described, is effectuated by the enactment of this section.
(f) Payment of Service Charge. The annual service charge in lieu of taxes as determined under the section shall be payable in the same manner as general property taxes are payable to the City except the annual payment shall be paid on or before February 14 of the year following the year for which payment is due.
(g) Duration. Commencing with the tax year 2005, and ending with the tax year 2034, this section shall remain in effect and shall not terminate from the effective date hereof, provided that the development remains subject to income and rent restrictions pursuant to Section 42, and that rehabilitation of development commences on or before December 31, 2005.
(h) Benefits. The sponsor shall allocate the benefits of the tax exemption granted pursuant to this section exclusively to the low-income persons or families of the development in the form of reduced rent. Such benefits shall not be allocated to market rate persons or families. The Sponsor shall, at the request of the City, submit to the City such evidence and documentation as may be reasonably necessary to verify Sponsor's compliance with this requirement.
(i) Audit and Inspection of Records. Subject to any limitations imposed by law, the Sponsor shall provide to the City such accounting records, audits and financial reports as the City shall reasonably require to verify the computation of the annual service charge as provided by this section. The Sponsor shall maintain such records of rent or occupancy charges received and the occupancy of units in the development as will permit the City to verify which of the units in the development have been occupied by low-income persons or families. Subject to any limitations imposed by law, the books and records of the Sponsor pertaining to the development shall be available for review and audit by the City at all times.
(j) Lien. Annual service charges payable pursuant to this section shall be a lien on the development, and, if delinquent, shall be collected and enforced in the same manner as general property taxes.
(Ord. 19-04. Passed 9-21-04.)