Captivating debate from council members over proposed city tax incentives and whether they help their target, flood victims

To date, federal money has provided most of the subsidies for housing that has been built or is in line to be built in Cedar Rapids with the hope of replacing affordable housing lost in the June 2008 flood.

Now the City Council is wrestling with a new matter: Using city taxpayer dollars to subsidize some of the cost of most of the homes in a proposed 81-home development, homes that council member Chuck Wieneke, for one, isn't sure any flood victim will be able to afford to buy even with taxpayer help.

At one point in an engrossing debate last night about trying to provide new housing for flood victims, council member Pat Shey said he the city easily could end up subsidizing new homes for farmers coming to town to retire or older college students who needed a housing deal that they could quickly turn for a profit once they had a degree.

In the end, though, even Shey said he would be willing to work on a plan by local developer Darryl High to help subsidize High's proposed 81-home development, called Sugar Creek, off Zika Avenue NW across from the Ellis Golf Course.

When the debate ended last night, it seemed as if High might get some version of his plan approved, perhaps in as soon as two weeks.

High has asked the City Council to provide a subsidy of $31,000 for each lot, which will allow builders to sell houses for between $90,000 and $130,000. Most of the council discussion last night centered on the $130,000 figure.

A city consultant has recommended just a $26,500 subsidy per house - $17,500 to be used by the buyer to buy down the cost of the house so its cost is no more than $130,000; and $9,000 for High to put in the development's infrastructure.

Under the High proposal, 20 of the homes would be built as rent-to-own homes, an idea which most on the council said they liked and which they said would make those homes meet an “affordability” standard.

Council member Brian Fagan, a mayoral candidate, talked about the idea of a voucher system, which would give a voucher to people, for instance, whose flood-damaged homes were slated to be bought out and demolished. Those people could put the voucher value toward the purchase of a home, whether it was in High's development or not.

High said, if he could, he'd like to see all 81 homes go to flood victims, but wasn't sure how that could be accomplished. He said his proposal adds housing stock to a city that's lost a lot of housing. He said some who buy the homes might not have been impacted by the flood, but they might be moving from an $80,000 home that a flood victim then could purchase.

Many of the council members wondered where the money would come from if the subsidy High was requesting was paid for most of the 81 homes.

After last night's meeting, Fagan said one value of a voucher system is that the city might be able to use local-option sales tax revenue designated for flood-related housing to pay for the vouchers since the vouchers would go to flood victims.

Council member Tom Podzimek suggested the city might be better off to scatter the subsidies so new homes could fill in older neighborhoods with empty lots. He said he knew of four lots near Daniels Park in northeast Cedar Rapids.

At one point, Shey said he needed to know if the High proposal was little more than the city subsidizing market-rate housing that owners could then sell for a quick profit once a five-year period passed.

Shey pointed to a recent incentive that came from the federal government through the state government as disaster assistance, which provided up to $60,000 in down payment assistance for homes up to $180,000. Shey called it federal money which may have been "muscled" through by homebuilders during an economic downturn. In any event, Shey argued that the city doesn't have that kind of deep pockets when it comes to housing incentives.

Wieneke noted that the city soon would be taking control of a large number of lots once buyouts and demolitions begin. Shouldn't the city subsidies be used there? he asked.

Council member Monica Vernon pushed sufficiently hard for the High proposal that she seemed to turn the tide of the debate. She said she wanted to see some homes built.

High is the developer, Tom Berthel owns the land in question and Kyle Skogman intends to build some of the home.

Vernon wondered if the city staff had misled the three by meeting with them over many months only to now have the council pull the rug from under them.

There were several mentions of 20 replacement homes that have been built by Skogman Homes in the Oakhill Jackson Neighborhood, which also have used local tax incentives. Each of those homes received about a $35,000 incentive, but the subsidy was part of a program that existed before the flood. The incentive there was seen as necessary to build in a neglected neighborhood where no developer had been willing to build.

The Oakhill homes are being sold for $83,000 to  $103,000 after the subsidy. Kyle Skogman, president of Skogman Homes, has said nearly every one of the 20 homes has gone to a flood victim.

Skogman also intends to build some homes in High's proposed development, and he urged the council to get behind the plan.

At one point, though, council member Wieneke asked Skogman if he could build new homes that might be accessible to flood victims if the city provided its 6.7 acres at what was the former Ellis Golf Course chipping area.

Skogman said he could, and he estimated that it would cost $18,000 to $20,000 in infrastructure costs per home for such a development.

High quickly pointed out that he proposed doing that very thing in November when he first approached the city with that idea, the Sugar Creek idea and a third one.

At the time, he noted, Sherman Associates Inc. of Minneapolis already had proposed affordable apartments for the Ellis chipping area site, so he said the city encouraged him to focus on the Sugar Creek plan. Sherman Associates gave up on its plan amid neighborhood opposition, and High last night said at that point he didn't feel like taking on “People for Parks” either.

At no point in last night's debate did any council member make mention of a new private-sector initiative, called Block by Block, which was launched to great fanfare just a week ago. Block by Block intends to see that life returns to most every property in eight blocks of flood-damaged homes before Christmas. Three homes on the program's first block are slated for buyout with the thought that new homes might go in those spots.

Skogman was at last week's event that kicked off the program in the 1300 block of Eighth Street NW.