City’s tax saving program offsets 38 percent of new construction costs

Sept. 05--Pat Velzka is the first in line for Akron's new residential tax abatement program.

Having recently moved into a brand new $320,000 house on the western edge of Wallhaven, Velzka could save $122,000 in property taxes over the next 15 years if his application is approved.

"Just think of what you could do with $120,000," said Velzka, 52. "Build an addition. Pay a debt. Pay for a kid's college."

These are the perks of buying a new home in Akron, where few new homes are built.

So far, four Akron homeowners have filed tax abatement applications to avoid the additional property taxes that come when property values increase due to new construction. Akron's Planning Department reviewed the applications this week to determine eligibility. The next step is final approval by the Summit County Fiscal Office.

The potential savings, if realized, range from hundreds of dollars to the six figures Velzka might get. The tax incentives are meant to encourage private investment in Akron's abundant but under-priced housing.

Velzka said he heard about the tax deal on talk radio. "A lot of people were pissed because they've lived here their whole life and didn't get [the abatement]. I kind of agree with them," he said.

But that was last year. Now, he said neighbors in his more upscale corner of Akron are breaking ground on new homes and talking about renovations knowing that tax savings down the road could offset more than a third of construction costs today.

Marketing

City leaders are banking on the residential tax abatements to revive development.

But only time will tell if or how the incentives reach every neighborhood and socioeconomic class.

"I think it will hit residents of all income levels, but it might do that in slightly different ways," explained Akron City Planner Jason Segedy.

Akron's mayor and City Council are appointing a housing commission as part of the legislation that wrote the tax abatement program into law. That group will first meet in December, Segedy said. By then, he'll have six months of applications to chart the impact on development and lost local government revenue.

When similar initiatives were rolled out in Cleveland and Philadelphia, Segedy said initial projects that were abated included multi-family apartment units, which, in theory, could benefit lower-income residents by allowing builders to pass along the tax savings in the form of cheaper rent.

Areas like Middlebury are close to employers, like Summa Health and the University of Akron. But they lack stable housing, Segedy said. "As the market gets stronger in some neighborhoods, we will see some infill with single-family houses," he said, referring to marketable single-family homes built around larger development.

Calculating savings

The Akron Beacon Journal/Ohio.com used current property tax rates (not including special assessments or other fees) to create a simple formula for anyone who is thinking about building a new house or taking on major repairs.

As a simple rule, multiply the cost of the project (assuming it would increase property value dollar for dollar) by 38.2 percent, or 0.382. The result will be a rough estimate of how much in property taxes one might expect to save over the 15-year tax abatement.

Awaiting the arrival of their first child, Alexis and Rob Frank had no plans for major home repairs.

Then, in December, Rob fell through the poorly constructed and rotting front porch of their Highland Square home while setting up a live Christmas tree for all to see. So the couple pulled a permit to rebuild the porch in March, not knowing the sagging beam holding up the roof and the joists below would all need replaced.

But they spared no expense. New floor joists and load-bearing beams. An outdoor ceiling fan, antique light fixture and fresh paint. Rot-resistant handrails and Douglas Fir tongue-and-groove floor boards.

Their little porch project more than doubled in cost.

"And we have learned that you pay for what you get," Alexis said. If they can get county approval, they could save about $10,000 in taxes over the next 15 years.

Since she bought the house in 2009, Alexis has seen few repairs made around the neighborhood. Several homes have stayed on the market for longer than she'd like to see, especially if she plans to sell in the next five years.

And the fact that she couldn't find a good local contractor made her think there's not much of a local demand for fixing up homes.

The couple said they think the tax abatement program might help. But it needs to be marketed better, they said. And they question who will benefit the most -- people like them, who make above-average incomes, or the entire city?

Doug Livingston can be reached at 330-996-3792 or [email protected]. Follow on Twitter: @ABJDoug.

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