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LMI lowered to 28 percent for Cottonwood condo project

Published: Thursday, July 10, 2014 11:37 a.m. CDT • Updated: Thursday, July 10, 2014 12:14 p.m. CDT

City officials have waited about three weeks for this news.

Mike Taylor, city administrator, told Creston City Council late last week that Iowa Department of Economic Development approved the city's waiver request to lower the LMI (low-to-moderate income) rate for the proposed Cottonwood Subdivision project.

It was reduced from 43 to 28 percent.

"When bonding for a project like this the state requires 43 percent be set aside for LMI projects," Taylor said. "So, if we borrow $1 million, we were required to put $430,000 aside for low-to-moderate income housing."

That percentage — based on population — is different for every county in Iowa.

The reduction to 28 percent is good news for taxpayers because more of the tax revenue generated from condominium properties in the Cottonwood Subdivision could go directly toward paying off the debt service for the condo project. (Read more about the proposed condo project, below)

The city is currently working with Sonntag to find locations in Creston — away from Cottonwood Subdivision — to build low-to-moderate income housing using the money that would be set aside.

This LMI rate reduction is one of several moving parts for this project as Taylor and city attorneys continue to prepare a proposal with Atlantic private developer Don Sonntag — who wants to build at least 14 condominiums in the Cottonwood Subdivision.

"I don't have a timeline for when the proposal will be ready," Taylor said. "The attorneys started working in June and know we'd like it as soon as possible."

Creston City Council will then vote for or against Sonntag's condominiums in the Cottonwood Subdivision once the proposal is complete. That vote is expected sometime before fall.

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Timeline of events

• In January, Atlantic private developer Don Sonntag — who has built more than 175 condominium units in the Atlantic area — made a presentation to Creston City Council proposing to build at least 14 condominium units in the Cottonwood Subdivision. He proposed two options. They included a 1,229-square-foot condominium on a slab with two bedrooms, two baths, large one-car garage with an estimated cost of $149,950. Sonntag said a second garage can be added to this floor plan for about $12,000. The second option proposed is a 1,459-square-foot condo with two bedrooms, two baths, double car garage and (unfinished) walkout basement. Estimated cost for that floor plan is $259,950. Infrastructure costs for this project — estimated at $750,000 — include sewer, public streets, sanitary, storm sewer, water and grading. The city would pay for the infrastructure costs through bonding.

• In February, Tionna Reed Pooler — financial advisor for the city — outlined the financial risks involved with the project being proposed by Sonntag. Her analysis estimated the infrastructure cost involved with this project could increase taxes for each Creston household anywhere from zero to $50 annually for a period of at least 10 years — depending fully on the project’s success.

• In March, about 20 Crestonians — city council members, local real estate agents and interested Creston citizens — went on a two and a-half hour bus tour all across Atlantic to view condos built by Sonntag. That day, many on the tour asked Sonntag if he could provide a third pricing option for a 1,459-square-foot condominium on slab that includes two bedrooms, two baths, double car garage in the neighborhood of $190,000 to $200,000.

• In April, Sonntag came back with a number of $229,950 for the third pricing option.

• In July, the city recieved notification Iowa Department of Economic Development approved the city's waiver request to lower the LMI (low-to-moderate income) rate for the proposed Cottonwood Subdivision project. The city was also successful in this waiver process in the late 1990s with the James Addition when LMI was reduced from 38 to 25 percent.

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