AP NEWS

Tax bill deals blow to Bear Creek housing effort

September 2, 2018

Urban

A Rochester affordable housing project got an unexpected tax bill of more than $118,000 after taking title of the property in June.

On June 29, Bear Creek Christian Church officially took title to the 37-acre site, which had been home to Crossroads College. The college, which had occupied the site for more than 45 years, operated there as a tax exempt operation.

Crossroads ceased operation as a religious college in 2017 and could not file under exempt status for taxes payable in 2018. That means the site — valued at approximately $4.9 million with a taxable value of $3.1 million — would be assessed full taxes. That left Bear Creek Church on the hook for $118,415 in property taxes when it took title to the property.

“That’s kind of a big hit,” said Jeff Urban, Bear Creek Church’s outreach pastor.

Urban said he hopes a raise in rents won’t be needed to offset the tax bill, saying that doing so would go against the goal of the project.

“If we had to charge market rates for everybody, we wouldn’t do this project,” he said.

Bear Creek’s plan for the site includes housing and commercial space for nonprofit organizations at below-market rents. The taxes put a sizable dent in the church’s business plan, Urban said.

The site is home to 13 four-bedroom family apartments, 18 one-bedroom apartments and a dozen four-bedroom spaces that have shared kitchen and living room spaces. The commercial space has yet to be developed, but if new tenants are found soon, that could help offset the tax bill, he added.

The entire site needed work when Bear Creek took it over.

“It’s got a lot of deferred maintenance,” Urban said.

Stopping plumbing leaks, replacing toilets and fixing windows helped drastically cut utility expenses, said K.C. Reed, who volunteers his time doing maintenance and upkeep on the properties. Balancing maintenance with the need for revenue and the demand for affordable housing keeps volunteers like Reed busy.

Even before formally taking possession of the property, Bear Creek had begun converting the campus into affordable housing and a place for area nonprofits. Donated materials and volunteers hours — including work by Urban — made it possible to get some of the residential spaces filled and bring in revenue.

“Once word got out they were available and affordable, we were getting calls faster than we could fix them up,” Reed said.

The 4-bedroom family apartments rent for $1,000 per month and the one-bedroom apartments are $575 per month, said MaryAnne Ortiz, Bear Creek housing coordinator.

By taking title on June 29, Bear Creek met the June 30 deadline to file for a partial exemption for taxes payable in 2019, said Julie Hackman, Olmsted County assistant director of property records. However, that doesn’t affect taxes owed this year for last year’s assessment, she added.

Bear Creek’s current tax status exempts spaces the church rents to nonprofits. The housing units are partially exempt since they fall under Minnesota’s 4d affordable housing tax code, Urban said.

“We budgeted about 50 percent of what we owe in taxes,” Urban said.

Half of the $118,415 has been paid. However, the bill sets back plans for heating, ventilation, and air-conditioning work and replacing a boiler. Between fundraising and anticipated rent revenue and the generosity of the 150-member congregation, Urban said he hopes to bridge the gap in the meantime.

“Our hope is to generate a fair bit of support outside the congregation,” Urban said. “We’re looking at the whole property as something that will benefit the community.”

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