The owners of land west of Havre de Grace who are seeking to have their properties annexed could get a 10-year waiver of city property taxes, if the annexation resolution in its current format is approved by the city council.
The process of annexing the 244 acres, collectively known as the Mt. Felix Farm or Montgomery Green properties, is occurring at a time when the city has been facing shortfalls in local income tax and water and sewer revenue, the latter situation which has been blamed on not enough new development occurring.
The properties being annexed are south of Route 155 and east of Bulle Rock Parkway.
The planned property tax waiver is not unusual, a city council member says.
"That's what the property owners asked for because that's what had been given in previous annexations," Councilman Fred Cullum said Tuesday.
'Incentive' to join city
He mentioned the 97-acre tract the city annexed about a decade ago that was owned by the Green and Barker families and is now owned by Upper Chesapeake Health, as well as the land that became the Bulle Rock community, which was also annexed.
Both received similar breaks, Cullum said. The Upper Chesapeake property is directly across Bulle Rock Parkway from the Mt. Felix properties.
According to the annexation resolution before the city council, the owners of the Mt. Felix properties would have to pay the full amount of city tax owed, if and when their land is slated for development with an approved subdivision plat entered into city land records. Otherwise, the exemption would automatically end after 10 years, regardless of what happens to the land.
"Basically, it's vacant land, and they don't pay taxes until a plat is approved to develop . . . it's an incentive for them to annex and an incentive to have them in the city limits for future development," Cullum said.
The owners of the annexed lands would still have to pay county property taxes, as they do now.
The incentive the city is giving them to be annexed is a double-edged sword. While no revenue will likely be generated immediately for the city, there is an expectation of revenue from any future development in the form of property taxes, water and sewer connection fees and even income tax revenue from people who might one day live there.
Tax incentive or not, the landowners have their own financial motivation to be annexed. Without the city water and sewer services that come with annexation, their properties would not be worth anywhere near what they will be to developers, once they come into the city.
Park, trail extension
The 10-year city property tax waiver is one of several amendments to Annexation Resolution No. 277 that Cullum introduced and his fellow council members approved during their Feb. 18 meeting.
Amendments to create a five-acre city park and an extension of the Lower Susquehanna Heritage Greenway trail within the proposed annexed area were also approved, and Cullum said both are significant.
Cullum, who is a member of the city's Planning Commission, worked with the property owners, City Attorney Paul Ishak and city planning staffers and members of the Planning Commission to develop the amendments.
A public hearing on the annexation resolution is scheduled for April 7.
The same night the property tax waiver and other amendments to the annexation resolution were approved, Mayor Wayne Dougherty presented a dire picture of the city's revenue received in the first half of the current fiscal year.
Dougherty recommended a minimum 15 percent increase in water and sewer rates, effective April 1. He also said income tax revenue is $120,000 short of budgeted goals, although property tax revenue is $175,000 higher than projected for the same period.
Income and property tax revenues support the city's general fund, while the water and sewer enterprise funds are supported by revenue from water and sewer customers.
No financial impact yet
Cullum stressed this point in a follow-up e-mail.
"Because undeveloped annexed property requires little to no services there is no impact to the General Fund until it is developed at which point taxes are then assessed," he wrote.
Cullum noted the city would collect water and sewer revenue, once the property is developed, through "the collection of Capital Cost Recovery Fees" and "billable water and sewer."
Ishak, the city attorney, also said Tuesday that "tax abatements on annexations are not unusual."
He noted several Green family members who owned the property that was previously annexed and the sold to Upper Chesapeake Health are also involved with the latest annexation.
"Instead of reinventing the wheel I think the city just took the position to use the same formula that was used on Bulle Rock and Barker/Green," Ishak said.