Committee offers a solution to Vergas City Council

By Robert Williams

Editor

Last month, the Vergas City Council forgave the special assessments on three Sunny Oaks county-owned HRA lots slotted for a future senior housing project. The eight remaining lots are now owned by the Vergas EDA/HRA and that group had a lengthy discussion on how to proceed with marketing said lots at their monthly meeting on Tuesday, Aug. 5.

The amount of those three special assessments on the county’s property will not have to be recouped on the sale of the remaining eight lots, per the council’s decision.

The senior housing project is waiting on grant approval for the county to proceed. That approval, or denial, is expected by November. If funds are not granted, they will be reapplied for in 2024.

Ownership of the remaining eight parcels, part of a tax-forfeited development that failed years back, has been transferred to the Vergas HRA.

The amount that is owed on each lot is $22,895 for sewer and water infrastructure that was built into the development.

At the time, the city council approved the Sunny Oaks development with the risk of not being recouped for the city and sewer install should the development fail.

“They knew at that time how much of a risk that was,” said EDA/HRA president Kevin Zitzow.

The city put $250,000 of infrastructure into the Sunny Oaks subdivision in 2009. One lot was sold, but the family that owned the property turned it over to the state.

The county owns three connected 0.19-acre lots on the south side of Eva Street that are slated for triplexes targeted for senior living.

The EDA/HRA owns three matching lots across the street and the remaining five lots on Dianne Avenue, which vary in size at roughly a half-acre or less. Sewer and water hookups are stubbed at each lot.

The specials have been removed from the eight lots on paper, but the assessments will be added by the city upon each sale.

“Right now, if it was today and someone was asking, I would say zero specials, I perceive $22,900 assesses going on from the water and sewer installation,” clerk/treasurer Julie Lammers said.

Assessments can be paid over a 20-year span.

The main discussion point was how the assessments are going to be handled by the Vergas HRA and its recommendation on proceeding with the sales to be made to the council, which meets this week.

The $22,895 could be included in the sale price and paid off by the HRA upon a sale or put directly on the buyer. That discussion led to different sales scenarios and price points.

One scenario was to sell a lot for $10,000 or less and let the buyer take care of the specials over two decades. 

“If the city is going to come back and ask for the $22,895 one way or another, I’d rather put them up for sale for $8,000,” said DuWayne Ditterich. “When you start seeing an $8,000 lot, a $22,000 assessment over 20 years, no one’s going to hardly think about that at all.”

“That was my point,” said Vanessa Perry. “If it’s paid off over that long, it just gives them that much more money to put towards building or whatever else.”

One counter to this plan was that specials can be a deterrent to prospective buyers, despite the low sale price.

“Marketability-wise, if we’re trying to make these look like the most attractive lots that we can, our first option would be to lower the specials and put them on a cheaper price with no specials,” Joy Summers said. 

Selling the lots is imperative to each member of the EDA/HRA.

“If they sit empty you’re never going to collect a dollar on water and sewer ever,” said Ditterich. “It makes more sense to have these sold than not.”

According to Lammers, if the lots sold and the water/sewer assessments were paid up front, the city could save money by refinancing and paying off a portion of the water/sewer infrastructure bond, cutting what the city is already paying in interest.

Bruce Albright, who sits on the EDA/HRA board and city council, discussed with Summers about going to the council with a plan that any profits made from early lot sales could be used to build on a remaining lot owned by the EDA/HRA to try to increase profits from a sale of a lot with a home already in place.

The discussion was also taken from the economic development side. Because Vergas has a combined EDA/HRA entity, profits from the sales could be used on either side, allowing for funds earned to benefit a business project in town.

Perry noted there is definitely a surplus of residential lots in Vergas compared to the lack of available commercial space.

The committee agreed early on that holding off on marketing the lots for a month to negotiate with the city council was the best way to proceed. It also allows for more research into the lots’ potential.

“One month isn’t going to hurt us,” Zitzow said.

“I definitely think it’s worth our time to look into what the numbers would be for us to build on them and how much profit we could get from that,” said Summers.

The discussion came to a conclusion that the assessments need to be addressed immediately.

“It’s a give and take situation,” said Zitzow. “I think the HRA needs to push the city for half off the assessments. Right now, you’re getting nothing.”

Summers worded the motion that was agreed upon and passed unanimously.

“We are proposing that at the sale of a lot, the HRA pays $10,000 per lot to the city to help cover some of the water and sewer infrastructure expenses with the condition that the city does not add special assessments at the point of sale,” said Summers.

“This is going to be our first major step into getting something done,” said Zitzow.

The city council meets Tuesday, Sept. 12, at 6 p.m.