WATERLOO | City leaders and home builders were hoping the promise of property tax breaks would have new homeowners flocking to Waterloo.
But more than two years after adopting the City Limits Urban Revitalization Area there has been only a modest increase in new single-family home starts.
City building reports show a combined 107 new single-family houses were started during the first two years of the CLURA compared to 93 new homes built in the two years before its July 1, 2011, adoption.
Totals are less impressive when homes built using state flood assistance grants are excluded: Just 73 new single-family homes were built in two years with the tax abatement program compared to 71 houses in the two prior years.
"Admittedly, it hasn't worked as quickly as I'd hoped it would," said Mayor Buck Clark. "I wanted to see people lined up at the (building department) to build houses in Waterloo."
Clark and local developers, however, believe the program has sparked renewed interest from potential home builders, especially in the higher price ranges, and is getting large-scale housing developers looking at Waterloo instead of outside its borders.
"I think it's working," Clark said. "It's having the effect we want it to have, and I hope the City Council votes to keep it."
Council members will be asked Jan. 13 to extend the CLURA for another three years. The original three-year program is set to expire June 30.
At issue is whether the incentive has been successful in making Waterloo more attractive to home buyers and builders or whether it is giving away much needed property tax revenue to support city services.
City Councilman Steve Schmitt chaired the Grow Residential Opportunities in Waterloo committee, which recommended the CLURA. GROW included developers, contractors, appraisers, real estate agents, land owners and city and school officials all looking for ways to attract more housing construction.
"I share some skepticism," Schmitt said. "But we got the group together against this fall, and they all said they thought it was having a positive impact.
"I've talked to a couple different people who said that was really the reason they decided to build in Waterloo," he added. "I think there's more positives than negatives."
Despite having more than 50 percent of the population in Black Hawk County, Waterloo was only getting about 20 percent of the new homes and was seeing Cedar Falls rack up three or four times more housing starts. Few were platting new residential lots in Waterloo.
Waterloo had a Consolidated Urban Renewal Area, adopted in 1998 to give property tax breaks for new construction and large improvements. But the CURA applied only in targeted inner city areas.
The CLURA is a citywide incentive giving three full years of property tax abatements for new single-family or twin homes. A person buying a new $200,000 will save a projected $12,700 in property taxes over three years.
Schmitt said the idea was worth a try because the status quo was not acceptable.
"When you look at the numbers and the roof lines going up in Waterloo compared to other cities like Cedar Falls, Waterloo had just been flatline for so long, a downward trend really," he said. "We really need to see some of those big developments in Waterloo like we're seeing over in Cedar Falls."
Skogman Construction Co. of Iowa is one of those large-scale developers the CLURA is hoping to attract. The company developed several hundred houses in Cedar Falls, largely in the Meadows and Quail Ridge subdivisions.
"Being a development company we have watched this (CLURA program) very closely," said Kevin Fittro, vice president of Skogman. "We are very seriously looking at providing a development in the next year (in Waterloo) like a Quail Ridge."
Skogman has already built 20 houses in Waterloo, mostly after the CLURA adoption, in Audubon Park and Klingaman Park south of U.S. Highway 20 near the West Fourth Street corridor. And it has invested in 60 buildable lots in the Hummingbird Circle area just south of the Crossroads Hy-Vee store.
Fittro said the CLURA tax savings are a "balancing" factor for developers choosing where to invest.
While it costs the same to develop land and build houses in Waterloo and Cedar Falls, homes in Cedar Falls generally command a higher price. The CLURA tax abatements even the playing field.
"When I talk to them directly — home buyers comparing Waterloo and Cedar Falls — that tax abatement value sitting in their head was a huge part of the conversation," Fittro said. "To me it's been a big success."
Developer Rick Young said the CLURA has helped fill up his Klingaman Park subdivision.
"We've sold more lots in one year than about three years worth of lots before the CLURA," Young said. "There were 27 lots in that subdivision, on Williams and Yellowstone (drives), and we got it done in two years.
"You're seeing a lot more higher-end homes being built too," he added. "Waterloo had been totally out of that market. I'd say it has been very helpful."
The city's Planning, Programming and Zoning Commission has also recommended renewing the CLURA.
Community Planning and Development Director Noel Anderson believes the program helped stop the bleeding after Waterloo saw new housing starts fall from 76 single-family homes in 2005 to just 21 homes in 2008.
"While not a great upward trend, it is at least not a downward trend anymore," Anderson said. "We believe the lack of more housing since the CLURA adoption is also due to the lack of new lots being platted or available."
Anderson said the city has been in discussions with several developers about the development of more than 150 housing lots in Waterloo over the next three years, provided the CLURA remains.
He also noted the first homes built under the CLURA will begin paying full taxes soon. Unlike tax-increment financing programs, the tax abatements expire automatically after three years and the revenue is released back to the local governments.
"While it may not appear the (housing) numbers are greatly above where they might have otherwise been," Anderson said, "we believe the CLURA has allowed some people to give Waterloo a second look to build their home here."
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