Written by Don Ratzlaff Wednesday, 28 May 2008 07:04
The recent platting of Hillsboro Business Park continues a model of real-estate development that has become increasing significant for the city over the past 15 years or so.
The city’s most progressive developer is the city itself.
“(The city of) Hillsboro really never intended to get into real-estate development, but that decision was made in order to give Hillsboro a chance to grow,” said Mayor Delores Dalke, herself a real-estate broker and developer in the private sector.
“That decision” refers to Hillsboro Heights, the first major development undertaken by the city. The light-commercial business park, which officially opened in October 1999 along U.S. Highway 56, is now home to eight businesses with two more lots being sold this month for a ninth project.
Rather than intentional design, the city entered the real-estate development business because opportunity and need intersected at a key time.
“Hillsboro Heights started because the land was available and we had nobody who would take it on to develop it,” said Dalke, who was mayor at the time.
“The city council, at that point, felt that without development along the highway, Hillsboro had nowhere else to go as far as commercial (growth),” Dalke said.
“When that land became available, the decision was made that (the city) would purchase it and develop it so Hillsboro had a chance to grow.”
In hindsight, she believes the move was a good one.
“Without developing it we wouldn’t have a motel, we wouldn’t have a Sonic, we wouldn’t have a grocery store out there, we wouldn’t have a Dollar General—because we had no place for those to go downtown, and they needed the exposure of Highway 56.”
By developing the property itself, the city could create an economic incentive for potential businesses to move in. By state law, light commercial business are not eligible for tax abatement. But the city was able to offer an economic incentive that a private developer couldn’t: new businesses would not have to pay special assessments on streets and utilities.
The payoff for taxpayers is long term.
“I do think Hillsboro Heights has been a very good thing because with the additional sales tax and extra property tax coming in from business that have located out there—it’s probably the best way we have spent our money for economic development,” Dalke said.
The city’s next major project was another case of opportunity and timing coming together. In 2002, the city accepted an offer from Dairy Farmers of America to purchase the company’s former building, the surrounding 30 acres and a major natural-gas line for a mere $75,000.
“Actually the $75,000 seemed like a very good price just to get our hands on the gas line,” Dalke said. “We have the gas line leased, and so far we haven’t gotten any return on that.
“But I do believe that owning the AMPI building was probably one of the best economic-development moves we could have made,” she added. “Granted, there are problems with the building. It’s an old building. But we have so many business that are located, at least partially, in there.
“It has helped our economy by having those businesses have a place to go—whether to store materials, to run a hot tub business, to keep the trucks coming in here with Gorges Dairy—those are very good jobs. They are some of the better jobs that have been created here.
“And those people live here, and they have a place to make a living here.”
A small fire in the AMPI building in 2007 created obstacles the city has had to face, including a decision by the school district not to locate its new central office and vehicle maintenance center in the facility.
“Because of the fire and because of the age of the building, some money will have to be spent in order to keep those buildings going,” Dalke said. “But we always talked about that we need an incubator building—and now we have one.”
The AMPI purchase has also led to the recent development of Hillsboro Business Park on the acreage between the building and the highway.
The council recently approved the sale of three lots in the new park, with street and utility development to begin in the next few months.
Public versus private
Dalke said in a perfect world real-estate development is the domain of private enterprise.
“If we had people who lived here, or were interested enough in Hillsboro to do the developing, we would let them do it in a minute,” she said. “It’s what we would like to see happen. But based on the size of the community we are, we have to do it because nobody else is stepping up to do it.”
The mayor said she’s sure the city’s forays into real-estate development have generated criticism in some circles, but she hasn’t heard any directly.
“I think it’s interesting that people in Hillsboro have come to the point where they expect the city to do lots of things for them,” she said.
“That really is a surprise to me because Hillsboro is basically a Republican town—we believe that business takes cares of things,” she said with a smile. “But we act like we’re Democrats because we want government to do things for us.”
When it comes to real-estate development, the city has few other candidates with sufficient financial means to take on major projects.
“I’ve always felt that if the Hillsboro Development Corp. had more money, the Hillsboro Heights project would have been a good project for them,” Dalke said. “Or even the business park would have been a good project for them, too.
“But I think it’s a lack of resources on their part for them to step forward and do those things,” she added.
“They’re a very good economic development group, but I think they have been short on resources in order to do the things that need to be done. (The city has) been able to work it out.”
In the past few years, the city has found itself entering the residential real estate field. It owns two lots on North Lincoln, two along North Ash, and seven lots—after selling one earlier this month—in the Willow Glen subdivision.
The acquisition of residential lots has been entirely be default, according to Dalke.
“The residential lots the city owns (on Lincoln and Ash) were (acquired) because the properties were condemned, and in order to get them torn down and cleaned up, we ended up with title to them,” Dalke said. “That was to get rid of some properties that were not in very good shape.”
Last year, the city was offered the lots in Willow Glen by the private developer when he was unable to meet his obligation to pay special assessments.
“If a developer can’t or doesn’t pay the special assessments, the city ends up paying them,” Dalke said. “That’s why we have become stricter and stricter about letters of credit and those kinds of things to back up a developer.
“We did have a letter of credit on Willow Glen, but once that was used up we were writing a check for all the special assessments out there on those empty lots.
“(The developer) offered to give them to us. I think in a way that makes a lot of sense because they weren’t in a position to pay the taxes, and we were paying them,” she said. “Now at least we have control over them and hopefully can get them sold so we can again have a landowner pay those special assessments.
“We as a community can’t afford to be paying those.”
Dalke said her personal desire is to see the two adjacent lots on North Lincoln be used for affordable family housing. By virtue of the deed restrictions and covenants outlined by the subdivision’s homeowners association, the lots in Willow Glen must be used only for new housing.
Sell or give away?
Whether for residential or commercial holdings, Dalke said the city council has resisted jumping on the bandwagon of giving away city-owned lots as a way to entice buyers.
“A lot of those programs, if you start talking about them today, people aren’t very happy with them because the people who got the free lots thought they were getting everything 100 percent free, and they weren’t going to have to pay special assessments for streets and sewers,” Dalke said.
The city also has to handle marketable real estate in a financially responsible way, the mayor added.
“We really have to make sure that anything we do will be profitable and that new homes will be built on them,” Dalke said. “A lot of those (giveaway) programs have turned out to be mobile homes, and there isn’t very much tax return on those.”
Dalke said the idea of a giveaway approach still surfaces occasionally, but she is convinced it isn’t a good path in the long run.
“I think Hillsboro is a little above doing that,” she said. “I just do not think we should ever give away lots. One person I talked to about a possible lot here in Hillsboro wanted me to promise we would never give away lots. They could see the value of what is going on in Hillsboro and the fact that those lots would be worth more and more in the future.
“They don’t want lots given away because that says they probably aren’t worth very much,” she added. “Particularly when we’re talking about commercial lots.
“Actually, the price of land versus the cost of building is small. The giveaway of lots doesn’t amount to much.”