The City Council on Tuesday night voted 5-4 to approve a tax abatement for an $8 million housing project near UTC.
Voting in favor were Chris Anderson, Jerry Mitchell, Russell Gilbert, Carol Berz and Moses Freeman.
Opposed were Yusuf Hakeem, Ken Smith, Larry Grohn and Chip Henderson.
UTC Five, LLC plans to construct two four-story buildings at 500 Lindsay St.
There will be 16 efficiencies, 24 one-bedroom, and 24 two-bedroom units. Officials said 13 of the efficiencies will be set aside as affordable housing. Those eligible must make less than 80 percent of the county median income of $31,000.
At the County Commission on Wednesday, Commissioner Tim Boyd sharply questioned the tax abatement, while Commissioner Joe Graham backed it. The county vote will be next Wednesday.
Commissioner Boyd computed that the governments would be giving up as much as $1 million in taxes. He said the developers could turn around and "flip it" in a few years. The county was told that the tax abatement can be transferred with the approval of the city's Health, Educational and Housing Facility Board.
Commissioner Boyd said it would be hard to verify if those qualifying for affordable housing truly qualify. He said, "I know bartenders driving around in BMWs who don't have $31,000 on their W2s."
Commissioner Graham said the county would not be losing any taxes and would stand to gain a significant amount for the schools.
Attorney Alfred Smith said, even if the county turns it down, the developer could opt to proceed using the city tax breaks but paying full county taxes.
Developer Roe Elam said the efficiency set asides will rent for $730 per month. He said the tax abatement allowed lowering the price by about $50 per unit.
He said, "If we don't get the PILOT (payment in lieu of taxes), we put a For Sale sign in the front yard. The PILOT makes a big difference."
Mr. Elam said this would not be typical dorm-style student housing, but would be aimed more at graduate students, professor, staff and young professionals.
Councilman Smith questioned whether a $50 difference "would keep a young professional from renting." He also asked, "Is it worth a 10-year abatement?"
The developer will pay no taxes on the improvements for 10 years. Afterward, there will be an annual step up from 20 percent to 40 percent to 60 percent to 80 percent and finally to 100 percent in 2030.
Councilman Freeman said the project is among those "bringing bodies" downtown, and he said they would help spur economic development.
Councilman Hakeem said the tax abatement benefits might help downtown, but would not brighten other areas, who he said would be without the $800,000 in forgiven taxes.
Kim White of the River City Company said such tax abatements are necessary to lure developers to include affordable housing. She said, "Our young people are moving back, but they have no place to live downtown."
She noted that the council earlier approved the framework of the residential abatement program. Councilman Smith said, "The fact that we approved the framework last Aug. 6 in no way restricts my right to review each individual project."
She said the property is hilly and difficult to develop. She said it has been vacant for six years.
Councilman Anderson noted that the developer would continue to pay the current taxes and the school taxes.
The Health, Educational and Housing Facility Board earlier approved the project.