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City agency considers plan to buy, rehab rundown properties

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An apartment building near downtown Franklin remains empty and has boarded-up windows and scorched siding after a fire one year ago.

A similar home next door that’s divided into apartments has a crumbling foundation and is missing gutters.

Both are being looked at by a city organization that wants to use tax dollars to fix and sell eyesore residential properties. The work could cost more than $500,000 to complete.

Multiple residents, business owners and city officials told the Franklin Development Corp. during community meetings this spring to focus on cleaning up rundown residences as a new program. The buildings at 399 and

397 N. Main St. fit that description, with the city receiving about 10 complaints since the beginning of the year, community development specialist Rhoni Oliver said.

Owner John Emery is willing to donate the fire-damaged building and sell the other to the Franklin Development Corp. so the organization can renovate and then sell them.

The city might need to spend as much as $570,000 in tax dollars to repair the buildings, according to a construction estimate from former board member Lisa Fears. That money would come from the city’s tax-increment financing, or TIF, districts, which collect property taxes from certain businesses for economic development. Once the renovations are done, the buildings potentially could sell for $605,000 to $710,000 combined, according to Fears’ estimate.

The organization has never done this type of project before, so board members aren’t sure how much work would be needed to design the projects, hire a contractor, oversee construction and then sell the buildings. Board members don’t want to become a landlord. The city could have thousands of tax dollars invested in a building if it doesn’t sell once the renovation is complete.

Since the organization has several other projects in progress, Mayor Joe McGuinness said he would prefer the group wait until other projects are complete before starting a new venture, although he was supportive of the idea of fixing up residential properties. The redevelopment commission would have to approve spending the tax dollars before any work could begin.

Improving properties

Fixing up eyesore properties and selling them could accomplish dual goals of cleaning up problem properties downtown and providing the organization with operating funds, board president John Ditmars said. The development corporation relies on the city council to provide money each year for operating costs such as legal fees, advertising and web hosting, but those expenses could be paid from profit made on selling renovated homes. If the properties sold for more than the renovation costs, the city also would be able to recoup all of the tax dollars used to rebuild them.

The organization was given $5 million in TIF money when it was created in 2008, and one goal was to renovate housing around downtown. The group gave out low-interest loans to several homeowners and landlords to help pay for building repairs but never purchased and paid directly to renovate and resell a house.

The city reorganized the board last year, replacing six of the seven members; and the original funding has almost run out. The previous board never was able to find a way to generate income, and the $5 million was depleted as the group gave out grants for facade work or large projects.

Even though one of the buildings would be donated, the board balked at the cost and amount of work that would need to be done, especially since they’ve never done a project like this before, board member Lisa Jones said. Board members want to meet with the mayor, city council and redevelopment commission to discuss upcoming projects and build a consensus about whether they’re good projects to invest tax dollars in, Ditmars said.

“The message I heard was the project is consistent with something we’d like to do, but we’re not sure both units is the way to go,” Ditmars said.

Estimating costs

Workers would need to repair the second-floor fire damage at 399 N. Main St., install new heating and cooling systems, replace windows, gutters and aluminum siding, upgrade electric service, put in new insulation, repair foundations and renovate bathrooms and kitchens. That work would cost about $281,000 plus another $138,000 for design work and a 10 percent contingency fund.

The board estimates buying 397 N. Main St. might cost as much as $150,000. But if the organization only renovated the fire-damaged building that Emery would donate, the cost for the project might be closer to $210,000 with a potential selling price of $250,000 or more. Rebuilding both at the same time would save a little money and improve the neighborhood, but the board might consider doing only 399 N. Main St. first as a trial project, Ditmars said.

The Franklin Development Corp. currently doesn’t have enough money to take on that size of project and would need more TIF funds to do the work.

Bob Heuchan, president of the redevelopment commission that controls the TIF dollars, said funding this type of residential work would be the next logical step to improving the downtown. The redevelopment commission already has invested heavily in new streets and sidewalks, while the Franklin Development Corp. has used tax money to fund new building facades for downtown businesses, he said.

“It doesn’t make sense to be putting in streets and sidewalks and lights if people are driving through and see a burned-out or rundown property,” Heuchan said.

State law bans redevelopment commissions from owning residential properties, so renovation work would need to be handled by the Franklin Development Corp.

The organization would try to sell the residences for a profit. That will be an additional risk when using tax dollars if a building doesn’t sell for several months or if it doesn’t sell at a high enough price to recoup the investment, Jones said. She was in favor of first rebuilding the fire-damaged building and seeing how much it costs to renovate, how quickly it sells and what price it sells for before tackling the other residence, she said.

‘Do our homework’

Jones and board member Steve Woods also plan to meet with Oliver to identify other properties that could be candidates for a rehab program if the board decides not to take on the larger Main Street homes, Jones said.

“We need to make sure we do our homework and get all our cost estimates and know what the risk and possibilities are,” Jones said.

Even if the Franklin Development Corp. doesn’t break even or make a profit on a residential project, Heuchan said, he would still be willing to put tax money toward the program because a renovated home would add value to the neighborhood and help attract more people to live or start a business in Franklin. The city has similarly used tax dollars on facade renovation grants that aren’t repaid in order to reap the benefit of a more attractive downtown, he said.

Franklin could lead the renovation efforts, since private developers aren’t seeking out homes to renovate, Ditmars said. A private owner is likely more interested in how much profit a home or apartment building could generate, while the city’s interest is more geared toward neighborhood improvement, he said.

Building a consensus among all city groups such as the city council and redevelopment commission will be important since this type of work hasn’t been tried before, McGuinness said. Multiple other projects that were funded by the organization haven’t been completed, so the mayor said he would like to see those completed first before beginning new projects that require tax money.

A renovation program could be beneficial to catch problem properties before they are too badly rundown to be repaired, such as the former Red Carpet Inn motel near Interstate 65, which was demolished, and would help improve gateways into the downtown and increase property values in neighborhoods, he said.

“The last thing we want to have is similar to that hotel on the east side that became a problem. We don’t want these properties to fall into complete disrepair, and a lot of them have a lot of history to them,” McGuinness said.

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