Bloomington-Normal may need a different approach to stimulate housing construction. The community first quantified the need for housing in a study a year ago and updated it in June to an estimated 7,500 units.
Yet a perfect storm of factors has inhibited the way builders have responded to the demand, barring a few exceptions, according to Normal Assistant City Manager Eric Hanson. High interest rates for builders, high interest rates for buyers, rising construction costs, and labor shortages all are having an effect.
The traditional approach the city of Bloomington and the town have taken to residential development projects has been to facilitate them, with maybe a grant program for improvement, but largely to let the market decide.
Hanson said it used to be developers paid for water and sewer extension, parks, and landscaping in addition to the apartment buildings. He said high interest rates and construction costs make that model unworkable now.
"If we really want affordable, accessible housing, there's going to have to be a different approach than just to say you, developer, cover all these costs and then hope that the rent covers all that plus whatever profit margin you need," Hanson said on WGLT's Sound Ideas.
“What we're seeing is those numbers just don't equate. They can't justify the development. So, we're just not seeing the expansion that I think a lot of people would like to see.”
In some cases in Bloomington-Normal, Hanson said developers who go ahead may find they cannot get tenants because the units are not affordable. Hanson said municipalities will have to come up with a new way to help developers create the housing the community desperately needs, adding public intervention will be required to offset some costs. And those costs are not subject to change.
“Maybe municipalities are going to have to look at the infrastructure side, because that's really the big cost going in — water, roads, sewer storm, sewer, sidewalks, green space, and so on. How does the municipality work to offset some of those costs to ensure that the actual buildings themselves are affordable?” said Hanson.
Some municipalities, he said, have found other tools.
“Some are doing it through HUD offsets, grants or tax credits. Those types of things tend to take a little longer but provide more assistance down the road. Some are just taking a bite and just putting in some of the infrastructure upfront,” said Hanson.
He said a couple communities have gone into housing development themselves and then offloaded the property or supported projects with bonding authority.
Some have offered property tax abatements, though it is far more common to offer those to developers who create jobs or commercial activity than it is to provide abatements for residential projects, partly because return on investment is more definable and faster.
"I've even talked with folks who have tried to take parts of tax dollars, whether it's CDBG, or just general fund dollars, and leverage that with either private or say, like community foundation dollars to do housing, rehab, housing construction,” said Hanson. “I suspect there's going to be either more public dollars going in or at least public dollars, leveraging grants and or additional private investment to make the math work.”
He said any conversation about property tax abatements must involve municipalities and school districts, much as Bloomington-Normal took a couple years to codify a standard incentive package for commercial development and to attract job creators.
“When I was in Iowa there was a housing program to incentivize new housing starts with property tax abatement. But just like here, in order for that to work, you also have to get the school to sign off and the county because the school in the county is 80% of the (tax) bill. And the town's portion of it is 10%,” said Hanson.
Exit gracefully stage right
Hanson is the outgoing assistant city manager for the Town of Normal. He's leaving in early December for the top job in the city of Galesburg. Hanson said his five years in Normal helped shape him into the public servant he has become.
“One of the things I have appreciated and will certainly take with me is that — organizational culture is important. The folks here work well together, Pam (City Manager Pam Reece) does a tremendous job of leading the team. And it makes a difference. I think a lot of our successes, a lot of our ability to get things done, obtain grants, deliver services, comes down to having a culture and having people who understand the importance of good service delivery,” said Hanson.
He said the other thing the town does well is plan.
“Many of the successes that have occurred here over the past 20-30-40 years are a direct result of really good planning and sticking to and not reacting, but being proactive to the things that they want to accomplish. And I just think, you know, Normal does that better than other communities very candidly,” said Hanson. “So professionally, those two things, will definitely help guide me as I move into the next role.”
Creating that culture, he said, requires understanding the nature of the organization you want to become, and then finding individuals that fit and adhere to that philosophy, people who at the same time bring different perspectives to the table.
“It's lead by example, right? Whether it's some small request or issue by an individual or neighbor all the way up to some major development project, the manager sets the tone and the expectation for how you do business, how you resolve those issues,” said Hanson.
He said most problems are not necessarily complicated to solve, but the approach matters.
“I think she (Reece) demonstrated, and I think and hope that I will do the same thing in my new role and Galesburg that here's the expectations. Here's how we deliver those services. Here's how we communicate,” said Hanson.
“The arrow is always pointed back at her first, right? She never deflects. And by nature that builds trust, builds camaraderie, builds respect within her staff, which then provides the right motivations to do the things that they need to do and the trust that they can do it. And I hope that when I get to Galesburg, I do the same thing.”
One of the advantages in creating a culture is continuity. Normal has had just three city managers in its existence with the present form of government. And those have all been internal. That is rare. Hanson noted the average tenure of a city manager is 5-7 years, and Normal greatly exceeds that track record.
His own path has been more hopscotch. He started as a city manager in Monmouth, a small town of 9,000 people, and then took other positions in larger communities to broaden his experience. He said long-tenured managers as Normal has had are an exception.
“I also think in today's world, there's more political volatility than there was 15 years ago. In some cases, there's turnover because the volatility of American politics today at not only at the state national level, but certainly at the local level too,” said Hanson.
That volatility inflects the care for and support of elected officials on city and town councils who set the policies that Hanson and other staff carry out.
“Everybody's style is different but in the end it's building trust, and good communication, and understanding the differentiation of roles. I can say without hesitation, there are decisions that the council here makes that I don't agree with. But in the end, the delineation is there in terms of what the roles are. Staff do their best to provide good guidance, good information and the best possible recommendation. In the end, the job is to carry out the wishes of the council," said Hanson.
He said the approach with one council member is not necessarily the same as the approach with another council member. They all have to get the same information and understand the intended goal. But they come have different perspectives and staff must understand the intricacies of each council member and communicate with them in the style that fits their approach to have constructive dialogue.
“Part of being in city management and administration in general is you are, in part, paying someone for their advice. If you choose not to listen to their advice, that's OK. If you choose not to listen to their advice repeatedly, then you're probably not in the right place. Right?” said Hanson.
The difficulty level rises in elected bodies that are more closely divided than has typically been the case in Normal. He said he is familiar with that. He was hired in his first job on a 5-4 vote. He said he tries to find areas on which people can agree, because so much in today’s politics and society involves focusing on differences. In reality, he said people probably have more in common than they are willing to acknowledge.
“What I have found over the years is that if you can get a group of people who are pretty divided to work and come together on issues of commonality, they begin to grow and understand that we're all human. You hope that through those experiences of finding commonality and success, that the disagreements become more civil and more ones of mutual respect between the parties. Because I think that's how democracy is supposed to work,” said Hanson.
