Worthington City Council reviewed a proposed Workforce Housing Property Tax Abatement Program on November 3rd that would provide tax incentives to developers who include affordable housing units in mixed-use projects that generate employment and income tax revenue for the city.
A Conservative, Targeted Approach
Assistant City Manager David McCorkle presented the working draft guidelines, emphasizing that this is not a broad residential tax abatement program. "We have specifically and deliberately named this a workforce housing tax abatement program," McCorkle explained. "In Worthington, as a landlocked community, having an income tax generating component to the project is very important."
The program requires projects to either retain or create a minimum of $5 million in annual payroll to be eligible—regardless of project size. Projects would also receive one bonus year of abatement for each additional $5 million in payroll beyond that threshold.
Target Income Levels
The program focuses on two income levels defined by the U.S. Department of Housing and Urban Development (HUD):
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60% Area Median Income (AMI)
- Targets skilled trades, retail workers, some teachers, and healthcare assistant staff
- One-bedroom max monthly housing cost: $1,241 (including utilities)
- Two-bedroom: $1,489
- Three-bedroom: $1,719
80% AMI
- Represents household incomes in the $65,000-$85,000 range
- Includes IT workers, nurses, firefighters, and police
- One-bedroom max monthly housing cost: $1,655
- Two-bedroom: $1,985
- Three-bedroom: $2,292
These maximum housing costs include utilities and represent 30% of gross household income—a standard measure of housing affordability.
How the Program Works
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Abatement Structure
Property tax abatements work by exempting a percentage of the increased property value resulting from new construction. The baseline property value continues to generate tax revenue for all taxing entities (city, schools, county, library, etc.). Only the incremental value from improvements can be abated.
For example, if a developer purchases property valued at $1 million and builds a $100 million project, the $100 million in new value could be partially abated at rates ranging from 50% to 100% for periods of 10-15 years, depending on the project's characteristics.
Key Requirements
- Minimum $5 million annual payroll (retained or created)
- New multifamily construction only (not renovation/rehab)
- Properties must be located within current commercial CRA (Community Reinvestment Area) boundaries
- Affordable units must be dispersed throughout the development, not concentrated in one area
- Mix of one-, two-, and three-bedroom affordable units proportionate to overall project
- Annual reporting and compliance review
Flexibility Options
Projects that fall slightly short of affordability targets can pay into a housing fund instead—$40,000 per unit for 60% AMI units or $20,000 per unit for 80% AMI units. However, this option is capped at 10% of required units to ensure the program focuses on actual affordable housing creation rather than becoming a fee-based opt-out.
Innovative Program Features
McCorkle highlighted several considerations that distinguish this program:
Extended Affordability Period
The city is considering requiring five additional years of affordability beyond the tax abatement period. "Tax abatements are valuable, very valuable," McCorkle noted. "So I do think we have the ability to encourage a great project to happen, but we also have the ability to reinforce the affordability component of these projects."
Stepped-Down Abatements
To avoid "sticker shock" when tax abatements end, the program could structure more aggressive abatements in early years that gradually decrease. This prevents sudden large tax increases that might be passed through to tenants as rent spikes.
Annual Oversight
The city's Tax Incentive Review Council (TIRC) would track projects annually, reviewing compliance reports and making recommendations to City Council to continue, modify, or terminate abatements if projects don't meet their commitments.
Resale Provisions
For units that are sold rather than rented, the city would monitor whether buyers meet AMI requirements and could adjust abatements if projects fail to maintain affordability standards.
Regional Context and Goals
The program targets creation of 1,300 affordable units, based on Worthington's proportional share of a regional goal of 200,000 new housing units. The City of Columbus has committed to half that regional target, with other communities encouraged to contribute their share.
McCorkle noted that few communities have similar programs. Columbus has "a very robust program, and they're very aggressive with it." Whitehall, Reynoldsburg, and Bexley also use property tax abatement for housing. "Bexley would be the best example," McCorkle said, noting they've emphasized the income tax generation and commercial investment aspects similar to Worthington's approach.
School District Coordination
McCorkle met with Worthington School District officials, who are "generally supportive" of the program. While the city can approve abatements up to 75% for 10 years without school board approval (only requiring notice), McCorkle emphasized the city's commitment to collaboration.
The schools' main concern was ensuring the flexibility option doesn't become a workaround allowing developers to simply pay fees instead of providing actual affordable units. The proposed 10% cap addresses this concern.
Companion to Fiscal Impact Study
The program aligns closely with findings from the fiscal impact analysis presented earlier in the same meeting. That study showed mixed-use developments with employment components generate positive fiscal impacts, while purely residential development creates deficits under Ohio's income-tax-based revenue structure.
One councilmember noted the connection: "I see this as really a good companion piece to what we heard earlier where we want to focus on mixed-use with residential, and this is our first tool to get that."
Council Reception
Council members responded positively to the proposal, with multiple members praising the level of detail and thoughtful approach.
"This is really, it's well thought out. The detail, it's impressive, all of the things that have been thought about," said one councilmember.
Councilmember Amy Lloyd supported all the optional features McCorkle presented, including extended affordability periods, stepped-down abatements, and strong compliance monitoring. She noted the importance of avoiding affordable units becoming "a pass-through" that benefits developers without providing lasting community benefit.
Councilmember David Robinson endorsed the conservative starting approach: "I do think approaching it commencing with a relatively conservative approach is smart as opposed to overextending and doing something that you regret. It can always be modified after three months, six months, a year or two."
Uncertainty and Next Steps
McCorkle acknowledged uncertainty about how the development community will respond: "We don't know exactly how well this will be received in the development community because we are being a little conservative."
He ran multiple scenarios using real development pro formas and believes the program will still be attractive, though it may not work for every project. Council members suggested checking in with developers after three to six months if applications aren't received, to understand what might be holding them back.
Dorothy confirmed Council is ready for staff to "start framing out the legislation and putting more meat on the bones essentially in terms of writing it up," rather than requiring another discussion session.
The program, if adopted, would give Worthington a new tool to address housing affordability while maintaining fiscal sustainability through the income tax generation requirements—a balance city officials believe is essential for a landlocked community with limited opportunities for new development.