The city council has granted an eight-year ad valorem tax exemption to the developer of the former Fred’s building downtown.
Mayor Keith Gaskin broke the tie after heated debate on the tax abatement at Tuesday’s council meeting preceded a deadlocked 3-3 vote. The building, owned by Jim Mauldin, now houses 130 climate-controlled storage units, which opened in November.
“Since we’ve done this in the past for other business, I am voting to give the (tax break) this time,” Gaskin said. “In the future I encourage other people who want this to come before the council before (construction).”
Mauldin, who renovated the old Fred’s location at 304 Fifth St. S. and turned it into climate-controlled mini-storage, asked the council to grant him a tax exemption for the improvements he made.
The building was constructed in 1948 and housed Freeheart Bakery. The site was divided in 1962, with the bakery on one side and Fred’s on the other. By the late 1970s Fred’s occupied the entire building, but the original owners’ descendants still owned the building until they sold it to Mauldin in January 2021. He renamed it the Freeheart Building.
The property renovation is eligible for local ad valorem tax exemptions of up to 10 years under two state statutes, since it is located in both the central business district and a historic district.
“One allows seven years, and the other allows 10,” Turnage said. “Oftentimes we’ll grant seven years under one code section and three years under the other.”
According to tax records, the building’s assessed value as of tax year 2021 was $150,270, and the most recent amount owed was $3,570.
The building was awarded landmark status by the Mississippi Department of Archives and History, and qualified for tax credits if it was renovated to the department’s standards.
Mauldin told the Dispatch on Wednesday afternoon that he did get those tax credits.
“The federal government issues a 20-percent tax credit,” he said. “The state does a 25-percent tax credit. Those apply to certain qualified expenditures.”
Tuesday night Mauldin was after an ad valorem tax exemption.
The tax break does not entirely exempt the property from taxation, it just means that it is taxed at its old value. In other words, if a property is worth $1 million and gets a $500,000 expansion, the property would be taxed as if it were still worth only $1 million for the duration of the exemption.
Several downtown properties, including Gail Guynup’s properties on College Street and Mark Alexander Sr.’s on Fifth Street North, have been given that exemption, Turnage said. The Stone Hotel on Fifth Street South — across Third Avenue South from the old Fred’s building — asked ahead of time for the exemption, and the council passed an intent resolution but has not yet formally given the tax break.
Tuesday night, Mauldin asked the council to grant him an exemption for the estimated $800,000 cost of the project, which he said includes the price of the building.
“It was really an eyesore on that end of town,” Mauldin said. “We rehabbed and refurbished the building and made it into something that is a nice focal point for that end of town. We’ve done a lot to clean (it) up and make it a good-looking part of our city.”
Arguments against exemption
Ward 2 Councilman Joseph Mickens questioned the exemption Tuesday on the basis that climate-controlled storage doesn’t create jobs.
“It’s not a business that requires a lot of employees,” Mauldin said. “I have a person who cleans and helps maintain it, but I do most of the work.”
Mickens then asked how the business creates revenue for the city.
“This exemption was originally done to incentivize people to invest in dilapidated buildings,” Mauldin replied. “… It’s not a matter of increasing tax revenue, it’s a matter of beautifying the city. That building sat empty for three years, and was deteriorating quickly.”
“When we go in a partnership like this … (businesses) were going to hire employees,” Mickens said. “I don’t see where this is going to benefit the city. The building looks great, but I don’t see no revenues coming in.”
Ward 5 Councilman Stephen Jones asked how long Mauldin thought it would take to break even on his investment, and Mauldin estimated about eight years.
Jones then moved to grant him an eight-year exemption, two years fewer than the maximum the law allows. Ward 3 Councilman Rusty Greene seconded.
Ward 1 Councilwoman Ethel Taylor Stewart spoke forcefully against granting the exemption.
“How are we going to run this city if we let everybody have a tax exemption?” Stewart asked. “We got employees we can’t pay, we got streets that need paving.”
“We are in desperate need of money,” she added. “… I’m not in favor of this. That was your choice to take that money and upgrade it.”
The motion deadlocked 3-3, with Stewart, Mickens and Ward 4 Councilman Pierre Beard voting no and Greene, Jones and Ward 6 Councilwoman Jacqueline DiCicco voting yes before Gaskin broke the tie in favor.
Mickens asked Turnage to develop a policy on giving tax abatements in the future. Wednesday, during the mayor’s press conference, Turnage said any such policy would look at establishing a minimum investment to qualify, as well as whether the exemption could be requested after construction is complete rather than on the front end.
“There’s a growing concern since we are trying to do the best we can with tax money not to just grant them after the money’s been spent,” Turnage said. “If it’s important to get the exemption, you’d think you’d ask for it before you did the work.”
Brian Jones is the local government reporter for Columbus and Lowndes County.