Tax Savings
Tax Savings

The condos at The Metropolitan come with a City of Cedar Rapids sponsored Urban Renewal Tax Exemption Program that taxes owners only on the base value of the property before improvements. Depending on the specific unit purchased this will most likely save a Met owner from $60,000-$120,000 across a 10-year timeframe.

The Program

The 100% exemption on improvements is one of several programs the City has to incentivize people to invest in key areas and types of buildings considered to be vital to the continuing development of the city core, those neighborhoods that will benefit all Cedar Rapidians. The Metropolitan development, located in the up and coming Kingston Village District, has been approved for this program. The benefits will be passed on to buyers! Owners will pay taxes only on the land for ten years.

How It Works

The City places a value to the land based on other residential land values. Owners will always pay taxes on the land. Because The Metropolitan is a multi-story building with units sharing a small footprint, while the city may change policy, this density should allow land allocations to be minimal. Using a unit’s square footage, the estimated proportion of the land value (at 2015/2016 City valuations) for a residential condo at the Met should range from approximately $6755 to $12,454.(Rough estimate based on preliminary estimates from the City Assessorʼs office, subject to final evaluation and determination. Tax across building may be allocated using another method. City land valuations likely to increase.)

Assessed Value

After project completion the City will determine how much has been invested in the construction and assign a value, the “assessed value,” on which taxes would be based; this is the same as any other residential property. If construction is not completed within a calendar year, a partial value may be assigned for each non-complete year. Thus the abatement may actually have more than one ten-year exemption period…one for partial completion and one after full completion.

The Value of The Exemption

Note that historically residential taxes go up many years. The tax rate is calculated multiplying two factors, the rollback and the levy. The rollback is the factor that essentially reduces the percentage of the value of the property taxed, thus reducing taxes. That factor, currently around 55.74% will gradually increase until 2022 where one can expect it to be at approximately 60%. The levy is a factor determined by financial needs of the community. The community is defined by the school district. The 2015/2016 factor is about $38.30 per $1000 assessed value. Thus the current tax rate is approx. $21.35/1000.

If a unit is valued by the Assessor at 95% of full purchase price, the following would be two current year examples of tax savings potential.

A. $315,000 2 bedroom, 2 bath unit example

– 95% of $315,000 is approximately $295,000.
– 21.35/$1000 tax rate should be $6384 tax per year if assessed at 95% of full purchase price
– However there would be no tax on the improvements and with the proportionate method the land value is currently estimated at $6800.
– Taxes this year on the land would be less than $150 assuming no dramatic increases of land values post development.
– This represents a year 1 savings of over $6000. (Again, should land valuations be higher, taxes may be higher.)

B. $499,000 3 bedroom, 2.5 bath unit example

– 21.35/$1000 tax rate should be $10,120 tax per year if assessed at 95% of purchase price.
– However there would be no tax on the improvements and the proportionate land value is currently estimated at $10,909.
– Taxes on the land this year would be less than $250 assuming no dramatic increases in land values post development.
– This would represent a year 1 savings of $9870. As taxes rise Met owners save more each year for the 10 years.

Homestead Tax Savings

Beyond the exemption savings, all home owners should apply for the Homestead Tax Credit which will further reduce the gross tax owed. This is a one-time application annually reducing taxes.

Bottom Line

The money saved via this tax exemption reduction program enables buyers to lower total monthly mortgage payments. Please consult with your lender to determine your qualifications and payments as a result of these significant tax savings.

The above are estimates only based on current tax rates and current policies. The Urban Renewal Tax Exemption Program for The Metropolitan can be discussed and verified with the City Assessorʼs office. Reference resolution No. 1363-09-15 of the City Council of Cedar Rapids, Lofts At Red Cedar Revitalization. The foregoing information is not warranted or guaranteed. Prospective buyers should verify all information.