Hershey Hall redevelopment requires balancing housing needs and community concerns

MT. PLEASANT — Hershey Hall, a once-vibrant part of Iowa Wesleyan University’s campus, is set to become affordable housing for Mt. Pleasant residents after the Henry County Board of Supervisors unanimously approved a resolution, ordinance, and development agreement to move the redevelopment forward.

This transformation addresses significant housing shortages in Mt. Pleasant while drawing both support and concern from the local community.

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The planning and zoning board previously voted two to three to approve moving forward with these plans. The two members who voted against the proposal cited concerns for the school district considering their ownership of central campus and potential plans to build a new school building across the street from Hershey Hall in the next few years.

Mt. Pleasant Community School District board members and Superintendent John Henriksen attended the Board of Supervisors meeting to address concerns raised by the Planning and Zoning Board. In Henriksen’s initial comments about the plan, he explained that he was grateful to hear the property would offer Section 42 housing and not Section 8 housing.

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“I think the type of housing was the greatest concern from the school district,” Henriksen said.

Section 42 supports affordable housing development by offering tax credits to developers who set aside units for low- and moderate-income tenants, but it does not include direct rental subsidies like Section 8. Section 8, by contrast, involves direct government payment to landlords on behalf of tenants.

“This is being proposed as section 42 housing, which were it not that, that would be a concern,” Henriksen said.

The Hershey Hall redevelopment aims to transform the 2.13-acre site at 600 W. Jackson Street into 30 apartments under Section 42 of the Internal Revenue Code which Developer Chris Ales further explained.

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"Section 42 requires that properties reserve a certain percentage of units for individuals earning 30%, 40%, 50%, or 60% of the area median income, ensuring affordability for working-class families,” he said.

The program also includes rigorous compliance requirements to maintain its mixed-income nature.

"The restrictions under Section 42 remain in effect for 30 years, ensuring that these properties continue to serve their intended purpose of providing affordable housing,” Ales said.

“We’re interested in ensuring the right kind of atmosphere and culture around our school,” Henriksen said.

In response, Ales emphasized the stringent requirements for such properties, stating, “Applicants undergo criminal background checks, financial assessments, and reference verifications.”

Despite initial concerns about the type of housing the Hershey Hall project would produce, Henriksen acknowledged, “ … there's some advantages to that as well. You know, as kids reside in those apartments, they will be right there, close to the school.”

During the public hearings concerning the Hershey Hall agreement, ordinance, and resolution, incoming Supervisor Steve Detrick asked Henry County Sheriff Rich McNamee if low-income housing typically results in higher crime rates. Detrick’s specific question centered on whether moderate- and low-income housing developments create safety concerns for the surrounding community.

“I don’t think I can give any data relating to what Section 42 is, but low-income housing is generally troublesome from a criminal justice standpoint,” McNamee answered. “That being said, I haven’t seen any specific issues related to developments like this one, and I wouldn’t expect it to be different here.”

Lindeen countered general perceptions of low-income housing by noting the demographic served by Section 42 properties.

“These units are for teachers, retail workers, and child care providers earning around $52,000 annually — hardly the profile of individuals likely to cause issues,” she said.

According to Lindeen, examples of Section 42 housing already present in Mt. Pleasant include the upper-story apartments on the downtown square. These units operate under income restrictions like those planned for Hershey Hall.

Supervisors and developers addressed the financial structure of the project, which relies on a Tax Increment Financing (TIF) agreement. Ordinance 32-2024 establishes the division of property tax revenues within the urban renewal area into base period taxes and tax increment revenues.

The TIF agreement rebates 80% of the increased property tax revenues over 15 years, capped at $360,000. Ales added that the agreement depends on an adjusted property valuation reflecting the building’s purchase price.

“Without this adjustment, the TIF benefits are negated,” he said.

Supervisor Chad White raised questions about the need for additional housing, citing reports of vacancies in existing units. According to Ales, a market study for the project, conducted in the beginning of 2024 after Iowa Wesleyan’s closure the previous year, confirmed a strong demand for housing within the specified income brackets. Ales added that market studies are vetted by the Iowa Finance Authority.

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Southeast Iowa Regional Planning Executive Director Mike Norris and Ales commented that market conditions, turnover, and substandard units contribute to the perception of vacancies rather than a lack of demand.

“You can’t expect 100% occupancy,” Ales said. “Even well-maintained properties experience turnover, and that’s part of the natural housing cycle.”

Despite these concerns, Rachel Lindeen, Executive Vice President of the Mt. Pleasant Area Chamber of Commerce, highlighted the broader economic necessity of the project.

“Mt. Pleasant has 13,000 jobs but a population of just 8,500,” she said. “If we can turn just 30 or 50 of those commuters into residents, it’s a step in the right direction. We’re talking about people who are already contributing to our economy but who live elsewhere.”

Concerns about the long-term management of the property also arose. Ales explained that Section 42 restrictions remain in place for 30 years, preventing the development from converting into market-rate or Section 8 housing during that period.

“Typically, properties are recycled within the Section 42 program after 30 years, securing additional tax credits to maintain and improve them,” he explained.

Another point of discussion focused on the quality of construction and the use of local contractors. Ales assured the board that construction standards mandated by the Iowa Finance Authority ensure high-quality housing.

“We typically use as many local subcontractors as possible because it’s more cost-effective and ensures quality,” Ales said. “This property will meet stringent requirements for ‘decent, affordable housing.’”

Construction on Hershey Hall is expected to begin in spring 2025, marking the beginning of another transformation of part of the former Iowa Wesleyan University properties.

The meeting concluded with unanimous approval of the development agreement, ordinance and resolution, waiving additional readings to expedite the project. Moeller commended Southeast Iowa Regional Planning and Ales for their work on breathing new life into this property.

Comments: AnnaMarie.Kruse@southeastiowaunion.com