IRON MOUNTAIN — The Iron Mountain City Council will meet in about a week to consider a 12 percent Payment in Lieu of Taxes, or PILOT, arrangement with Commonwealth Development Inc. on the former Central School property.

The council Monday set a special meeting for 6:30 p.m. March 29.

The Fond du Lac, Wis. developer wants the PILOT as a show of city support for its second Michigan State Housing Development Authority funding application that must be filed by April 3.

Commonwealth is seeking $686,000 through the Low Income Housing program for its proposed $8 million project, which would create 28 apartments in the former school building and 12 new townhouses on nearby properties.

The company has offered to buy the building from the Iron Mountain Public Schools, along with four lots on West Hughitt Street and two lots on West Ludington Street, for $445,000, contingent on securing the tax credits.

The PILOT payment, which is intended to offset costs of providing city services such as police and fire, is based on a percentage of rents on the property, City Manager Jordan Stanchina said.

The 12 percent PILOT would generate $26,875 in the first year, compared with $22,000 from the 10.23 percent PILOT. The city will get a third of that amount, or about $8,958.

The 12 percent offer is higher than the 10.23 percent Commonwealth had proposed to the city when it applied for the first round of MSHDA funding in October. It did not secure that funding in January.

The PILOT increase came after Commonwealth learned from a market study it could charge higher rents, Stanchina said. Rents need to be 30 to 60 percent of the average median income of $38,000, according to the last census.

The PILOT request is bumping up against the new application deadline because Commonwealth got an appraisal late in the process to determine the PILOT amount, Stanchina said.

“The appraisal is also needed to justify the project with MSHDA,” Stanchina said.

City officials earlier had suggested a variable PILOT that would decrease by a certain percentage each year. Commonwealth instead came back with the 12 percent amount.