2/28/2019 3:05:00 PM Split vote grants TIF
development agreement amidst continued opposition
The Lindstrom City Council voted 3-2 last week; approving the development agreement with Northland for its proposed 92 apartments, marina and restaurant complex, on Hwy. 8 at the east edge of South Lindstrom Lake. Councilmembers Ann Marie Brink and David Waldoch were the no votes.
The developer agreement fine-tunes the Tax Increment Financing for the site. (The TIF District itself was approved in December.) The TIF District encompasses the east side of the bay, from Beach Park to the channel bridge, with the exception of two residences at the intersection of Vine St. and Newell Ave.
TIF is a way for local governments to assist a developer in making a project happen, if it meets certain criteria. It captures the difference between what the project area currently generates as property tax and what it will generate when complete. A pre-determined amount of this increment (increase) goes back to the developer to help recoup approved costs as a rebate.
In this case, Lindstrom retains 10 percent of the redirected or increment amount.
Any portion of the full tax that’s supposed to go to school referendum debt service will go to that.
TIF is tied to the “but for” question.
The developer has to show that “but-for the special financing” in place, this project would not happen, explained economic development advisor Kirsten Barsness. This development has a “gap” in what traditional sources will authorize as a loan and what the project costs will be. The gap is $3.3 million, which is the maximum the council allowed for the total TIF.
The city will also redirect property tax monies (first paid to the county and then sent to the city) into project mortgage interest, which is estimated at 5.4 percent ($2 million approximately) for purposes of the contract.
The developer agreement redirects the “increment” portion for 23 years.
The increment could end up greater than what’s estimated, which is based on the county assessor valuation, and this might hasten the payback. Any redirected amount is tied to the actual property tax (with a 1.5 percent parcel-specific annual growth in valuation.)
Council member David Waldoch took aim at the valuation presented during last week’s meeting.
When first viewing city paperwork the county assessor had put an $11 million tax valuation on the site. When developers, in continuing negotiations with Lindstrom, stated they needed more like $15 million to generate enough increment-- the developer agreement last week contained a new valuation at $14.8 million, which Waldoch called “unrealistic.”
Barsness responded that this valuation is “the most accurate” with up-to-date information.
Now called The Peninsula at Lindstrom LLC, this project has also been known as “The Overlook” and Northland Lindstrom Apartments. Northland Real Estate Group, based in Minneapolis, is slated for a developer fee of $973,713.
The council also heard $500,000 of TIF funds that Northland receives will help underwrite buying the property. Total estimate for the acquisition is reported at $1,195,000.
Council member Brink observed that the developers must have known from the outset that without the TIF approval, they wouldn’t even be able to buy the lots. Strong opposition sentiment from the neighborhood has partially risen from the fact that early on in city project reviews, direct questions about future corporate welfare avenues failed to get any direct answers from Northland representatives. Neighbors feel deceived.
During public comment last week approximately seven residents who spoke, reiterated what they have voiced for months with this project: including TIF liability is too much money for such a small return, the project doesn’t suit the single family vintage housing surrounding it, the project lacks parking space for residents and aggravates traffic access problems at the highway, plus developers have already gotten variances and ordinance revisions to accommodate their plan for this site.