Despite much backlash from residents, Edina City Council has approved the creation of a tax increase funding district in 70th and France to facilitate the construction of a mixed-use development on this site .
The board voted on the 3-1 resolution at its March 22 meeting. The concept of establishing district tax increment funding, or TIF, on the site elicited nearly 100 responses from Edina residents, with many saying that using a tax grant should only not be used to fill a financial gap in business development.
The redevelopment project, led by Mortenson Development and Orion Investments, is often referred to as the US Bank site, located at 7001 and 7025 France Ave. Plans include a new bank branch with drive-thru, a 200,000-square-foot office building with first-floor retail, underground parking and a public plaza, and a 267-unit, 24-story multi-family building with a structured parking and commercial space. The project also includes an eight-level parking ramp, according to city documents.
In total, the development will divide the 5.8 acre site into four parcels. One of these lots, which houses the US Bank branch, had already obtained final site plan approval and can proceed with construction.
“We are thrilled that the City of Edina has approved the creation of the Tax Increment Funding District for the redevelopment of 70th and France,” Brent Webb, development manager at Mortenson, said in a statement provided to the Sun Current. “We continue to make progress on other elements of the project and look forward to providing more construction details shortly.”
At the request of the development team, the city began discussions about the potential use of TIF more than a year ago, according to city documents.
Supporting this project would help Edina “carry on the legacy” of what was envisioned when the Southdale Center was created, Bill Neuendorf, the city’s economic development officer, told Sun Current. He said it reinforces the idea of the city as a “destination” with a mix of commerce, jobs and living spaces.
“We’re excited to see him moving forward,” Neuendorf said. The recent vote signals to the development team that the city is committed to creating a future TIF agreement, he said.
The site currently contains the US Bank branch built in 1975, a 1980s office building and surface parking spaces.
The development team obtained preliminary zoning approval in 2020 and returned to council for a plan amendment in November. The amendment proposed the replacement of an affordable housing building with a parking ramp and was later granted despite a recommendation against it from the Planning Commission.
The development team called for the amendment, citing changing market conditions driving up commodity prices.
In January, the city’s Housing and Redevelopment Authority voted to certify the site met the state’s “wither test” criteria for creating a specific type of TIF neighborhood, called a renewal neighborhood. and renovation. This type of designation dictates the number of years a TIF district can be active, which in this case is 15 years.
Cities use the TIF to incentivize developers to construct buildings, with the aim of stimulating economic revitalization and raising money to pay for improvements or public amenities.
When a TIF district is created, the amount of property tax revenue paid to taxing agencies – the city, schools, and county – at the time is frozen at its current rate while the development is built. As new developments occur and property taxes rise accordingly, these monies are paid into a TIF fund which will later pay the financial shortfall identified in the project or fund other public improvements.
For this particular project, Ehlers Associates, a financial firm advising the city, determined that there was a financial shortfall of $22 million for the development team, which is an impediment to completing the project. According to city documents. The total development is expected to cost over $250 million.
Ehlers also concluded that “without” the use of TIF, the project would not be able to secure the private funding needed to build the site as approved. The “but for” test is a requirement under state law for cities to use TIF, and it’s ultimately up to the city’s “opinion” to confirm that finding, according to the site. Minnesota House Research Department website.
The HRA approved a term sheet last month, outlining the structure of the TIF at the site. To guide the board’s decision ahead of term sheet approval, a staff report, presented by Neuendorf, identified challenges facing the development team, including supply chain issues, unpredictability office space demand and labor shortages.
Another challenge cited in the staff report was investor hesitancy due to the “reputation and image of the Twin Cities” “damaged by the murder of George Floyd and subsequent civil unrest.” The mention sparked consternation from residents, former officials and Mayor Jim Hovland, as noted in a Star Tribune article.
Neuendorf told Sun Current that the issue of investor hesitation has come up at several industry conferences and webinars he has attended. For this reason, he said he thought it would be important to note it.
But he didn’t mean that was the only reason to consider TIF, Neuendorf said.
When asked by the Sun Current if securing funding was a challenge for this reason, a spokesperson for Mortenson said no.
The HRA-approved term sheet affirmed the city’s practice of a “pay-as-you-go” system for providing TIF funds to developers. To access the funds in the form of a TIF ticket, the developer must first complete each of the elements of the development with the defined public benefits. Those TIF ticket funds only come from “new” property tax revenue generated from redevelopment of the site, according to city documents.
If the “new” property tax revenue is lower than expected, the development team will receive a lower refund amount. Mandatory benefits must be paid before any city payments are made, the city documents note.
The city’s budget for the TIF district is $22 million, which includes expenses such as demolition, site improvements, public parking, public plaza, and other professional costs for the TIF agreement. .
Neuendorf told the HRA in January that the cost of parking is driving up the cost of the project. The whole project offers more than 650 public parking spaces.
Neuendorf’s presentation to the board noted several benefits for the TIF district, including the project plan to subdivide the “superblock”, create a public realm area, add new Class A office space, build a public parking and improve Edina’s tax base.
The fiscal capacity should be multiplied by 10 and the market value by a factor of 12, according to the presentation.
Residents, civil servants respond to the TIF district
Despite the public benefits that the city says come with TIF, residents of Edina have expressed overwhelming dissatisfaction with the prospect. In public comments received by the city in person and on its pledge website, Better Together Edina, the vast majority of responses were against the creation of a TIF district for this site.
Common criticisms included the association of cost constraints with civil unrest, the lack of affordable units within the project, and the use of a tax subsidy on the site.
“If they really believe that the profitability of this project is in doubt without the TIF, it is incumbent on them to solve this problem,” a resident wrote on Better Together Edina.
The Edina Planning Commission also disapproved of the TIF district, voting against the plan on March 9. The commission argued that the plan was not in line with the city’s stated development goals and raised concerns about the number of parking spaces and the design of the parking lot. Planning Commissioner Lou Miranda said the next day on Twitter that the commission’s vote against the TIF district was “the first time in memory” that such a vote had taken place.
The disapproval prompted a legal opinion from Dorsey & Whitney, the city’s legal adviser, on the role of the Planning Commission in forming TIF districts. The company found that while the commission can provide direction on the TIF district and whether it conforms to city land use, the final decision ultimately rests with the council.
Council members who voted in favor of the TIF district, including Mayor Hovland, largely acknowledged public dissent on the issue, but proclaimed their belief in the district’s overall benefits. Council member Kevin Staunton was absent in the 3-1 vote.
Council member Carolyn Jackson, who voted in favour, said she was unhappy with the Planning Commission’s analysis of the development, dismissing the council’s findings as “broad extrapolations of the guidelines currently being written”.
Jackson, who spoke on the subject for about 45 minutes, said the project wouldn’t happen without the use of TIF. She pointed to several benefits of the project, including new office space, affordable housing funds and “the vision” of the Greater Southdale District Plan that she believes it reflects.
Council member James Pierce noted that at one time he was not in favor of the creation of the TIF district. But he said after “digging in” by talking with community members and other stakeholders, he came to the decision that it would be beneficial for the city.
“It’s going to be an unpopular next month for us as we move forward, but I think it’s a good thing to do,” Pierce said. He cited the development team’s $250 million investment in Edina which could spur further economic revitalization.
Council member Ron Anderson provided the only dissenting vote on the TIF district. Taking into account the current vacancy rate for luxury apartments and the number of additional units planned in Edina, Anderson expressed concern about the project’s effect on vacancy rates, increasing the risk of “pressure to the drop” on the rental rates. He also wondered if the TIF was necessary to make the project a reality.
“I think the most important thing we keep in mind as elected officials is that public sentiment on giving TIF public support for this project is very low,” Anderson said.
Even though the neighborhood has been created, a separate TIF redevelopment agreement has yet to be concluded between the development team and the city, authorizing the responsibilities of each.
The deal is expected in late 2022 or early 2023, according to city documents.
– Follow Caitlin Anderson on Twitter @EdinaSunCurrent