By Tim Krohn
The Free Press
NORTH MANKATO —
North Mankato City Council members Bill Schindle and Bob Freyberg squared off against Port Authority Chair Bob Knutson in an often contentious exchange over the merits of subsidizing the proposed Marigold apartment complex.
Thursday night's joint City Council/Port Authority meeting was called after the council earlier put off a decision on the project after holding a public hearing.
Some council members said they wanted more information about details of the city's proposed subsidy for the six story, 108-unit, high end rental project.
The Port Authority has approved $2.5 million in tax-increment financing for developer Van Moody. TIF takes the increased property taxes the owner pays on the finished project and gives it back to the owner to help cover part of his costs.
One discussion was on the length of the TIF -- scheduled to be for as long as 26 years, a length that concerned Schindle.
Ed Tschida, a consultant to the Port Authority, said the TIF should actually end in 15 years. The 26 years was used because state law allows it and offers some wiggle room. But Tschida said the amount of money the city is agreeing to Ñ $2.5 million -- won't change whatever the exact timeline.
Much of the discussion was on what happens if the project is built and fails and what financial risk the city faces.
"There is no risk to the city. It's 100 percent owner financed," Tschida said. If the owner for some reason stopped paying property taxes, the developer would stop receiving any TIF payments and the city would have no other financial obligations.
If the owner did default on his loan, said Tschida and others, the bank would own the building and would likely sell it at a discounted price to a new owner who could presumably make it cash flow with lower rent costs.
That raised a concern for Schindle and Freyberg. "If it can't rent at (a high) rate, will we end up with college kids in it?" Schindle asked.
"That's not going to happen," said Knutson. "It's not reasonable to say (rent) will drop that far from that high end to college students."
Tschida and Knutson said if this project isn't approved there are no other projects that would likely succeed. A big project is needed because the city has spent some $1.3 million on the site over the years and sold bonds to pay for much of it. Those bonds need to be paid off. If the apartment is built it should generate enough property taxes to pay for the TIF for the developer as well as cover those bond costs.
"If not this project, what would ever work there?" Tschida asked.
"That should have been a question asked in 1990," responded Freyberg, referring to the year the city first took on the site.
After more than an hour of debate and a near shouting match erupting between Knutson and Schindle, Mayor Mark Dehen -- sitting between the two -- raised his hands. "That's enough. We're beating a dead horse," he said, ending the discussion.
The council members also learned that the project will need several variances -- including allowing it to be built right up to Wheeler Avenue without a required setback. Originally it was said no variances would be needed.
Support and opposition to the project has been fairly evenly split at past meetings. Supporters say it would bring people and business to the downtown and the property tax revenues would help pay off debt the city has accumulated over the years as it tried to develop the property.
Opponents say the six-story structure is far too tall for the area and question whether the project is financially feasible given a large number of apartments going up in Mankato.