MANKATO — A development agreement governing the largest downtown project since the civic center goes to the Mankato City Council Monday.
The 304-page agreement spells out the rights and responsibilities of the city of Mankato and of Tailwind Group, which is seeking to build a seven-story glass office tower and a five-story mixed-use building.
The agreement “is focused clearly on the things in the downtown setting that make downtown better,” City Manager Pat Hentges said. That means more parking, newer buildings and, eventually, an increase in the tax base.
The agreement is sophisticated; the city’s budget for the project draws on five separate sources of funding, though public money is being spent only on parking and soil correction.
The largest source is a state redevelopment grant, which will provide $2.2 million of the $4.9 million in parking improvements. The state is also providing a contamination cleanup grant worth $935,000.
The project also draws on $1.6 million in tax increment financing, which captures the increased property taxes the complex will generate and dedicates them toward the improvements. The length of the increment is estimated at 15 years, meaning the project will move back on the tax rolls in roughly 2029.
But what happens if the project goes belly-up after the ramp is built? Tax increment financing projects depend on developers paying higher taxes after the redevelopment occurs, which will happen only after the ramp is built.
To help minimize the city’s risk, the developer is required to provide a security deposit of $2.1 million. That figure can be reduced to the first year’s tax bill as the developer spends money on construction.
The project also draws on a separate tax increment financing district for $695,000 for site work and building demolition.
The final city source is a $600,000 loan, paid back over 15 years at 3 percent interest. For the first five years, the interest payments on the loan will pay the developer’s portion of the ramp’s maintenance expenses.