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.
The ramp will be built on land deeded to the city by the developer. Property records show the developer paid more than $1 million for the Red Sky Lounge and Miller Motors properties, 77 percent of which will be given to the city for the ramp.
In exchange, the city will use part of its tax increment financing allotment on demolition.
Demolition of an antique store and survey business near the corner of Warren and Front streets should be the first outward sign of the development. That’s expected to start in mid-October.
About 30 parking stalls will be located there in order to make sure that the number of publicly available stalls increases as a result of the project. The ramp would seemingly accomplish that task, but the tenants and businesses that move here because of the project will also add to the parking demand.
The next priority for this fall is demolition of the other Front Street properties. Kyle Smith, one of the developers, said construction will begin in the spring.
Overall, the project will introduce some diversity into this area of Front Street, sometimes called the “Barmuda Triangle,” Hentges said. Having a vital downtown means that people are around at all times of day, not just at night.
“Vital downtowns are an attribute of vital regional centers,” he said.
Paul Vogel, the city’s community development director, also noted that the project relies on existing utilities and streets. In other words, the city doesn’t have to build new infrastructure like it would for a site on the edge of town.
The City Council meeting begins at 6 p.m. in the Intergovernmental Center.