MANKATO — The 10-year process of developing the vacant lot between the Veterans Memorial Bridge and Old Town culminated Monday night with the Mankato City Council authorizing $1.5 million in subsidies and loans for the $16 million Bridge Plaza building — the latest in a series of major investments in Mankato's downtown.
"It's just a progressive renaissance that we're in the middle of," said Mike Brennan, who purchased the lot with his wife Catherine in 2009.
Construction is expected to begin by late summer on the five-story building that will be home to accountants, architects, developers, a communications firm and yet-to-be announced restaurant. The city subsidies — the final piece of the Brennans' financing package — were approved unanimously.
First came a series of sometimes tough questions from council members and indications of reluctance from at least three of the seven. So when the vote was taken, the Brennan's smiled broadly and supporters — including most of the future tenants of the building — broke into applause.
"I think over the years we've come to the conclusion that it'll happen when it's supposed to happen," Catherine Brennan said. "And now is when it's supposed to happen."
For decades, the only development on the 1.6-acre parcel that abuts two major routes of entry to Mankato's downtown was an Embers restaurant near Riverfront Drive that closed in 2006. Bridge Plaza will transform the site with a Kasota stone and glass building containing fifth-floor apartments, Class A office space on the second, third and fourth stories, and ground-floor retail and a restaurant with outdoor seating areas and fire pit.
Bridge Plaza will be the third new multi-story building under construction along an 800-foot section of Second Street, joining the seven-story Eide Bailly Center and the three-story PrairieCare clinic.
Combined, the three buildings will host well over 300 employees, although a substantial number are relocating from other offices around the city.
Bridge Plaza will have a minimum of 122 full-time-equivalent workers, most in the third-floor space to be occupied by 80 accountants and other employees of Clifton Larson Allen. Tenants on the second floor include the Fisher Group, Jaguar Communications, Brennan Construction, and architectural and engineering firm Widseth Smith Nolting — which will be making Mankato its ninth office in Minnesota and North Dakota. At least 42 full-time-equivalent jobs will be new to the community.
The first floor will also include 18 enclosed parking stalls. Another 108 surface parking spots will be available adjacent to the building and 32 will be added across Plum Street — parking that will be available to the public in the evening and on weekends.
The council agreed to Brennan's request for assistance based on job creation and the additional costs of redeveloping a vacant downtown lot versus construction on farmland on the edge of town. Those added costs top $1.3 million for Bridge Plaza, and the council has long promoted dense development in an effort to revitalize the city center — even if public subsidies are required to accomplish it.
The tax-increment financing has a present value of $1.08 million and involves the additional local property taxes Bridge Plaza will generate. Taxes on the vacant lot would be less than $14,000 a year versus $134,000 after completion of the five-story building. For 15 years, the difference between the two — $120,000 — will be returned to Brennan to help cover the cost of the development.
The council also approved a pair of $200,000 City Center Renaissance loans — one at 5% interest over 10 years and the other at 3% over 15 years. In addition, the Minnesota Department of Employment and Economic Development provided a $170,000 grant for soil corrections at the site.
Council President Mike Laven, who was particularly skeptical of one of the $200,000 loans that will be dedicated to "leasehold improvements" such as elevators and interior finishes to make the space ready for tenants, wondered if the project would really grind to a halt without the assistance.
"That's absolutely not true," Laven said. "The project's going to move forward regardless."
Both city staff and a representative of US Bank, the primary lender on the project, insisted the assistance was critical to the financial viability of development.
Council members Jenn Melby-Kelley and Jessica Hatanpa questioned whether the large loans would leave financing available for smaller entrepreneurs. City Manager Pat Hentges talked about the numerous loans and grants provided to small-business owners, and Community Development Director Paul Vogel said the loan fund and other city subsidy programs are far from depleted.
Hatanpa, after asking the Brennans if they would be living in one of the fifth-floor apartments and learning they will, wondered why they should be getting city subsidies on a building that will be their home when a typical homeowner wouldn't. Mike Brennan said they will be paying the full market rent charged to anyone in one of the six apartments.
But there was also strong backing for the project, including a dozen letters of support. Some were from predictable sources, such as the one from Clifton Larson Allen, which emphasized how the new building will make it easier to recruit the young accountants and financial advisers the firm needs to continue its growth: "Our planned relocation shows our deep commitment to the community and will enable us to recruit, attract and retain talented young professionals in the Mankato area; a critical part of our past and future success. These young professionals seek a dynamic business community and desire to work in class A office space."
But there were also letters encouraging council support from owners of other commercial office space, including developer Kyle Smith, who wrote that Bridge Plaza will continue the revitalization of downtown Mankato, the retention of good employers and the creation of more parking for use by the general public.
That economic revitalization was the driving factor for Mark Frost and Karen Foreman, the longest-serving council members. Foreman said the project was the final piece of urban renewal that began with the reconfiguration of the Mulberry Street and Second Street at the Veterans Memorial Bridge more than a decade ago.
"It's going to be so good — so good — to see that corner developed with a very attractive building," she said.
Frost recalled the atmosphere in the city center twenty years ago.
"Downtown was just an empty space, losing jobs, losing tax dollars, losing everything," he said. "We should be really proud of what's happened down here ... . We need to keep the growth going as long as we can."
Mike Brennan said site preparation will be done in coming weeks with construction likely to start in September and tenants moving into the building by the end of 2020.