Lewis Lofts Sinclair Flats site layout

The proposed Lewis Lofts apartments, now at 64 units, would be targeted at low-income elderly tenants. The previously approved Sinclair Flats project would be aimed primarily at lower-income working families.

MANKATO — A new apartment building targeted at lower-income elderly tenants, which would be Mankato’s largest affordable senior housing project in half a century, received a boost from the City Council just before a critical financing plan was submitted to state officials.

The council committed $500,000 in grants to Lewis Lofts, an income-based housing project near Cub Foods West, along with $757,000 in tax-increment financing, public housing vouchers and a promise to build a $250,000 new road to the site.

The city assistance aims to boost the project’s chances in a statewide competition for federal affordable housing tax credits and state-financed housing-infrastructure bonds that begins with Thursday’s application deadline and ends with the Minnesota Housing Finance Agency announcing winners in December.

“This is an area where we are really able to impact the scoring,” said Kristin Prososki, associate director of housing and economic development for the city. “Low-income tax-credit rounds are very, very competitive, so we look to really spell out what we could be contributing to the project to help it be successful.”

The $15.9 million Lewis Lofts project is being pursued by Kansas-based Cohen-Esrey Development Group in partnership with the city, which owns the land where senior apartments and an earlier phase — family-focused apartments known as Sinclair Flats — are to be constructed.

All 64 units in the four-story building, split between one- and two-bedroom apartments, would be reserved for elderly tenants with incomes no more than 60% of the area median income. Rents for three units would be just $344 a month with another 12 renting for $401. Two dozen units would rent for between $619 and $648 monthly. Rents on the remaining 24 units would range from $774 to $918.

“We have been hearing from seniors about the need for affordable units and affordable options,” Prososki said. “... This is a growing segment of the population, and there’s just not a lot of affordable units targeted at that population.”

Cohen-Esrey submitted both phases of the project to the Minnesota Housing Finance Agency in the 2020 tax-credit competition. When awards were announced late in the year, the $10.8 million Sinclair Flats project was among the winners. Construction of those 48 units, most dedicated to lower-income workers, is expected to start in the spring of 2022 with completion a year later. But Lewis Lofts was not selected.

The new city assistance plan increases the upfront grants for the project from $100,000 to $500,000 while reducing the amount of tax-increment financing, a development subsidy that sets aside additional taxes generated by a project for up to 20 years. In this case, those tax payments — rather than going to the city, Blue Earth County and the school district — would be turned back to Cohen-Esrey for more than a decade until the total reaches $757,000. The developer could use the funds to cover the additional costs of construction on the former municipal Public Works Department site, which has poor soils and contamination from pollutants.

The TIF assistance was originally going to be $1.4 million. That figure dropped to $1.16 million when Cohen-Esrey decided to abandon plans to include a commercial building on the property in addition to the apartment buildings. And in the latest package approved by the council, the TIF is reduced further to reflect the additional $400,000 in grant funding. Essentially, Cohen-Esrey gets more money at the start and less money from tax relief in the late 2030s.

Other city assistance includes $250,000 — the same amount Cohen-Esrey is paying for the city land — to construct a northward extension of Stoltzman Road through the eastern portion of the Cub Foods parking lot to Sibley Parkway.

In addition, the city is committing six affordable housing vouchers to Lewis Lofts — meaning six units of the apartment building will be home to the very low-income recipients of Housing Choice Vouchers.

The package of municipal assistance is more straightforward than it was for the 2020 competition, Prososki said.

“We’re specifically trying to spell out in very clear terms for Minnesota Housing’s scoring criteria what we were willing to contribute,” she said.

The council hasn’t decided the source of the additional $400,000 in grant funding. Federal pandemic relief funding could be used, or the city could tap into the Economic Development Authority’s revolving loan fund, which has a balance of more than $2 million.

If the loan fund is used, it would be replenished with TIF funding in a dozen years or so once Cohen-Esrey receives its $757,000 in TIF assistance, said City Manager Susan Arntz. If the pandemic funds are used, then the TIF subsidy would end early and taxes generated by Lewis Lofts would flow to the city, county and school district.

“The project would be on the tax rolls sooner,” Arntz said.

If the strategy is successful and Minnesota Housing awards more than $12 million in assistance to Lewis Lofts, it would be Mankato’s largest apartment complex focused on low-income seniors since the construction of the 101-unit Orness Plaza in 1971.

A recent update of Mankato’s housing study reported vacancy rates of less than 1% at affordable housing apartment buildings targeted toward the elderly and people with disabilities.

An analysis by Cohen-Esrey found that the number of qualifying seniors far exceeds the affordable apartments available at those facilities and at scattered locations elsewhere in the community.

“There are over 1,200 age- and income-qualified renter households in the immediate Mankato area,” according to the analysis. “Counting Lewis Lofts, there are only enough units for 252 of these households.”

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