MANKATO — A $23 million proposal to dramatically transform a vacant site on the west side of Mankato's city center — placing affordable housing and a new day care center within a tree-lined campus-like setting — will miss a critical deadline in April.

Nevertheless, the nonprofit organization chosen by the city to redevelop its old streets department site has amended its plan and timetable and remains convinced it offers the best option to tackle critical shortages in Mankato.

"It addresses those pressing needs we have in front of us right now at a pretty large scale," said architect James Arentson of the Southwest Minnesota Housing Partnership. "... And it's in a good location next to downtown for accessibility for people."

The location and the size of the site — more than five acres — prompted three developers to propose ambitious revitalization plans. A year ago, the City Council unanimously chose SWMHP's Gateway West concept because it offered a workforce housing building, a stand-alone day care/pre-school and a third building offering supportive housing for families at risk of homelessness.

But the city's agreement with the SWMHP requires the Slayton-based housing developer to provide evidence by April 9 that it has the necessary financing to proceed with the first phase of construction this spring. That won't happen, SWMHP officials concede, and they will ask the council next month to provide an extension as part of an amended development agreement.

The alternative for the city is to reopen the process to other developers.

Strike one

More than a third of the financing SWMHP was counting on fell through in October when the Minnesota Housing Finance Agency chose not to approve federal tax credits for the Gateway project. The limited number of tax credits, which are targeted at affordable housing, are sought by developers around the state in a highly competitive annual process.

SWMHP was counting on the credits to provide $8.4 million in equity for the $11 million first-phase of the project to create a 48-unit apartment building reserved largely for working-class tenants with incomes no more than 60 percent of the median income in the area.

The plan was to seek more tax credits in 2019 for next year's final construction phase, which would have included the day care building and a 30-unit supportive housing apartment building. That second apartment building would have provided homes and other assistance to people recovering from chemical dependency, mental health issues and nonviolent criminal histories — particularly women with children.

A return to the drafting table

Arentson and SWMHP Interim CEO George Brophy laid out to The Free Press its "Plan B" for the site as they prepare to ask the City Council in March to stick with them for another year.

The biggest change is a reduction in the number of buildings from three to two and a new schedule that would have all of the construction occurring in a single year — 2020. That doesn't mean, however, that the project's goals are being scaled back.

"The two buildings are still doing the same things as the three buildings in the original concept," Arentson said.

The new plan eliminates the pre-school building, moving the day care to the first floor of the supportive housing building on the eastern side of the site — which is just north of Cub Foods West. The 10,000-square-foot day care, which would have the capacity for about 160 children, would have a separate entrance and playground, and there would be no direct access between the apartments and the child-care operations.

A tree-lined walkway would lead from the day care to the nearby Children's Museum of Southern Minnesota.

Both of the buildingd in the amended plan would be four stories, compared to last year's concept calling for three stories on top of a partially sunken parking area on the first floor.

The changes aim to reduce the costs of the project. Poor soils on the site require a foundation with piers reaching down to bedrock, and the new plan reduces the amount of foundation work by roughly a third. Replacing enclosed parking with surface lots also will be less expensive.

The two remaining buildings will be no taller than originally proposed because flat roofs are replacing pitched roofs. The design of the buildings will be modern, similar to SWMHP's other workforce housing complex in Mankato — Sibley Park Apartments on Sibley Parkway.

Looking for a second chance

Brophy compared the design and quality construction of Gateway West to the developments occurring in Minneapolis' Uptown and northeast neighborhoods.

"It gives to those who live there a sense of 'I'm living in a nice place,'" Brophy said. "... It's not that traditional public-housing image."

Other changes include the addition of two more apartments, bringing the total to 80, and an increase in the number of three-bedroom apartments to 20.

"We recognize the (housing) needs of large families downtown," Arentson said.

The day care space on the first floor of the eastern apartment building is half the size of what was originally proposed in a two-story building, but Arentson said day care operators have told SWMHP that 10,000 square feet is an appropriate size.

Arentson and Brophy said the revised plan will provide a more persuasive case for federal tax credits when a new application is made in June to the Minnesota Housing Finance Agency. Because it's now a one-phase project, the day care component can be included in the application.

"It creates a stronger project where it addresses a major need in Mankato," Arentson said.

Asked if they were confident of being funded in their second attempt, Brophy said it's inevitable that strong proposals from across Minnesota will be competing for a limited number of tax credits. So there are no guarantees about any individual round of applications.

"We will at one point be funded — No. 1, because it's a good project," Brophy said. " ... We intend to win."

And, typically, strong projects are funded in their second attempt if they aren't successful in their first, Arentson said.

"It's a compelling project," he said. "Everybody seems to agree with that."

First things first

A second chance to persuade the Minnesota Housing Finance Agency will first require persuading the Mankato City Council, probably at its March 11 meeting.

City Manager Pat Hentges recently told the council, acting as the city Economic Development Authority, that SWMHP's was finishing its revised proposal and that he expected details to be available at the March 11 meeting. Hentges also indicated he will recommend giving Gateway West another shot at earning the necessary tax credits.

Reopening the site to other developers would likely push the project back another year, Hentges said, because those developers also would likely need to win the affordable-housing tax credits. And with applications to the state due in June, it would be difficult for another developer to pull a project together that quickly, receive the city's blessing and meet the application deadline.

If SWMHP fails a second time when tax-credit winners are announced in late October or early November, the city's patience could run out and a request for new proposals could be issued in time for the 2020 round of applications.

"We're hopeful," Hentges said of Gateway West's second time at the plate. "But if we have to go back out ... ."

Council President Mike Laven, a strong supporter of the Gateway West option a year ago, noted Mankato did win affordable housing tax-credits in the last round. A competing project — the 45-unit Dublin Heights apartment building just north of Madison East Center — was successful, and a city of Mankato's size typically doesn't see two projects funded in one year.

Hentges said he expects there will again be more than one local project in the 2019 tax-credit competition: "I suspect we're going to have three applications citywide — at least two."

Laven, though, reminded his fellow council members that Gateway West hit a triple with its project.

"This one had all the stuff we've been talking about as a community that we really need," he said.

Brophy didn't offer any theories as to why Dublin Heights, developed by St. Paul-based Common Bond Communities, prevailed over Gateway West in 2018. But he did suggest the city might consider prioritizing only one project in 2019, rather than every proposal within Mankato. And only one proposal is likely to address three critical needs in Mankato while also redeveloping a vacant city-owned lot.

"So another proposal, unless it's on city land, is probably less attractive to policy-makers," he said.

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