Little Falls City Council approves TIF district for apartment building
22 May 2021
Community, News, Infrastructure, Economic Development
Little Falls will soon be adding a 49-unit apartment complex.
Eight people spoke in favor of the project during a public hearing Monday, on a proposed tax increment financing (TIF) district for the apartment building. A resolution to approve the development agreement — which included the TIF district — passed, 8-0. The building will consist of one- and two-bedroom units and will be located on an extension of 14th Street Southeast, just south of the River Rock Townhomes.
Further discussion and a new investor yielded changes to what the Community Asset Development Group (CADG) was initially proposing for the district. Those changes made the issue more agreeable for the council members who had opposed the plan when it was first brought forward in February and March.
Initially, CADG was asking for a 25-year, estimated $1.1 million TIF district. Its initial investor was also requesting an up-front TIF, which would have required the city to loan the amount of eligible expenses to the investor at the outset of the project and be repaid through TIF funds over the length of the agreement. The new investor agreed to a 15-year, estimated $554,000 pay-as-you-go TIF. That means each year for the life of the TIF, the city will recoup taxes paid on the property and return eligible costs to the investors.
“They have to build it, they have to perform under the contract, they have to pay their taxes, and then what’s collected in increment is what is paid back to them at 90% of what is collected by the city,” said Jason Murray, a bonding agent with David Drown Associates. “So, the city is able to retain 10% administrative (costs), which is very similar to other TIF districts that you’ve created. The pay-as-you-go model assumes the minimal amount of risk for the Council and the city.”
The initial investors were also asking to buy the 3.5 acres of city-owned property for $1. The new team included a purchase price of $10,000 in their agreement.
The TIF is set up so that it lasts either until the full amount is paid off or the 15-year obligation is fulfilled, whichever comes first. As such, if the investor has recouped the entire amount of eligible costs within 10 years, the TIF will end. If market values are lower than anticipated and the full amount is not paid back within 15 years, it will still end after that length of time.