The city of Waseca has owned the empty lot between Waseca Junior/Senior High School and Walmart for years, and now it will finally be developed into an apartment complex.
The complex, which will include affordable housing units, will contain a total of 36 units. A group of local business owners created a group called the Waseca Real Estate Fund (WREF) and partnered with fiscal agent REVocity to plan the apartment complex project. To help finance the project, WREF applied for Tax Increment Financing (TIF) from the city. TIF is an incentive for builders that allows them to save money on property taxes equal to the value of the improvement for a certain number of years.
At the April 16 Waseca City Council meeting, Chris Kennelly of REVocity, who has been representing the development project, talked to the council about the project.
Because of some setbacks, Kennelly did not have a developer’s agreement available for the council. No further action by the council concerning the project can be done without the agreement. A public hearing to take action on the matter was scheduled to take place at the meeting.
“We don’t have anything for you tonight, and I know that’s one of the holdups of taking action here, so we’re very comfortable with extending,” Kennelly said.
Kennelly and Waseca City Manager Carl Sonnenberg encouraged the council to re-open the public hearing at the May 21 council meeting. The action needed for the project to move along is to adopt the TIF district agreement and authorize the sale of the city property to WERF.
The project was originally set to break ground in June, but Kennelly and WERF are now looking at a July start date for the project.
“We’re still overall very positive on it, we know we can make it happen,” said Kennelly. “We just need a little more time than what we were expecting.
Kennelly also stated that they are not concerned about losing the month of the project, and it will still be completed in 2025.
With a few members of the council confused about the TIF agreement aspect, the city’s financial advisor Jessica Greene of Northland Securities talked to the council, sharing her perspective on the incentive,
Greene explained that the TIF agreement allows for WREF to have flexibility when it comes to financing the project.
“TIF is the collection of property taxes that are derived from newly developed value,” Greene said. “So the base value that exists today continues to be paid to the local taxing jurisdictions, and as development occurs, those property taxes are captured within the district and then used to reimburse for property taxes. In this case, it would be used to reimburse for the construction of affordable housing.”
Of the proposed 36 units of the apartment complex, eight of them will be specifically slated for affordable housing and be for whoever is eligible. WREF has to provide 20% or more of units for occupancy by people at 50% or less of the area median gross income.
The income limits are set by the Department of Housing and Urban Development (HUD) on an annual basis, and WREF will need to provide certification to the city that the apartments are being rented out to those that qualify.
”It is primarily a market rate project, just with that affordable component built in,” Greene said.
The TIF district will run for the maximum duration of 25 years. Because Kennelly and WREF do not have a developer’s agreement available at this time, Greene did not recommend that the council move forward with the project.
”At this time, being that we are still waiting for some financial information from the developer, Northland is not in a position to provide a recommendation to the council as to the level of assistance,” said Greene. “We are of the opinion that assistance is necessary to move the project ahead, but it’s at what level, and that’s going to come from the information that we are still waiting on.”
The council agreed to re-open the public hearings for the agreement of the TIF district and the sale of the city property at its May 21 meeting. The council will be asked to take action on both items that night.
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