DLDA gets earful at Waterfront TIF hearing
After having to wait a few extra minutes to have a quorum, the Detroit Lakes Development Authority held a public hearing Tuesday afternoon on the tax increment financing on The Detroit Lakes Waterfront LLC project.
While there was some opposition to the $1.2 million 25-year pay-as-you-go TIF, the authority unanimously passed the motion to accept it. It will now go before the Detroit Lakes City Council Tuesday evening at 5 in city hall.
Minnesota Avenue resident Tom Harper expressed his concerns with giving the project TIF support. He said that the way he understood it, the developer wouldn't be charged any interest in the TIF, yet he is paying for the street repairs done to Minnesota in the last couple years.
"He said he sees "a real disconnect" if the city is treating the neighborhoods and the commercial districts differently.
Community Development Director Larry Remmen explained that the city actually saves money by not giving developer Drew Olson the interest from the TIF. At times developers are given the interest from the bonds sold to cover the tax increment financing, but not so in this case.
Harper also pointed out that with all the variances Olson has been given with the project, he didn't see why the city should be giving him financing as well.
"You're giving him money and increasing expenses to the rest of us to give them money," he said, warning the city to be more careful with this project.
Authority member Tom Klyve explained that the tax increment financing would not be costing the tax payers. The way it works, is the developer will still be responsible for paying the existing taxes on the property, but won't have to pay the increment of increase due to the value increase for 25 years. Instead, he can use that money to pay for the cost of the project.
The cost of the project is estimated at $8 to $10 million, so the extra taxes on that will be deferred for 25 years, but then when the taxes do start in 25 years, the building will still have held its value, and likely increased in value, and the taxes will increase that much more.
"I like TIFs," Klyve said. "Without them, businesses might come (to town), but they won't come as big."
"Twenty-five years sounds like a long time, but we're insuring a substantial tax increase in 25 years," Remmen added.
One of the property owners, Brad Wimmer, said in years to come, the project will certainly pay for itself and the TIF it is given now.
"This is a good time to make a mark on Detroit Lakes," he said, acknowledging there will also be apprehension about change.
"This is our opportunity to make something unique happen for Detroit Lakes," agreed his brother and property owner Mitch Wimmer.
The final design of the project will be approved at a future DLDA meeting.
"Before the money is released to the developer, conditions need to be met to the satisfaction of the development authority," Authority member and Alderman Bruce Imholte said.
According to the agreement, the developer will have to start building by May 1, 2010, and have the project finished by Dec. 31 of the same year. But, also one of the 12 conditions is that he must have 50 percent of the commercial space pre-leased or sold before he's allowed to build.
The other 11 conditions include getting final planned unit development approval; giving the city right-of-way for a road to the north; dedicating at least 10,000 square feet to commercial space; building up to 27 condominium units (about 51,000 square feet); using only high-quality materials; and the final design must be approved by the DLDA.
Not including the purchase of the land, the project must cost $8 million, must have permits from the Pelican River Watershed District, and more parking will be made available if needed due to a restaurant in the commercial space.
The developer will reimburse the city for any legal fees associated with the TIF if the project doesn't continue -- and must provide bank commitment for financing.