Editor's note: This story was updated following the Feb. 20 Edina City Council meeting to reflect the council's vote, to update data related a funding gap, and to more clearly describe the item that the council and HRA approved.
A mixed-use apartment project on the 7200 block of France Avenue is in line to receive $12 million in tax increment financing from the city of Edina.
The Edina Housing and Redevelopment Authority on Feb. 14 unanimously approved a term sheet meant to help the project’s developer fill a financing gap that, according to Edina Economic Development Director Bill Neuendorf, amounts to $23 million to $24 million. Subsequently, the Edina City Council, which is comprised of the same members as the HRA, unanimously voted to approve the term sheet Feb. 20.
“The (funding) gap is significant,” Neuendorf said as he explained how the agreement will help make the project financially viable.
The $111 million project aims to bring two apartment buildings to 7200 and 7250 France Ave., where two office buildings currently stand. Twenty percent of the 301 units will be priced as affordable for renters earning 60 percent of the median income. Designs also call for 28,000 square feet of retail space in the development. A final phase of construction envisions the construction of 10 townhomes.
To help make the project happen, however, developer France Equities requested that the city of Edina use tax increment financing, known as TIF. With TIF, developers receive subsidies based on the amount by which they increase the tax capacity of a redevelopment site.
In the case of the 5 acres at 7200 and 7250 France Ave., the developer will take a $10.9 million site and transform it into an estimated $94 million parcel, Neuendorf told the HRA.
In exchange for the $12 million TIF note, the developer agrees to provide public improvements valued at the same amount. Those enhancements include the project’s signature feature, a pedestrian-friendly road called a “woonerf” that will divide the two buildings. Under the TIF agreement, other public benefits include stormwater improvements and an extension for the duration at which the affordable units will remain affordable.
The complex’s affordable units are to remain that way for 25 years, 10 years beyond the city’s current policy that requires subsidized units to stay affordable for 15 years. Of the $12 million in TIF funding, $5 million is meant to offset the cost of keeping the units affordable for the additional 10 years.
Although the HRA voted unanimously to approve the TIF term sheet, some of its members questioned whether all the items on the list of public benefits qualified as such.
For instance, $1.4 million of the $12 million in TIF-related property improvements will go toward a second-floor public plaza. HRA Members Mary Brindle and Ron Anderson were skeptical whether the feature would be used by the public in practice.
“I think it has minimal benefit to the public,” Brindle said, suggesting the money go toward other improvements such as a water feature as recommended by the Southdale Small Area Plan working group.
The ultimate public benefit of certain features in a development is central to how HRA members view the justification for TIF. Anderson called the mixed-use complex “an outstanding project with a lot of affordability, so I get a little torn between the total amount that goes in and the ultimate benefit that’s received.”
But Edina’s contribution is already conservative, considering what state law allows, HRA Member Mike Fischer argued. The project has an estimated $22 million worth of improvements that legally qualify for TIF, Fischer noted.
According to Neuendorf, the $12 million figure was identified as the sum that will be required, along with other funding sources such as public grants from regional agencies, to make the project viable.
“The gap is so big I really recommend the full 12,” he said. “I think that’s what it’s going to take.”
Solving a $22 million funding gap with a $12 million contribution “seems like a very reasonable conclusion,” said Jay Lindgren, a financial consultant to the city.
Arguing for the public benefit that justifies TIF, Neuendorf pointed out that 46 percent of the site’s acreage will include easements allowing for public use. In addition to the woonerf, public amenities include 217 parking stalls and the conservation of a 25,000-square-foot wooded area on the property.
Plus, the project is the best of the three options facing the site, according to Neuendorf. In one option, the two office buildings – one that is aging and another that is uninhabitable – could be rehabilitated. In another option, the developer could pursue its alternate plan and build two new medical office buildings on the land, but that would result in less of a tax capacity benefit in the long term compared to the apartment complex, Neuendorf explained.
The TIF district will last 20 years, after which the city will collect on the full tax capacity of the site.
“That’s where the community really sees the benefit,” Neuendorf said.
– Follow Andrew Wig on Twitter @EdinaSunCurrent