Council: No TIF for apartments

File photo by John Gessner

A four-story apartment building is proposed at Highway 13 and Diffley Road, now occupied by a shuttered gas station and car wash and mostly vacant strip center.

Project proposed for blighted corner 

A proposal to replace blighted commercial buildings with apartments on a prominent Burnsville corner may not get off the ground.

At a work session Tuesday, City Council members opposed tax-increment financing for a four-story, 155-unit building at Highway 13 and Diffley Road.

Developer Roers Cos. says it needs TIF to complete a $3 million assistance package to make the $35.8 million project work.

“Without TIF, I don’t believe we will get this project to move forward,” Andy Bollig of Roers told the council. “Honestly, it’s just too difficult with the numbers.”

That message was echoed in a report from the city’s financial consultant, which reviewed Roers’ numbers.

Even with a $1 million grant council members said they’d likely approve, “it is unlikely this project can proceed as proposed without some additional city assistance,” said a report from Ehlers Public Finance Advisors.

The price of the property — $2.75 million — is higher than the acquisition would be without an operating commercial building on it, Bollig said. He said Roers is under contract to buy it from owner Bona Ku.

The two-lot property next to Metcalf Middle School at the Burnsville-Eagan border has long been considered an eyesore. It contains the long-vacant Mr. B’s gas station and car wash, built in 1960, and the Riverview Center, built in 1965.

The mostly vacant strip center has a bar, a barber and a massage business, said Council Member Vince Workman, whose family insurance business used to rent office space there.

Council members said they support helping the project with at least $1 million from the Dakota County Emergency Legacy Fund, which provides county grants to cities with landfills.

Burnsville has secured a $1.15 million allocation that expires in September and is eligible for $1.1 million more through fall 2022. The city plans to use its share for building teardowns or land assembly to aid redevelopment projects.

Other developers are also pursuing ELF funding for projects in Burnsville, Assistant Community Development Director Regina Dean said.

“We’ve long looked at this particular site as a high potential for ELF money because it’s the gateway to our city, and it looks terrible coming into the city,” Council Member Dan Gustafson said.

But it shouldn’t get all the ELF money, and TIF is a nonstarter, Gustafson said. TIF uses the additional property taxes paid as a result of development to pay for part of the development costs. The council would have to create a TIF district for the property.

If it were granted $1.15 million in ELF money, the project would still need nine to 14 years of TIF assistance, according to Ehlers.

“I’m not comfortable giving TIF to housing projects,” Gustafson said. “It just doesn’t make sense to me. They don’t create jobs or anything like that.”

The property is a “terrible eyesore” and a candidate for an ELF grant, but “I am not in favor of TIF for this project at all,” Council Member Dan Kealey said.

“Housing. TIF. We’ve never had to prime that pump,” Mayor Elizabeth Kautz said, adding that the multihousing industry had a “banner year” in 2020 and stands to do even better in 2021.

Council Member Cara Schulz said she rarely votes for using TIF but would support an ELF grant. Workman said he’d back a grant if the all-residential Roers proposal included some commercial uses.

The mostly residential area — which will get more homes if School District 191 is able to sell the shuttered Metcalf — needs commercial uses, said Workman, who envisions a grocery store nearby.

The property is designated mixed use in the city’s comprehensive plan, and a single use is “not the highest and best use,” Kautz said.

“There has to be multiple uses there,” she said.

But the corner isn’t a prime commercial area because it’s an “island” between two commercial magnets — the Eagan outlet mall and Burnsville’s Heart of the City, Bollig said.

The building plan calls for parking behind the building, another impediment to commercial uses, he said.

Workman says he thinks current owner Ku paid too much for the property — $2.1 million in 2017 — and Roers would also be overpaying at $2.75 million.

The proposal for market-rate apartments includes 15 three-bedroom units, which Roers says are in short supply in the Twin Cities rental market.

Roers built the Maven Apartments, which opened last April on West Travelers Trail in the Heart of the City.

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