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The Eagan City Council saw plans for Nicols Apartments during its meeting last week.

City authorizes CDA TIF district

Eagan is one large step closer to seeing in more affordable housing in the community.

Eagan City Council unanimously approved the 204-unit Nicols Apartments affordable housing development during its meeting last week.

Its construction will meet several affordable housing benchmarks for the city set by the Metropolitan Council for 2030.

The council also voted to support the creation of a 26-year tax-increment finance (TIF) district by the Dakota County Community Development Agency.

It took more than an hour of discussion to find council consensus.

“The amount of affordable housing available in Dakota County and let alone Eagan is small compared to the need,” Mayor Mike Maguire said. “That affordable housing development benefits the community in different ways than it costs the community.”

Maguire said adding affordable housing to a city “that has added 1 million square feet of retail in the past 10 years means those retail outlets have access to employees. Those employees can work in those outlets, live in the community, and spend their paychecks at other business.”

Patrick Ostrom, partner with Real Estate Equities, said they will be the long-term owners of the property, which will be located at the southwest corner of Nicols Road and Diffley Road.

He said it’s an attractive location for affordable housing because it’s close to public transit as well as Highway 77 and I-35E. It’s will also be close to Cedar Cliff Center, Cliff Lake Centre and Rahn Elementary.

The development plans include a small playground, outdoor patio, dog run, sport court, lounge, fitness room and club room.

The plan is to break ground in 2020 and it would be complete by 2022.

It will be 100 percent affordable, as defined by the CDA.

In the new development, 45 units will be affordable to households for those earning below 50 percent of area median income, 139 units for 60 percent AMI and 20 at 70 percent AMI.

Tony Schertler, executive director for the CDA, said affordability is locked in for 26 years, which is as long as the TIF district is active.

To make the project financially viable, the development used multiple funding sources, including TIF, 4 percent low-income housing tax credits, tax-exempt bonding and the Dakota County affordable housing levy.

“The development project is only feasible with public financial assistance,” Community Development Director Jill Hutmacher said.

The Dakota County Board will hold a public hearing and be asked approve the district, she said.

TIF will provide a revenue source to the Dakota County CDA for capital maintenance, preservation and new development of affordable housing in Eagan.

Council Members Cyndee Fields and Paul Bakken initially hesitated in approving the project.

Fields said she felt the building was too big, and the setback deviations and parking deviations were significant.

Maguire and developers noted they need the higher density to make the economics work.

“The developer and CDA and city staff put together a delicate deal,” Maguire said. “Affordable housing projects always are ... they’re complex deals. They’re challenging. There’s a lot of math.”

The position of the building was also due to the inclusion of a regional pond.

There’s currently a wetland on the site, which is prone to flooding, Public Works Director Russ Matthys said.

It will be converted into a regional stormwater pond.

“It’s a site staff has been aware of for decades,” Matthys said.

Bakken said he’s generally against changing land uses from commercial to residential from a tax base perspective.

One part of the approval was changing the land use designation from retail commercial to high density residential.

He said high density residential “doesn’t carry it’s own weight in the revenue it generates” to provide for city services.

But given that it has an affordable housing aspect to the project, “there is a compelling offer here. This meets many future affordable housing needs.”

Bakken was concerned about setting a precedent with a TIF district for high density housing, but after discussion with Schertler, staff and the council, he felt more comfortable.

Maguire said he anticipates after not seeing a TIF district like this in 20 years that he probably won’t be around for the next one.

“We’ve had the (land use) wrong on this (property) for as long as I’ve been on the council,” Maguire said. “It’s never moved in the retail market.”

TIF revenue is created by capturing the new tax generated by the development.

For the first 15 years of the district, the CDA will provide up to 70 percent of the increment to an interest rate reduction program and it will retain the other 30 percent.

The CDA will use 100 percent of increment for the remaining 11 years of the district for other affordable housing developments in the city.

Schertler he will “put it overtly into our resolution all the increments will be in Eagan” in the TIF plan.

Fields said the CDA has never let the city down.

Though it’s a “big ask” it meets many 2030 benchmarks for affordable housing.

Council Member Gary Hansen said he believes it’s the optimal, viable use for the site and there are benefits for the tradeoffs.

Council Member Meg Tilley was absent.

Eagan has the most CDA housing units of any city in Dakota County with 497 units. Lakeville is next with 459 units.

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