Council approves tax-increment financing for new housing development on Blazing Star Landing
Developer hopes project can help kickstart growth in Albert Lea
The Albert Lea City Council on Monday approved setting up a new tax increment financing district to support a new multi-family housing project on a portion of the Blazing Star Landing.
The project, through development firm Unique Opportunities LLC, initially calls for developing three acres of land into 48 units of multi-family housing with plans for two additional phases in the future with another 48 units per phase — for a total of 144 units on 12 acres.
Rebecca Kurtz with Ehlers, a public finance advisement firm, said the developer’s initial request was for $600,000 in tax increment financing over 26 years to support a gap in the project for the first phase, but that has since been reduced to about $474,000. The developer would need to come before the council if it wants additional assistance for future phases.
Kurtz said tax increment financing is a tool communities have to provide gap financing for projects without impacting existing taxes. Through it, a municipality diverts the increase in property taxes that comes because of the new development for a set number of years to pay for development expenses.
The city presently owns the land where the project is proposed to be developed, which is on the southern portion of the Blazing Star Landing property adjacent to Front Street, at the site of the former Farmland Foods plant.
Samuel Herzog with Unique Opportunities said the company is currently based out of Fergus Falls but is transitioning to Alexandria.
He said seven years ago when the company started developing, he looked at an existing building in Albert Lea. At that same time, he realized there was a need for new housing in the city.
Herzog said the company was developing more in northern Minnesota at the time, but as it continued to grow, it was brought back to Albert Lea through a mutual connection with Philip Johnson, executive director of the Albert Lea Economic Development Agency. They set up their first meeting about the potential project nine months ago.
“We’re hoping our project can be a spark that ignites developments of all kinds,” he said.
He said though there are some demographic concerns about Albert Lea, they see a lot of potential for the community over the next 20 years.
“We’re really excited to be a part of it,” Herzog said. “We hope it can kickstart growth.”
Twenty percent of the units for the first phase — or 10 units — would have income restrictions on them and would be occupied by people with incomes of less than 50% of the median income. The remaining 80% of the units would be market rate.
Rates for the affordable units are proposed at $650 for a one-bedroom unit and $795 for a two-bedroom unit. Rates for the market rate units are proposed to be $750 for a one-bedroom unit and $895 for a two-bedroom unit.
The estimated total development cost is about $4.97 million, or about $104,000 per unit, with the developer achieving lower costs through reasonable land acquisition, not taking a developer fee and not funding working capital reserves in the first mortgage, the information to the council states.
The TIF assistance would represent approximately 9.5% of the total project cost for the first phase.
The proposed sales price is $6,000 per acre for the first three acres, with the city proposing to offer the developer a right of first refusal on the adjacent land, meaning if the city opts to sell that adjacent land, the firm would have the first opportunity to purchase the property at prices designated at that time.
Kurtz said the final agreement would be brought before the council at a later date.
Herzog said developers are still hoping to break ground this fall once the state signs off on tests on the property. If it takes longer than expected, construction would be pushed back until next spring and would be expected to take 12 months.