Developer Bluff Country LLC, of La Crescent, has put forth an agreement to the City of Rushford for the purchase of Lot 2, Block 1 in the Himlie Business Park. The goal in development in the southeastern most lost is construction of six, duplex-style townhomes. At the Monday, February 27 council meeting, the city discussed the purchase agreement as well as a counter proposal that would call for the structuring of a Tax Increment Financing (TIF) district related to the project. Doing so would ultimately make the project more feasible to the developer and allows the city to collect additional tax revenues.
Recouping both land and existing infrastructure costs related to Himlie Business Park has been talked about many times since the land was purchased in 2007. Currently, only one business resides in the park, with two others adjacent to it. Bluff Country LLC offered $48,000 to purchase the land. According to City Administrator Tony Chladek, this would utilize a structured purchase of $8,000 up front, and then additional per unit sold. However, this is not enough to offset land and infrastructure costs incurred by the city. Financial Consultant Mike Bubany, of David Drown Associates, was present at the meeting to add to the conversation and offer a counter idea. “The advantage is you’re recouping some of the costs,” said Bubany speaking of the original offer. “Some is better than nothing.”
Bubany’s counter idea takes a lower purchase price, but maximizes the city’s return, utilizing a TIF district to capture of city, county, and a portion of school taxes. “The 12 units could generate additional revenue.” He noted that there would be specific obligations to the developer and incentive to sell to income qualifying individuals and families. An “administrative fee”, stated as potentially $2,000, could be applied to the developer price if sold to someone not income qualified. “The carrot before them is the land could be sold at $24,000 if he sells to income qualified folks,” added Bubany.
If a TIF district is structured, and left open the maximum of 26 years, it could generate upwards of $190,000 or more for the city through taxes, based on development assumptions. “If we take into account the underlying cost of the land and infrastructure, we want to recoup as much of that as possible,” said Bubany.
The Planning Commission reviewed the basic proposal for this project February 21 and noted in their meeting minutes, “A TIF district is potentially the way the city can offer a reduced land price to the developer and over time recover those costs through the increased taxes collected. This type of housing is needed, the area is ready for development, and both the developer and the city will benefit from the partnership, all of which is consistent with the city’s Comprehensive Plan and recent housing needs study.”
Bubany did hit at a few questions regarding the TIF district, including how it affects the school. He clarified that the school is not able to capture tax from the district. Doing so would lower debt equalization aid to the school due to more taxes being collected, so the school does benefit day one, said Bubany.
The project has to go through Planning and Zoning, site plan review, and any public hearing, if necessary. “It’s a counter idea to think about. We’re not under any rush here,” added Bubany.
“It appears to be a workable solution,” said Councilor Vern Bunke. “We’ve had success with other TIF districts.”
“It’s a pretty good project,” added Chladek. “It will set a tone going forward. We can use that in promotion going forward.”
The city will need to determine the cost of investment, plus interest, as well as further infrastructure. Zacher indicated that the city is responsible for the storm sewer and 50% of the electrical utility, both of which can be included in financial planning to make sure the city recoups as much as possible. Roads and all other infrastructure are the responsibility of the developer. Site plans currently indicate three bedroom, two bath, 1,600-1,800-square-foot units on one level with a two-car garage. This meets with the current permitted uses for R3 zoning.
“We’re not past the point of no return. There are many steps. If this deal were to crater, you’ll get no bill from me,” added Bubany. Considerable detail will still need to be worked out regarding the zoning configuration of street and utilities and the detailed responsibilities of the developer and the city regarding that infrastructure. The counter proposal was approved by the council and will be presented to the developer.
In other news, the city council debated continuing with membership in Southeastern Minnesota Historic Bluff Country Tourism Program (HBC). Mayor Chris Hallum, who sits on the HBC board, is a fervent promoter of it and recommended the city maintain its membership. Councilors Terri Benson, Vern Bunke, and Mark Honsey expressed some concern, however, with what the city gets for its $1,500 annual cost in the current six-municipality membership.
Honsey noted that in 2015, the same discussion had been had by the council and questioned whether or not the organization had turned a corner or not. “Do you see a light at the end of the tunnel?”
Benson further questioned what the $1,500 actively went toward and what the goals of the organization were. “The struggle I’m having, there’s not a lot of communities behind it. What are the goals we have, the strategy we have? They just don’t have the results or strive to get the results. It’s not that I don’t believe Historic Bluff Country is important; I do. I just don’t feel the passion to drive that. How is it feeding back to Rushford?”
Hallum indicated the organization is working on getting more memberships and that the new website is in operation. Still, some on the council struggled with how it was tying back to the community, a correlation that is hard to track.
“Here’s the numbers. Here’s what we’ve done. Here’s what we’re working on. That’s what I need to see,” added Benson. “It’s a piece of the puzzle, but it seems like there’s a lot of pieces missing.” In the end, the council approved the annual membership for HBC for another year.
The next regularly scheduled council meeting is Monday, March 13, at 6:30 p.m., at city hall. The public is encouraged to attend.