Eager to jumpstart 450 residential units and a series of commercial buildings on long-stalled development parcels at Highland Bridge, the St. Paul City Council voted 5-2 on Wednesday to amend a longstanding tax incentive district, delaying construction of some internal sidewalks and landscaping for up to five years.
The amendments — the sixth to the former Ford Motor Co. site’s $275 million tax increment financing district since 2016 — do not alter the total spending planned within the TIF district, but they do alter payment schedules. A new “minimum assessments agreement” shifts some TIF payments from interest to principal and saves the master developer, the Ryan Cos., some costs upfront as the taxable value of particular land parcels are lowered.
“This does not impact the city budget or the general fund,” said Council Member Saura Jost, addressing the city council on Wednesday. “This reduces the holding cost to the developer, enabling it to move forward as foreseen in the master plan. … We’re not changing the public investment at the site.”
Getting county assessors to agree to drop land values took a joint effort from both the city and the Ryan Cos.
At Highland Bridge, Weidner Apartment Homes now plan construction of two market-rate apartment buildings spanning 350 housing units in the near future. Nearby, the Ryan Cos. had once planned to have started work on a series of commercial or mixed-use buildings on the parcel known as “Block 2” back in 2021.
Neither project has moved forward in recent years, with both developers blaming the city’s rent control policies for adding to an already-complicated financing landscape weighed down by high interest rates, rising construction costs and other barriers.
3,100 units instead of 3,800
The Ryan Cos. have since redrawn their plans for four one-story commercial buildings, as well as a four-story, mixed-use residential building consisting of 97 market-rate rental units attached to ground-floor commercial space, a rooftop deck, streetscape improvements and a public promenade. Also planned is a 190-stall structured parking facility.
“You would see immediate development at this site,” said Maureen Michalski, a regional senior vice president of development with the Ryan Cos., referring to the TIF agreement.
So far, the developer has secured a letter of intent for a daycare to operate in one of the stand-alone commercial buildings.
Both Council Members HwaJeong Kim and Nelsie Yang voted against the new TIF arrangement and the related agreements.
While 20% of Highland Bridge is set up for affordable housing through a master plan, Yang expressed concern Wednesday that there was little clarity about the specific rents planned in the new residential buildings. The overall number of residential units planned for Highland Bridge has been redrawn at 3,100 units, down from an initial projection of 3,800 units, according to city staff.
Rents at an existing market-rate development — The Collection at Highland Bridge — average about $2,000 per unit, according to a spokesperson for Weidner Apartment Homes, who said he expected the new construction to proceed along the same grounds.
“Is this truly the biggest win that we can get for the city of St. Paul at the negotiation table?” said Yang, noting that Ramsey County had delayed a vote this week on the new minimum assessments agreement. “I don’t know what an alternative agreement could have looked like. … Also, where is the county on this, too? This is something that is going to be impacting them.”
With Weidner refusing to move forward until the company was released from rent control obligations, the city council voted 4-3 last week to relieve all buildings citywide built after 2004 from the city’s voter-approved 3% cap on annual rent increases.
A lack of communication
Council Member Cheniqua Johnson, who chairs the city’s Housing and Redevelopment Authority, said Wednesday she was excited to see new housing move forward, though she was disappointed with Weidner’s lack of communication with her office, as well as with the city in general, prior to the council vote on the rent control amendment.
“I want to add you to that discussion,” said Johnson, addressing Weidner development director Nick Nowotarski, who promised better days ahead. “That was the first time I had ever met you.”
Added Council President Rebecca Noecker, “I have been on this council for 10 years, and I’ve never had any contact with Weidner. … It matters to have you show up, and it matters to have this communication.”
The Ryan Cos. now hope to build the stand-alone commercial structures and the mixed-use building on Blocks 2 using both a public business subsidy and some $24 million in additional loan principal, supported by tax increment financing through a pay-as-you-go note. “TIF” tax incentives allow private developers to complete public-facing aspects of their developments using money that would ordinarily pay off city, county and school district tax obligations.
The city’s Housing and Redevelopment Authority hired the tax firm Baker Tilly as a fiscal consultant to evaluate project costs, financing and operations and confirm the need for TIF to move the Ryan Cos.’ Block 2 project forward.
New lower land values
A fresh agreement involves lower new tax values for the buildable land.
The original “minimum assessments agreement … places a tax burden on the properties without an offsetting income source,” reads the city staff report. “Both the city and the developer have incurred debt to advance the infrastructure and have carefully evaluated adjustments to the minimum values to entice the stalled development to proceed.”
“We have worked with the assessor, who is supportive of adjustments to certain lots,” the report states. “The resulting … amendment will reduce values for the certain lots in the short term.” The lot values will exceed the original values in 2041 and continue to increase through the year 2047, the final year of the TIF district.
Separately, the Weidner agreement will require the construction of two buildings resulting in approximately 350 housing units over the next few years, as well as pre-payment to the city of all of their “Green Infrastructure” assessments. Jost noted that form of binding development agreement was not in place previously.
The two developers have agreed not to apply for additional city or Housing and Redevelopment Authority funds on land they own for any future “vertical development” at Highland Bridge.
“Highland Bridge is important to Ward 3,” Jost told the council Wednesday. “It’s important to the whole city. … Our city will see one of its vacant spaces replaced with something of purpose. … We’re expanding the housing options available to our residents in Highland.”
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