The St. Paul City Council voted 5-1 on Wednesday to award $2.95 million in tax increment financing to a private developer to demolish and redevelop three properties at the northeast corner of Grand and Victoria avenues, including the Victoria Crossing East Mall.
Developer Ari Parritz and Afton Park Development, who plan a mixture of 90 apartments over 12,800 square feet of retail space, had requested the tax incentive, a request that has drawn opposition from different corners of the city. The financing would be paid back by the developer over the life of the 26-year tax increment financing district using property tax increments that otherwise flow to the city’s general fund.
TIF districts are designed to help the city spur private sector investment in blighted areas, but the prospect of using the development incentive in one of St. Paul’s toniest restaurant and retail districts has drawn relatively heavy scrutiny. The city council received at least 32 pages of emailed comments, most of them critical of the proposal.
“This is not a blighted area, this project does not in any sense fulfill the definition of need for TIF funding,” wrote Rodden Turner, a resident of Laurel Avenue. “As my property taxes have become unmanageable, like so many St. Paul residents, we cannot afford to grant our money to wealthy developers who are and have been allowed to feed at the city trough, with the approval of city government. We cannot afford these policies any longer!! Please vote no.”
Similar sentiments were shared by multiple members of Insight, a fiscal watchdog group, who testified before the council during a public hearing on Wednesday alongside other city residents opposed to the TIF district.
City Council President Rebecca Noecker noted that while Grand Avenue remains a popular destination, a third-party review found the three buildings to be substandard, and the $44 million project likely would not occur but for TIF assistance.
“I do think that the blight test is met,” said Noecker, who pointed out that most of the recent major real estate development in the city has received some form of public assistance. “I think that there’s compelling evidence that this project would not happen but for … subsidy. … We have the option to not grow or we have the option to grow.”
“We haven’t seen a completely unsubsidized housing development in St. Paul in a long time,” she added later, in an interview. “Landmark Towers was completely market rate, and it still required TIF to move forward. A third party review found there was a (financial) gap, and the amount of the gap is what we’re allowing.”
Council Member Anika Bowie, who cast the sole dissenting vote, said she supported the project but saw no need for public financing. She said TIF-backed projects should include affordable housing. Council Member Cheniqua Johnson is on leave following the recent birth of her child.
The 845 Grand LLC project would replace three buildings, including the former home of Billy’s on Grand and the adjoining mall, as well as a small and vacant apartment building. The mixed-use development that would rise in its place would include 90 units of rental housing, 22 public parking stalls and 99 private parking stalls. It would span 12,800 square feet of commercial space on the first floor for two restaurants and a retailer.
Parritz, addressing the council, explained that the city would continue to collect the $200,000 in existing property taxes at Grand and Victoria, and the TIF district would be paid back through the tax increment generated above and beyond that amount based on the development’s increased property value.
“If this TIF plan is approved, nothing happens to that $200,000 that goes to pay for city services,” Parritz said.
The project, according to the TIF plan, would increase the site’s $6.5 million value by $20 million.
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While the developer would receive $2.95 million to put toward site improvements and construction preparation, as well as other qualifying public improvements, the overall TIF district would total $9.4 million. That includes $908,000 for administrative costs, $3 million toward off-site affordable housing, and $2.6 million in interest.
The city currently captures 7% of its annual tax capacity for TIF spending, or about $37 million this year in 58 TIF districts.
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