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Serving Northern St. Louis County, Minnesota

Harbor town home project back on track

Marshall Helmberger
Posted 9/30/18

TOWER— The town home project at the city’s harbor here is back on track after the city council and the project developers reached agreement on the terms of a new development agreement. At a …

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Harbor town home project back on track

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TOWER— The town home project at the city’s harbor here is back on track after the city council and the project developers reached agreement on the terms of a new development agreement. At a special meeting on Wednesday, the two parties agreed to move forward in a phased approach with repayment for public infrastructure coming through a 20-year, pay-as-you-go tax abatement deal.

The arrangement is a work-around from an earlier city request for an up-front letter of credit to cover the cost of the full installation of streets and utilities to serve the planned 20-unit development. Under the new agreement, the developers, currently led by Tower resident Orlyn Kringstad, will have until April 1, 2019 to demonstrate a bankable project by obtaining signed purchase agreements sufficient to move forward with at least the first of three planned town home buildings. The first building would encompass six separate units, the second would encompass eight units, while a third building would account for the remaining six town homes.

The new agreement establishes a timeline for the various phases, with the first phase set to begin construction by July 2019, with a one-year deadline for completion. The timeline on subsequent phases was less clear, but Jeremy Schoenfelder, the project’s master developer, said construction on subsequent phases would preferably start in 2019 as well. Depending on sales, the project could still be done in a single phase, which would reduce costs for both the city and the developers.

The two parties agreed that the project bonding would need to be ready to go by June 1 of next year so the city would have the funding in hand before approving bids for the streets and utilities work. The city is expecting to receive some grant funding from the IRRRB to pay for a portion of that work, which will reduce the amount of the construction bond.

The city would bond for the cost of infrastructure for each phase, with the developers being responsible for the repayment of the bond. The city council agreed to forego the property tax gains from the development for up to 20 years, with those tax dollars going instead to help finance the bond payments. The city will also be asking St. Louis County to forego its additional tax revenue from the project to help pay the debt. Any shortfall from the tax abatement would be up to the developers to pay.

The agreement allows a project that had been in doubt to move forward again after months of wrangling over the city’s demand for a letter of credit. Under the original development agreement, the city was responsible for paying the cost of public infrastructure, but when grant dollars proved more limited than the city had originally thought, city officials backtracked on that promise and opted to put more of the financial risk onto the developers.

Schoenfelder said the phased, pay-as-you-go approach was an effort to “mitigate risk” for both parties.

The revisions to the agreement will now go to the city’s attorney for final drafting. The changes will also need to be reviewed by attorneys for the developers before a final version is signed. That signing is now set for Nov. 13, when Schoenfelder and the project’s primary investor, Lars Hanstad, are planning to be in Tower.

In other business, the council:

‰ Approved a ten-percent preliminary increase in the city’s levy for 2019. The council has traditionally set its preliminary number relatively-high, but then adjusts it downward when it approves a final 2019 levy in December. The council has typically received a proposed budget when it sets its preliminary levy, but that budget was still in process, according to Tower City Clerk-Treasurer Linda Keith, so the council had no proposed budget to examine.

• Took no immediate action on a request from Dave Rose for the return of $7,500 he put in escrow while the city reviewed his proposal for an RV campground near Hoodoo Point. Rose said the reluctance of the city’s planning and zoning commission to allow him to build 20 lots in his proposed campground had made it uneconomical. City Clerk-Treasurer Linda Keith said the city had spent down some of the $7,500 on an engineer’s review of Rose’s EAW. “You can return what’s left or wait pending the review on the house he’s proposing,” said Keith.

The council may take the issue up at their Oct. 8 regular meeting.

• Approved a low bid of $28,500 from C.W. Winger for replacement of sidewalk along the west side of the new clinic. The decision came after considerable discussion and a decision to hold off on replacement of a portion of sidewalk in front of the Ubetcha antique and thrift shop on Main Street.

• Declined to change the billing procedures for city utility customers who only receive sewer or water. A Breitung Township resident who receives only water from the city had asked for a reduction in his quarterly assessment, which encompasses both sewer and water. He indicated in a recent letter that he is disputing the charge.

• Approved a resolution accepting a $7,500 donation the Tower Fire Department from the Bois Forte Band. The city will also be sending a thank you.

• Reviewed a letter from the MPCA indicating that the city’s water supply remains in compliance with state standards for haloacetic acids and total trihalomethanes.

• Approved a resolution remembering infant deaths due to Sudden Infant Death Syndrome, or SIDS.