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Midway Center site redevelopment financing moves steadily forward

Posted on 26 October 2017 by Calvin

Tax increment financing (TIF) is poised for use in Midway Center site redevelopment. The St. Paul City Council, acting as the Housing and Redevelopment Authority Board Sept. 13, voted 5-2 to make findings needed for building demolition and a future TIF district on the shopping center property.

Council member Rebecca Noecker and Jane Prince voted against the TIF district; Dan Bostrom, Amy Brendmoen, Russ Stark, Dai Thao and Chris Tolbert voted in support.
The TIF district would cover an ell-shaped property that includes the shopping center and buildings to the north along Snelling and University avenues, as well as the vacant lot at the northwest corner of Pascal St. and St. Anthony Ave. Most of the stadium is being built on Metropolitan Council-owned property where a streetcar and later bus garage stood for decades. That property isn’t eligible for TIF.

A Housing and Redevelopment Authority (HRA) staff report indicated that the 15.6-acre site needs an “infrastructure system of streets, pedestrian-friendly sidewalks, walkways, and utilities installed. Private sector investment will finance site redevelopment, but additional financial resources may be necessary in the future to assist in turning this large and complex transit-oriented development site into a vibrant community hub of diverse businesses, jobs, housing, and entertainment.”

Part of Midway Center, including Rainbow Foods, Midway Pro Bowl, and several shops to the east in the strip mall, must be torn down to make way for the Allianz Field soccer stadium’s north end.

Although Minnesota United FC is paying the entire cost of building the roughly $200 million stadium, lead stadium partner Bill McGuire recently entered a master lease for the 15.6-acre Midway Center property itself with owner New York-based RK Midway.

Rainbow Foods and Midway Pro Bowl closed in September. A home rental store closed in August. Other closings haven’t yet been announced.

The demolition agreement is with the newly formed Snelling-Midway Redevelopment LLC. The TIF district is classified as a “renewal and renovation district” which could allow for TIF to help cover some of the related costs. St. Paul Director of Planning and Economic Development (PED) Jonathan Sage-Martinson said the findings are “limited and technical in nature” to allow the city to enter into the demolition agreement.

It does leave open the option to create a TIF district in the future, he added. The staff report states that “the developer intends to submit an application to the HRA for tax increment assistance in the future in connection with a proposed development to be constructed by the developer or its successors or assigns on the property. To preserve TIF eligibility, Minnesota tax increment law requires certain findings be made by the HRA before the demolition of the buildings or removal of improvements. This action does not obligate the HRA to create a Tax Increment Financing District.”

The demolition agreement for Midway Center is required by state TIF law. Any future application for the TIF district itself would have to show that the redevelopment cannot proceed without that form of public financing.

There are no plans for land acquisition using eminent domain.

Noecker, who tried to block the use of TIF for Midway Center in 2016, said she continues to oppose its use. “Frankly, we’re giving up property taxes,” she said. In a TIF district, the added property taxes generated by redevelopment are instead used to pay project costs for a time, instead of being paid to the city, county and school district.

Noecker also said she believes the stadium itself will be a catalyst for redevelopment and questioned if TIF is needed.

Prince agreed with those sentiments. She and Noecker also cast the votes against using $900,000 in TIF generated at other sites to help with the stadium site’s environmental cleanup.

“I see this as a way that cities impoverish themselves,” Noecker said.

But other council members said the option to use TIF needs to be kept open. Ward One Council Member Dai Thao, whose ward includes the stadium and shopping center site, said he favors TIF. He expressed support for redevelopment that would include affordable housing, given the site’s proximity to good transit.

“We should keep every (development) tool and option on the table for as long as we can,” said Ward Three Council Member Chris Tolbert. He said it would be “premature” to block TIF now.

Snelling-Midway Redevelopment LLC owns what is called “possessory rights” for five of the Midway Center properties. Its affiliate MUSC Holdings, LLC is the owner of possessory rights in the adjacent parking lot parcel in the southeast corner at Pascal and St. Anthony. McGuire is the controlling partner of the LLC.

For TIF to be used, the HRA needs to make specific legal findings including a finding that the property eyed for TIF is blighted. The Minneapolis-based consulting firm of LHB, Inc. was hired by the city to inspect and evaluate properties within a proposed TIF district made up of Midway Center and a vacant property at the northwest corner of Pascal St. and St. Anthony Ave. LHB looked at the site as well as the buildings. One determination LHB made is that Midway Center and the Big Top Liquors building, are in the poorest condition.

The LHB report documents that parcels consisting of 70 percent of the area of the property are occupied by buildings, streets, utilities, paved or gravel parking lots. About 20 percent of the buildings meet the state’s legal definition of “substandard” structures. Another 30 percent would require substantial renovation or clearance to address existing conditions.

Next up for the project will be council action on the TIF district itself, as well as a final decision on the property plat. A preliminary plat for the soccer stadium area won City Council approval more than a year ago, along with the master plan for Midway Center site redevelopment. The final plat is expected to go before the City Council this month.