Seconded by council member Fredericks. All in favor, say aye. Aye. All say nay. The motion carries. I'll now call to order the, Rochester Economic Development Authority meeting for 05/19/2025. And, our first item is to approve the consent agenda. Is there a motion? It's moved by Council Member Walls, seconded by Council Member Fredericks. All in favor, say aye. Aye. Any, opposed say nay. Motion passes. We have one public hearing on our,
agenda. It is the economic development plan and tax increment financing plan for CityWalk Apartments. And I believe, mister Johnson, you will be presenting this item. Yeah. Thank you, president Schubert and council members. Yeah. Tonight before us, we have a public hearing, and a request to approve an economic development plan for Economic Development District Number 85 and a tax increment financing plan for the redevelopment tax increment Financing District Number 85 Dash 1. So this project consists of five parcels located at the,
intersection and corner of Second Street Southwest and Sixth Avenue Southwest. The project proposal is a 13 story, 340 unit, highly amenitized, and high density housing. I think when we're looking for density of housing, this location makes a ton of sense. It's obviously across the intersection from where Mayo's Bold Ford Unbound project's expanding to. It's also about 60 yards away from where there's going to be a future high frequency transit station, right across the street. Other benefits of the project is,
the site currently houses some very underutilized and some vacant, buildings. In order for us to, request a redevelopment district, the owner had to conduct a blight study. The study considered all of the current structures on the building to be structurally substandard. So this is revitalizing that corner, bringing it to a much higher and better use. We spent a considerable amount of time this evening talking about intersections. One of the other benefits of this project is it is going to improve this intersection. Right now, when you turn south going on Sixth Avenue, you enter sort of a blind merge into that lane where you have to look
backwards to see if there's traffic coming. So we'll improve the safety, vehicular safety as well as the pedestrian safety, by making access going north across Second Street or east across Sixth Avenue more, safe for pedestrians. The other, I think, unique facet or creative facet of this project is we know that we need more housing. We know we need both market rate housing, but we also need affordable housing. In order to make the numbers work on this project, it was really, really difficult because it's on thin margins already to incorporate affordable housing into the 340 units. So what we did is we worked with the current owner of those sites.
He happens to also own an apartment complex to the East and apartment complex directly to the South. So through the negotiations, we actually, came to terms in agreement to put those, what are now naturally occurring affordable housing, into the county's four d program, which ensures affordability for the next twenty years. So it'll be two two cycles of ten year renewal cycles, into the county's program. When I was looking, through the Maxfield study, it indicated the vulnerability of naturally occurring affordable housing, especially in areas like this that are receiving or seeing economic revitalization with Mayo's project,
with infrastructure improvements in the Link Rabbit Transit project. So it's only gonna be more difficult to have affordable housing along this corridor. So, what Maxfield said is many of these older developments are vulnerable to redevelopment due to their age, modest rents, and deferred maintenance. So with them, committing to a twenty year process, that gives us a longer ownership horizon and incentivizes more, more updates and and and more investment into those properties long term. A couple of other things that I want to mention is we often talk about TIF project and development projects,
and I think we we we feel like they they're occurring much more rapidly than they maybe are. So also in the Maxfield study, it said that seventy four percent of the market rate rental development in the DMC area occurred during the last decade. So there's actually been no new development of market rate units that has happened since 2020. The exception to that would be, the former YMCA development, but that's not fully constructed yet. So those units haven't come online. The only other project that we approved was a mixed income project. That would be the brick, which, that development assistance was approved in 02/2021.
A couple of other just TIF related items since it's been a while since we've, you know, we looked at where we're currently standing with TIF. So our current percentage of TIF compared to our overall tax tax capacity in 2024 was four and a half percent. We pulled nine other comparable cities. Some of them are cities in comparable size. Some of them are just cities more located proximity to Rochester. The average over a five year span of of those nine municipalities was 4.5%. So we're right in the,
you know, mid range of of other municipalities. They also range from 1% from Saint Cloud percentage of tax capacity all the way up to about 11% for Saint Louis Park. So I'd say we we we're still in a very healthy spot in terms of our overall TIF commitment. Another fact that I just want to touch on really quick and then we'll open it up to the public hearing is that, we did look and we have we anticipate seven TIF projects to come in line in in about the next three years or in about three years. And that'll be about the time that if this TIF district's approved, that we're actually be we'll actually be collecting increment on City Walk.
And those seven TIF projects would account for about a hundred and $3,000,000 in total market value. So in about three years, we'll be decertifying, seven projects with a value of about a hundred and $30,000,000. So I think that's another, key point to add. With that, I'll open it up to questions in the public hearing. Council member Palmer, I I just wanna clarify something. You said to the East, they own the apartment buildings. Did you mean to the West? Is it the three story apartment building? Yeah. I think that was my dyslexia. I meant West. On the apartment going to the West and then the apartment going to the South.
Both of those are owned, and they will be staying in the, for the county. Correct. It it accounts for about 76 units. Yep. Thank you. Sorry. Mister Johnson, is there an applicant for this project? Or Yes. We have, so Justin Fincher with Rooter Walton, who is one of the equity development firms, is in the audience right there. Okay. So, mister, what's your name, Mike? I'm sorry. Mister Fincher. Mister Fincher. So if you wanna step forward, you have ten minutes to discuss the project. And then, and then after the public hearing, we'll invite you back for another five minutes,
and you don't have to use it all. That's a threat. Yeah. No. I don't think I will, but, thank you, council president, council members. My name is Justin Fincher, vice president of development at Reuter Walton. I did not prepare a formal presentation. I was, looking to Josh for that. So I think he's done a a great job. He's It's been great working with city staff today on this project. So, Reuter Walton is the proposed buyer developer for this project. We couldn't be more excited, about the opportunity, about the location. I don't have to tell you all. There's a lot of, interesting things going on in Rochester, and we're just excited to be able to potentially add to the mix.
So, our project in total is 350, units. 202 and, sorry. I just need to read the notes here. So in total, we have 250 market rate apartment units and then 90, what we're calling short term rental units for a total of 340 units. In addition to that, we do have structured underground parking, and we have approximately 264 parking stalls. In total, we plan to break ground, ideally, by the end of this year or maybe early next year and then turn over
the project within a twenty four month period. And from there, we would start our our lease up and stabilization period. So, that's that's really the project in a nutshell. As as Josh alluded to, we have a whole host of amenities. So this is market rate, premier project, where our amenities range from, like, work from home house work from work from home units. We have community spaces. We have, like, gaming centers. We have a a rooftop lounge and private dining area for residents,
just kind of a whole host of of items to cater to to the to the patrons. So Great. Thank you. We will invite you back after the public hearing. This is a public hearing. If you wish to be heard on this item, please step forward. This is a public hearing. If you wish to be heard on this item, please step forward. Seeing no one, I will close the public hearing and invite mister, Fletcher to come back up. I have a question. Oh. And if you have any closing comments and if you don't, then we will go right into questions. Well, come forward because we have questions already.
And I'm gonna start actually, I know council member Palmer is in the queue. But you you mentioned the, the number of units, the, three fifty. Does that include the natural occurring units in the three story apartment to the west and the one to the south? No. No. That does not. And, Josh, if you wanna clarify that, statement as to how many units are affordable that are not included in the redevelopment too. Yeah. Yeah. Thank you, President Schubert, city council members. So it's actually and I believe it's 340 units, of total market rate.
And then, the 76 units are actually, a a partner of the development, which will have a separate development agreement with them. And it should have also stated that, you know, this is tonight, the resolution is for the TIF plan and TIF district, and we'll be coming back with a subsequent development assistance agreement, which we're working with, Justin Fincher and his development team. So the 76 is not inclusive of the 340. So we're at over 400 units of housing that we're talking about. Just to clarify, so are the 76 within the district, though? Oh, I I apologize. No. I didn't ask that.
So you don't have to apologize. Okay. Good. They are not. So the district boundary is just going to be the alleyway out into the streets because it does include some street improvements and then the basically, the the site that you see in front of you there. Okay. Got it. TIF District. Got it. Council member Palmer, go ahead. I've got kind of a theme, and and and one of the themes is that you have 264 parking spots. If you have the BRT running in front of your of your apartment building, you're so close to Mayo Clinic that you're within walking distance of a tunnel to the subway system,
why are you putting parking in? Great question, council member Palmer. This has been a a point of conversation for our entire team. We actually believe it or not, there was actually less parking, on this proposed development before we got involved. And, the reality is that we have lenders and investors that need to invest in this project, and they have certain requirements for parking ratios as it relates to market rate developments. And so that's really what you're seeing here, is is a marketability concern. But we are with you. Like, the the BRT is we view it as an amenity to the project and really
we really hope that that our residents will utilize that to its full capacity. So in in the answer, are you telling me that the bank or your investors are requiring you to have that many spots? Or or is that the the driving force? That's currently, that's the driving force. And it's again, it's a marketability concern as well. So we have, I mentioned earlier, we have market rate apartment units, but we also have the short term rentals. And so between those two uses, we do see that there will be need for those parking stalls. So one last question. If if we decided as a city not to allow parking in that spot,
would your bank not not fund it or would they say, well, okay? Well, more than likely, they would not fund it. Even if you have ramps at both ends and that they can ride on the BRT to to to get to their car that's at the ramps? That's correct. Okay. Thank you. Council member Werkheen. Yeah. This is, more questions for staff, but I'm trying to understand this. You you, there's the new building going up. The TIF District is the new building, but then you're bringing in this idea of the other two buildings as, naturally occurring affordable housing. I that's nothing to do with the business in front of us tonight,
or that's just an interesting fact? Yeah. Thank you, Christopher Warking. I I would I guess I'd put it in the interesting fact category. We we think that it's it's an amenity. It's a it's an additional, negotiation discussion point, but they are two separate agreements. So there'll be a development agreement for the the naturally occurring affordable housing and then there'll be a development assistance agreement for the actual TIF District. But we we look at them encompassing one project because both are selling points to us. Thank you, council member Keane, for saying what I had in my mind when I asked my question. Alright. But but I'm still trying to understand that so when this market rate comes forward,
do we have a TIF policy that says, you know, is the TIF based on these public amenities that are in the streets? Or is it what what is the public good that I'm going to be, assessing this on, its market rate? Yeah. I would say the public good. I mean, right now, if you look at the the the tax generation of those five parcels, it's about $69,000 annually. Once the project gets developed, it's estimated to be valued at $86,000,000, which will generate over $1,300,000 annually in in in taxes.
Now I understand that, you know, it's a TIF district, so it has to run the term of the TIF district in order for those, property taxes to then come back on the tax roll. But, like all our TIF projects, it still needs to meet the but for test. So but for this assistance, we don't see this corner developing into such a high and and intense use. I'd say that, you know, looking at the Maxfield study, we still have a shortage of 30 about 3,336 market rate units. That's Olmsted County wide, but about 95% of those are projected to be in in Rochester,
over the next ten years. Like I said, we haven't had a a market rate housing development actually open in the last five years, and we're halfway through the decade. So, I don't I I don't think that but four I know I'm not but but for the but for test, that this project would happen. Okay. Well, that that's the discussion I wanted to have. I mean, I'm I'm good with what's in front of us tonight, setting up the district. But this idea of the the but for, it it it bothers me because I'm afraid we've gotten into a cadence where, like, it becomes part of the the income stream of doing this,
and that shouldn't it just shouldn't be. And when we come back with this but for, I don't want it to be us saying, like, yeah. They told us they can't do it without it. I I wanna see some real assessment that this project doesn't work without this. And and I don't want it just to be from what the developer here is. I I mean, we've had we hire I believe it's Baker Tilly. And I really want to make sure that if they're I mean, I'm just not buying into this thing that said, oh, there's this new increment. We need to give it to them. It's like, no. That's because they're generating taxes. So let's make sure we I mean,
I thought we had a policy that said we would give this much TIF based on the amount of affordable housing or the amount of this or that. And now it seems like we've just gotten into, like, oh, no. It's part of the deal because look at how much they generate. I've had people tell me that, like, no. That's mine. That I've I've raised those taxes, and I'm gonna use it to pay for it. And it's not the but for test. It's like, no. We that's how the that's how business works in Rochester, and I don't wanna see it go that way. Thanks. Council member Wahl. So thank you,
council member Keane. I think that you, perhaps more eloquently said, some things that, I am feeling. I have nothing against City Walk project. I think that that, looks like a really great project and will be, wonderful for for Rochester. But we keep putting projects in TIF districts. And, if I can go back, mister Johnson, to did I hear you correctly that within three years, we'll have a hundred $30,000,000 of projects coming out of TIF and onto the, tax rolls,
fully? Yeah. Our calculation based on current market values is a hundred and 3,000,000 to a hundred and 21,000. Yep. Okay. Okay. That that helps me a great deal. I asked, that earlier today, and you've said it more clearly, that, we see light at the end of the tunnel, that there are projects that come out of this and will benefit us in the long term. But with mister Keane, I'm a little worried that, almost every project can say, well, you know, I'm bettering this corner or this block. And because of that, I get to keep, the enhanced property taxes for fifteen or twenty or twenty five years.
That's that that is, troublesome. This is going to come back to us, sounds like, a lot in the next few years as well. And then one very specific, question about this project. Will will it impede the pedestrians and bicycles going north on Sixth Avenue, to downtown, through the construction? Customer Wahl. So we'd be working when we haven't very we're working very closely with the, existing construction that's gonna be occurring on Second Street. So, I mean, this site will be pretty much self contained.
You know, let just, mister Fincher talk about it. I don't know if we've crossed the actual phasing of construction bridge yet, but, we'd you know, they'll be required as part of a private entity to keep sidewalks open for pedestrians and bicyclists. Yeah. Just to add to that, there's a specific comment, from the planning review that we, as a developer, need to coordinate our traffic plan, with the City of Rochester and with the surrounding construction activities. So we'll definitely make sure to monitor that. Thank you. Council member Palmer. Josh, when we do residential, we did fifteen year, TIF district.
And is this a twenty five year? Is there a reason why we went twenty five? Or is this done by the, what I'm trying to say, our lawyers that look at this and say it makes it for twenty five years? Yes. Councilwoman Palmer, it's really all of the above. And, on Councilwoman Rekien's point, we do have Baker Tilly analyze all these to make sure that the, return on cost or the other, return factors are in alignment and not, you know, overly aggressive or asking too much. This is also commercial construction. So it's it's a different type of construction than your typical five over one. It's gonna last longer.
It's gonna have feel like better quality. It's gonna be, you know, higher quality aesthetically. The other thing also just to note is, you know, in order to get to that twenty five years, that 76 affordable units was really a huge consideration of of of that. Otherwise, without an affordability component, I I don't think we would be in front of you requesting anything over twenty years of increment. The other item, that I just wanna note is, you know, this CityWalk has, I think, first got maybe its approval back in 02/2022.
Project has ebbed and flowed. It's changed in in in density since then. But these projects take a very, very long time. So, whenever we're in front of you, we're recommending very, very few of the projects that actually we're discussing in the background. Just an item of note. So just an item of note. So so you kinda confused my issue here in in you have the four d project, it's a twenty year deal. And then we have TIF for twenty five years. So in twenty one years, they could clear the site and then apply for TIF. Is would would would that be unbelievable? It it wouldn't be unbelievable. So the reason why it was twenty years is just because the the Olmsted County
cycle is on ten year cycles. Yep. So we could off I mean, if if you are guiding us, we could request to make it thirty years. We just anticipate it's a twenty year, five year test district. A lot of times, these stiff districts end prematurely. So twenty years seemed like a good range, but we're open to feedback. Thank you. Council member Doreen. Yeah. Thank you for all the clarification, and I I appreciate that the CityWalk project itself had come before this council in 2022. Has this project received subsidy, from DMC,
before this discussion? Yes. So the, the funding that they've been allocated is from the DMC Main Street Grant, which is a a deed grant that's administered by DMC. So different funding that requires different approvals. But they did receive up to $500,000, and those are primarily for those intersection and and public realm improvements on the corner. Okay. I I just wanted that to to kinda be on the record. And then, can you talk a little bit I I appreciated council member Keane's question about whether the naturally occurring affordable housing units were in the district that we would be approving
this evening if we choose to do so, and I believe I hear your response as being no. And and so now I'm confused by council member Palmer's questions about, if those naturally occurring affordable housing units went offline in twenty years, that would require an additional application to be involved in in a TIF district if they were going to be developed. Do I have that straight? Did that make sense? I see. Let me let me, I'll try to answer. And if I if I don't make sense to your question, please correct me. So one of the discussion points that we've had so within that twenty years,
we don't want if there's an opportunity to redevelop those but, maintain the same affordability levels, we don't wanna deincentivize that. So at at some point, if there were to be maybe a new TIF district created on one of those, you know, west or south parcels, that they could redevelop those, but they would still be required to have them in the four d program for the remaining term. Okay. That's helpful. Just a follow-up question about the affordability unit. Component of this, that's really interesting to me. Am I understanding correctly that the developer of the CityWalk Apartments is different than the
the operator of the naturally occurring affordable housing units? This is where it gets kinda Yeah. Right. I'll I'll help clarify that. Yeah. That that's correct. So CityWalk will be developed by an entity, or affiliated with Reuter Walden Development. The affordable and that's the redevelopment TIF district that you're approving tonight. The affordable housing component in the four d program is with the, owner to the West and the owner to the South, which which is a different LLC, a different owner entity. So k. Does that clarify your Yeah. And those developers would,
or those owners would come forward to us for a development agreement for those naturally affordable Yeah. We're currently working with because the owner of those is actually the current owner of these sites. So This is where it gets all confusing to me. Yeah. So we're working with them concurrently so that we ensure that if the TIF district and TIF plan get approved and the development assistance plan gets approved, that the development, agreement, we'll say, for lack of a better term for those NOAH affordable housing projects would happen subsequently. K. So it would be my hope in that,
in the that agreement for the naturally occurring affordable housing units that there is language in those agreements about, about, addressing concerns of deferred maintenance, about, improving, those two apartment buildings as well. I have experienced visiting with residents in those apartment buildings, and and and they need a little work. So, I would hope that that would be part of the development process as that comes forward. Absolutely. And point taken, and and we've had those discussions already. Thank you. Any further discussion on this? Is there a motion on this item?
I'd like to make a motion to adopt the resolution approving the economic development plan for Economic Development District Number 85 and TIF financing plan for redevelopment, tax increment financing District 85 Dash 1 for CityWalk Apartments project. Second. Moved by council member Keane and seconded by council member Palmer. Council member Keane? Yeah. I again, just one aside. I I'm list I'm listening to these discussions, and I'm not sure I'm picking up on it right. But four d tax means what it comes down to is you have affordable housing.
You pay very little tax, so TIF makes no sense for you because there's no anchor increment. So I don't wanna get them confused here, but, I I am getting confused listening to the discussion. I know those are not part of this this discussion of the district, but, I I have trouble thinking of what we what I understand to be naturally occurring affordable housing and then having it in a program because it's supposed to be naturally occurring. When it's in a program, it's like it's government aided, which, again, the the words aren't working out for my mental model,
but I'll just leave it at that for tonight. Further discussion on this item, council member? Oh, no. I Sure. Just a question. Because I I think we've had a dis somewhat of discussion about the length of the test district. Mister Johnson, you mentioned some come out prematurely. Could you just clarify why they would come out prematurely? Because I it's odd phrasing. They they collect the increment faster. Yep. Yeah. Correct? Yeah. It it it all depends on the acceleration of the estimated market value. Sure. So if the market value, you know,
the project is so successful, the market value increases more than anticipated throughout that twenty twenty five or twenty five years, the district could meet its obligation. So it's either twenty five years or the total amount of increment that's generated, whichever Thanks. Factor is met first. Thanks for that clarification. And and, with a building like this, I guess, just what is the useful life as you're projecting depreciation or how you're thinking about a building of this quality? How long might that last? Council member Miller, that's a fantastic question, and I would wanna get back to you with the correct answer,
but well over fifty years. Okay. So we're getting a a much appreciated value for at least half or perhaps longer of this building. And and I guess my my follow-up question was for mister Johnson. You mentioned the Baker Tilly analyses that happened on projects like these. Will we see that at some point? Yeah. Councilman Mueller, we're we're always happy to share those if you'd find them helpful. We, you know, would set to figure out the the best method, that you'd like to receive it. Yep. Okay. I I I guess I've gotten a question today as this has come up.
Just why is the city giving money? Right? In the long term interest of the city, these kinds of projects can be economically beneficial once we pass that period and collect a much higher tax valuation that wouldn't have naturally developed on its own without this funding. Is that true? Is that a good way to think about it? Right? I mean, there is long term value for the community. We we forego a an immediate tax benefit. Multiple benefits, but I can tell, miss the the administrator says I was going to go ahead. Sure. Thank you. Council president Schubert,
man versus the council. So I I just wanna I I was going to jump in and say that. Right? That the but for test, I appreciate the concern. I I really want to share with this council how much vetting is done. You know, these projects, in this case, I could go back a couple of years, but over the course of generally six to twelve months, there's a lot of vetting with attorneys, accountants, testing against the state legislation to make sure we are in compliance. And truly, understanding that but for TIF, which is last money in,
it's the last money in on a project, the project wouldn't happen. And, that the the tax generated helps to make the project happen and then comes back to the taxing body, and it's not just to the city council. The county receives funding. The school district receives funding that otherwise would not be realized without a project like this. But what you really, need to understand is the due diligence that is done here and the fact that TIF is last money in, it has been vetted through countless, legal processes,
legislative process, as well as, the financial assessment. And the other thing I do want to say is you approved a revision to the TIF policy just a couple of meetings ago and that has given us really great guidance. When does a fifteen year TIF make sense, a twenty year TIF or a twenty five year TIF? And that is the, guide that Josh applied in in bringing forward this project. So, there is a motion on the table, and I I really appreciate council member Miller's line of questioning, but it's kind of like we are supposed to be discussing,
our vote now. So Okay. If there are no further questions, did you wanna continue with No. I just appreciate the clarification. I I feel like this is a a complex process, and we get additional insight and clarification. And I think it's it's just I wanna make sure that the community understands how we compare to Pure Cities that we're not overleveraging ourselves. So I appreciate the comparison to Pure Cities, and I also appreciate the context of projects that are coming out prematurely from the the tip timeline and where that balances us and and the long term benefit.
And I appreciate, miss Steinhauser's reminder that tax valuation beyond the city's benefit to the county and the school district is also part of this consideration. So Great. Thank you. Further discussion? Seeing none, there's a motion on the table. All in favor, say aye. Aye. Any opposed, say nay. Passes unanimously. Is there a motion to adjourn the EDA at Just a second. Oh, new business. Oh. Oh, you have new business. I have a question. Oh, go ahead. Council member Palmer. Question about Sherman Associates.
We had an agreement. When does that agreement run out? June. So June. So June 30, if we don't have a deal, it's done. That is correct. Yep. Okay. Thank you. Any other, other business? Sorry. No. That's okay. You. Motion to adjourn. There's been a motion to adjourn by council member Miller. Second. Seconded by Councilmember Palmer. All in favor, say aye. Aye. Any opposed, say nay. Thank you. We are now