by April Scheinoha
Reporter
Thief River Falls’ growing pains were evident during a special meeting of the Thief River Falls City Council on Tuesday, July 7. The council met with the Pennington County Board and the Thief River Falls School Board regarding a proposal to provide additional assistance to housing developer D.W. Jones Inc.
D.W. Jones Inc. is seeking an additional $400,000 in tax abatements from the city, county and school district. The government bodies have already agreed to provide a proportional $400,000 to the firm for infrastructure improvements for the property commonly known as the Noper property.
The state of Minnesota has also provided a $400,000 workforce housing grant to the city for the project. However, prevailing wages would apply. This latest request would enable D.W. Jones Inc. to obtain the $800,000 in assistance without using the state grant.
City Council and the County Board have scheduled public hearings about the matter. The city’s hearing will be held Monday, Aug. 3 at 5 p.m. at City Hall. The county’s hearing will be held Tuesday, July 28 at 6 p.m. at the Pennington County Courthouse.
The School Board was expected to discuss the matter at its meeting Monday, July 13. At that time, the board may decide to schedule a public hearing to hold a public hearing on the project.
D.W. Jones Inc.’s plans
D.W. Jones Inc. plans to construct two 52-unit apartment buildings on the property, which is located on the west end of First Street West. Construction was slated to begin in July on the first building with the latter building to be constructed a year later. As of right now, the firm plans to open one building in June 2016 and the other building in December 2016.
However, problems ensued since the state money is tied to prevailing wages. “The legislative journey has been full of unknowns,” said City Administrator Larry Kruse. He noted that if the developer accepted the state money, it would cost D.W. Jones Inc. an additional $1.35 million to offer prevailing wages.
While finalizing the project, city leaders learned from the Minnesota Department of Employment and Economic Development that prevailing wages would apply. The city’s request for proposals from developers indicated that prevailing wages may apply.
On Wednesday, July 1, city leaders sent a letter to DEED, asking it to reconsider the issue of prevailing wages. They asked if the prevailing wages could be offered as part of the city’s contract for infrastructure at the site.
On Monday, July 6, city leaders learned that DEED officials have tentatively agreed to that stipulation. However, Kruse said he was 90 to 95 percent certain that amendment would be added to the grant. He said that proposal could always go up the chain of command.
Now, D.W. Jones Inc. is asking for $400,000 from the three governmental bodies to avoid the added costs of prevailing wages. Part of the reason why the firm is requesting the assistance is to make the apartments more affordable, said D.W. Jones Inc. President Skip Duchesneau. He added that a one-bedroom apartment is expected to cost $735 per month and a three-bedroom apartment is expected to cost $1,045 per month. The rental rates include the cost of heat. Rent would be market-rate, and the apartments won’t be restricted by income limits.
Pennington County Economic Development Director Christine Anderson said a market-rate apartment for a person with a $15-per-hour job would be about $700 per month off of gross wages. She added that rate is low compared to other cities across the United States.
D.W. Jones Inc. has also added amenities to both buildings. Duchesneau said the firm has added attached garage stalls, in-unit laundry facilities, storage lockers and community rooms to the two buildings.
“We really believe, at this stage, there are no surprises,” Duchesneau said.
D.W. Jones Inc. has been approved for a $8,268,000 loan from Minnesota National Bank for a first mortgage and a $400,000 tax abatement bridge loan in second position. Miller Architects & Builders Inc. has agreed to start construction on Monday, Aug. 10 if it has received a one-week notice to proceed.
D.W. Jones Inc. has moved up its timeline. It hopes to start construction on the second building in March 2016. Initially, the firm planned to construct the buildings one year apart.
Duchesneau said financial advising firm Ehlers believes $127,000 in taxes would be abated each year of the abatement once both phases are completed. He said D.W. Jones Inc. is anticipating that amount to be $140,000 per year based on its River Falls Estates property along Alice Drive.
Under a tax abatement, D.W. Jones Inc. would pay its taxes in full. However, the firm would receive a rebate of the increased taxes once the development has been completed for a specific designated time period. That money would then be used for the development.
Duchesneau anticipated the tax abatement would last four or five years if the firm only received the $400,000 tax abatement, and nine or 10 years if the full $800,000 were abated.
When asked, Pennington County Auditor/Treasurer Ken Olson said tax abatements are handled similarly to Tax Increment Financing districts. He indicated that the only problem is how much the tax abatement will be and how to raise the county property tax levy accordingly.
School District Business/Office Manager Tanya Monson-Ek said the school district can only levy according to state formulas. She indicated that the school district can’t increase its levy by 3 percent like the city. When there are too many expenditures, Monson-Ek said the district has to reduce its expenditures or seek additional money through a referendum.
Thief River Falls Mayor Brian Holmer said City Council may have to raise the city’s property tax levy to cover the additional proposed tax abatement. However, he hoped that the tax abatement would stay at $400,000 for all three groups.
School Board members raise concerns
School Board Member Kevin Ballard said it would be a poor business decision for the three entities to agree to provide an additional $400,000 to D.W. Jones Inc. for the project at this time. He indicated that they don’t know all of the facts.
Ballard later said he was one of the biggest proponents of the project. “This no-brainer has turned into a headache, a big one,” he said.
School Board Chairperson Mike Spears also raised concerns. He said everyone is in favor of additional housing in Thief River Falls. However, he raised concerns about spending education funding for a housing problem and placing that on the back of every taxpayer.
“It’s a discussion point in our community,” said Spears, who noted he has heard more comments from taxpayers about this project than the district’s $70 million renovation project. He also noted that the district isn’t in the business of building apartments.
Spears later pointed the finger at prior City Councils, mayors and city administrators, noting that they towed the line at a 0 percent property tax levy increase for many years. For the last 10 years, he said, the city should have been in the process of installing infrastructure instead of keeping the property tax levy at the same rate.
Holmer replied that they have been dealt these cards. He said they need to look to the future now and make a decision.
Arctic Cat and Digi-Key
Some Thief River Falls City Council members also voiced their thoughts. Council Member Rachel Prudhomme said she had a hard time putting the tax abatement on the backs of other taxpayers. She noted additional police officers and firefighters may need to be hired. Prudhomme also wanted a commitment from Arctic Cat and Digi-Key, saying she wanted assurances that the companies wouldn’t leave tomorrow.
“This is where we do business,” said Rick Trontvet, Digi-Key vice president of human resources. He added that Digi-Key applicants have no places to live in Thief River Falls and the company buses some employees to and from work.
Randy Twistol, Arctic Cat human resources representative, said, “I just hope that we don’t lose this opportunity for another year. We’re at a real critical juncture for the city.”
When asked by Prudhomme, Twistol said that Arctic Cat isn’t a housing company and doesn’t plan to be a landlord.
With regard to Digi-Key, Trontvet said company representatives have been strong advocates for Thief River Falls and additional housing. They have spoken in St. Paul. They have also given tours and provided information to developers.
Arctic Cat has already announced its expansion plans in the city of Thief River Falls. “We need to support Arctic Cat by adding housing. We need to support Digi-Key by adding housing,” said Anderson, who noted the tax abatement won’t be on the backs of taxpayers. She noted it would be on Duchesneau and investor Mike Hron. If the government bodies don’t support housing opportunities, Anderson said developers will leave.
Council Member Josh Hagen seemed to advocate for the tax abatement. He said growth usually spawns more growth. He indicated that the rental rates aren’t outrageous and he believes that D.W. Jones Inc. will have no problems filling the units. Hagen also said that housing is all that anyone talks about in Thief River Falls.