Flagship project requests $ 1.1 million in tax subsidies | Local news
MANKATO – City of Mankato urged to provide more than $ 1.1 million in tax grants for $ 13.3 million redevelopment of historic downtown Mankato building into upscale apartments, distillery and in a cocktail bar.
Developer Jon Kietzer plans to begin construction on the project in the second half of February if city council approves the additional tax financing plan on February 14.
âI am 100% committed to this project, which I have been working on for 3 years,â Kietzer wrote in a letter accompanying his request for help. âI think this will become an iconic property at the corner of 2nd and Main streets when completed.â
The plan is to gut the three-story structure, built in 1919 as a Dodge car dealership, add a fourth story, and build a four-story addition on the northwest side. A total of 33 high-end apartments are planned for the upper floors, renting between $ 1,600 and $ 3,100 per month, with the distillery, lounge bar and event center on the first floor.
The building is to be connected by a new skyway to the City Center Hotel, also partly owned by Kietzer, which is due to undergo a major renovation from April or May.
For the project to be financially viable and move forward, funding through tax increases is needed, according to Kietzer.
A financial advisor hired by the city came to the same conclusion.
The TIF funding would not provide any direct payment from the city to the developer, but rather would return a portion of the additional property taxes generated by the project to Kietzer and its partners to help cover project expenses.
Blue Earth County appraisers have estimated the property’s market value will drop from less than $ 1.1 million currently to nearly $ 6.3 million once the redevelopment is complete – $ 3.5 million for 33 apartments and $ 2.8 million for first floor commercial property.
Under the proposed grant, the property owner would continue to pay their current property taxes of approximately $ 20,000 to the city, county and school district. But the additional property taxes generated as a result of the building’s expansion and renovation – $ 79,000 in additional annual taxes on the higher-value structure – would flow back to owners for 15 years to help cover the costs of eligible redevelopment of the project. These include interior demolition, asbestos removal, modernization of utilities, soil remediation and land acquisition.
The cumulative amount returned to Kietzer and its partners between 2024 and 2039 would be $ 1.15 million. After the 15 years, all property taxes generated by the Landmark Building would revert to the city, county and school district.
Minnesota law allows cities to approve these kinds of grants, regardless of the opinion of counties and school districts, only if the aid is so vital to the success of the project that TIF’s denial would doom the project.
Baker Tilly city councilors reviewed the financial data for the project on behalf of the city and determined that “the project would be unlikely to go ahead without the requested TIF assistance.”
Passing the non-compliance test allows city council to approve the grant, but does not require it. A decision is expected following a public hearing at the February 14 council meeting.
While the redevelopment does not create new affordable housing for low-income workers, a top priority for the council, it would increase the tax base, create around 13 jobs, transform an aging building, and meet council goals of bringing residents and other downtown vitality.
âThe distillery / event center will be able to handle events / parties of more than 200 participants,â according to Kietzer’s request. âIt will feature a cocktail lounge with both indoor and outdoor seating. As it is connected to the hotel next door, it will attract big events such as weddings, conventions, etc.
Construction costs for the project are expected to be $ 8.8 million with the total amounting to $ 13.3 million when land acquisition, development costs, interest costs, charges architectural and redevelopment costs are included.