By Anne Holzman
A developer converting the old TIES office building in Falcon Heights to affordable housing received state bond money in January, after lowering the required income levels for renters and, consequently the rents.
To make up for the loss of prospective rent, Buhl Investors has asked the city of Falcon Heights to grant tax increment financing status for the property. The City Council will hold a public hearing March 10 to consider the request.
Buhl Investors bought the property in 2019 and began working with the city to apply for various funding streams, as well as securing historic status for the site from the National Parks Service. The site was renamed Amber Union in a nod to its history as the headquarters of the Farmers Union Grain Terminal Association.
Buhl’s plan is to convert the main building from office space to affordable rental apartments and retail space, likely a coffee shop.
The Minnesota Housing Finance Agency issues state-backed bonds to finance low-income housing. (These are separate from the “bonding bills” issued by the Legislature.) In two rounds of bond money allocations last year, Amber Union did not get chosen.
After consulting with Falcon Heights city staff, Buhl decided to drop income level for prospective renters from 60 percent of the area median income (AMI) to 50 percent, with a proportional drop in the amount each family would pay. At the Dec. 16 council meeting, Buhl asked for TIF status to bridge that gap, and the council voted to consider that request.
“I’m not a fan of tax increment financing,” Mayor Randy Gustafson said. “But if we structure this one correctly, I think it will be an asset to the community.”
Falcon Heights learned in January that the Buhl project would receive the requested $23 million in state bond proceeds from the Minnesota Housing Finance Agency, based on the 50 percent income commitment.
Ramsey County property tax records show that Buhl paid just over $140,000 taxes on the property in 2020. That included almost $47,000 to the county, nearly $35,000 to the city of Falcon Heights and about $45,000 to Roseville schools, plus smaller amounts for other entities.
Tax increment financing works by setting a baseline value on the property (determined by the county assessor) on which the owner pays taxes in the first year of the program. But instead of the owner’s taxes increasing each year as the valuation increases based on improvements to the property, the owner is granted back the “increment” between the baseline tax amount and any increase.
And while a city’s property taxes are generally only about a third of a property’s total tax liability, the city alone controls TIF valuations. That has made the financing tool controversial as counties, school districts and other entities find themselves at the mercy of each city’s TIF management.
The Amber Union request for TIF status may be more palatable because the former owner, a consortium of school districts set up in the 1990s to run internet and technical assistance, was tax-exempt as an education nonprofit. And the previous property owner, a farmers co-op, would also have been tax-exempt. So any tax yield at all is more than the parcel has produced in prior years.
Buhl partner Peter Deanovic told the City Council on Dec. 16 that if the city grants them TIF status, the project will be able to begin asbestos abatement in March, estimating that work will probably take about three months to complete.
Asked when the building might be finished, he said, “We anticipate occupancy in December 2022.”
City Administrator Sack Thongvanh told the Bugle in early February, “It would be difficult for the project to move forward if the city doesn’t provide TIF.”
Anne Holzman is a Bugle freelacer who covers news from Falcon Heights and Lauderdale.