In response to an increased interest in development in the city, Wadena Council members bit the bullet, so to speak, in an effort to increase business, revenue and residents in Wadena during the last regular city council meeting Tuesday, July 9.
The council approved several decisions that will cost some money, but could pay off in the long run. First council members agreed to purchase 16 tax forfeited lots in the Folkestad's East Addition, knowing the city would collect no special assessments on those properties.
Each of the 16 lots were up for auction last March with minimum bids of $1,500. They had special assessments that ranged from $3,768 - $8,786. None sold.
This decision to buy tax-forfeited lots is similar to Staples decision to do the same.
Wadena City Administrator Janette Bower said using taxpayer dollars to buy city lots was something she really wrestled with, but ultimately felt was a decision that could be a benefit to the city.
"The reason I wrestle with it is, again, back to taxpayer money, but also, I feel like we need to do something that would start generating interest in the lots and the thought is reducing the special assessments again or the city reducing them to zero and the city purchasing the lots back to resell them."
The city will fork out $24,000 to buy the 16 lots, but has plans of offering them for sale for $5,000 a piece. Bower said the city has been in conversation with a housing group out of Detroit Lakes, Midwest Minnesota Community Development Corporation, MMCDC, who may be interested in purchasing a lot or two, maybe even eight, to begin building homes for sale.
City council member Jessie Gibbs agreed that something should be done with the lots.
"We do have a lack of newer homes and I think it would encourage people to move to Wadena," Gibbs said.
Councilman Wade Miller said the alternative is the properties sit empty, collecting no taxes.
"We're not giving up money, because there is no money to be had," council member Mark Lunde said of the lots that were developed, but have had little interest.
Wadena development authority director Dean Uselman chimed in to mention one local business is talking about adding 20 percent to their workforce.
"These are jobs that will be new people moving into town, and they will easily be able to afford a $200,000 - $300,000 home," Uselman said.
He stressed that if the city does not have homes for these expected new residents, they will have to buy homes elsewhere.
Much discussion was had about partnering with MMCDC, including comments from two interested residents, Jim Kraemer and Kyle Davis.
Kraemer said MMCDC is a non-profit that had partnered with a number of area communities.
"They build reasonable single family homes in the range of about $170,000 - $225,000," Kraemer said. Because of the difficulty for a developer to build and make a profit, he said the non-profit was a better option to start bringing in single family homes.
"They are interested in Wadena, they think they can get the houses built, and they think the houses will sell," Kraemer said. "Here's a chance to get a non-profit ... we increase tax base, we increase single family homes and we can get that southeast area, we can kind perk it up, and at the same time open some lots for housing and school economic development."
Davis brought up a fact that he found unsettling, that in 2019, no home newer than 2009 has sold.
"Not one is even for sale," Davis said.
"From an appraisal standpoint, the biggest challenge is that cost does not equal value," Davis said. If you build a house and try to sell it in this region, you'll likely lose money. He said this is keeping investors from building in Wadena.
"That being said we still have to do something," Davis said, "If a non-profit is willing to stick their neck out and take the risk of doing it, my response would be, 'well, how many do you want to do,'" Davis added.
Wadena Housing and Redevelopment Authority Executive Director Maria Marthaler mentioned continued work with the Wadena-Deer Creek School and the Wadena Housing and Redevelopment Authority and Wadena Development Authority to get the school's trades home on a lot. She said she hopes to work with the city to continue to bring homes in built by students. She hoped the city might consider donating a lot for these homes in the future.
The passed motion was to purchase the 16 lots and work with MMCDC to develop a contract for future development. A key part of the contract seemed to be that there be a timeline that must be followed. Once bought, they must build in a certain timeframe.
Tax abatement policy
The second decision was to approve an amendment to the tax abatement policy. The policy was shaped following joint meetings with the city, county and school to determine the implications of offering tax abatement.
Bower explained how the abatement might look should a business be bought in downtown Wadena. Abatement, once granted, lasts up to five years. If the tax was $1,000, it would stay at that amount for five years, rather than increase as is often the case as a new business seeks to make improvements to the property.
A major amendment of the policy is the cost. The application fee has been increased to $750. If the project does not meet tax abatement requirements, $500 is refunded to the applicant. The $2,500 deposit has also been deleted.
In order to qualify for the abatement, the purchaser must include in their application proof of an investment of a minimum of 30% of the purchase price to improve the appearance of the building within the first year of ownership, in addition to other requested information. Other objectives and reporting must be met during the life of the abatement.
"If this is going to help businesses come to our community or stay, I'm all for it," council member Jessie Gibbs said. All council members were in favor of the tax abatement amendments.
The tax abatement policy now stands alone, but was formerly attached to two other policies, business subsidy and tax increment financing. Those are expected to be updated at a later date.
Service territory expansion
Utilities superintendent Dave Evans brought forth a recommendation from a previous discussion concerning getting the most of providing utilities to residents and businesses in and around the edges of the city.
The council was presented with a service territory expansion policy, whichEvans said would be the most fair to all city residents. The territory expansion policy seeks to lay out the expectations for those that want water and sewer from the city, that the city would also like to provide electricity to the property, even if it's out of the city's current service territory.
Wadena mayor George Deiss said the policy was good for the tax payers of the city.
"This is for the good of the whole city," Deiss said.
City administrator Janette Bower said this policy seeks to be proactive rather than reactive. It was, however, brought forward a recent addition to the community, such as Freshwater Education, which is not served by the city electric, but is served by city sewer and water.
Evans said in the past there have been petitions used to gain service, however that does not guarantee an entity gets to serve outside of their territory, there are negotiations and costs associated with entering another provider's territory. Evans said there's a big difference between buying out a customer rather than buying bare ground without a customer in place.
The policy explains that "during the annexation process or upon completion of the annexation, the city will in good faith attempt to negotiate a mutual settlement of claims and realign electric service territory boundaries in order to avoid the costs and risks of litigation."