The Wadena City Council voted 4-1 to approve a Tax Increment Financing (TIF) request to go through for a southwest Wadena townhome project during a public hearing at Tuesday's regular meeting.
Mayor Wayne Wolden and Council Members Jeanette Baymler, Kay Browne and Toby Pierce voted in favor of approval, saying the TIF plan was for long-term economic development, and TIF districts had been created for other businesses in the past. The motion allowed for the city to negotiate and compromise.
Council Member Don Niles, who also made a failed motion to deny the request, voted against approval, saying the TIF request amounted to a government handout for a project that was going to go through with or without a subsidy.
Mikaela Huot of public sector advisory firm Springsted gave an overview of TIF.
"It is a method by which increased taxes from a new project are diverted for a specific purpose for a specific period of time," Huot said.
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For the project by Roach Development LLC, the tax increment district would remain open for up to 11 years, after which the new tax base would flow to the city, county and school district, Huot said.
Southwest Wadena resident Jerry Maas objected to the plan, saying it would cost around $220,000 in taxes, and that TIF has been discontinued in California and is also not allowed in Arizona and Wyoming.
"It's risky business," he said. "This is not a good deal."
Maas also said developers were not doing business in Wadena, and bringing in supplies from out of town.
Matt Roach of Roach Development LLC said they purchased materials through Merickel Lumber, Wadena Concrete and Drywall Supply, and the wholesaler trucks Merickel uses are from other towns like Alexandria, Fargo and St. Cloud.
Another southwest Wadena resident, Walter Wiskow, objected to the TIF plan.
"You told us at the first or second meeting that there would be no tax breaks," Wiskow said. "They're not going to pay a damn tax for 11 years, is that right?"
Dean Uselman, Wadena Planning and Zoning director and Wadena Development Authority director, said the Roach Development project would be the 10th TIF project in the city of Wadena, and there are many different kinds of subsidies on economic development - including the Folkestad's East development, for example.
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"You're right, Walt, there isn't going to be much tax paid on this for the next 11 years, but for the next 111 years, there will be a lot of taxes paid," Uselman said.
Arleen Paulson of Wadena asked why the developers did not choose an available property on the north side of town, and Matt Roach responded they did not have knowledge of that property at the time, and the southwest parcel in Otter Tail County was a good spot for them.
Pierce said the townhome project was good progress and ultimately increased revenue, and he did not understand why people were objecting to it.
Baymler said the apartments would still contribute to the city by tenants paying into utilities.
Niles said while he couldn't blame the developers for taking advantage of an available program, he said allowing TIF would be using government to give a handout when the development already broke ground and apparently didn't need it. He said the developers would receive an 11 percent return on investment, rather than a 5 percent return on investment.
Roach said the reason TIF was not brought up in previous meetings was because they were not allowed to ask for it until the land was annexed, but they have done it in other towns.
One aspect of TIF housing districts is an affordable housing requirement.
For a TIF housing district, Huot said, a percentage of the apartment units would need to be restricted to tenants with low incomes. Unlike Section 8, where rent is subsidized, TIF housing district rent would be lower to begin with.
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"The developer is, in most cases, having to take a reduced rent on those units," Huot said.
Matt Roach of Roach Development LLC said all the apartments would be the same reduced rate with TIF. In their plan, the apartments would be around $775 to $875 with TIF, and about $75 more without it, which he said would be a significant difference to seniors living on social security.
Browne said lower rents would benefit the area, since the Wadena area is high in poverty.
