The Park Rapids City Council agreed Tuesday to serve as the fiduciary "pass-through" for a $550,000 grant to provide affordable housing for local workers.
City Planner Ryan Mathisrud introduced the proposal by the Hubbard County Housing and Redevelopment Authority (HRA), working with Headwaters Regional Development Commission (HRDC), to build a 28-unit apartment building adjacent to Walmart.
The facility would target workers earning $10 to $12 per hour. The project, costing approximately $2.6 million, would be partially funded by a 2-to-1 matching grant from the state's Workforce Housing Development Program.
According to Mathisrud and HRDC Operations Director Mary Thompson, the city should not have to put up any cash for the match.
"We have identified $305,000 worth of match," said Thompson. "The vast majority of that is the valuation of the land donation. The other part is that the parcel that's available is tax forfeit."
If the county agrees to forgive the delinquent taxes on the property, she said, "that can count as an in-kind match. Those will add up to be the match required. So there would be no cash out of pocket for the city to meet the match requirement."
Mathisrud added, "There is no request on the table for Tax Increment Financing (TIF). It should be all self-supported and will pay local property taxes."
In a memo to City Administrator John McKinney provided to the city council, Mathisrud noted that the last three apartment buildings constructed in Park Rapids all requested TIF.
"It's kind of exciting," said Thompson. "The grant doesn't come with very many strings. It's really a pass-through responsibility for the city."
She explained that the HRDC, based in Bemidji, is contracted to represent the HRA as the project's developer. Once constructed, the building will be owned and managed by the HRA.
Thompson asked the city to adopt a resolution of support for the project. She noted that if the grant is awarded, the city will also have to decide whether to accept the grant.
Depending on how the final budget comes together, she said, the city may also be asked to make some fee concessions to aid the project, in lieu of TIF.
Mathisrud explained that these concessions may include an extension of Charles Street, a paved road running east from Henrietta Avenue between Walmart and Dollar Tree. Mathisrud's memo noted that $150,000 has been included in the project budget for street paving.
"We would have to do a subdivision and rezone the parcel," Mathisrud added. His memo also listed such requested concessions as a 30-percent reduction of building permit fees, waiver of zoning and platting fees and waiver of of a portion of the deferred sewer assessment.
"Those items are all forthcoming, and we would have to review that on a separate basis at that time," he said.
Council member Erika Randall asked, "To be clear, by approving this today, we're not agreeing to the reduction in the building permit or any of those other things?"
"Correct," said Mathisrud. "We are not agreeing to make those concessions at this time."
Speaking to the need for the proposed apartment building, Thompson said, "The HRA has been keenly aware of the struggle of folks who are in that $10 to $12 an hour range and the affordability of units that are available. The standard is that individuals should pay no more than 30 percent of their income for rental facilities."
With that standard in view, she said, "we have been exploring options on creating a building that would not have income restrictions or rental subsidies, so that anyone can afford to live there."
Thompson noted that many income-restricted apartment buildings exclude people who earn $12 an hour. "While most of the market-rate buildings are too expensive, they can't get into the ones that have income restrictions," she said. "So there is this niche of folks who struggle with finding affordable rentals."
Thompson said HRDC and HRA are working with a general contractor they have dealt with before and who is known to build good-quality buildings. She said she believes that with the Workforce Housing Development Program, they can provide market-rate housing that local workers can afford.
"There are some caveats to this program," she said. For example, "it requires the support of businesses within the community that employ, in aggregate, 20 employees or more. We've already received letters of support from businesses that would meet that qualification."
Another requirement is that the average vacancy rate for rental housing in Park Rapids and cities within a 15-mile radius must average 5 percent or less during the previous two years.
Because the planned housing will be non-subsidized, "we fully intend to have it on the tax rolls once it's developed," said Thompson.
Asked whether people earning more than $12 per hour would be excluded, she added, "It's market rate, so there are no income restrictions. We're targeting a specific niche, but that doesn't preclude anyone else from living there."
The city's grant
Although HRDC and HRA are developing the project, the Workforce Housing Development grant requires the applicant to be a city in Greater Minnesota between 500 and 30,000 in population. That, Thompson said, makes their $550,000 request "the city's grant application."
She said the application was due at 4:30 p.m. on Thursday.
"We should hear in January whether or not we were successful in funding," she said. "Then we will have a final project budget put together. That's when we will have the final bituminous adjustments and construction numbers. Then there is a potential that we would ask the city for some concessions, but there is a potential that we would not need that based on the final budget numbers."
Thompson stressed that the city council was only being asked to approve the submission of the grant application. "Then, if we're funded, then you would have the ability to accept the grant," she said. "So, there is still another time when you have the ability to stop the process, if you feel uncomfortable with it."
Council member Tom Conway moved to approve the grant application submittal. The motion passed unopposed.