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June 5: With tie-breaker vote, Willmar, Minn., council OKs tax abatement for Lakeland Hotel redevelopment

WILLMAR -- After more than 90 minutes of debate, the Willmar City Council deadlocked Monday night on whether to grant a 15-year tax abatement for the redevelopment of the historic Lakeland Hotel building -- a tie that was finally broken when Mayor Frank Yanish voted in favor of the measure.

The 4-3 vote means the developer, the Southwest Minnesota Housing Partnership, will receive the property tax abatement it sought from the city to help subsidize operating costs after the project is completed.

Supporters of the project had hoped for unanimous support from the City Council.

Rick Goodeman, executive director of the housing partnership, said after the meeting that the split vote "was disappointing."

"These funds are extremely competitive and really do require a concentrated effort by the community," he said.

Regardless of the council's divided vote, however, the project's backers believe that redeveloping the Lakeland Hotel into commercial space and downtown housing will prove the catalyst for broader revitalization of the downtown district.

"What we're really hoping is we can stabilize the downtown and encourage investment," Goodeman said. "We want to provide a quality place for that to occur."

Council members Denis Anderson, Bruce DeBlieck and Rick Fagerlie and Mayor Yanish voted to grant the tax abatement. Steve Ahmann, Ron Christianson and Jim Dokken voted against.

The close vote followed nearly two hours of sometimes impassioned debate over the merits and financial feasibility of the project.

Money for the $3.8 million redevelopment of the old hotel will come from multiple sources: state and federal historic tax credits, low-income housing tax credits, and deferred loans from the federal Small Cities Development Program and the Minnesota Housing Finance Agency.

The property tax abatement covers 15 years and will average about $3,000 a year from the city of Willmar. A similar request is being presented to the Kandiyohi County Board of Commissioners this month.

Without the abatement, the project will slip into red ink at the five- or six-year mark, Goodeman said. But the developers believe that once the hotel building is renovated, more downtown revitalization will be sparked, property values will increase and downtown will become more attractive for businesses, tenants and shoppers.

"This project is not the end. This is just the beginning," said Richard Engan, president of the nonprofit Willmar Design Center which has been working with the city and the Southwest Minnesota Housing Partnership to move the Lakeland Hotel project forward.

City officials said the abatement will be more than offset by a handful of tax abatement agreements with other local entities that are expiring in the next few years and will put more than $350,000 back into the city's tax coffers.

The cost to the city is low, said Bruce Peterson, community development director. To pass up the opportunity and allow the historic building to deteriorate "would be a great injustice to the people in Willmar," he said.

Council members struggled, however, to weigh the risks versus the benefits.

Denis Anderson called it "an outstanding opportunity."

"We have to be creative and we need to think for the future," he said.

For Steve Ahmann, though, it was "a big leap of faith."

"This is probably the most difficult decision I've ever made on the council in four years," Ahmann said.

He said he's "100 percent" in support of preserving and rehabilitating the old hotel building. But he said he's also worried about the riskiness of the project and whether it will live up to its promise.

"What if it fails? How does that make us look?" he asked.

He also questioned whether all the options had been adequately researched. "I just want to be thorough," he said.

Ron Christianson had similar doubts. "I like to vote on facts and it seems a lot of what we're hearing tonight is hope," he said.

Tenants of the Lakeland Hotel told the council that once the building is redeveloped, they'll be displaced and likely will have nowhere else to go.

Twenty to 30 renters, mostly low-income men, currently live in the building, paying between $250 and $350 a month for rent.

"It's a community. It fills a niche," Chad Cooper, one of the tenants, told the Tribune in an interview.

He said it would be "very challenging" to find other housing with affordable rent.

"I think they just see the advantage," he said. "They don't think about the fact they're displacing 30 low-income men. ... If we want to preserve the building, there are ways we can do it that doesn't involve gutting it and doesn't involve displacing 20 to 30 poor people."

But supporters of the project urged the City Council not to walk away from an opportunity to create a stronger downtown district.

Dean Peterson of Glenwood, who owns the downtown Heritage Square building, said he looked at it as a gift.

"Here's a chance for us to really do something," he urged the council. "It's going to be the start of something really awesome."

Anne Polta

Anne Polta covers health care, business/economic development and general assignment. Her HealthBeat blog can be found at Follow her on Twitter at @AnnePolta.

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