WILLMAR - The Willmar City Council heard Monday from a developer hoping to build a $28 million housing project on the northwest side of the city.
"It is a pleasure to have a project come before the council," Mayor Marv Calvin said during the council work session. "Businesses tell me on a regular basis they can't expand because there isn't enough housing."
Samuel Herzog, of JH LLC, is requesting tax increment financing assistance for a multi-family housing development on a 15-acre site along Kandiyohi County Road 5. Over four years, the project could bring 288 new apartments to Willmar's tight housing market.
"Willmar has a lot of things happening that are positive. There has been a lot of development and job creation. I think that is fantastic," Herzog said, adding he is surprised how little market-rate housing development there has been.
Eighty percent of Herzog's units would be market-rate, meaning no income restrictions on renters. To be eligible for tax increment financing, 20 percent of the units must be set aside for low-income households.
"This is going to be an opportunity for anyone who wants to rent a nice apartment in Willmar," Herzog said.
A public hearing for the tax increment financing has been scheduled for the Dec. 3 meeting of the City Council.
The proposed project includes four, 72-unit buildings plus 120 garage stalls for residents who want them. The developer plans to construct one building per year, starting in 2019. The total project is estimated at $28 million.
"Looking at the market, four buildings in four years is very doable," Herzog said.
Herzog is requesting 15-year tax increment financing term for each of the four buildings, with the TIF district lasting 18 years in total.
Tax increment financing means the taxing jurisdictions would continue to collect the current taxes on the property, but would give back the increased tax value to the developer for 15 years for each building to help fund eligible costs of the project.
"Fifteen years is the bare minimum to make it happen," Herzog said, adding the tax increment financing he's received in other communities where he has developed projects has ranged from 18 years to over 25. "We are going to do all we can to make our project work at 15 years."
The estimated city portion of the taxes for the first phase of the project is $33,800 per year, which would be for the first building and real estate costs. The costs for the remaining buildings should be slightly less than that.
The school district tax impact is an estimated $16,000 annually - or $17,000 if voters approve the additional operating levy - for the first building per year, while the county would have a tax impact of approximately $52,500 per year for the first building. In all cases, the second, third and fourth buildings are expected to be slightly less.
Both the school and county will be notified of the potential tax implications.
"It is virtually impossible to build multi-family units without some level of assistance," Willmar Planning and Development Services Director Bruce Peterson said. "The developer cannot afford to do these projects as a charity project. There is a return expected on these projects."
A portion of the property, which is along County Road 5 Northwest just north of the Word of Faith Family Church, would need to be annexed by the city. The developer plans to seek annexation and land use approvals at the same time as the tax increment financing review process.
Herzog said the plan for the first building is to have a mix of one-, two-, three- and four-bedroom units. Each unit will have stainless steel appliances, in-unit laundry along with community spaces throughout the campus. The buildings will be pet-friendly and have on-site and full-time management from Herzog's own management company.
"Those are key components to reaching a lot of the workforce businesses in Willmar need to grow," Herzog said.
If everything moves forward, Herzog hopes to begin construction on the first building next year. Herzog believes the units will fill up and that it could mean even more people moving to Willmar for work.
"Do you need the jobs first or the housing first? They go hand in hand," Herzog said. "You have been doing a lot to bring jobs into the community. Getting this type of housing is key to filling those types of jobs."