WILLMAR — To assist Lumber One Development Company to complete the Block 25 Lofts apartment project in downtown Willmar, the Willmar City Council approved a tax increment financing district and plan at the Nov. 1 meeting.

The plan will reimburse a portion of the company's property taxes on the project, which can be used to pay for eligible development costs such as land acquisition, building demolition and environmental remediation.

The tax increment financing district will run for 15 years, over which time Lumber One is expected to be reimbursed $1,075,722 or approximately $47,000 for year one and $73,000 a year for years two through 15.

Lumber One will continue to pay all current property taxes on the land. The reimbursement comes from the new tax value added by the development project.

The council approved the tax increment financing district and plan unanimously, with Councilor Audrey Nelsen abstaining, as her family at one point owned and operated a business on the land in question. Councilor Tom Butterfield was absent from the vote. There was no public comment during a hearing prior to the vote.

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Block 25 is located between Second and Third Streets Southwest, bordered by U.S. Highway 12 and Benson Avenue. The block is located within the Willmar Renaissance Zone, an economic development district created in 2020 by the city.

Project developers in the zone could be eligible for a host of incentives including free building permits and utility hook-ups, practically free city-owned property and tax increment financing. The Block 25 Lofts is the first approved project for the zone.

Concept art for Block 25 Lofts in downtown Willmar. Art by JLG Architects.
Concept art for Block 25 Lofts in downtown Willmar. Art by JLG Architects.

The project will see the construction of a four-story, market-rate apartment complex with 58 units, as well as underground and surface parking for residents. The total project value is estimated at $10 million.

The city-owned the west half of the block, while a private individual owned the east. Both were sold to Lumber One in the spring. The city-owned land was sold to the developer for $1 a parcel, or $4 total.

While Lumber One was aware there were environmental concerns with the property — a dry cleaner used to be located on it — recently more issues were found, including traces of petroleum in soil borings from under the public parking lot on the west side of the block.

The company decided to complete both a phase 1 and phase 2 environmental assessment to uncover the issues and come up with a plan on how to correct them. Remediation could cost Lumber One hundreds of thousands of dollars. Funds from the tax increment financing plan can be used to pay those costs.

While using tax increment financing for a housing development is something the city has been doing only the past few years, the feeling on the council was the Block 25 project is a good candidate for it. This is especially true as the development is cleaning up and developing a difficult lot at the downtown location.

"I think it is a good project for downtown Willmar," said Councilor Rick Fagerlie. "I am glad there was a developer to come in and put up a four-story apartment building."