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Kandiyohi County Board rejects housing tax abatement request

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Erica Dischino / Tribune The 24-unit market-rate apartment building owned by AEHM, also known as Suite Liv’n, on 15th Avenue Northwest next to Ridgewater College will not receive a developer's tax abatement after the Kandiyohi County Commissioners turned down AEHM’s request during their board meeting Tuesday in Willmar. The company owns two existing apartment buildings on the site that are undergoing rehabilitation.
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WILLMAR — The Kandiyohi County Commissioners turned down a request Tuesday for a developer's tax abatement to build a 24-unit apartment building in Willmar, saying they were concerned about the cost to taxpayers and citing worries about setting an unwelcome precedent.

The board's vote, which was unanimous, came after public testimony that was overwhelmingly in opposition to granting the abatement.

The commissioners said they do not doubt there's a need for more housing in Willmar but questioned whether a tax abatement is necessary for this particular project.

"It has not been demonstrated to me," said Commissioner Steve Ahmann.

He said his vote came down to how much the taxpayers of Kandiyohi County should be asked to shoulder. "The taxpayers are already contributing to economic development," he said.

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AEHM, also known as Suite Liv'n, sought the tax abatement to help finance construction of a new $2.5 million, 24-unit market-rate apartment building on 15th Avenue Northwest, next to Ridgewater College. The company owns two existing apartment buildings on the site that are undergoing rehabilitation.

The new units, consisting mainly of three-bedroom apartments, will help meet local demand for rental housing in a market that has become increasingly tight, said Gabe Olson of Suite Liv'n.

The average vacancy rate for rental units in the Willmar area is 2 percent, he said. "That tells us something about where our need is."

The overall need also has been underscored in various studies on housing availability and affordability, both locally and regionally, Olson said.

A comprehensive countywide study undertaken in 2015 by the Kandiyohi County Housing and Redevelopment Authority documented a growing shortage of housing across the spectrum, from single-family homes to market-rate rental housing and low-income housing, he said. "The need is very clear."

Suite Liv'n asked for 90 percent of the property taxes on the new apartment building to be abated for 10 years. Once the abatement expired, the full property tax amount would have been applied. A similar request to the city of Willmar was granted earlier this year by the Willmar City Council.

Nearly all of the half-dozen people who testified at Tuesday's public hearing were against granting the request, saying the project offers little or no benefit to Kandiyohi County.

AEHM "can well afford" to construct a new apartment building without help from the public, said Linda Kacher, noting that many other housing developers "are not being supported in any way."

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"I just hope there is a real need for this," said Diane Sing.

Support for Suite Liv'n's request came from Aaron Backman, executive director of the Kandiyohi County and City of Willmar Economic Development Commission, who pointed to a strong housing demand, particularly for rental housing, that he said is "not going away anytime soon."

Housing availability is closely tied to workforce development and a community's ability to recruit and house employees at all levels of the income scale. National trends also suggest that single-family home ownership, long considered the ultimate housing goal, may be losing some of its luster, especially among cash-strapped millennials and among older empty-nesters, and pushing up demand for rental options.

Tax abatements are usually sought for manufacturers or businesses, not for housing development. But although the abatement request from Suite Liv'n is the first of its kind to come before the Kandiyohi County Board, it's allowed by statute, Backman said.

"It's certainly assistance, but at the end of the day, they have to make that investment in the community," he said.

Dennis Baker, mayor of Spicer, also spoke in favor of tax abatement as a useful economic development tool.

"Yes, we have to watch how we use them, but they are positive. ... It's not something that is cheating anyone," he said.

A misconception persisted throughout much of the testimony and discussion that the Suite Liv'n project is for low-income housing. Olson has said the new apartments will be rented at competitive market rates, a point that had to be clarified for the board and the audience more than once.

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Olson expressed some disappointment after the meeting about the misinformation that appeared to be circulating but said the County Board's rejection of the abatement request would not halt the project.

Renovation has started on the two existing apartment buildings and construction will start soon on the new building, he said. "It won't change the goal to do the project."

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