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Council action needed soon for proposed northeast Willmar apartment project as financial deadline looms

At Monday’s Willmar City Council meeting, the proposed Lakeland Drive Northeast project was nearly derailed by the possibility of not holding the public hearing for creation of a tax increment financing district. The council later agreed to conduct the hearing as a delay would have made the project financially unfeasible for the developer. He has financing with a locked-in interest rate, but the project needs to begin this fall.

092222.N.WCT.UniqueOpportunities.001.jpg
Developer Samuel Herzog is seeking to build a three-building, 216-bed apartment complex on Lakeland Drive Northeast near the Trentwood Estates development. Each of the buildings would contain 72 apartment units, a fitness center and underground parking, similar to the Unique Opportunities development on County Road 5 northwest of Willmar.
Contributed / Unique Opportunities
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WILLMAR — Housing is something that is greatly needed in Willmar, but creating that housing can turn out to be quite a complicated matter within the slow-moving cogs of city government — even more so when a group of vocal citizens oppose the new development in their neighborhood .

Developer Samuel Herzog is currently dealing with this issue as he attempts to move the Unique Opportunities apartment complex project forward while a financial deadline is looming — the project needs to begin this fall to be financially feasible, he said.

At Monday’s Willmar City Council meeting, the project to build three 72-unit apartment buildings on Lakeland Drive Northeast was nearly derailed by not holding the public hearing regarding the creation of a tax increment financing district to make the project financially feasible.

Under this tax increment financing agreement, the developer invests his own capital to develop the property, and is then reimbursed the increased tax revenue the development generates over the next 17 years, beginning in 2026. The total amount to be reimbursed during that time is approximately $8.7 million.

Preliminary plat for Unique Opportunities Lakeland 2022
The preliminary and final plat of the proposed Unique Opportunities apartment complex shows how the development would be laid out on the land located between the Trentwood Development and the mobile home park on Lakeland Drive Northeast.
Contributed / Willmar Planning and Development Department

The council decided Monday not to act to rezone the property until a traffic study could be completed.

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Mayor Marv Calvin then decided that the public hearing regarding the tax increment financing district also would not take place, due to the fact that such districts can be created only if the zoning for the project aligns with the current zoning for the site.
The project was salvaged when Councilor Julie Asmus moved to revisit the public hearing for the tax increment financing district after being informed that the process — which takes 60 to 90 days — would have to start all over if the public hearing did not take place, according to Tom Denaway of Baker Tilly, who created the agreement. The council approved that motion and the hearing was held.

Holding the public hearing and taking public comment Monday satisfied the notification portion of creating a TIF district, Denaway informed the council, and the decision to create the district could be delayed to a future City Council meeting after the issue of rezoning is resolved.

The council then approved tabling to a future meeting the decision to create the district.

It was Councilor Justin Ask who made the motion to table the rezoning of the land until a traffic study is completed amid worries that the developer may back out of the project if the traffic study deems it unfeasible. The land is currently zoned for agriculture and the council is being asked to approve rezoning to R5, which is high-density residential.

“If we rezone tonight, and this becomes R5 ... we’re (potentially) going to have a developer that is no longer interested in the piece of property, but it’s going to be zoned R5 and probably unwanted for any other developer to build anything in R5 zone,” Ask commented.

His motion garnered a tie 4-4 vote. Councilors Rick Fagerlie, Tom Butterfield, Michael O’Brien and Ask voted to table the rezoning, while councilors Andrew Plowman, Audrey Nelsen, Vickie Davis and Asmus voted against tabling the matter.

A public hearing will take place Sept. 6 for the rezoning of agricultural land to R5, which is high density residential. The location of the agricultural land to be considered for rezoning is east of Lakeland Drive Northeast between the Trentwood development and the mobile home park located on the corner of Lakeland Driver Northeast and Civic Center Drive.
The Willmar City Council voted to table the rezoning of agricultural land to R5, which is high-density residential. The location of the agricultural land to be considered for rezoning is east of Lakeland Drive Northeast between the Trentwood development and the mobile home park located on the corner of Lakeland Driver Northeast and Civic Center Drive.
Macy Moore / West Central Tribune

Calvin broke the tie by voting to table the rezoning.

“In light of what happened at the last City Council meeting, I think we’re probably heading in the same direction and it’s just a fruitless effort to continue this hearing. I will vote in the affirmative,” he said.

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In a conversation following the meeting, Herzog informed the West Central Tribune that he thinks that there is a lot about the project that is unclear to council members, and that there seems to be some tension amongst the council members.

He intends to contact individual council members before the next council meeting and have a conversation with them regarding the project in order to provide some clarity, he said.

One issue is agriculture-deferred assessments on the land currently that have to be paid upon the land being rezoned, which Herzog said he intends to pay whether or not the land purchase and project move forward.

He also noted that even though the land would now be zoned R5, that does not mean the city could not allow lower-density housing to be constructed in the zone or that it could not be rezoned again.

If the council does not take action on the rezoning and tax increment financing district in time to allow the project to start this fall, it will kill the project as Herzog would lose the interest rate he currently has locked in, he said.

It should be noted that since Herzog locked in the interest rates, the Federal Reserve has increased the interest rate several times.

Support for the project

In a letter to the council, Warren Erickson, who developed and lives in Trentwood Estates and currently owns the property in question, stated that since signing the purchase agreement with Unique Opportunities for the land, Erickson has “been asked to cancel the purchase agreement by a number of (Trentwood Estates residents) who communicate with me. It has been said that when I was selling lots that the buffer zone between the (mobile home) park and Trentwood Estates would always remain. What I said was that the land may be for future development by myself, not as a buffer zone.”

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Erickson noted that Trentwood Estates took longer to develop than expected, and in that time the cost to develop the land for single-family and townhomes became economically unfeasible.

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What would have cost $156,000 in 2005 would cost $299,000 to $309,000 today, he added. “I feel the proposed use of the property would be a good transition for the (mobile home) park to the north and Trentwood Estates to the south, (given) the current high cost of building single-family homes and continued need for housing in Willmar,” he said.

Kandiyohi County and City of Willmar Economic Development Commission Executive Director Aaron Backman also spoke in favor of the Unique Opportunities project.

“The location of R4 and R5 zoning in the city of Willmar has not been done willy-nilly by the Planning Commission nor the Willmar City Council,” he said. “There has been some thought given to appropriate zoning adoption over the years.”

He noted that most high-density residential zoning investments have been located along the city’s minor arterial roads, including Willmar Avenue, 19th Avenue, Lakeland Drive and County Road 5.

“Lakeland Drive is a relatively wide road. It can accommodate more growth in a manner on the northeast side of town, including multi-family residential,” Backman concluded.

Willmar real estate agent Doug Fenstra added his support for the project, noting Herzog informed him there are currently more than 700 people on the waiting list for his other apartment complex in Willmar, an increase of about 200 people from when this project started going through the approval process with the city.

“This is very uncommon and unusual for his circumstances and it’s needed,” Fenstra said. “I wanted to point out these companies that are going to be hiring or are trying to hire within our community. One of the problems and obstacles that we face in our community is providing clean and good, new housing for executives, engineers, scientists and others that are paid an advanced rate.”

Fenstra listed 19 businesses in that category, including Prinsco, Jennie-O Turkey Store, Bethesda, Northern States Supply, PALS, Nova-Tech, Select Genetics, CentraCare, Epitopix, FedEx, TerWisscha Construction, Ridgewater, and Marcus Construction.

“All these companies are expanding very much and greatly contributing to our community,” he concluded.

Jennifer Kotila is a reporter for West Central Tribune of Willmar, Minnesota. She focuses on local government, specifically the City of Willmar, and business.

She can be reached via email at: jkotila@wctrib.com or phone at 320-214-4339.
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