TIF package for downtown office tower up for City Council voteA proposed tax-increment financing package to support the construction of a parking ramp and new office tower in downtown Duluth will go to a vote of the City Council Monday night.
By: Peter Passi, Duluth News Tribune
A proposed tax-increment financing package to support the construction of a parking ramp and new office tower in downtown Duluth will go to a vote of the City Council Monday night.
With the help of Maurices, a Duluth-based national clothing chain, the city expects to invest about $11 million in a 490-spot parking ramp and skywalk serving the development at 425 W. Superior St.
Normally, the city would sell general-obligation bonds to finance such a project, but Chris Eng, Duluth’s director of business and economic development, said Maurices has agreed to front the money. In turn, the city would use tax increment-financing collections and revenues collected from the parking operation to pay off the note at a rate of interest expected to be about 4.5 percent.
Tax-increment financing is a form of subsidy that captures new taxes generated by a development and uses them to cover qualified expenses to help make possible a project that might not otherwise fly. The present value of the tax-increment-financing package now being assembled is expected to be about $9.6 million.
Maurices also plans to invest about an additional $50 million of its own money in the 10- to 12-story structure.
The tax-increment financing agreement being proposed would begin in 2017 and last for the next quarter-century. At the end of that time, all the local property taxes generated by the development would flow into city coffers.
Not accounting for appreciating values, Eng said the project could conservatively be estimated to generate an additional $430,000 in local property tax revenues for the city.
The state of Minnesota has awarded an $8.5 million grant to assist Duluth with the construction of a 4½-story parking ramp to support the project. At a minimum, the city will be required to match that state money.