State gives $8.5 million for new downtown Duluth office tower

• Office building

An artist’s rendering of the proposed office building for 425 W. Superior St. that will be constructed by the AtWater Group. (Image courtsey of Krech Ojard)
• Office tower news conference

In a news conference Thursday afternoon, Duluth Mayor Don Ness celebrates the news that the Duluth Corporate Tower project has received the state funding it needs for the project to go ahead. Joining him are David Ross, president of the Duluth Area Chamber of Commerce, City Councilor Jennifer Julsrud and Kristi Stokes, president of the Greater Downtown Council. (Bob King / rking@duluthnews.com)

Talk about it

A proposed office tower in downtown Duluth took a step closer to becoming reality Thursday when Gov. Mark Dayton announced that the state of Minnesota will contribute $8.5 million toward the project.

Supporters, including Duluth Mayor Don Ness, say the project will help revitalize western downtown. Developers promised a major tenant that would bring 200 new jobs to Duluth to anchor the new 15-story building, and that tenant appears to be Duluth-based Maurices and its parent company, Ascena Retail Group. The anchor tenant will be officially announced at a “public celebration” of the project set for 11:45 a.m. today at the site.

The tower, which will be built along Superior Street and Fifth Avenue West, is expected to hold up to 1,000 people, city officials said. Groundbreaking for the tower will be in the spring, with construction expected to be finished by 2016.

The project is expected to create an average of 150 construction jobs over the three-year construction period, Ness said Thursday morning as he was flanked by city and county officials and building trade union leaders at a noon news conference at City Hall to announce the project. Ness called the $60 million AtWater contribution the largest single, private investment in downtown Duluth history.

“With that support (from the state), we can say with confidence that the $80 million Duluth corporate tower is a reality,” the mayor said.

Dayton announced the Duluth project as one of the winning statewide projects from a list pared down over the summer by the Department to Employment and Economic Development. The winners are getting a cut of $47.5 million that the 2012 Legislature set aside to pay for projects expected to spur private economic development and create jobs.

Developers AtWater Group LLC originally asked for $20 million in public money to make the project work. The city had sought $10 million from the state, but Dayton pared it down by $1.5 million.

Ness said the $1.5 million not included by the state was to offer space to University of Minnesota Duluth offices. DEED officials said that didn’t fit the economic development requirements and so dropped that element of the project.

The city will now have to front an equal $8.5 million for the parking ramp project that also includes public utilities and skywalk access for the new tower, Ness said.

The city’s share of the project will come from revenue bonds issued by the city and from creation of a Tax Increment Finance District for the tower and ramp. Duluth would own the 600-car ramp and receive the revenue from parking to pay back the bonds.

Rob West, representing the AtWater Group, said the state’s investment marked “a great day to celebrate a terrific public-private investment.” Ness said the project would not have happened, or would have been smaller in scope, without the state’s contribution.

The parking ramp was near the top of the list of finalists submitted by DEED to the governor recently. City officials said the tower project had by far the best private-to-public investment ratio of any project seeking state money.

AtWater Group LLC is a division of Twin Ports-based Reuben Johnson & Son Inc. The company also owns Building Logic, Charter Films, Fraser Shipyards, Johnson Materials Co., Lake Assault Boats, Northern Engineering Co. and Viant Crane.

The other statewide grant recipients included: