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DEDA considers TIF for Duluth waterfront hotel project

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Artist’s rendering of the proposed Pier B project. (Submitted by John Michael Cook)2 / 2

A prospective tax subsidy package for a proposed upscale hotel on Duluth’s waterfront will take center stage when members of the Duluth Economic Development Authority meet at 5:15 tonight in City Council chambers.

Alex Giuliani, one of the would-be developers of the $29 million, 140-unit hotel, described the aid as critical if the project is to become reality in today’s risk-averse lending market.

“It closes the funding gap we have, and without that tax-increment financing I don’t think we could go forward,” he said.

Tax-increment financing — or TIF — is a form of subsidy that uses new property taxes generated by a project to pay off certain qualified development expenses.

Tonight, DEDA will take up a resolution of support for the creation of a tax-increment financing plan for what has been dubbed the Pier B Development. The proposed hotel would go up on the site of the former Lafarge cement terminal and an adjoining lot now owned by DEDA.

Giuliani said the site will require substantial investment to shore up failing seawall pilings, address some contamination issues, improve storm water drainage and bring new utilities into the area.

An analysis by Ehlers & Associates Inc. identified more than $5 million in project costs that would be eligible for funding with tax-increment financing money.

The proposed TIF package would last 25 years and is expected to generate about $8 million over the course of its life. The total package was estimated to have a current market value of just a little more than $3.8 million, according to analysis by Ehlers & Associates.

Chris Eng, DEDA’s executive director, described tax-increment financing as a valuable tool for putting old sites to new uses.

“It’s almost always more expensive to redevelop a site than to build on a green field, and we of course we want to see redevelopment in our city,” he said.

There are still many hoops for the project to jump through before it qualifies for tax-increment financing. Besides requiring DEDA action, the project also will be subject to public hearings and review by both the Duluth Planning Commission and ultimately the City Council.