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Duluth Central High School site will be developed into housing

The Duluth school district has signed a purchase agreement with Harbor Bay Real Estate Advisors to sell the 77-acre Central High School campus above downtown Duluth for $10 million. Harbor Bay aims to develop the site for housing. Steve Kuchera / skuchera@duluthnews.com1 / 3
Duluth Central High School (2014 file / News Tribune)2 / 3
Duluth’s Central High School (top) has been vacant since 2011. The Secondary Technical Center is at lower right. Steve Kuchera / skuchera@duluthnews.com 3 / 3

The 77-acre hilltop Central High School property in Duluth — largely unused since 2011 — will be developed into housing.

The buyer, Harbor Bay Real Estate Advisors, and the Duluth school district announced the plans Monday as they signed a purchase agreement for the property.

The purchase price is $10 million, $3.7 million less than the asking price. The property, at 800 E. Central Entrance, is the most valuable of the district’s surplus property following the consolidation of schools as part of its long-range facilities plan, also known as the Red Plan.

“Harbor Bay is extremely enthusiastic about the development potential at such a large and iconic site,” said Tom Lund, one of the principal partners in the firm. “The possibilities are endless.”

Lund said in a news release that the company has had interest from “several users” for the site and would work with the city on design, infrastructure and permit approvals.

“Versatile” housing options are planned for the site. Construction could begin in 2015; the sale is expected to close on or before July 31.

The property includes the high school and the Secondary Technical Center. Harbor Bay, highlighting the parcel’s views of the city and Lake Superior, said the development would “preserve and showcase the site’s beauty,” and would create “significant” local jobs in construction, design and engineering fields.

The company deals in development, investment and advising. It already has a large-scale Duluth project in the works: a 148-unit apartment complex on London Road overlooking Lake Superior, along with commercial space, which will cost about $36 million to build. Other projects include student housing being built in Grand Forks and multi-family housing in Minneapolis.

Harbor Bay is owned by Lund and Mark Bell, with offices in Minneapolis and Chicago. Both previously worked for the Minneapolis-based Opus Group, where they helped orchestrate total investments of more than $1 billion.

Bell and Lund didn’t return phone calls Monday.

A ‘CHALLENGING’ PROCESS

Kerry Leider, property and risk manager for the Duluth school district, said the district and School Board made the agreement with Harbor Bay because they felt the offer was reasonable and they were pleased that it included the entire property.

Over the years, conversations with several other parties — many serious — showed that most were interested in only a part of the site, he said.

Duluth Edison was one of those parties, but the School Board has a policy that says it won’t sell school buildings to other K-12 entities. The agreement with Harbor Bay includes a provision barring it from using the property as a school for kids between the ages of 5 and 18.

The district had struggled to rezone the property, doing so twice via a lengthy process in an attempt to attract buyers. The most recent rezoning meant it could have been sold in parcels, something that may have cost the district more money and time. Just paying for maintenance of the property cost the district $170,000 in 2012-13, for example.

“For me, this has been a real challenging but interesting process,” Leider said. “It’s a page of the long-range facilities plan that I have been hoping we could close sooner than later. We’re here today.”

Leider said he is “confident” things will go well during the process leading up to closing the sale, and said Harbor Bay “will take over the property and turn it into something as equally beneficial to the community as Central High School, which served it for the (40) years it’s been here.”

Leider said that because of the interest in the Secondary Technical Center, it’s unlikely it will be torn down. As the master plan is developed, he said, some part of the high school building might also be considered for reuse. He also didn’t rule out some type of commercial development, which the property zoning allows.

Duluth Mayor Don Ness said Harbor Bay builds a “very high-quality product” and has been responsive and open to accommodating community interest.

“With this project, that will be of utmost importance,” he said, because of the emotional connection many Duluthians, including 1992 Central graduate Ness, have with the school. “I believe they will approach the project in a way that will be sensitive and respectful.”

The city will help Harbor Bay in some capacity, whether it’s with basic infrastructure or potential demolition.

“Being on this rocky hill, there will be challenges to developing it in the right way,” Ness said, and the current infrastructure that was meant to serve one school isn’t adequate.

Ness, too, said he was pleased with a sale to a single buyer. That makes for a “cohesive whole” as opposed to possibly competing visions, he said.

The development will “help address our very serious housing needs in Duluth, and it will expand the tax base and support local governments, including the school district,” Ness said.

It also will maintain green space and public access, via a connector trail that will travel through the property, for example, for the proposed Duluth Traverse Trail.

WHERE WILL THE MONEY GO?

The School Board will decide where the $10 million goes, with options including growing the once-nearly-depleted general fund reserves, paying for educational needs or reducing the property tax levy. It also could be a combination of any of those, said Bill Hanson, business services director for the district.

“The reality for us is we are still dealing with a fund balance lower than we want it to be, and tax relief is always a welcome thing for taxpayers,” he said, noting that paying for further efforts to boost the academic performance of students also would be welcome to many.

The district’s fund balance had been used to help pay Red Plan debt in recent years because properties such as Central hadn’t sold. The sales of leftover buildings were meant to help make payments. When the fund balance was too low to help make payments, property taxes were raised significantly in 2012 and 2013.

Some administrators and board members have said they would like to replace some of the reserve money. That would allow the district to pay bills without resorting to short-term borrowing and paying interest costs; that’s been an annual event in recent years because of the timing of state aid payments.

For that reason and for urgent needs, that option would be preferable, said board Chairman Mike Miernicki.

But it’s something the board will discuss, he said, noting the news of the sale was “wonderful.”

The current reserve amount is $4.1 million. A board policy says it should be 10 percent of annual expenditures, which are about $100 million.

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