Duluth considers aid to help redevelop Historic Old Central High School
A complicated package of assistance will be required to redevelop the school into an apartment building.
Plans to convert Duluth's Historic Old Central High School into a 125-unit apartment building are likely to require a large quantity of public subsidies. And the details of that proposed $18.96 million aid package are coming into clearer focus, thanks to documents recently shared with members of the Duluth Economic Development Authority and the City Council.
The components of the proposed aid include:
- $2.94 million in tax-increment financing.
- $8.9 million in state historic tax credits.
- $6.63 million in federal historic tax credits.
- And $460,000 in the way of a state environmental cleanup grant.
The fact that the would-be developer, Saturday Properties, needs financial help comes as little surprise to Adam Fulton, deputy director of Duluth's planning and economic development department, given the anticipated scale of the $43 million project.
"This is a marquee building in the city of Duluth. It's one the most important historic buildings in our city, and we're pleased that Saturday Properties is contemplating this investment," he said.
The school welcomed its first students in 1892. Designed by Emmet S. Palmer and Lucien P. Hall, its architecture was inspired by the Richardsonian Romanesque revival.
While the school has a rich history, Fulton predicted that restoring it will be expensive.
"When developers are looking at historic buildings, there's often increased costs related to the complexity around making sure the building retains its historic character or dealing with things like the abatement of lead paint," he said.
"This building has deferred maintenance that needs to be addressed, and that's a large part of what the funding will be used for, but also for the conversion of the building to apartments," Fulton said.
Under the terms of a pending development agreement, he noted that 13 apartment units would be reserved and offered at reduced cost to households of modest means, earning no more than 60% of the area median income. The remainder of the building would be offered at market-rate rents.
Up until now, the school has been exempted from local property tax rolls. But as a privately owned apartment building, it is expected to generate $195,000 per year in additional taxes.
It most likely will be awhile before those funds begin to flow into the coffers of local government, however, as tax-increment financing is a form of subsidy that takes new taxes generated by a project and redirects them for a period of time to cover development costs. In the case of Historic Old Central, the proposed term of the TIF agreement is up to 26 years.
"When you think about catalytic projects in the core of the city, this is a piece of the puzzle for that. It takes up a full city block. And since it has not been a high school, it has not been utilized to its fullest potential.," Fulton said. "So, we are pleased to see this building being converted to apartment units and we look forward to having a greater level of activity here."