The Duluth Economic Development Authority approved a development agreement Wednesday evening that could lead to the razing of the Esmond Building, formerly known as the Seaway Hotel, and the raising of a new apartment building in its place.
Merge LLC — an offshoot of Merge Urban Development of Cedar Falls, Iowa — proposes to construct up to a 45-unit apartment building at the southwest corner of Superior Street and 20th Avenue West in Duluth's Lincoln Park neighborhood at an estimated cost of about $9.25 million. In addition to housing, the building would offer about 8,500 square feet of commercial space at the ground level. Merge refers to the development as the Urbane Duluth project.
For its part, DEDA proposes to offer up to $1.085 million in tax-increment financing (TIF) to help move the project forward. TIF is a subsidy that enables communities to capture new property tax revenues generated by a project and use them to cover certain development costs. In the case of this project, the TIF agreement would remain in place for 26 years before the full property tax stream would become available to local taxing authorities, including the city, county and school district.
While DEDA signed off on the proposal Wednesday, the Duluth City Council must also approve of the development agreement before the deal can proceed.
In return for the public assistance, Merge would agree to offer no fewer than 40 of the units at rates affordable for households earning no higher than 80% of the area median income.
"This development is in an area of the city that is really experiencing a renaissance, for all practical purposes, with the different work that's going on there, " said Chris Fleege, director of Duluth's planning and economic development department.
The Esmond Building is currently owned by the Duluth Housing and Redevelopment Authority, which stepped in to buy the troubled structure after it fell into disrepair and faced the imminent threat of condemnation. If that happened, resulting in a substantial loss of low-rent apartment units, about 70 vulnerable tenants could have been displaced. Many of those residents have since relocated to Garfield Square, a new supportive apartment building constructed and owned by Center City Housing.
DEDA commissioner and at large Duluth City Councilor Zack Filipovich noted that the authority had earlier provided the HRA with funds to help revive the Esmond.
"I'm guessing those efforts have failed, and that's why this resolution is before us. And I'm wondering perhaps why those efforts failed to revitalize that building," he said.
Senior Housing Planner Jason Hale explained that a previous party did look at trying to renovate the existing building, but the structure did not qualify as historic architecture. So, applying for needed historic tax credits was not an option.
"We looked at a variety of ways to try to salvage the structure, and there just wasn't an economically feasible way to do it," Hale said, offering his opinion that in its present state the building constitutes neighborhood blight.
Filipovich questioned whether sufficient efforts had been invested to save the building from the wrecking ball. He cast the sole vote against approving the development agreement for the project when DEDA passed it 4-1 Wednesday night.