Developer of proposed Miller Hill apartment building encounters resistance

Plans for a 72-unit apartment building proposed to be built behind the Buffalo Wild Wings restaurant off Central Entrance were placed on temporary hold earlier this week by the inaction of the Duluth City Council.

Developer Ryan Bowman expected the council to sign off Monday night on a $250,000 tax abatement package for the project - dubbed phase II of the neighboring 90-unit Miller Hill Manor - but councilors instead chose to table the development agreement.

Craig Olson, president of the Duluth Building and Construction Trades Council, called on the developer to sign a project labor agreement (PLA), pledging to put up the building with union labor in return for a guarantee that work would not be disrupted by any labor actions.

"When a developer comes to our community and looks for a public subsidy of any kind, we think there should be some ground rules," he said.

Bill Burns, an attorney for Bowman, objected. He noted that the Minnesota Department of Employment and Economic Development agreed to provide a $1 million grant for the project, but it was contingent on both the city and St. Louis County each abating $250,000 in property taxes.

"Those two ($250,000) amounts are leveraging $12 million of investment," said David Montgomery, Duluth's chief administrative officer.

The St. Louis County Board of Commissioners unanimously approved the abatement of $250,000 in taxes on July 12, without a project labor agreement.

A project labor agreement was never discussed as part of the deal, Burns said. But he noted that the developer has agreed to pay prevailing wages to all workers involved in putting up the new apartment building.

Olson said the prevailing wage requirement included in the development agreement provides no guarantee that local tradespeople will be hired to construct the apartment building. He said past experience shows that developers can find "creative ways" to bring in outside workers.

"We feel the local trades are being circumvented," he said.

Burns observed that other projects which received public subsidies have been allowed to proceed without project labor agreements.

"If you're from out of town and you're a developer, you don't have to sign a PLA. But if you're a local you do," said Burns, suggesting Duluth-based developers like Bowman are being held to a higher standard.

"We've got a lot of apartment construction going on in Duluth, including Lambert - no PLA - Pohlad - no PLA - and the development at 21st Avenue East - no PLA," Burns said.

Montgomery acknowledged a PLA requirement would be a new wrinkle for the project, when its details have been on the table for more than a year.

"The nature of this project has been known for quite some time," he said.

Mayor Emily Larson confirmed that no project labor agreement provision had been discussed as part of the project but suggested future deals could include such a requirement.

"I have a real interest in looking at our business subsidy policy and ensuring that it's clear and consistent and that it's also consistently applied, because this is not the first time that we are having these discussions at the very end," she said.

Montgomery noted that Larson had not had a direct hand in putting together the development agreement for the apartment building.

"This project predates this administration and this mayor. It really is a carryover from the last administration," he said.

Nevertheless, 5th District City Councilor Jay Fosle called on Bowman to sign a PLA.

"It really is important to keep any of our local dollars here by employing local citizens from our unions and keeping guys off the bench," he said.

Also advocating for a PLA was 4th District Councilor Howie Hanson, who said: "I don't think there's any reason to give this particular project a free pass."

"My statement to the current developers at the table today and to future developers is: No PLA, no abatement, no TIF (tax-increment financing). That's my position," Hanson said.

For his part, 2nd District Councilor Joel Sipress said: "I think PLAs provide clarity for everyone. So I'm hoping that this could become an opportunity to begin thinking about whether we want to move in the direction of being more consistent with PLAs."

Sipress expressed reservations about subsidizing the apartment building even with a PLA. He noted that rents for the 1- to 2-bedroom apartments offered there are expected to range from $900 to $1,640 per month.

Even if tenants were to spend a hefty one-third of what they made on rent, Sipress said the cheapest apartment would require an annual household income of more than $32,700.

"That's the low end of this market building. Now, about 40 percent of Duluth households live on incomes of $30,000 per year or less. So basically, about 40 percent of our households couldn't afford the cheapest apartment in this building," he said, noting that poorer renters face the greatest need for more housing.

Montgomery said the city needs more housing for people across the income spectrum.

Burns said phase II of Miller Hill Manor will provide housing that's more affordable than some other local projects that have also received public subsidies and asked the council to honor the city's prior commitments.

"I think it's profoundly unfair to spring this on a local developer who's trying to put together a project that's going to offer apartment rents that are 20 to 30 percent lower than the 21st Avenue East project, which got essentially unlimited TIF, or the Kenwood/Arrowhead project, which also got unlimited TIF," he said.

The Duluth City Council will likely take up the development agreement at its next regular meeting, Aug. 15.