For the past year, plans to redevelop about 12 acres of Duluth’s downtown waterfront have been placed on hold in the face of formidable site challenges. But the Duluth City Council approved a resolution Monday night that could unlock the property’s potential with the help of a newly created tax-increment financing district.
Sandy Hoff, one of the would-be investors in the Lot D property, said that if not for some assistance, the site would be an impractical candidate for redevelopment.
“That is a 100-percent engineered site. So, 100 years ago it was floating bog,” he said.
“What we’re dealing with from a development standpoint is environmental issues which are typical for the waterfront. There also are a lot of old building foundations to contend with,” said Hoff, who is no stranger to such challenges, having previously tackled the redevelopment of the former Lafarge Cement terminal property next door to Lot D and now home to Pier B Resort.
Hoff and his business partner Alex Giuliani also obtained an option from the Duluth Economic Development Authority to explore the purchase and reuse of Lot D, but the project has been held up.
Failing seawalls also will need to be replaced throughout the property to stabilize the site, Hoff said.
To assist with the project, the city of Duluth had sought special state legislation authorizing it to create a new tax-increment financing district last year, but when the request proved unsuccessful, Hoff said he had no choice but to shelve plans for property
This year, the same legislative request was approved, granting the City Council authority to consider tax-increment financing for the project. The council exercised that authority by an 8-0 vote Monday, with 5th District Councilor Jay Fosle absent.
“Realistically, at a minimum, you need about $10 to $15 million, just to get out of the ground so you’ve got a development site,” Hoff said.
One of the requirements for a project to be eligible for tax-increment financing — often called TIF for short — is that the proposed development could not occur if not for the requested support.
“This might be the poster child of TIF-eligible sites, because it’s just not economical to develop that site without tax-increment financing,” Hoff said.
Tax-increment financing is a form of government subsidy that uses new tax proceeds generated by a project to cover certain qualified development costs. These new tax dollars are collected but are then diverted for a prescribed number of years before local property tax revenues are fully realized.
Hoff envisions a mixed-use development at Lot D, including public spaces, an extension of the Baywalk, commercial office, retail, apartments and condominiums, as well as parking in the area to accommodate those different uses.
“Of course, Alex and I would like to see the continuation of the success we created at Pier B. We would like to see another diamond in the rough, which is Lot D, polished into a wonderful community asset,” Hoff said.
“Of course, you’ve got to make a return on your investment though, so that’s where the TIF comes in, because it’s just not feasible to redevelop this site without TIF,” he said.
Even with the help of tax-increment financing, Hoff said he doesn’t consider the project “an automatic yes in terms of going forward.”
“There’s a lot of work to do and a lot of hurdles to overcome. But we’ll keep going until we realize that we have a project or that it’s not feasible and we’re not going to be able to get this done,” he said.
Hoff said that with the TIF eligibility in hand for the property, he and his team plan to work diligently over the next few months to determine whether or not the project is a go.
“I think it’s put-your-head-down time and see if we can get it done. It can’t drag on in perpetuity,” he said.