The Duluth City Council approved its property tax levy for the coming year and also signed off on a controversial tax-increment financing project Monday night.
After lengthy public comment involving nearly two dozen speakers, the council granted a request for $6.2 million in tax-increment financing assistance that a developer will use to help erect a 15-story downtown residential high-rise.
By a 6-2 vote, councilors approved the tax-increment financing package, with Councilors Em Westerlund and Joel Sipress voting in opposition. Councilor Jay Fosle was not present Monday.
A number of speakers raised concerns that the project includes no reduced-rent units.
The developer proposes to build a 204-unit apartment building where the Voyageur Lakewalk Inn now stands at 333 E. Superior Street. The structure also would accommodate about 20,000 square feet of commercial space on the ground floor, which developers suggest could prove an attractive spot for a grocery store.
Rob Robinson of Landmark Co. of Madison, one of the would-be development partners, said he hopes to begin construction of the building in the spring of this year if all the project's pieces come together. He said that any delay could put the project at risk.
Several community groups called on the City Council to delay action on the request, including the Homeless Person's Bill of Rights Coalition, Loaves and Fishes, the American Indian Community Housing Organization and the Duluth branch of the NAACP. They suggested the prospective rents to be charged would be out of reach for many residents.
In a joint statement, the groups said: "The city could not give handouts to for-profit developers without a clear public benefit. Right now, our greatest public need is housing for low- and moderate-income people."
But a number of trade representatives spoke in support of the project which is expected to create 300 union-wage construction jobs, and the developer has agreed that 15 percent of the work hours will go to people with barriers to employment, creating what Keith Hamre, Duluth's director of planning economic development, called "career pathways" into the construction trades.
David Ross, president and CEO of the Duluth Area Chamber of Commerce, said the project would provide needed downtown housing and noted some local employers were having trouble recruiting new talent due to the shortage.
Robinson said rents in the building are expected to begin at an average of about $1,345 for a studio - with some units going for more or less, based on their view.
A study indicated that the project faces a $6.4 million funding gap, which the proposed tax-increment financing package would help to close. The development is expected to cost $70.4 million to complete.
Tax-increment financing - often called TIF for short - is type of subsidy that uses new tax dollars generated by a project to cover certain qualified development expenses.
The TIF for the proposed high-rise apartment building would last a maximum of 25 years but could expire sooner if collections retire the debt at a faster-than-anticipated rate. When the TIF ends, all future property tax collections from the development would flow directly into the local coffers of the city, county and school district.
Councilor Arik Forsman said he would support the TIF package but agreed the city must do more to meet the need for both affordable and market-rate housing.
"I think it's really unfortunate the two things have been pitted against each other, because we really need both," he said.
Westerlund and Sipress said they saw value in the project but would vote against the TIF package to send a message to city administration that the city needs to do more to address its shortage of affordable housing.
In other action, the Duluth City Council approved a $31.2 million tax levy for the coming year.
By a 7-0 vote - with Councilors Fosle and Renee Van Nett absent - the council adopted a budget that would boost local property taxes by 5.92 percent, versus the 3.96 percent increase originally proposed by Mayor Emily Larson.
The additional levy funds were requested to help phase out a streetlight fee Duluth residents currently pay on their utility bills. That charge is slated to drop from the present $3.25 to $2 per month next year.
Councilors Zack Filipovich and Joel Sipress, who proposed the shift, said that most households actually will save money under their plan, which would equate to about $15 in reduced household fees over the course of the year.
In terms of property taxes, the levy change would cost the owner of a $175,000 home an additional $11.35 next year. That uptick comes on top of the $20 hike in taxes such a homeowner already faced under the mayor's proposal, yielding a total increase of $31.35.
The Duluth City Council has pledged to completely phase out the streetlight fee it charges residents by the end of 2019, and it has been working to incrementally shift the fee from utility bills to property taxes for several years.