County balks at support for Hermantown senior living complex
Lacking union guarantees, the $36 million project failed to move the County Board to act, but the city says it will forge ahead.
HERMANTOWN — A 105-unit senior living complex may be coming to the corner of Lavaque and Maple Grove roads, across from City Hall, despite a rejection of supportive financing from the St. Louis County Board this week.
A request to match $300,000 in tax abatement across four years died at the County Board meeting in Brookston this week when it failed to gain support for a vote.
County commissioners expressed concern during a public hearing about a lack of a project labor agreement that would ensure local union contractors assigned to the job.
Despite the setback, the city of Hermantown is moving forward with the full $600,000 in tax abatement across roughly seven years.
The city reasoned that a wooded lot that yields roughly $7,200 in taxes annually would bring $500,000 per year once the development was in place and abatement figures achieved.
“The senior housing project is still on from the city’s perspective,” Hermantown City Administrator John Mulder told the News Tribune on Thursday. “The city is providing $600,000 in tax abatement for this private investment of $36 million that will provide much needed housing for seniors in our area.”
County administration recommended the tax abatement and city officials argued that the main contractors were local, including Johnson Wilson Constructors and Veit Companies — both of Duluth. Still, commissioners balked.
“Why are we putting tax dollars into this project?” Commissioner Frank Jewell, of Duluth, said during Tuesday's meeting in Culver Town Hall.
City and county officials were not able to satisfy the board with an answer.
In fact, Mulder noted that the developer Oppidan, based in Excelsior, Minnesota, originally planned to build the complex without public financing.
“We were ecstatic about that,” Mulder said, describing city approval early in 2020. “Then, COVID delayed everything.”
Oppidan was not present at the board meeting, but Mulder described how the development firm said during the pandemic that the project no longer worked financially.
The city rallied to save the deal with a tax abatement proposal. The senior apartments are scheduled to feature a mixture of independent and assisted living units along with a memory care unit. The 10-acre lot, at 5097 Maple Grove Road, was sold to the developer in 2020 for $950,000, according to a county property report.
“For $600,000, we can get a $36 million economic development project,” Mulder told the board. “That’s a good return.”
County rules require any project investment over $150,000 to come with a project labor agreement. While commissioners heard testimony, they offered little engagement, seemingly discouraged by efforts to circumvent a project labor agreement. It's notable that earlier in June, the board unanimously approved $108,000 in support for a YWCA facility in West Duluth, in part, because the organization had come to the board with a labor agreement in hand.
Attorney Steve Overom, representing Hermantown, testified during the public hearing that he’d identified numerous local union contractors among the roughly 30 subcontractors scheduled to be on site.
“You are assisting a project that was dead in the water,” Overom said to the board.
Others remained unconvinced.
Dan Olson, vice president of the Duluth Building and Construction Trades Council, testified that while the unions supported the project there was only one guarantee to avoid work stoppages and picketing that could slow down construction.
“The safest thing you can do is enter into a PLA,” Olson said.
In the end, while the project may continue, county involvement won’t.
“Motion to approve the resolution?” Board Chair Paul McDonald, of Ely, asked. “None? It died.”