Duluth may open wallet wider for high-rise apartment building — priced at nearly $85 million
Higher construction costs boosted the need for aid to keep the proposed development on track.
DULUTH — A project that promises to bring more than 200 new market-rate housing units to the downtown could receive up to $7.5 million in tax-increment financing.
On Wednesday, the Duluth Economic Development Authority voted 4-0 in favor of boosting its support for the proposed Lakeview 333 apartment complex by $1.3 million beyond the tax-increment package previously approved for the 15-story building.
Tax-increment financing is a subsidy that uses a portion of new property taxes generated by a project to cover certain qualified development costs for a defined period of time, after which taxes flow in full to local units of government. In the case of this particular project, the duration of the agreement would be for a maximum of 25 years.
While DEDA gave its nod to the revised development agreement Wednesday, the Duluth City Council also would need to sign off on the deal before it becomes official.
If the requested aid is approved, construction of the new apartment building at 333 East Superior St. is expected to begin this year.
But even with the proposed aid package, the building's prospects remain uncertain, said Chris Fleege, director of Duluth's planning and economic development division.
"There's still a gap that this developer is working to overcome. So, even with this assistance, we're not certain that they're going to make it," he said.
In a section of the resolution labeled "statement of purpose," city staff observed: "The request for additional assistance is based on changing project costs driven by inflationary pressure in the construction materials and labor markets."
Fleege said the undertaking is now projected to cost nearly $85 million.
When originally proposed in 2018, the anticipated cost of the project was about $70.4 million. At the time, developer Rob Robinson of Landmark Co., based in Madison, Wisconsin, projected studio apartments in the high-rise would likely go for around $1,345 per month on average, with higher rents for larger units and those with special views.
While the Lakeview complex is not geared toward providing low-cost "affordable" housing, Fleege said it came forward at a time when the city was providing support for all types of housing. Hence, Duluth offered similar similar types of assistance to housing developments such as Kenwood Village, Endi and Bluestone.
"We need housing at all levels," Fleege said. "We need market-rate and affordable housing."
The proposed 15-story building would have about 20,000 square feet of commercial space on the ground floor, which the developer had suggested might be an attractive location for a grocery store.
The original development agreement for the project was first signed in August 2019. But while the former Voyageur Lakewalk Inn, Hacienda Del Sol restaurant and the First Oriental Grocery buildings have been razed to make way for the development, it has been repeatedly delayed. Wednesday marked the fifth amendment to the original development agreement.