Affordable housing project at Fort Snelling stalls

A once-celebrated plan to convert abandoned buildings at Fort Snelling into affordable housing has stalled, with the developer telling Minnesota Public Radio that the project turned out to be more costly and complicated than originally imagined.

Dominium vice president and project manager Owen Metz told the radio station that there's a one in five chance the Plymouth-based developer will get additional bonds to bridge the financing gap, but absent additional help, the renovation of some two dozen brick structures at Fort Snelling's Upper Post cannot proceed.

Metz was unavailable Friday by phone or e-mail for further comment.

The potential demise of the Upper Post housing project comes one year after Gov. Mark Dayton lauded a public-private deal meant to turn a complex of 26 derelict but historic brick structures into 176 units of affordable housing. The $100 million, 40-acre development was to be called Upper Post Flats.

The project held the promise of putting one of the state's most significant historic properties back into use. During World War II, the site was used as a Japanese intelligence and language school. For a time, the site also housed all-black regiments of the U.S. Army called Buffalo Soldiers.

The Upper Post site and buildings have been maintained at taxpayer expense by the state Department of Natural Resources since 1971. During that time plans to renovate and reopen it have come and gone.

A multiagency negotiation to find a developer began in 2013 when the DNR, the National Park Service, Hennepin County, the Minneapolis Park and Recreation Board and the Minnesota Historical Society formed a board to supervise future plans for the property.

Dominium was chosen two years later to create affordable housing on the site, with a 2017 groundbreaking expected on a project financed in part with tax-exempt bonds and federal, state historic, and low-income housing tax credits.

That plan fell apart, however, when the Minnesota Housing Finance Agency unanimously voted against using its bonding authority for the project. MHFA Assistant Commissioner Ryan Baumtrog said at the time that the board felt the Upper Post project was too costly and the board didn't want to finance it on the back of other affordable housing initiatives.

The project came back to life in 2018 when Dominium and the building trades union won the support of the Legislature, which directed the MHFA to set aside $58 million of its bonding authority for the Upper Post project.

Larry Peterson, the DNR's manager of the Upper Post site since 1999, said he's optimistic that the renovations will still go forward even after this latest hurdle.

"We're still hopeful," he said. "This is the best proposal for the state of Minnesota in decades here."

Peterson said progress was underway until just three or four months ago when a detailed cost estimate came in higher than expected. Historic factors and the nature of renovating 26 separate buildings, each with their own needs, likely played a role in pushing those costs up, according to Peterson. He said he heard that Dominium needs $30 million to $35 million more in financing, but that he would defer to Dominium's explanation.

A statement from the company said rising construction costs, more planned living units and the worse-than-expected deterioration of some buildings all drove costs higher.

"These are all contributing factors that have caused us to reopen a dialogue with state officials on what it is going to take to bring our shared vision of quality affordable housing for veterans and their families to the Upper Post," the statement read.

Dominium has completed other historical projects such as artists lofts in the former Schmidt Brewery in St. Paul and the Pillsbury A Mill in Minneapolis.

Matt McKinney • 612-673-7329