Legislature pushes Fort Snelling affordable housing, at $600K per unit

A project to rescue the historic Upper Post of Fort Snelling from oblivion and turn it into affordable housing for veterans got a lifeline from state lawmakers just minutes before the end of the legislative session — but at a high cost.

In a feat of furious lobbying from a politically connected developer and the building trades union, the Legislature in its infrastructure bill directed the Minnesota Housing Finance Authority (MHFA) to use its bonding authority for the Fort Snelling Upper Post project.

Cobbled together with other public and private money, the plan is nearing fruition. Gov. Mark Dayton is expected to sign or veto the infrastructure bill soon.

Despite the "affordable housing" moniker, the total price tag to convert 26 old military buildings into 176 units is more than $100 million — or $600,000 per unit. That's more than twice the cost of a median-priced single-family home in Minneapolis.

"Six hundred thousand per unit does not sound affordable to me," said Hennepin County Commissioner Jeff Johnson, a Republican candidate for governor. The county would also be part of the Upper Post project, which sits in unincorporated Hennepin County near the Minneapolis-St. Paul International Airport.

The Legislature made sure cost would not get in the way of the project, writing into law that the MHFA "shall not include in its review of the project any per-unit cost limitations."

Project supporters — a long list of influential backers like Dayton, legislators and local elected officials — say the per-unit cost is misleading because half would come from restoring historic buildings according to exacting standards, accomplished in part with special federal tax credits.

The alternative, they say, is to continue to allow the site to lie fallow at great cost. According to a 2015 report from the state Department of Natural Resources — which took over the site in 1971 — the agency expected to spend nearly $2.3 million during the following decade to patrol the site, clear away debris and maintain structures to prevent incidents like a building collapse in 2009.

"If we didn't do something this year, those buildings are gonna fall down and will be lost," said Dan McConnell, business manager for the Minneapolis Building and Construction Trades Council. During World War II, the site was used as a Japanese intelligence and language school. For a time, it also housed the Buffalo Soldiers, members of an all-black regiment in the U.S. Army.

The late-night maneuvering at the Legislature to include the project in the every-other-year $1 billion bonanza of borrowing for infrastructure — known around the Capitol as the "bonding bill" — was led by the building trades lobby and developer Dominium.

The Plymouth-based company employed two Capitol lobbying firms — Winthrop & Weinstine and McGrann Shea — and won the key support of Senate Minority Leader Tom Bakk, a retired union carpenter whose DFL votes were needed to pass the bonding bill. (The state Constitution requires a "supermajority" vote in order to add to the state's debt load.)

"As part of Dominium's ongoing efforts to improve housing policy in Minnesota, this session, we actively worked with the Legislature and governor's office to advance policy language that will best address the affordable housing crisis," the company said in a statement.

Dominium, its employees and their political fund are also active contributors to campaigns, including $5,000 to the Senate Republican campaign fund days before the legislative session began.

The company uses tax-exempt bonds and federal tax credits to spur private investment in affordable housing developments around the country, including notable projects like A-Mill Artist Lofts in Minneapolis and Schmidt Artist Lofts in St. Paul.

The monthly rent for a one-bedroom unit at the Upper Post site, for which military veterans would receive preference, would be $1,000. That's also roughly the average rent of a one-bedroom unit in the Twin Cities.

The company said its development fee is still to be determined and added that it will have invested about $5 million even before construction begins.

According to a 2016 city of Minneapolis document on the A-Mill Artist Lofts, the Dominium development fee was $28.4 million.

Despite the cost, the project has won the support of the state's political establishment — including the Hennepin County Commission, a bipartisan group of seven Minnesota members of Congress, and Dayton, a DFLer.

Curiously, however, the Dayton administration's own MHFA declined to use its bonding authority last year to back the project, in an 8-0 vote of its board.

If Dayton signs the bill, the Legislature would be muscling his own housing agency on behalf of the project.

"The board thought it was unfair to finance the project on the backs of affordable housing resources," said Ryan Baumtrog, assistant commissioner for policy at the agency.

"We have to use scarce resources to meet statewide needs for first-time homeownership and rentals, and one of the reasons the board said 'No' was because of the high cost trade-off," Baumtrog said.

Hennepin County Commissioner Peter McLaughlin, a key driver of the project, explained the cost by likening the expensive historic preservation to a brownfield. "A big chunk of the cost is like cleaning up polluted land. You can't redevelop the property unless you do it in the way that respects the history of the Upper Post," he said. Once historic preservation costs are factored out, the project costs roughly the same as other affordable housing, he said.

McLaughlin said the plan, relying heavily on federal tax credits, will transform the site from a burden on government to productive, taxpaying use, while housing veterans at affordable rents.