Minneapolis leaders at odds over subsidy for new housing along Blue Line

A proposed $3.7 million tax subsidy for new housing in Minneapolis' Seward neighborhood was thrown into doubt Friday after City Council members debated whether it was appropriate for market-rate housing.

The Minneapolis City Council postponed a decision Friday on tax-increment financing (TIF) for the third phase of Seward Commons, a 4-acre redevelopment southeast of the Blue Line's Franklin Avenue light-rail stop. It includes the construction of two five-story buildings, one of which would have 128 market-rate units and the other which would have 32 units for lower-income tenants.

At Friday's council meeting, several council members were concerned about providing financing for the 128-unit building, known as the Bessemer, and the precedent it could set.

"This is $3.7 million for market-rate housing, and I don't believe we should open the door for this developer," Council Member Lisa Goodman said. "Once we open the door for this one, everybody else will be lined up, too."

The council tabled the discussion until next month as Council Member Abdi Warsame, who represents the ward where the project lies, was sick and absent from Friday's meeting.

In 2009, nonprofit developer Seward Redesign Inc. acquired the land for Seward Commons, located blocks away from where a large homeless encampment sprung up last summer.

Since then, it opened two buildings with 100 affordable units for seniors and people with mental illness, all built without TIF.

With tax-increment financing, cities use higher property taxes generated by a development for certain infrastructure needs. In Minneapolis, the financing is used to "provide an array of housing choices that meet the needs of current residents and attract new residents to the city, with an emphasis on providing affordable housing," and to "eliminate blighting influences throughout the city," according to its policy.

Warsame expressed his support for the project in an e-mail sent by his policy aide. Council President Lisa Bender, who had voted against providing tax-increment financing in an earlier committee meeting, changed her mind on Friday after looking at the impact of the entire project and at the need for market-rate housing in the area.

"If you consider the project as a whole ... it far exceeds our policies" for financing, she said.

The Bessemer was expected to break ground this fall and is estimated to cost more than $29 million. The TIF money for the Bessemer would come only from property taxes generated at that particular building, according to city documents.

Developers also requested more than $600,000 in TIF for the affordable-rate building, called Wadaag Commons. It would be available for families making 60 percent or less of the area median income, and construction on it would begin in 2020 or 2021.

Council members opposing the use of public financing were wary of this timeline, saying they would feel more comfortable if the affordable units were built sooner or simultaneously. Goodman also questioned whether the developers would be able to gather the funding necessary to build Wadaag Commons.

Brian Miller, the executive director of Seward Redesign Inc., the nonprofit developer leading the Seward Commons project, said the city needed to follow through on their redevelopment contract for the site, where blighted buildings now sit.

"If the city can't come forward with TIF, I'm going to tear those buildings down and we're going to have a contaminated, vacant site for who knows how long," he said. "The market will not build in that location without assistance from the city."

Miguel Otárola • 612-673-4753