Developers seek $22 million tax subsidy for 70th and France project in Edina

Developers of a $251 million project with luxury apartments, retail and office space in Edina are seeking a $22 million tax subsidy to counter rising construction costs, a workers shortage and — according to unnamed "industry leaders" — the damage done to the Twin Cities' image by the unrest that followed the murder of George Floyd.

"Some investors are hesitant to make long-term commitments in this environment," according to a city staff report that recommended the tax subsidy for the project.

Mortenson Development of Golden Valley and Edina-based Orion Investments plan to redevelop a 5.7-acre commercial site at W. 70th Street and France Avenue now occupied by a US Bank branch and a vacant 1960s-era office building.

The development will feature a 24-story apartment complex with 267 high-end units, a six-story office building and an eight-story parking ramp with 668 public stalls. None of the apartments will be priced as affordable. U.S. Bank plans to replace its branch on the site.

The developers want the city to create a tax-increment financing (TIF) district, an incentive to defray costs that would return $22 million to Mortenson in new property taxes generated by the project over 15 years. Edina's legal and financial advisers told city officials that the project would be unable to secure private funding to fill the $22 million gap.

The City Council is expected to vote on the TIF district March 22 and is accepting public feedback on the issue through March 14.

A February staff report from Bill Neuendorf, Edina's economic development manager, recommended TIF for the project and noted it faced five development challenges, including local rioting and looting after Floyd's murder in 2020 in Minneapolis.

"Unrest was identified by industry leaders as one of several influential factors for investors' decisions where to invest," Neuendorf said in an e-mail. "Staff is aware that this is not the only factor that influences real estate investments, but may potentially influence and deter some large-scale investors from providing private funding.

"None of the five factors mentioned are unique to Edina locations, but apply generally across the Twin Cities metro area."

He said the request for TIF funding resulted from "the identified challenges facing real estate developers in the current marketplace."

Ian Nemerov, a lawyer and former chair of the Edina Planning Commission, criticized the city staff report for mentioning Floyd.

"I couldn't believe it when I saw that it was proposed in an Edina document that we should give US Bank and Mortenson $22 million because of the challenges they're facing as a result of the murder of George Floyd and the civil unrest that followed," he said.

At a Housing and Redevelopment Authority meeting Thursday, City Council Member Ron Anderson questioned the timing of the project and said he didn't support using TIF for it.

"The project has changed over the course of time," he said. "We've lost any affordability on the site, and we've replaced the potential for affordable housing on the site with a parking ramp."

Projects seeking TIF funding must have a public benefit, such as affordable housing or public parking. For instance, a seven-story apartment complex that will replace the Edina Perkins off Hwy. 100 qualified for TIF by pledging to provide a number of affordable units.

Edina officials say the 70th and France project offers public benefits such as new sidewalks and streets, a public plaza with public art, storm water improvements, electric vehicle charging stations and 668 public parking stalls.

Asked for comment on the TIF funding, Mortenson development executive Brent Webbsaid in a statement that TIF "and the city of Edina's commitment to this project are required to move the project forward."

Mayor Jim Hovland said he heard Neuendorf mention Floyd during discussion of the project but disregarded the comment because it wasn't relevant to the TIF request.

"What we have talked about had nothing to do with George Floyd," Hovland said. "I think it has more to do with the lack of public safety or public safety concerns relative to every community."

The mayor said that while he didn't believe unrest was a basis for the use of TIF in this project, he was surprised to see it listed in the staff report as a reason.

"It's a statement you could read in different ways, you know, and some of them aren't so flattering," Hovland said.