Minnetonka advisory commission backs TIF gap financing for 44‑unit Marsh Run 3 apartment

The Minnetonka Economic Development Advisory Commission voted July 17 to recommend approval of a tax‑increment financing (TIF) assistance package for a proposed 44‑unit rental apartment building in the Marsh Run area that would reserve nine units (20%) at 50% of area median income (AMI).

City community development staff presented the financing request and the project pro forma, saying the developer had revised earlier townhome plans and now proposes a four‑story rental building composed of one‑bedroom, one‑bedroom-plus‑den and two‑bedroom units. Staff said the city’s financial consultant (Ehlers) reviewed the sources and uses; staff recommended approximately $850,000 in TIF assistance, to be financed at 5% or the project mortgage rate, whichever is less. The recommended disbursement would be paid from 90% of the increment generated by the TIF district, with the city retaining the remaining 10%.

The staff presentation described the affordability and cost details included in the commission packet: 44 total units with 9 affordable units (five one‑bedrooms and four two‑bedrooms). Staff presented rent comparisons in the packet (staff reported market one‑bedroom rents of about $1,823 per month versus about $1,241 per month at 50% AMI, and market two‑bedroom rents around $2,600 versus roughly $1,500 at 50% AMI). Staff also presented development cost figures, saying total cost per unit was about $310,700 and that construction costs were roughly $10 million; the packet included yield‑on‑cost and cash‑on‑cash analyses prepared by Ehlers.

Staff described key contract provisions included in the draft assistance agreement: a look‑back provision to true up costs after project completion, a requirement that the project accept Section 8 vouchers, a 90‑day sale notice to tenants, and limits on the term of annual distributions (staff described the annual payout structure as 15 years while noting the affordability obligations are structured for a longer term consistent with other affordable projects). Staff said the developer intends to commence construction this year and complete the project in roughly 12 months.

Commissioners questioned site constraints and why the design changed from prior townhome plans to a stacked‑rental building. City staff said site limitations including floodplain, wetlands and a narrow buildable area constrained the layout and helped drive the current design. Commissioners also asked about the decision to target deeper affordability (50% AMI rather than the more common 60%); staff said the commission had previously discussed neighborhood needs and that the area already had a number of 60% AMI units while 50% units were scarce, and that offering deeper affordability increases subsidy needs and cost to the developer.

Tom Dillon of Inland Development Partners, the project developer, told the commission the team was comfortable with the 50% AMI mix and that the developer hoped to start construction in the fall, with about a 12‑month delivery timeline. "We'd like to get started on this project this fall," Dillon said.

A motion to approve the proposal as documented passed on roll call; commissioners voting yes included Connors, Falk and Hague. Staff said the commission recommendation will go to the planning commission next week and then to the city council for final action.

The commission discussion also touched on neighborhood coordination across the three development phases in the area, shared amenities and trail connections, and potential future micro‑transit or pedestrian improvements to improve connections to Ridgedale shopping and employment centers.

The commission’s recommendation does not itself authorize city funds; the item will return for formal review by the planning commission and city council. The staff packet and the Ehlers financial analysis contain more detailed pro forma tables and the draft assistance agreement terms.