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Advisory commission leans toward larger affordability package for Marsh Run financing request
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Summary
At its May 28 meeting, the Minnetonka Economic Development Advisory Commission reviewed a developer request for tax-increment financing for a proposed 44-unit apartment in the Marsh Run area and provided nonbinding feedback favoring the option that would produce nine affordable units, while staff will continue negotiations with the developer.
At its May 28 meeting, the Minnetonka Economic Development Advisory Commission reviewed a developer request for tax-increment financing (TIF) tied to a proposed 44-unit rental building on the Marsh Run site and provided nonbinding feedback favoring the option that would produce more affordable units.
The project, described by staff as the latest phase in the Marsh Run area (referred to in materials as Marsh 13 or Marsh Run 3), is proposed by Inland Development Partners. City staff said the development would be a four-story apartment building with a mix of one- and two-bedroom units and is located inside the Marsh 2 TIF district. The developer asked the city to consider two financing scenarios: about $915,000 in TIF assistance for a lower-level subsidy and about $1.15 million for a higher-subsidy scenario.
City consultant Shane Redling of Ehlers presented pro forma comparisons and the TIF generation analysis. The two scenarios produce different numbers of affordable units: the staff briefing identified a baseline scenario that would yield fewer affordable units and an elevated scenario at 20% affordability at 50% of area median income that would yield up to nine affordable units. Redling summarized the development cost and revenue math and said, “the extra affordability costs the development about $342,000,” a present-value estimate staff used to show how much more subsidy the higher-affordability option would require.
Staff also explained the interaction between the higher-affordability option and property-tax classification. Affordable units that meet the 4d/4d1 statutory classification pay a lower class rate, which reduces annual property taxes and therefore lowers TIF generation for the site; Ehlers estimated present-value TIF generation at about $1,040,000 for the mixed-affordability scenario and about $855,000 for the 20% at 50% AMI scenario, figures staff used to evaluate subsidy needs against TIF yield.
Tom Dillon, a representative of the ownership group with Inland Development Partners, said the developer’s internal underwriting was done by the CFO Ryan Johnson and that, in Dillon’s view, “there’s not a significant difference to us. I think we’d be open to either” option if it enabled the project to proceed. City staff noted the developer’s current requests are still preliminary and that staff has not recommended a final assistance amount.
Commissioners and staff discussed trade-offs between fewer units at deeper affordability and more units with broader affordability. Several commissioners said smaller projects are economically challenging and that the higher-affordability option’s lower per-unit annual cost made the nine-unit option attractive. Commissioner Connors said a roughly $300 monthly rent difference for households under the deeper-affordability option “is pretty significant.” Commissioner Fogg (first name not stated in the record) and others urged staff to push negotiations that reduce per-unit subsidy while maximizing the number of households served.
Staff said the current Marsh 2 TIF district was structured as a redevelopment district with an original term that could go beyond the 15-year window used in some calculations; staff noted the district has available years up to 26 in current design and that TIF generation assumptions (assessment values, term length, inflation) remain inputs to be finalized in negotiations.
No formal vote was taken. The commission’s direction was advisory: members provided a majority of favorable comments for the higher-affordability option (the scenario that would support up to nine affordable units and a roughly $1.15 million request), and staff said it would return with a negotiated proposal and more detailed pro forma for a future meeting and subsequent city council consideration.
Next steps: staff will continue discussions with the developer to refine development pro formas, tax and assessment assumptions, and the precise TIF assistance request and will return to the advisory commission and then to the city council with a recommended package.
