Approval of Tax Increment Financing Redevelopment Agreements with Enclave Adina LLC and Lifestyle Communities LLC

Dissent: None. All commissioners voted in favor.

Moved by Commissioner Jackson [1:06:10] · Seconded by Commissioner Agnu [1:06:24]

Economic Development Manager Bill Nindorf presented a comprehensive overview of the $300+ million Enclave project, emphasizing two years of development work. The project transforms a 40+ year old single-use commercial building into a vibrant mixed-use destination with residential (rental and ownership), retail, office, and extensive public amenities. Staff identified a financial gap that prevents the project from proceeding without public assistance. The recommended financing approach combines traditional TIF pay-as-you-go notes ($22.87 million) with SPARK funding ($1.5 million minimum) to bridge the gap while maintaining all City standards for affordable housing, sustainability, and park fees. Key public benefits include: (1) 10x increase in annual tax creation and 20x increase in market value; (2) $2.8 million in park dedication fees; (3) $1.9 million in sewer fees and $1.6 million in water fees; (4) $80,000 annual park maintenance fees for Centennial Lakes Park; (5) 45% of property as public outdoor space with permanent easements; (6) public art installations; (7) secured easement rights and funding for potential France Avenue pedestrian crossing; (8) affordable housing (rental and ownership units); (9) 140 public parking stalls; (10) sustainable building certifications; and (11) equity and inclusion goals for contractors and workers. Staff presented financial modeling showing that without TIF, the project would not be built in the approved form. The project is conditioned on final City Council approval on November 19, 2024. Commissioner Jackson raised questions about the SPARK forgivable loan structure versus a traditional repayable loan, and staff explained that state auditor restrictions on tax increment dollars make a forgivable loan the most practical approach. Commissioner Egner requested that contractual language be added to ensure the Northwest building includes a public-facing community amenity (beyond just a conference room), and staff agreed to work with the developer on this between the HRA and City Council meetings.

Approval of Resolution 20247 Establishing Tax Increment Financing District 72nd France #3

Dissent: None. All commissioners voted in favor.

Moved by Commissioner Jackson [1:06:48] · Seconded by Commissioner Agnu [1:06:48]

Following approval of the redevelopment agreements, the HRA voted on the formal establishment of the TIF district. The resolution creates a new TIF district to capture tax increment from the Enclave project. The district structure allocates 25% of captured increment to the City for public infrastructure improvements (including the potential France Avenue pedestrian crossing, utilities, sidewalks, or affordable housing elsewhere) and dedicates 75% to support the developer's project financing. Staff emphasized that this structure provides flexibility for future City decisions about public improvements while ensuring the developer has sufficient TIF support. The 25% City allocation is consistent with the approach used in the Macy's project and reflects lessons learned about ensuring public benefits beyond the four corners of the property. Commissioner Jackson noted the importance of this broader public benefit approach for future developments.

Authorization to Draft SPARK Loan Agreement and First Amendment to 7200/7250 Redevelopment Agreement (7200 France Avenue Residential Project)

Dissent: None. All commissioners voted in favor. Note: This motion authorized staff to draft documents for future approval; no final loan agreement was approved at this meeting.

Moved by Commissioner Jackson [1:37:57] · Seconded by Commissioner Egner [1:38:13]

Affordable Housing Development Manager Stephanie Hawkinson presented a request to authorize staff to work with legal counsel (Dorsey & Whitney and Ellers Associates) to draft a SPARK forgivable loan agreement and associated documents for a 150-unit residential project at 7200 France Avenue. The project includes 12 permanently affordable units (8% of total, down from the standard 10-15% policy requirement) secured by perpetual restrictive covenants under new Minnesota legislation. The project also includes 65 parking spaces for the adjacent 7250 France Avenue commercial development. Staff requested approval of a deviation from the affordable housing policy to allow 8% permanent affordability instead of 10-15% for 30 years. The estimated SPARK funding need is approximately $3.8 million (6.8% of the $55 million project budget). Staff also requested authorization to prepare a First Amendment to the existing 7200/7250 Redevelopment Agreement to reduce the TIF increment pledge from 90% to 80%, freeing approximately $1.2-1.5 million in additional TIF capacity for other affordable housing or infrastructure needs (such as the France Avenue pedestrian crossing). Staff emphasized that the project cannot proceed without public financing and that the permanent affordability structure is a significant public benefit. Key cost drivers include: investor returns (market-driven), volatile interest rates, 65 parking spaces for 7250, affordable unit rent caps, and sustainable building policy compliance. Staff explained that the SPARK forgivable loan would be structured similarly to the Macy's project: funds would be deposited with an escrow agent, drawn during construction with lien waivers, and forgiven upon project completion and delivery of all required elements (150 units, 12 permanently affordable, sustainable building compliance, go-ahead letter by July 1). Staff would true up costs at completion; if material prices or interest rates dropped, the City would only provide the amount actually needed. Commissioner Egner asked about the per-unit cost of the SPARK investment ($314,000 per unit when divided by 12 affordable units) and whether that felt appropriate. Staff explained that the $314,000 figure is not purely attributable to affordable units but includes the cost of 65 parking spaces for 7250, sustainable building policy compliance, and other project elements. Staff noted that in 2022, analysis showed an equivalent buy-in of $320,000 per unit of non-affordability (the rent differential between market-rate and affordable units), suggesting the current figure is reasonable. Staff also noted that in 100% affordable developments, the per-unit cost can reach $400,000, but those projects benefit from tax credits and other funding sources not available for inclusionary housing. Commissioner Egner also asked how the City ensures permanent affordability even if the property is sold. Staff explained that the Declaration of Restrictive Covenants is recorded against the land and remains on title through any sale, making it permanent and binding on future owners. Staff noted that new Minnesota legislation allows perpetual restrictive covenants for affordable housing (previously limited to 30 years). Staff also indicated that safeguards will be built into the Declaration to provide recourse if the developer fails to comply with affordability requirements. No vote was taken today; staff is requesting authorization to draft documents for potential approval in December.

France Avenue Pedestrian Crossing Feasibility Study Report

Dissent: N/A

Economic Development Manager Bill Nindorf reported that a feasibility study commissioned from LHB Inc. in February 2024 has been completed. The study confirms that an underpass under France Avenue connecting the Enclave site to Centennial Lakes Park is technically feasible and can be designed to feel safe and comfortable for pedestrians. The study examined engineering, hydrology, and geology considerations. No final decision on construction has been made. Nindorf indicated that a resolution will be presented to City Council on November 19, 2024 requesting direction to continue further study. Hennepin County (as the owner and regulatory agency for the county road) and the 9-Mile Creek Watershed District are regulatory partners in any future approval. Staff has had extensive conversations with Hennepin County regarding transportation constraints. No permits have been applied for at this stage. The feasibility study will be posted on the Better Together web page. Chair Huffman requested that the study be sent to him independently of the web posting.