City council explores options for city-owned property, former Tomteboda Motel site

Kalli Hawkins | February 7, 2024

As the Grand Marais city council finalizes the last few details for the upcoming construction of the new city hall/liquor store building, scheduled to begin on Apr. 1, the council is now considering what to do with a small city-owned parcel of land west of town along Hwy 61.

During the Jan. 31 city council meeting, the council, Jason Hale, the executive director of the Housing Development Authority (HRA), approached the city to gauge interest in city participation for a potential 16-unit apartment development project. The proposed project will be located on the former Tomteboda Motel site in front of the city public works building and next door to WTIP.

“There is some one-time funding opportunity here at the state of Minnesota to apply for Minnesota housings, workforce housing development program,” Hale said.

Hale said the program was funded last year for $39 million. “It’s one of the few that rural communities like Grand Marais can actually take advantage of because it’s geared towards smaller project sizes.”

The workforce housing development program allows small to medium-sized cities to build market-rate residential rental properties in communities with proven job growth and demand for workforce rental housing. The program requirements state that communities are required to secure funds that match one dollar for every two dollars in funding.

During the Jan. 31 meeting, Hale wanted to gauge the council’s interest in moving forward with the project. The application deadline to apply for the funding is Apr. 30.

Developer Alex Duval accompanied Hale via Zoom to give the council an informational presentation about what the proposed workforce housing development would entail. The concept plans are preliminary and are subject to change. The proposed 16 units would include eight studios, six 1-bedroom apartments, and two 2-3-bedroom apartments.

“The rent would be 80-120 percent of the median income, which is kind of designated by Minnesota housing,” Duval said. “That’s one of the requirements of the grant program.”

Following the informational presentation, the council discussed the property’s history and how they envision the site’s future use now that the new city hall/liquor store building plans are finalized. Grand Marais Mayor Tracy Benson shared some historical insights with Hale and Duval about the property, noting that the council has yet to formally finish a conversation about their future intentions with the property.

In the past, the city council has discussed using the property for city operations or selling the commercial property to interested individuals.

During the meeting, Benson said the first step is to find a market valuation of the property so the city knows what the property is potentially worth. “And then we can go from there,” she said. The city decided to move forward with finding the property’s value and will resume discussions about the property during the upcoming Feb. 14 meeting.

Benson said the council wants to be cognizant of Hale’s timeline to submit an application and intends to decide on the property in the coming weeks.

In other city council news, Hale also presented a tax abatement request for the Heights multi-family residential project. The Heights project is a 36-unit housing development brought forth by the Cook County Real Estate Fund (CCREF), comprised of 41 separate limited partners. The CCREF has raised over $2.1 million to fund the project. The goal is to raise $8.1 million to complete the project.

The HRA is prepared to provide $150,000 toward the project. CCREF is requesting funds from various sources to make the project viable, Hale said. The proposed tax abatement is being requested so CCREF and the HRA know whether the city is willing to partner and assist the Heights project.

Hale said his intent for presenting the tax abatement proposal to the city council during the Jan. 31 meeting was to gauge interest. If the council were interested, he would finish drafting a tax abatement agreement.

The councilors and City Administrator, Mike Roth, talked about the fact that the city does not have a policy or guidelines for tax abatements. Roth said, “If we’re going to be subsidizing housing projects, what do we expect to get out of it? And what circumstances are we going to say yes or no.”

“In all honesty, I’m not excited about it. Like I’m not excited about abatements at all, “Councilor Ben Peters said, “But I’d like to vet the project.”

In an interview with WTIP following the meeting, Benson said, “That’s something too; we haven’t really sat down and given thought to what our policy is.” Benson said the council will resume discussions during the Feb. 14 meeting.

WTIP’s Kalli Hawkins spoke with Grand Marais Mayor Tracy Benson following the latest city council meeting about various agenda items. The audio from the interview is below.

Find the full Jan. 31 city council meeting here.