County board and city council approve tax abatement request for The Heights apartment project

The Housing Redevelopment Authority (HRA) and Cook County Real Estate Fund made requests for tax abatement to both the Cook County Board of Commissioners and the Grand Marais City Council this past week for the housing project, The Heights. The board approved the request during their meeting on Feb. 13, and the city council approved it at their meeting the following day.

The requests made at both meetings were for a potential tax abatement, and specified that exact terms would be discussed at future meetings. At the county meeting, HRA Executive Director Jason Hale said that the purpose of the draft abatement resolution was “to approve an ‘up-to’ term and ‘up-to’ amount.”

The HRA and Cook County Real Estate Fund have applied for funding for The Heights through the Iron Range Resources and Rehabilitation Board (IRRRB), and in their requests to the board and council, stated that an official show of support from local government would make the IRRRB application stronger. Hale explained that until the IRRRB has made a decision on the application submitted for The Heights, the duration and amount of the abatement request will not be finalized.

Hale said during the city council meeting, “Tonight the request is that you indicate your interest in the project and that you’re committed to talking about abatement, exploring an abatement agreement for the project.” 

At both meetings Hale presented figures to reflect the argument that the abatement would not cost county or city taxpayers. He said that the property is currently collecting $2200 annually in vacant land property taxes, which Hale says would continue to be paid to the taxing jurisdictions for the term of the final tax abatement agreement. The HRA is working with Ehlers Public Finance Advisors, who Hale said estimate that property taxes on the developed property would be in the range of $50,000-70,000 per year. The current proposal would designate 90% of that property tax amount for tax abatement. The remaining 10% ($5,000-7,000) would be split between city/county, school and hospital district, in addition to the current $2200.

At the county meeting Hale said, “Functionally, what it is, is capturing the increased value that would not exist if the project did not happen.”

Grand Marais Mayor Tracy Benson told WTIP, “So there’s a little bit that we would gain initially. But what we would gain is the housing. The housing opportunities that our community has set is very important.”  The city council voted to approve the request from the HRA and Cook County Real Estate Fund, but also committed to discuss establishing a general policy about tax abatement for future requests that may arise.

An argument made at both meetings centered on the HRA requirement that project offer half of the planned 36 units at 80% of the local Average Median Income (AMI) in the interest of providing more affordable housing. Howard Hedstrom, a general partner in the Cook County Real Estate Fund group, pointed to the abatement as part of keeping the units affordable at the county meeting. He said, “This abatement kind of buys down the rent for the folks that we want to have live there.”

Now that both the city and county leadership have approved the draft abatement requests, the exact terms of the agreements with both bodies will be determined after the IRRRB funding decision has been made.

Kirsten Wisniewski February 17, 2024