Tax abatement for The Heights apartment project approved

As the Gunflint Vue project takes shape up the hill from Grand Marais, The Heights, another large apartment project planned for the West side of town, is moving forward in the planning stages.

Tax abatement for The Heights

At the Sept. 24 Board of Commissioners meeting, and at the Sept. 25 Grand Marais City Council meeting, each body officially accepted a tax abatement plan for The Heights. In February of this year both groups had accepted preliminary requests for tax abatement based on the projected project costs at that time. The Cook County Housing Redevelopment Authority (HRA) made the requests at that time because they were applying for funds from the Iron Range Resources and Rehabilitation Board (IRRRB) on behalf of the developers. The application required that projects demonstrate public match funds. The IRRR awarded the HRA $630,000 for The Heights, in part based on the preliminary approval of the tax abatement plan. Without the tax abatement, as HRA Executive Director Jason Hale put it, “the math doesn’t work.”

Hale explained to WTIP what the details of the tax abatement plan included. He explained that the currently vacant site of the project generates about $3,000 in property taxes for the county. If the Heights is completed, the developers anticipate that the tax liability would increase to about $70,000 annually. The tax abatement plan that the board and council approved would return 80% of the $67,000 difference to the developers, a change from the original 90% that was approved in February.

The time period for which the developers will be granted tax abatement is changeable, according to Hale. He said that the abatement could last up to a maximum of 15 years, but that abatement is only guaranteed for the first eight years. The agreement includes a “look-back clause” for years nine through 15. Hale said that by then the project should be stabilized, meaning that it has been constructed and rented, and the rate of abatement could be adjusted. If The Heights is performing better than projected, the taxing municipalities could decide the lower the percentage of abatement.

Next steps for The Heights

With these financing elements in line, Hale said that the next step is for the developers to hire a General Contractor, and they can move forward with more concrete planning. Hale doesn’t expect any construction to begin before the end of year, due to the unpredictability of when winter weather may move in. He said, “So realistically, they’ll probably start meaningful construction in the spring. That’s when they actually order the modular units to be built, too.”

Because the building will be comprised of modular units,  parts of it can be fabricated while the building site is being prepared, and during bad weather. Hale said that if the dirt work and off-site unit building goes to plan, the project could be open by June, just about one month after the Gunflint Vue apartments are slated to open.

Temperance Trails update

In addition to the official approval of tax abatement for The Heights, Hale gave WTIP a few other updates. He said that the Temperance Trails project in Tofte is still in the planning phases, and that the developers have had to make adjustments to their preliminary plat proposals for the county. The project would build a neighborhood of single family homes for sale. While the site of the proposed project has not changed, the developers have had to make adjustments around elements of the property, like power lines, protecting access for the Birch Grove community to their playground, and a billboard on the site, that were not originally accounted for.

Hale said that one result of the changes a drop in proposed units from 21 down to 15 or 16. Recently, the Grand Marais City Council opted to reject the proposal for the Bjorkberg project, which would have offered single family town homes within city limits. Before the council voted against the project, some community members had criticized the estimated cost of buying one of the homes, likely over $400,000.

The estimated price for the Temperance Trails homes has not been announced, but Hale said that the HRA does have an agreement with the developers to cap the price of some of the houses. He said, “In the agreement, 25% of those lots, however many they end up being, will need to be entry level homes, which means sold at 290,000 or less. I know a lot of people would balk and say, ‘That’s not entry level.’ And then I would contest to that and say, ‘Go find a house in Cook County that is new for under $300,000, or is at that price point and doesn’t need some, a new septic, new well, etc.'”

As for the remainder of the units that would be part of this project, Hale said that there is a natural market cap for this type of development. He argued that the size of the plots and the location will mean that, “they’re not going to build a $650,000 house there. It doesn’t make any sense.”

The development agreement between the HRA and Temperance Trails stipulates that the developers will have until the end of 2024 to get their preliminary plat proposal approved by the Cook County Planning Commission.

Envelope and Energy pilot program update

While the HRA works to help new building projects across the county reach the construction phase, it is also seeking to preserve existing housing stock. The Envelope and Energy pilot program selected nine projects proposed by homeowners earlier this year that would contribute to improving the efficiency of an existing house. The program, a joint effort by the HRA,  the City of Grand Marais, Cook County Local Energy Project (CCLEP), and Cook County Public Health and Human Services (PHHS), awarded funds to the selected projects up to $5,000. Hale told WTIP that the first of the projects has been completed, and another is poised to begin. Hale has stated both on WTIP and in public meetings that the HRA seeks to support housing of all types in Cook County, and that preserving existing housing is an important part of addressing the ongoing housing crisis.

WTIP’s Kirsten Wisniewski spoke with HRA Executive Director Jason Hale about The Heights, as well as several other HRA projects. Audio from that interview is below.

Kirsten Wisniewski October 2, 2024