Seward Commons sparks debate about city-financed development in Minneapolis

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The Minneapolis City Council’s most contentious development debate since last year’s comprehensive plan has nothing to do with building height or parking, and everything to do with how it could be financed.

Last Friday, the council agreed to delay a vote to authorize an analysis of whether “tax increment financing (TIF) assistance is appropriate and justifiable” for Bessemer at Seward Commons. The delay was intended to give Ward 6 Council Member Abdi Warsame a chance to be present for an issue affecting his ward.

Tax increment financing diverts future property tax revenue increases (that arise from improvements) in order to help finance development. Current policy requires city financial assistance only be used for projects that include affordable housing.

The first two phases of what is expected to be a four-phase Seward Commons redevelopment have already been completed:

  • 40 units of permanent supportive housing for individuals with mental illness
  • 60 one-bedroom units for seniors earning less than 50% AMI

At issue is the interpretation of what constitutes Phase III of Seward Commons and whether it is eligible for TIF under the city’s policy. Phase III consists of two buildings called Bessemer and Wadaag Commons. Bessemer is market-rate and Wadaag will include affordable housing.

According to a background analysis from city staff:

Since Bessemer at Seward would begin prior to Wadaag Commons, the City will file a declaration against title on the Wadaag Commons site (on which the City has a first mortgage) that requires future development of the site to include at least 32 units of housing affordable at 60% AMI. This approach is intended to ensure the overall City TIF policy affordability requirements will be met by the Wadaag Commons development.

Proponents, including Warsame, say that one reason Bessemer is worth supporting is that Seward lacks housing options for residents who are no longer eligible for income-restricted housing. Despite improvements like the Franklin Ave light rail stop just to the north of the site, the neighborhood hasn’t seen any new market-rate apartments in 35 years. According to the city, market rents at Bessemer are expected to be affordable to 80-100% of area median income.

Ward 9 Council Member Alondra Cano cited staff support, the support of council members in the area, and neighborhood sentiment as reasons to support the project.

Council President Lisa Bender who voted “no” in committee a week earlier — while indicating she was keeping an open mind — voted “yes” on Friday.

Bender said if you consider “the project as a whole” then it “far exceeds” the requirements in the city’s TIF policy. She acknowledged that “if you take this building separately from the whole, or if you take building three [Bessemer] separately from building four [Wadaag], you may reach a different conclusion.”

Reaching a different conclusion was Ward 3 Council Member Steve Fletcher: “I feel like it’s a little bit dangerous to stretch the way we’re thinking about TIF to think about sort of hypothetical future theoretical projects. I know that projects can fall apart… I’m more concerned if we’re saying this meets policy [by giving credit for the fourth building]. I’d be a little less concerned if we were saying we’re making an exception to our policy for some exceptional reason.”

Fletcher suggested something he could support: waiting to have Seward Commons’ third and fourth buildings move forward together as a package. Ward 11 Council Member Schroeder disagreed with the idea of delay, saying this was simply about allowing staff to pursue further analysis of the project.

Ward 7 Council Member Lisa Goodman — who used to chair the committee with power over city development policy — has been the most outspoken against using TIF in this case. At a March 20 committee meeting she said, “The only difference is who the chair is.”

Ward 2 Council Member Cam Gordon — who is the new chair of the committee controlling development policy — disagreed: “I don’t know why we’re pretending we don’t have a policy that allows this.”

Gordon then cited the city’s Unified Housing Policy:

Large redevelopment projects that include more than one building or phase can meet this requirement on a blended basis, so that the total affordable housing units developed within the project area is at least 20 percent of the total housing units produced; however, City financial assistance will only be considered to support buildings or phases that include affordable housing for at least 20 percent of the units.

The city council will take up the issue of Seward Commons again on April 12.

If you’re counting votes

The city council will take another vote in two weeks. Based on publicly expressed opinions, here’s where they stand:

  • Yes: Bender, Cano, Gordon, Schroeder, Warsame
  • No: Goodman, Cunningham, Fletcher, Ellison, Reich
  • Unknown: Jenkins, Johnson, Palmisano

Reich sounded open to changing his mind. Gordon sounded optimistic about using the next two weeks to win over the support of Fletcher and others.

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