At its Dec. 22 meeting, the Fridley City Council unanimously approved a resolution establishing a new tax increment financing district for the redevelopment of a property on Commerce Lane NE.
Community Development Director Paul Bolin said the project would transform the site from a vacant industrial property into a modern warehouse and distribution facility.
The property is located between 73rd Avenue and Osborne Road and is zoned heavy industrial. The site was originally developed in 1970 with a 65,000-square-foot building constructed for the Totino’s Frozen Pizza factory.
The property has since been expanded to approximately 162,000 square feet and has had several owners over the years, including Lofthouse Bakery and Rich Products.
Under a proposal from Endeavor Development, the existing building would be demolished and replaced with a 250,000-square-foot warehouse and distribution center. Bolin said the building would run north to south on the site, requiring the rerouting of storm and sanitary sewer lines.
Bolin said the building would be designed to accommodate a range of potential users, with flexible office and warehouse space.
Jessica Green, managing director for public finance at Northland Public Finance, explained the process for establishing a tax increment financing district.
Green said Endeavor Development, a Twin Cities-based real estate company that develops and acquires industrial properties, applied for TIF assistance.
Tax increment financing captures the increase in property value created by a new development and uses the resulting increase in property tax revenue to finance or reimburse eligible project costs.
The proposed building would primarily be constructed of architectural precast panels and structural steel and delivered in shell condition, Green said, meaning it would be a basic structure without interior finishes. Interior buildout would occur as Endeavor secures tenants, which have not yet been identified.
Green said the TIF district boundaries include four parcels at the site, describing the district as an “envelope” used to capture the tax increment generated by the redevelopment.
An independent inspection commissioned by the Housing and Redevelopment Authority determined the existing building to be “substandard,” a requirement for establishing a redevelopment TIF district under state statute, Green said. Both the building condition and site characteristics must meet statutory criteria.
Under the plan adopted by the city and HRA, the TIF district would have a 12-year duration, which is less than the 26-year maximum allowed under Minnesota law.
Estimated tax increment revenue over that period is $4,702,288, with a present value of $3,281,085 based on a 5% rate, Green said. The increment would be received semiannually from the county, with the property tax distributed to the city.
Green said that under current market conditions, the project would be unlikely to proceed through private financing alone. Without TIF assistance, she said, investor returns and debt service coverage would not be sufficient to support the development.
During the council discussion, Council Member Ryan Evanson asked whether Endeavor planned to monetize the TIF and whether that would pose a financial risk to the city if the developer failed to perform.
Green said Endeavor has not yet determined whether it will monetize the TIF note but said there would be no risk to the city because the agreement is structured as pay-as-you-go.
“The city is not putting any money in up front,” Green said. “So if they failed to get their financing together, effectively they would not deliver the project and therefore they would be in fault of the development agreement.”