A motion to approve tax increment financing (TIF) for a new housing development across from Fond du Lac Tribal and Community College died during the Cloquet City Council meeting Tuesday.
Council member Deb Hill made a motion to approve the measure, which would have allowed Blackhoof Development to use the increased tax revenue created by the project to finance some of the project. No one seconded Hill's motion for approval, therefore no vote was taken and it went nowhere.
The proposed development consists of five 18-unit apartment buildings with 1-3 bedrooms. Under TIF, at least 20 percent of the units would have renters with incomes at or below 50 percent of area median income.
After the public hearing portion of the meeting in which a dozen people spoke for and against the development, Hill said she supported it for several reasons.
"I move to approve because Ehlers has served us well," she said. "They did a thorough investigation ... and if they say that it's good for us, that holds a lot of weight."
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Employees at Ehlers & Associates were hired to present an overview of the proposed TIF district. They found the project met all the TIF requirements and estimated that once the project was complete, it would increase the local tax base by up to $95,196 annually.
Hill also pointed out that Blackhoof was the only developer to "step up" after the city and college facilitated separate studies showing the need for housing in that area.
New Fond du Lac Tribal and Community College President Larry Anderson said in a letter read at the meeting that he supports the creation of the TIF because many of his students struggle to find housing in the area.
Many in the audience of about 50 people and the rest of the council members disagreed, however.
Katie Pfeffer, manager of Woodgate Properties in Cloquet, said the new project would compete directly with her apartments and could put her out of business. She also cited a higher vacancy rate overall in the past five years, although she receives many calls per week from people interested in renting.
"We're paying out taxes but we can't compete with a brand new building with all the bells and whistles," she said. "I just want to make sure [city council members] look at whole picture ... I don't see how us going out of business is good for the town. Any building that goes up, whether it's assisted living or not, it affects everyone."
Jim Kuklis of Trails Edge Development in Cloquet cautioned the council that the use of TIF could set a dangerous precedent
"I'm all for building, but let's have a level playing field for everyone," he told them.
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David Chmielewski of Blackhoof Development, countered that Cloquet has a vacancy rate of 5 percent, and since so many people are seeking housing, it means people don't want the housing currently available.
"I think we need to focus on the fact that the primary market [for the proposed project] is college - the students, faculty and staff," he said. "We cannot build this without a government subsidy (TIF), but we can build something that requires very high rent [and it] will sit empty."
Dave Manderfeld spoke on behalf of the Cloquet Area Chamber of Commerce. Although he declined to take a position for or against the project, he said no one with the chamber has voiced opposition. He also said the chamber takes numerous calls every week from renters who can't find housing.
Thomson Township resident and representative for the Duluth Building Trades Larry Anderson, who is not affiliated with FDLTCC, was one of some 30 people from the building trades who attended the meeting. They weren't there to speak specifically about TIF, but to lobby for a "prevailing wage" addition to the TIF plan. Anderson spoke of the current housing construction project on Big Lake Road. He said they were allowed to bid, but because prevailing wage is not in place, they could not compete with cheaper labor coming from other parts of the state and country.
Prevailing wage holds that on construction projects partially or entirely paid for with state funds are required to pay employees no less than a particular determined amount.
Chmielewski said he believes in hiring local construction workers, but would not enter into a specific prevailing wage agreement.
Once the public hearing portion of the meeting closed, most attendees cleared the room before knowing if a motion would come before the council.
After Hill's motion fell flat, Chmielewski and the council discussed the additional portion of project business - executing the development agreement. Without TIF, the council would need to approve a different version of the agreement and Chmielewski asked for some time.
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"We just got body slammed and need time to figure something out here," Chmielewski said of the housing project TIF denial.
Council members agreed to allow more time for Blackhoof to retool their plan and for city administrators to review it.
