Duluth may offer $2.35M subsidy to bring apartment building to Lincoln Park

Tax-increment financing, often called TIF for short, is a subsidy that uses new tax revenues generated by a project to help cover certain qualified development costs. In this case, many of those TIF dollars would go to pay for the demolition of the former Robert's Home Furnishings store, which has been classified as a blighted structure.

Rachel Development, based in St. Michael, aims to build a new apartment building atop the site of the former furniture store and a parking lot to the west of it. The development is expected to cost about $13.8 million to complete.

The tax increment would last only as long as it takes to generate the $2.35 million called for in the agreement — up to a maximum of 26 years — after which time all property tax proceeds would flow unencumbered to local entities, including the city, St. Louis County and the Duluth School District, aka ISD 709.

Despite DEDA's support, the proposed project subsidy would still need to be approved by the Duluth City Council before it becomes reality. Councilors are expected to vote on the proposed TIF package Monday.

City staff propose creating a new tax-increment financing district to allow for the project and it would include not only the Lincoln Park Flats site but also the Esmond Building, formerly known as the Seaway Hotel, at 2001 W. Superior St., another location where redevelopment efforts are in progress.

As part of the development agreement, Rachel will dedicate 30% of units in the building to affordable housing, offering to rent those apartments to households earning 80% or less than the area median income.

Lincoln Park Flats will contain a mix of studio, 1-bedroom and 2-bedroom units.

As for parking, 41 indoor stalls would be tucked underneath the building, with another 44 available outside.

City staff and Rachel Development have been working to bring the project forward for about 18 months, according to Senior Duluth Housing Developer Jason Hale. He praised Rachel Development for sticking with the effort, despite the economic uncertainties introduced by the COVID-19 pandemic.

"Various road blocks and hurdles and different things have come up, but we're excited," said David Stradtman, vice president of development for Rachel Development. "We're glad to be working on this project in concert with DEDA and the city of Duluth."