$22M In Tax Incentives Needed For Edina Project: Developers

EDINA, MN — Developers are urging Edina officials to authorize about $22 million in tax incentives to help them with a quarter-billion-dollar redevelopment project near Southdale Center.

Mortensen Development and Orion Investments are planning to demolish existing buildings at the southwest corner of West 70th Street and France Avenue and replace them with a new residential/commercial complex.

The developers’ $251 million plans call for a new bank branch; a 24-story apartment building with structured parking and retail space; a commercial building with office and retail space, as well as underground parking and a plaza; and a parking structure.

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After receiving preliminary approval for its plans in November, Mortensen is now asking Edina to create a tax-increment financing district to plug a “budget gap,” according to a Edina city staff report.

A tax-increment financing district, often referred to as a TIF, is an economic-development tool that many cities use to fund development projects.

When a TIF district is established, city officials complete a valuation of the area, which is used as a baseline. Tax revenues from increases in the area’s assessed value — the “increment” — are diverted into an account to pay for a portion of the initial project or related infrastructure work.

TIF districts were also established to complete projects at 50th and France, Centennial Lakes Park and Edinborough Park, according to Edina city officials. Eight TIF districts are currently active in Edina.

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Developers do not receive any discounts on their property taxes if a TIF district is established, officials said.

Mortensen is asking Edina to create a TIF district worth about $22 million across 15 years after several factors caused a previously approved plan to no longer be “economically feasible."

Those factors included supply chain issues, a shortage of workers and uncertainty over return-to-office plans, which could affect revenues generated by the development’s planned office space.

Officials also cited George Floyd’s killing by Minneapolis police and “the subsequent civic unrest” as the “final unusual challenge” for the developer’s initial plans, as first reported by Kim Hyatt of the Star Tribune.

“The reputation and image of the Twin Cities has been damaged by the murder of George Floyd and the subsequent civic unrest,” Edina Economic Development Manager Bill Neuendorf wrote last month in a report to the city’s Housing and Redevelopment Authority. “Some investors are hesitant to make long term commitments in this environment.”

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Edina officials are recommending approval of the $22 million TIF district, as it’s unlikely Mortensen could afford to complete the $251 million project without it.

City officials said they expect the market value of the proposed TIF district to increase by almost $170 million if it is approved. The market value would not increase at all if the TIF is rejected, officials predict.

The TIF district could help pay for new sidewalks and streets, landscaping, a public plaza, stormwater improvements and more initiatives in the area, officials said.

A public hearing was held March 1 on the developers’ request for a TIF, and city officials are accepting public comments through March 14. The Edina City Council is expected to vote on the TIF district at its March 22 meeting.