Burnsville, Savage ponder financial help for senior housing

  • Article by: SUSAN FEYDER , Star Tribune
  • Updated: September 24, 2013 - 3:44 PM

Burnsville and Savage are studying tax-increment financing requests.

One of the Twin Cities’ largest commercial developers has proposed senior housing projects in Burnsville and Savage, and in both cases is asking the cities for financial help.

United Properties is seeking tax-increment financing (TIF) for an independent-living senior cooperative housing development it would build in Burnsville’s Heart of the City redevelopment district. United also has proposed a TIF as part of its bid to build a rental project with independent-living, assisted-living and memory-care units in Savage.

The two cities are still studying the proposals and financing requests. In both cases, the projects would fill sites that have languished after plans by developers fell by the wayside.

“The land is sitting there, not developed,” Burnsville Economic Development Coordinator Skip Nienhaus said at a recent meeting of the city’s Economic Development Commission. The vacant parcel adjacent to the Uptown Landing building was originally to become condominiums. It currently has $180,000 in delinquent taxes and $109,000 of delinquent special assessments. Part of United’s projected $13.8 million cost to develop its project would go toward paying off the delinquencies.

In Savage, the vacant parcel north of the town’s library is part of a larger site where Keystone Communities had planned to develop a complex with assisted-living and memory-care units, independent-living townhouses and an equestrian center. The land went back on the market early this year after Keystone dropped its plans.

In Burnsville, the financial assistance would amount to an estimated $338,440 over four years. The amount of city aid from Savage is not yet known; it will be the subject of a study.

At a recent work session, Savage City Council members asked why the city should provide United with the TIF since Keystone hadn’t sought any financial help. In an interview, United Senior Vice President Brian Carey noted that Keystone may not have sought assistance but also backed out after it decided the development wouldn’t be financially viable.

With TIF districts, cities subsidize development with the increased property taxes generated by improvements on the site.

Carey said the financial assistance would allow a portion of the development’s 86 rental units to have rent subsidies. “We’d like to be able to provide housing to a group that might not otherwise be able to afford it,” he said.

Carey also said United has received financial assistance for other senior housing projects it has built in the Twin Cities, including an independent-living property it recently completed in Roseville.

Savage City Administrator Barry Stock said there are other justifications for the TIF. The site is near the Savage Fen, increasing stormwater management costs required to protect the wetland. It’s also an old gravel pit site, raising the cost of getting it ready for construction.

Stock said another factor is that Savage currently doesn’t have senior housing with assisted-living and memory-care units. “We’ve heard from people in our community that they would like to have this type of housing here,” he said.

But Savage borders other communities like Prior Lake and Shakopee that do have assisted-living facilities and also is close to Lakeville and Burnsville, which have added hundreds of senior housing units, including assisted-living and memory-care units, in the past couple of years.

There are some signs that the Twin Cities’ market for assisted-living housing has softened. The vacancy rate for assisted-living properties in the 13-county area climbed from 6 percent in 2007 to 12 percent last year, according to the National Investment Center (NIC), a Washington, D.C.-based senior housing research firm.

A recent NIC report shows that the Twin Cities had added assisted-living units at a faster pace than the average for the nation’s 31 largest metro areas, and that rents here are increasing at a slower rate. That’s good news for seniors, but could mean the market is weakening — a risk for developers and their partners, including cities.

The picture is different for independent-living projects, like the one United has proposed for Burnsville. They are geared mostly to younger seniors, currently a large group because it includes baby boomers.

Carey said the financial assistance United is seeking in Burnsville isn’t related to the unpaid taxes and assessments. It’s because the 52-unit building has fewer units than others it has built under its Applewood Pointe brand in Bloomington, Roseville, Maple Grove, Woodbury and New Brighton.

Carey said the Burnsville land parcel is well-suited for active seniors because of its walkability to shops, restaurants and amenities like the Burnsville Performing Arts Center. But it’s smaller than other sites where United has built, limiting the number of units and increasing the per-unit development cost. Carey said the TIF is necessary in order to not pass those additional costs onto buyers.

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