A local developer is asking the city for $70 million in "tax exempt multi-family housing entitlement revenue bonds" to build artist lofts at the former Pillsbury A-Mill near St. Anthony Falls.
That's a mouthful, but what does it mean?
It sounds like a giant city subsidy, but it's not. The bonds do not involve any city money (though developers are also requesting a $3 million property tax subsidy). Here is what MPLS learned after a conversation with city multi-family housing manager Wes Butler:
Tax-exempt bonds have lower interest rates, which are a big perk for developers if they can obtain them. The federal government gives the state authorization to allocate a certain amount of tax-exempt bonds each year, a portion of which is set aside for Minneapolis.
The bonds are bought by private investors and paid back using the revenue generated from the development (renters) -- hence the term "revenue." Unlike "general obligation" bonds, they are not backed by tax dollars. So if the project fails, the city isn't on the hook.
The city has a limited amount of tax-exempt bonds it can dole out. In this case, since the city only has $26 million left for 2011 and 2012, it will have to rely on the state and St. Paul to pitch in some of their allocation.
The city often actually makes money from the deal. Butler's multi-family housing division is funded by fees the city charges in exchange for use of the tax-exempt bonds.
Public money will be involved in the final deal, however. Developers will be seeking low-income housing and historic property tax credits, which they will sell to fund project costs. They also want a $3 million property tax break and county cleanup money.