Burnsville eyes more powerful development tools

Burnsville’s city staff is seeking more powerful tools with which to spur development and redevelopment across the city’s aging commercial-industrial landscape.

Staff is asking the City Council to consider:

• A building demolition fund to lighten developers’ costs of building anew on old parcels.

• Renovation grants to help building owners prevent deterioration and keep properties marketable.

• A more aggressive land-assembly policy giving the city authority to buy options on land, assemble small parcels for developers and prepare the land to “shovel-ready” condition.

“When you look at developers now, their home run is what is known as a shovel-ready parcel,” Skip Nienhaus, the city’s economic development coordinator, told the council at a March 14 work session.

Any new tools could come with a tax increase. The city could through its Economic Development Authority levy raise an extra $400,000 a year, according to a staff report. The existing EDA levy funds current economic-development programs and annual debt payments on construction of the city’s $20 million Ames Center.

Council members reached no apparent consensus on the recommendations, asking instead for more information, including other cities’ track records with such tools.

The council in January requested a review of economic-development tools and land-use policies with the goal of sparking redevelopment. The land-use review is underway as part of the city’s comprehensive plan update.

Burnsville now has two economic-development tools — tax-increment financing and the little-used tax abatement, Nienhaus said. TIF, which uses the project-driven increase in a property’s taxable value to fund infrastructure projects and grant rebates to developers, has yielded big dividends in Burnsville.

In the once-dormant, now-booming Southcross area along County Road 42 west of County Road 5, TIF funding was used to correct poor soils and prepare land for office-industrial development.

In the Heart of the City, Burnsville used a broader set of development tools. A $27.1 million investment (which included the Ames Center) yielded private investment of more than $100 million, the staff report said. The city, acting as the developer, purchased and assembled land parcels and used TIF and tax abatement to fund public improvements. The city received $4 million in Metropolitan Council grants that were part of its investment, Mayor Elizabeth Kautz noted.

TIF and tax abatement are strong tools for new development but not redevelopment projects — such as renovations, building teardowns and land assemblies — that by themselves don’t result in significantly higher property values, according to the report.

“Because TIF is based on the premise that assistance is in the form of taxes paid on new development, sites with existing buildings are not ideal for obtaining assistance,” it said. “Staff feels that for Burnsville to compete with adjacent cities, it would be helpful to have assistance for demolition of existing buildings.”

Developers say they want the kinds of help staff is proposing. Two years ago, a panel of developers convened by Burnsville’s Economic Development Commission called for measures such as teardown incentives and city loans or grants for building upgrades.

Such grants would come with a city requirement for some matching spending by the owner, Nienhaus said.

They would amount to a city giveaway, he said in a pre-emptive response to skeptics. “The flip side is, how many buildings like 101 are we comfortable having?”

Nienhaus was referring to Parkway Place at 101 Burnsville Parkway W., a prominent building at the intersection with Nicollet Avenue that suffered steep vacancies and then sat empty for several years after falling into tax forfeiture. It was purchased last year from Dakota County at a deep discount and is now being renovated for new tenants.

Council Member Cara Schulz described such grants as “corporate welfare,” a perk not extended to Burnsville citizens.

Council Member Bill Coughlin said he’s philosophically opposed to any city assistance beyond TIF and tax abatement.

Council Member Dan Kealey said he prefers loan programs to subsidies. “It’s not a subsidy, but a funding source,” Kealey said.

But even city “gap” funding a building owner or developer might use to complete a loan package is perilous because the city’s contribution would hold a subordinate position, said Coughlin, a lawyer. If the loan package went bad, the city might not be repaid.

Council Member Dan Gustafson pointed to St. Louis Park and said that city’s “very aggressive” economic-development efforts are getting results.

“Cities have to reinvest in themselves,” Gustafson said.