BAXTER — A $6.1 million 34-unit townhome project designed to provide affordable housing received support from Baxter.

Central Minnesota Housing Partnership (CMHP) requested support for the tax-increment financing for Sprucewood Townhomes, a three-building project on undeveloped land off Grand Oaks Drive.

The CMHP said this project will create construction jobs and increase housing choices for low and moderate-income residents in the area.

The rental rates are designed to be affordable for the work force — and be open to all households making 60 percent or less of the county’s median income.

Household income breaks down to:

• $25,920 for one person.

• $29,640 for two people.

• $33,680 for three people.

• $37,020 for four people.

The plan is to construct three buildings of affordable housing on foreclosed property. The proposal calls for buildings of eight, 12 and 14 units. The 8.1-acre property owner is Black Ridge Bank of Baxter.

Monthly rental rates for the units range from $635 per month for a two-bedroom unit, $730 for a three-bedroom unit and $790 for a four-bedroom unit.

The project will also have four units for homeless.

The Baxter City Council supported a tax credit application for Sprucewood and tax increment financing (TIF) assistance, which the project needed in order to score highly enough to be considered for Minnesota Housing Finance Agency (MHFA) funding. The TIF requested is a pay-as-you-go plan of about $26,000 per year.

Tax-increment financing allows a city to use the additional property taxes generated by a new development or a redevelopment project to pay for certain development expenses. With TIF, a city secures the additional property taxes, or increment, generated by the project. The increment is then returned to the developer for a period of time to finance the development costs.

A project summary noted financing is coming from a 9 percent tax credit program administered by the MHFA, $5,280,000 from tax credits and about $852,000 from the first mortgage, which includes the $26,000 annual TIF payment for support.

The project includes two, three and four-bedroom units with attached garages. Deanna Hemmesch, CMHP executive director, said city support through TIF, utilizing a foreclosed property and green building plans such as solar panels on the roof, all help the project to score needed points for funding. The CMHP said TIF was necessary to make the project financially feasible.

In 2011, the project wasn’t funded after it lost a tie-breaker. In 2012, the project fell short by scoring 82 points, four points shy of the cutoff. This project is anticipated to score 87 points.

Sprucewood units are expected to have custom cabinets, appliances, central air, a playground and private patios. The tenant pays for electric and cable. The landlord pays heat, water and sewer. Solar panels are being considered for the southern roof exposure.

The site was originally part of the Grand Haven proposal for two 50-unit apartment buildings with underground parking. That project didn’t go forward. The area is part of the JMS Baxter Estates planned unit development.

Conditions imposed by the city included a trail and sidewalk connection parallel to Grand Oaks Drive be installed before the project was given a certificate of occupancy.

RENEE RICHARDSON, senior reporter, may be reached at 855-5852 or renee.richardson@brainerddispatch.com. Follow on Twitter at www.twitter.com/Dispatchbizbuzz.