City to help HRA get out of debt on Brainerd Oaks

The city of Brainerd will help the Brainerd Housing and Redevelopment Authority get out of debt from the authority's Brainerd Oaks housing project in southeast Brainerd.

The Brainerd City Council on Tuesday, with a 5-2 vote, approved expanding the Brainerd Oaks tax increment financing district - in which increases in property taxes are returned to the developer - to allow the HRA to issue $4.6 million in bonds to refinance debt accrued with the housing project. Voting against were council members Lucy Nesheim and Bob Olson.

Tuesday's request was the second from the HRA to be considered by the council in the last five months.

In October, the council - in a split vote - denied a request by the HRA to have the city back $8.9 million in bonds to refinance $6.5 million in debt obligations. The request approved Tuesday restructured the debt and lowered the bond refinancing by removing about $3.3 million of the debt from the request. That debt will instead be paid off through house and land sales within Brainerd Oaks. The HRA also would begin aggressively marketing the properties within the development.

"We feel very good that we've come off with a workable deal that meets our statutory requirements," said Doug Grout, Brainerd Housing and Redevelopment executive director. "Brainerd Oaks is a worthy project and one that will ultimately be successful."

Brainerd Oaks was designed to be a 96-home development with two commercial lots off Oak Street in east Brainerd, with landscaped yards, tree-lined sidewalks and four parks. Eleven houses and 83 lots are for sale in the Brainerd Oaks development, which the HRA bought from Tony Elvig in 2003. The HRA sought refinancing because sales of the houses and lots had been slower than expected.

Council member Kevin Goedker, who voted against the HRA's request in October, said he was voting in favor this time as he believed that Brainerd Oaks, while showing a deficit financially, was headed in the right direction and the HRA has had success in the past.

"This project is very scary, I think, to say the least. I think there's been some mistakes made and we definitely should pause to consider what we're doing, which is why it was defeated in the past," Goedker said. "However, when we look at the flip side, if the HRA is to fail, what is the consequence for the future of housing in Brainerd, not just Brainerd Oaks? I think that could be detrimental.

"Eventually it will be the right thing to do."

Olson took issue with the debt assistance provided by the city, saying it was too risky for Brainerd taxpayers. He also questioned why the private sector wasn't willing to refinance the $6.5 million in debt on the Brainerd Oaks project.

"I really think this is a big risk to the city," Olson said. "I just can't see it."

Olson made a motion to table the HRA's request until March 19 to allow a committee made up of himself and council members Mark O'Day and Kelly Bevans to meet with real estate agents for advice on selling the property. His motion died without being seconded.

As part of the motion approved Tuesday, city staffers will prepare all documents and schedule a public hearing on the request to expand the Brainerd Oaks tax increment financing district.