The East Brainerd Mall redevelopment cleared its last hurdle Monday.
The Brainerd City Council, by a 6-1 vote, approved the development agreement between the city and KTJ Limited Partnership, which is developer Oppidan's local company. Council member Bob Olson voted against the agreement.
The development agreement includes tax-increment financing for 25 years, not to exceed $2.4 million. The city originally had approved Oppidan/KTJ's TIF request of $2.4 million over 15 years. As a result of legislative changes to property tax laws, the estimated amount Oppidan would have received over 15 years would have dropped to $1.4 million.
The legislative changes will save Oppidan/KTJ about $217,000 in East Brainerd Mall property taxes per year.
Tax-increment financing is a method of financing public or private improvements that are needed to serve new development. While the existing tax on the property continues to be paid, the increase in tax value of the property is returned to the developer for a set period of time to help pay off the cost of the development.
The city council also approved the assignment of the lease on land the city owns in front of the mall from Gustafson Stores Inc., the current owners, to Oppidan/KTJ. Oppidan/KTJ will eventually buy the land at the appraised value at the time of purchase.
Several people, including Olson, spoke out against the development agreement. Olson said he could not support the extended years of the TIF or the fact that Oppidan/KTJ would not be buying the land the city owns outright as part of the TIF agreement, as stipulated by the Brainerd Economic Development Authority.
Olson also objected to the fact that Oppidan/KTJ would be paying reduced property taxes for the mall -- more than $200,000 less per year -- yet requested an extension of the TIF to 25 in order to recoup as much as possible of the original $2.4 million request.
"I cannot support this," Olson said. "The school district, the county and the residents of Brainerd will not receive the new taxes for 25 years. That's too long." Added Olson: "I cannot in good faith mortgage the citizens future in Brainerd."
Olson was also concerned about the possibility of the East Brainerd Mall TIF agreement turning out like the Brainerd Dispatch's TIF, which came up short of projections when the Legislature reduced taxes in the 1990s. The city agreed to make up part of the Dispatch shortfall. Joe Ryan, Oppidan owner, said he would not come back to the city if the TIF falls short.
Brainerd resident and former city council member Mary Koep said the elderly people of the community will never see the tax benefit of the redeveloped mall, and the money could be better used to fix streets and sidewalks.
"(Oppidan/KTJ) should make the sacrifice, not the citizens of Brainerd," Koep said.
Council member Mark O'Day disagreed with Koep.
"Whether I see the benefit or not is short-term thinking," O'Day said. "Our kids and grandkids will benefit."
O'Day also felt the citizens wouldn't be paying for the TIF because the East Brainerd Mall, as it is today, is a property losing value, and without the TIF the site will continue to lose tax base. He noted the legislative changes also meant the city wouldn't have to pay the 5 percent local contribution.
Ryan said the TIF process has not been something he has enjoyed going through, but he said his company is making a commitment in Brainerd and is anxious to contribute to the city.
"We're trying to do a good thing and we believe in Brainerd," Ryan said. Oppidan/KTJ will close its purchase agreement with Gustafson Stores Inc. in about two weeks, Ryan said.
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