by Mandy Moran Froemming
The city of Anoka will put its urban development fund into action by lending Leon Fischer, a partner in Teddy Bear Management, $127,920 to assist in payment of sewer and water access charges. These are the result of Fischer’s conversion of the property at 2022 North Ferry Street to residential apartments.
The loan was unanimously approved by the Anoka City Council last month.
According to Planning Director Carolyn Braun, Fischer’s Homes on Main project includes the conversion of the two northerly components of the building into 29 one-bedroom and one two-bedroom units and is expected to cost $800,000.
She said Fischer has been working with the city’s building official for the last two or three months on the plan. SAC and WAC fees on the project total $127,920.
As for the loan, the city will use its sewer access charge credits it obtained from the Metropolitan Council back in 2009. The city has used these credits to set up an urban development fund, and relies on the credits banked to help aid developers with five-year loans to help offset the often large initial bill for sewer and water access charges.
When there is new construction or a change in use of a property that requires additional sanitary sewer capacity, a fee is charged by the Metropolitan Council Environmental Services.
According to the city’s policy, in some situations upfront utility costs may prevent business start-ups, renovations or expansion. The bank of credits with the Met Council has allowed the city to lend a hand to developers in the way of a loan.
“We use our credits and the property owner reimburses the city for our payment,” said Braun.
As of October, the city had 673 credits with the Metropolitan Council. With 24 going to Homes on Main and an additional 92 credits for the Volunteers of America senior housing campus, the city was left with 557 credits as of Jan. 1.
Over time, the $1.3 million SAC credits the city has with the Met Council will go into the urban redevelopment fund as the money is borrowed and then repaid.
The loan agreement with Teddy Bear Management is for five years, with a 5 percent interest rate, which is consistent with the city’s policy. The Metro Council SAC fee will be placed in the urban development fund ($53,520 plus interest). The remaining amount will be placed in the city’s sewer fund ($26,400 plus interest) and water fund ($48,000 plus interest).
The council did have questions about what would happen if the loan wasn’t paid back on schedule.
If there is a default on the loan, the defaulted amount would be assessed back against the property to be collected with the property taxes, according to City Attorney Scott Baumgartner.
The concerns weren’t necessarily specific to Fisher’s project, Councilmember Steve Schmidt said.
“As the deals get bigger and bigger there is more and more risk on this,” he said.
Mandy Moran Froemming is at [email protected]