Week of July 8, 2002
Snapshot from the Field
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Chamber: Housing 'in Large Part a Business Issue'
Mayor's $1B Housing Plan Reshaping St. Paul Economic Development
By JACK LYNE,
Site Selection Executive Editor of Interactive Publishing
ST. PAUL, Minn. St. Paul Mayor Randy Kelly (www.stpaul.gov./mayor) is reshaping the city's economic development strategy. Housing - a whopping US$1 billion worth of it - is the centerpiece of the new mayor's thrust.
Kelly, who took office on Jan. 1, 2002, is spearheading a four-year plan to build 5,000 housing units in the city, with at least 20 percent defined as "affordable."
High home prices and housing shortages have combined to create headaches for many business facilities around the world. Otherwise sound sites, for example, are sometimes dropped from site-selection consideration because of scarce labor within a comfortable commute. Some existing business operations are likewise encountering problems, as proximate labor pools dry up.
St. Paul's plan, however, has its detractors. Some of the most vocal opponents contend that Kelly's new economic development direction will put a damper on private development. Others question whether the $1 billion from public, private and nonprofit sources can be raised.
The funding, Kelly contends, will be there. And, he insists, the city's business community will be one of the many sectors that will benefit from St. Paul's housing plan.
"It means $1 billion in new investment in our city," Kelly said. "It means new construction jobs. It means new customers for our small businesses. It means new riders for public transportation on our transit corridors. It means stability and hope for school kids who now fall behind in the classroom because poverty forces their families to move from apartment to apartment."
Chamber Backs Plan; Leader
St. Paul's housing shortage "is, in large part, a business issue,'' asserted Coldwell Banker Branch Vice President Don Maietta, who chairs the chamber's board of directors.
Business-sector involvement is crucial in making Kelly's plan work. The mayor's push envisions tapping multiple sources for the $1-billion housing fund. Major funding sources specified in the plan include $150 million in housing bonds and tax credits; $90 million in tax increment-financing proceeds; $60 million from the city of St. Paul and its Housing Redevelopment Authority; and $50 million from nonprofit groups, public organizations and federal agencies. Private-sector investment, however, will provide far and away the biggest slice of the $1-billion pie - $650 million.
The housing initiative's funding plan, however, will mean fewer subsidies for developers in St. Paul, the mayor says. Thus far, the local development community seems to be going along with carrying more of its own financial weight.
"One of the things we preach is that the market dictates development," St. Paul Area Chamber of Commerce President Larry Dowell told The St. Paul Pioneer Press. "If there is no market, no amount of government assistance can make it move forward."
Project Approvals Streamlined, Mayor SaysKelly in turn has vowed to streamline the city's approval process. Developers, he said, will be able ''push projects through the city'' in 12 months, half the time heretofore required. In another effort to promote downtown development, the mayor has created a new department charged with rehabilitating abandoned buildings and preserving old homes.
The U.S. housing sector's recent bullish performance has undoubtedly boosted the St. Paul development community's support for the plan. Housing has been the lion in winter during the current downturn. The Economist even entitled a recent cover story "The Houses That Saved the World."
Housing's bacon-saving performance also probably aided Kelly's cause in securing the St. Paul City Council's approval. The only audience question raised at April's council meeting was whether the plan included enough of what it defines as "affordable" housing. The initiative stipulates that at least 500 of the 5,000 units will be built for residents earning 30 percent of the Minneapolis-St. Paul metro's median household income of $76,700.
As in most U.S. areas, Twin Cities housing prices have skyrocketed in recent years. Earlier this year, The Metropolitan Council, the seven-county metro's planning agency, redefined an "affordable" new area home as one priced at $170,000 or less.
Financing Will Be 'Transparent,' Official VowsAll financial support for the housing initiative will reside in a single fund, according to the mayor's plan. "Our financing processes will be transparent to policy makers and housing partners alike," vowed Tony Schertler, director of the St. Paul Dept. of Planning and Economic Development.
Part of that fund will be made up of capital drawn from St. Paul's Neighborhood Sales Tax Revitalization (STAR) Program. The program is financed from proceeds from the city's half-cent sales tax.
Heretofore, STAR funds had been earmarked for neighborhood economic development projects and cultural programs. The mayor's plan will divert 60 percent of St. Paul's STAR funds - $20 million in all - into the housing push. In addition to helping build homes, STAR funds will be used to boost existing home preservation and housing-code enforcement.
"This plan won't work unless we refocus the way we use our STAR resources," Kelly said. With $1 billion on the line, though, the City Council unsurprisingly promised that Kelly's plan would be under continuing intense scrutiny.
"We will review every single one of these projects," said member Kathy Lantry.
©2002 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.