UPDATED: City Weighs $1.25 Million Deal With Argenta Hills Developer

The fate of the Argenta Hills commercial development project — including a — may hinge on a $1.25 million deal between the city and the developer.

 On June 13, the Inver Grove Heights City Council is expected to vote whether to approve a contract with MGT Development, the developer behind a stalled commercial and residential project near the intersection of Robert Trail S. and Hwy. 55. Under the terms of the proposed agreement, MGT would construct roughly 150,000 square feet of commercial development and complete site improvements, including paving, landscaping and on-site lighting.

 In return, the city would pay for roughly $1.25 million of the $2.2 million cost to install those site improvements.

“Padding the Hand” of Developers

Fully developed, Argenta Hills may bring in as much as $400,000 in annual tax revenue for Inver Grove Heights, Mayor George Tourville said at a council work session on Monday night. Additional money could be generated by the fees paid by business owners when they connect to the city’s sewer and water infrastructure

That revenue, city officials said, could help the city offset the roughly $12 million debt it incurred when it installed sewer infrastructure in portions of the Northwest Area several years ago. This year alone, the city will pay roughly $636,000 in principal and interest payments on the bonds it issued for extensions to the sewer infrastructure.

But Inver Grove Heights City Councilor Rosemary Piekarski Krech criticized the proposed business subsidy on Monday night, saying the development wouldn’t bring any quality jobs into the city, while the deal would be “padding the hand” of the developer.

 “Where is their buy-in?” Piekarski Krech asked, referring to MGT. “I see [the developer] coming in and saying ‘Gimme, gimme, gimme.’”

The deal, she added, sets a potentially dangerous precedent for the city when it deals with developers in the future.

"Each one that comes is going to want more,” Piekarski Krech said.

Window of Opportunity

The money for the deal would be drawn from a Tax Increment Financing district fund created nearly 20 years ago to spur development of the Southeast Quadrant, an area near the intersection of Interstate 494 and Hwy. 52. When building slowed in that area, the TIF fund fell into disuse, City Administrator Joe Lynch said. It now contains roughly $3 million.

Ordinarily, TIF money must be used within the boundaries of the TIF district, but a 2010 state law permits cities to use TIF money designated for one area to apply the money to another area, as long as that expenditure spurs job creation and development. The city, however, has a limited amount of time to use the money: The law stipulates that the TIF money must be spent by the end of the year and that construction funded by the money must begin by July 1.

Under the proposal, work on the site improvements would start on June 30 and be complete by the end of this year. MGT would finish construction on the retail buildings by Dec. 31, 2012. Without the money, city officials said, it could be years before the development is completed, if ever.

On Monday, the council unanimously voted to hold a public hearing on modifications to the TIF district that would allow the city to tap the money from the fund for the Argenta Hills development. The hearing is set for June 13 and will be an opportunity for the city to collect public comments on the proposal.

The city and the developer have yet to flesh out the full terms of the proposed agreement. The final document, Lynch said, will contain assurances that the developer will pay the city back in the event that the planned development does not occur.

Before the city shells out $1.25 million, Lynch added, the developer would have to secure a signed an agreement with Target Corp. to bring a Target store to Inver Grove Heights.

“The developer is saying 'I can deliver, and Target can sign if we get this deal done,'" Tourville said.