Less than 90 minutes after cutting the city’s residential growth incentive program from the 2018 budget, the Clearwater City Council agreed to come up with an agreement to waive a portion of water and sewer access charges (WAC & SAC) on a potential large development south of I-94.

 

The city has been approached by developers asking the for incentives to build multiple homes.

 

Monday, Administrator Kevin Kress and members of the council reviewed a number of options that would help developers by reducing up-front costs.

 

They discussed tax abatements, creating a Tax Increment Financing (TIF) district, or  reducing WAC & SAC charges to make new home prices in Clearwater competitive with other areas.

 

Kress said the tax abatement option wouldn’t be the best answer, since it would typically be used on one big parcel rather than multiple smaller lots.

 

“The developer pays up front. The city issues a tax bond that repays the developer as they build out the development,”he said. “That would have been used when the Cedar South Development went in.”

 

He said a TIF district could be a better option, although there are conditions a developer and city must met to get it approved.

 

Engineer Joe Pelawa from Bolton & Menk said TIF districts are usually associated with commercial areas, not residential, where the community expects a certain number of jobs to be created and a certain increase in property taxes.

 

That left the third option of reducing WAC & SAC charges.

 

Council Member Andrea Lawrence said she like the idea of incentives, but wasn’t in favor of giving a break on WAC & SAC if it meant raising water and sewer rates to make up for the discount.

 

Developer Denny Nelson, owner of Progressive Builders of Big Lake, was present to talk about the idea of incentives.

 

He said he was under contract with Annandale State Bank to purchase 30 existing lots in Cedar South and was looking for the city to work with him to bring costs down.

 

“I build a lot of houses and I know we can jump start the area,” he said.  “We built over 30 in the second phase before the market turned. But things are starting to pick up.”

 

He the actual construction costs are the same to build a home in any area, except for local permit costs and fees, which vary from community to community.  A typical 1,200 to 1,400 sq. ft. three-bedroom, two-bath model with three car garage would cost $218,529 in Clearwater, compared to $204,000 in Foley, $215,900 in Sauk Rapids, $219,000 in Becker and $222,000 in Zimmerman.

 

“Without an incentive, Clearwater is in the high end,” he said.

 

Nelson said realistically, he could build five to six new homes a year, or 30 in five years, which would increase the tax base and give the city momentum as people started looking at the area. But the price had to be competitive.

 

The council discussed the pros and cons of an incentive.

 

“I’m thinking 20-plus lots is a lot of new rooftops, which is something we’ve wanted for years,” said Councilman Kris Crandall. “Coming up with a creative way like using WAC & SAC is a great way to proceed.”

 

Lawrence said she was still in favor of some other way that wouldn’t cause water and sewer rates to increase.

 

Mayor Pete Edmonson asked whether WAC & SAC were tied to water and sewer rates.

 

Administrator Kevin Kress said WAC & SAC were used for infrastructure, capital improvements and expansion, while rates were used for daily operations. 

 

The council discussed how the new homes would cover the cost of the incentive by increasing property taxes, adding new contributers to the water and sewer system and increasing the collection of local sales taxes.

 

Without committing to a specific dollar amount, the council voted to entertain developing an incentive agreement with Progressive using a WAC & SAC discount. It would include the number of lots, a time frame for development and possibly a tiered system to encourage future development.

 

Kress said he would have something for the December or January meeting.

 

“We want to make sure we’re catching everything that we need to in order to incentivize any developer that wants to come in,” he said.

 

Councilman Richard Petty, who could potentially be involved in development in Clearwater, abstained from the vote.