(February 13, 2023): Recent articles and letters published in the Pope County Tribune have covered the community’s continuing struggle with the Fremad Building site, including efforts by Pope County and the Pope County HRA-EDA to resolve the issue.
The Fremad site has challenged the County and community for years. Recent actions taken by Pope County and the Pope County HRA-EDA have been taken to pursue redevelopment of the site, and not, as has been speculated by some, for “a parking lot.” While the reasons for this course have been repeatedly discussed at public meetings, the information and context provided below will be helpful in understanding why redevelopment of this site is now being pursued, how the costs for redevelopment will be paid, and why the County and HRA-EDA are part of this process.
COUNTIES ARE FORCED TO RESOLVE TAX-FORFEITED PROPERTY ISSUES BY THE STATE
The State of Minnesota, by statute, forces local County governments to bear the cost and burden of resolving issues posed by tax-forfeited properties once the State seizes the property due to failure to pay taxes. This can include abating hazards and nuisances when, as here, a property is significantly compromised or undesirable in its current condition. When this happens, a property has little value or potential by the time a county is forced by the State to become responsible for the property. That property has little value at that point is no surprise; otherwise, if the property had such value, the prior owners would have been able to sell it or otherwise leverage its value to pay its tax liabilities. And when this happens, counties are forced to bear the burdens of these properties by the State, with no money appropriated to a county to carry out this unfunded statutory mandate. This mandate is how the Fremad was passed off on to the County. As later explained, this is why the County and HRA-EDA are working in the Fremad’s case to explore other funding sources, such as tax increment financing and federal ARPA funds, to mitigate any effect on local property taxpayers from this unfunded State mandate.
REPURPOSING THE EXISTING STRUCTURE HAS BEEN EXPLORED FOR YEARS, AND IT IS COST-PROHIBITIVE
Many opportunities were given over time to interested private parties to propose repurposing plans to restore the existing Fremad structure to a condition where it could be occupied in compliance with current building code and standards for new uses. Many approached the County and HRA-EDA with interest, but none have been able to make a workable proposal that makes economic sense, can bear the costs of labor and materials to bring the structure to standards, and abate the hazards of the property as it was conveyed to the County. An often-cited January 2017 Conditions Assessment Report gave an estimate of “probable” project cost of $1,538,442.30 in January 2017 dollars; this cost would closely approach or exceed $2,000,000 in 2023 dollars if it is in fact accurate. But a review of the 2017 report’s conclusions appears to be an absolute “best case” scenario, without accounting for additional hazards or issues later engineering reviews found with the structure’s integrity and with the extent and cost of bringing the building to many required modern safety standards and codes.
In 2017 and 2018, the Fremad was offered for auction by the County twice, at very minimal starting bids. No bidders appeared at either auction, and none of the many “interested” parties were willing to pay the minimal over-the-counter price of $10,000 for the building. With no willing parties, and no other realistic means to legally offer the property for sale, the property was conveyed to the HRA-EDA for repurposing or redevelopment of the site in 2019. Over this period of time, dozens of interested parties with an eye toward repurposing the current structure have toured the Fremad, with none being able to put a pencil to paper for a plan that was feasible. The very few repurposing plans later proposed to the HRA-EDA either did not account for full remediation of the issues with the site, or left the taxpayers with increased and unwarranted obligations and risks if the plans would have been approved as proposed. After many years, it seems that if such a repurposing plan was workable, the property would have been purchased by a private party when offered or a viable repurposing plan would have been advanced by a private developer.
COST OF REDEVELOPMENT INTENDED TO BE FROM GAINS IN VALUATION AND/OR FEDERAL GRANT FUNDING, NOT EXISTING LOCAL TAX DOLLARS
To mitigate the effect of what would otherwise be an unfunded mandate on local taxpayers by the State, the County and HRA-EDA proposes that cost of the rehabilitation of the Fremad site into a buildable condition would be funded by a Tax Increment Finance (TIF) district in the City of Glenwood, whereby any increased taxable value generated by the property built on the rehabilitated site in the coming years will be pledged toward paying for the expense of rehabilitating the site. If approved, this new taxation pledge to pay site preparation costs would come from new valuation that would not exist but for the demolition and redevelopment of the Fremad site. For those costs not recaptured by TIF proceeds, the County may consider use of federal American Rescue Plan (ARP) grant funds previously received by the County. Between the sale proceeds for the property paid by the new private owner, TIF proceeds, and ARP grant funds, redevelopment can take place on this blighted site, the property is placed back on the tax rolls, and all without an undue burden from the preparation costs being placed on the local taxpayer. And because such redevelopment will in part fund the site’s rehabilitation costs, a “parking lot” or other unimproved land use would not be the type redevelopment that would be sought in this location.
THE BUILDING IS A HAZARD, THE SURROUNDING BUILDINGS CANNOT STAND WITHOUT IT, AND SOMETHING NEEDS TO BE DONE
Due to the way buildings were constructed when this block was built, the Fremad building now rests upon, shelters, or provides partial enclosure to the two occupied buildings to the Fremad’s west and north. Removing the blighted Fremad building would remove one wall of one of the neighboring buildings, and would leave the other neighboring building without sufficient shelter and stability to remain according to engineering experts. For these reasons, the two adjacent buildings are being acquired by the HRA-EDA with the support of the County, to be able to efficiently and cost-effectively carry out rehabilitation of the entire site. Selective demolition of the Fremad alone would multiply the costs of clearing the site based on project estimates, compared to the costs for demolition of the cluster of buildings. Also, selective demolition of only the Fremad building would leave a much less desirable site than if the site was completely cleared. In the end, if the Fremad cannot stand as it is, these other adjacent buildings will not be able to remain either due to logistics and cost.
REDEVELOPMENT IS THE COURSE OF ACTION THAT RESOLVES THE BLIGHT AND HAZARD WITHOUT UNDUE RISK TO THE PUBLIC AND WHILE MINIMIZING DIRECT COSTS TO TAXPAYERS
In the end, the State has mandated that the County resolve the issue of the Fremad as a tax-forfeited property. Through careful consideration of all the options available to local government under law, redevelopment is being pursued by the Pope County HRA-EDA Board and the Pope County Board to finally resolve the issue, put the property on a path to productive use and a return to the tax rolls, and do so in a way that minimizes the risk and direct taxpayer expenses that the State would otherwise mandate the County and its taxpayers to bear.
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