Oak Park Heights officials are crying foul over Washington County’s plan to make the city of Stillwater a sub-recipient of COVID-19 relief funds to bring sewer and water to the southeast corner of Minnesota 36 and Manning Avenue.
The county board is slated to vote on the $750,000 grant on Tuesday. Stillwater would be the first municipality to receive such a grant from the county; the grant would supplement the $2 million Stillwater is contributing to the project, said Jennifer Wagenius, deputy county administrator.
Plans call for a Hy-Vee grocery and about 200 luxury apartments. The $50 million project, called Central Commons, is the largest retail development proposed for Stillwater in the last two decades.
The Stillwater City Council approved in May a tax-incentive plan that includes a 15-year property-tax abatement worth about $3.145 million.
Stillwater had asked Washington County to consider $750,000 in tax abatement for the project, but county officials instead proposed using funds from the American Rescue Plan Act of 2021, Wagenius said. The ARPA provided billions of dollars in emergency funding for state and local governments to respond to the COVID-19 pandemic.
ARPA funds can be used to aid in certain infrastructure issues, including sewer and water, she said. Washington County received $51 million and has allocated about $40 million. Among the projects are: $8 million for heating and cooling improvements at the Washington County Government Center in Stillwater; $6.8 million for a 50- to 75-bed hotel to be converted into a 30-bed shelter; and $700,000 to replace the boat launch at St. Croix Bluffs Regional Park.
But officials in Oak Park Heights are questioning what criteria county officials are using to make Stillwater a sub-recipient of the ARPA funds.
“Is this a proper use of public funds to basically subsidize a private business?” said city council member Mike Runk. “The money should be spent for the common good of the public, not solely for private interests.”
SEEKING AN ‘OPEN PROCESS’
Before the county board votes on sub-recipients for ARPA grants, they should establish an “orderly and open process,” Runk said.
“They should establish a process that is clearly laid out and open to the public,” he said. “How much money is available? How can it be used? How can cities and townships apply? What are the criteria? When the money is awarded, there should be a public discloser of all relevant information.”
Runk said he is particularly concerned about how a new Hy-Vee could affect a Kowalski’s grocery store, which is located in Oak Park Heights.
“This is a subsidy for Hy-Vee,” Runk said. “Washington County should not be in the process of subsidizing a company that is going to come in and compete with current businesses.”
Oak Park Heights City Administrator Eric Johnson said county officials told him Washington County would follow the “guiding principles” of its economic development tax-abatement policy. But the Stillwater project does not demonstrate meeting those criteria because it does not have a regional impact, does not create livable-wage jobs or affordable housing and does not include transit-oriented development, he said.
In a letter to county officials in June, Johnson spelled out many of the city’s objections.
“Our area, like most in the metro, is experiencing an affordable-housing shortage, flat wages and service-worker shortages,” Johnson wrote. “The current proposal does not offer, nor supports, a remedy to these problems and may further exacerbate … some of these issues.
“The proposal, in the developer’s terms, offers “high-end” luxury housing, appears to promote jobs that would not provide living wages, and has clear potential for job displacement in this market,” he wrote. “Businesses competing for workers that are already in short supply in this area could make businesses harder to run and risks more commercial vacancies in an area already plagued with empty buildings.”
A NEW LOOK FOR AREA
Stillwater annexed the property from Stillwater Township in 2020; the land had previously been in Lake Elmo. The Stillwater City Council approved the final plat for the project in November.
It’s part of a massive makeover in the area that includes a new $31.5 million interchange at Minnesota 36 and Manning Avenue, a partial-cloverleaf design under construction. Plans also call for the northeast corner of the intersection to be the future site of a Lakeview Hospital campus.
County Commissioner Gary Kriesel, who represents the area, said using ARPA funds for the Stillwater project makes sense. The funding, he said, is meant to be spent on infrastructure that has an immediate impact on economic development — and bringing sewer and water to the area fits the bill.
“We’re out to provide economic development consistent with a community’s desire to increase their tax base and create jobs, and this is a mechanism to do it,” he said.
One advantage to using ARPA funds over tax abatement is that funds are available now, Wagenius said
Said Kriesel: “If we funded it through levy, that would be $50,000 a year over 15 years that our local taxpayers would have to pay, but we can use the ARPA funds, and that wouldn’t impact local taxpayers. That seems a reasonable approach to me. I haven’t heard an outcry from citizens saying, ‘Don’t use federal funds, tax me.’ ”
Any municipality in the county is welcome to make a funding request to the county board for a project, and the county “would decide the best way to support them,” Kriesel said. “Who knows? It could be something down at the King plant (in Oak Park Heights) when they redevelop that.”
The debate over ARPA funds isn’t Oak Park Heights’ only issue with the county. City officials earlier this year informed the county that the city will not pay any of the costs to build a new frontage road in Oak Park Heights that would lead to the Hy-Vee development. The county has asked the city for $1.4 million in cost-sharing, Johnson said.
“We have made it clear to them that we are not going to pay for a road that would hurt our businesses and shift traffic problems to our city,” he said.