Council approves six figure loan for 36-unit townhouse project
WORTHINGTON --Citing a housing need and an opportunity to reinvest into the community, the Worthington City Council approved a loan to the Housing and Redevelopment Authority (HRA) during its regular meeting Monday night.
The council approved a loan in the range of $600,000 to $800,000, with the money used out of the legacy funds of the hospital sale.
"My sense is, we have been talking as a council for a very long time about having an endowment, and real estate is a very good endowment," Council member Ron Wood said. "I am very much in support of this. Given what our housing situation is and that the debt payment is $36,400, I would say this should be our first endowment piece."
The HRA asked for the money to be put toward a 36 unit townhome complex, called Rising Sun Estates.
Six buildings made up of two and three bedroom units will be constructed, with completion planned in the fall.
In February, a housing study showed that Worthington needed between 91 and 104 units to help alleviate the zero percent vacancy rate in town.
The plan is for 12 two-bedroom units with 890 square feet. The proposed rent for those would be $830. Twenty-four of the units would have three bedrooms with 1,080 square feet and proposed rent of $925.
"As part of the project, we are partnering with Highland Manufacturing," Southwest Minnesota Housing Partnership CEO Lisa Graphenteen said. "We are partnering with a local employer to build those units and also use United Prairie Bank as the primary financer of the project."
While the HRA and SWMHP have secured some funding for the project, most banks require having 25 percent equity into the project.
"We do have a number of financial partners, United Prairie Bank, JBS, Wells Fargo, the Housing Partnership and the Housing and Redevelopment Authority," Graphenteen said. "There are a number of parties involved in financing the project."
The loan was requested for 30 years at 4.5 percent interest. However, there are adjustment windows every 10 years, but the interest rate would be between 3.5 and 6.5 percent.
"As far as the loan request from the city, I think that pretty much mirrors United Prairie Bank's terms, so we're not asking for anything less from the taxpayer, we're willing to pay our fair share," Council member Mike Kuhle said. "As far as the vacancy rates, we have Prairie Acres and there are seven people on the waiting list. I think it's a good project and we need the housing in town."
The council approved the loan and proposed the principal money goes back into the legacy funds, and uses the interest for other special projects in the future.
A question was raised on whether it was better to keep the money in the bank, especially for bond rating purposes.
"But cash in the bank doesn't grow your community," Mayor Alan Oberloh said.
In other business, the council also approved a higher daily green fee rate for the peak season --Memorial Day weekend through Labor Day weekend --at Prairie View Golf Links.
Council also approved a change order for the Center for Active Living. The total cost of the project is $1,231,292.58. Council also approved a change order for the Worthington Event Center for $26, 313.
The council will meet again at 7 a.m. Thursday. The outdoor pool request and the farmer's market ordinance/domesticated animal ordinance are on the agenda. The council will also discuss requests from the Beach Nook.
Daily Globe Community Content Coordinator Aaron Hagen may be reached at 376-7323.