Honey of a Deal

Mary Fallon

WHEN HONEYWELL announced plans to demolish the rental properties next to its international headquarters and replace them with condos, a seemingly unending list of positives began flowing from the mouths of local politicians and nonprofits. According to Minneapolis Mayor Sharon Sayles Belton, replacing the neighborhood's rentals with owner-occupied homes will help "deconcentrate" poverty. City Council member Brian Herron, who represents the area, believes the construction will "help eliminate an environment which is more conducive to crime." Both point out that Honeywell is collaborating with local nonprofits. The community organizations, meanwhile, add that Honeywell could just as easily leave the poor neighborhood as redevelop it.

But even as the residents of some 51 to 100 apartments are out looking for new, affordable homes in a tight rental market, it appears Honeywell's housing project may only be private while tenants are being booted out. Once no one's left to relocate, the city of Minneapolis is considering ways to reimburse Honeywell. Leaving aside the question of whether public funds should be used to displace renters in favor of homeowners, the city's cooperation with Honeywell effectively sidesteps the Federal Relocation Act. That law requires cities to provide up to $5,500 in compensation for each household displaced by publicly financed projects.

If the city is to secure public money for the project, support from local nonprofits is important. And in this case the community organizations that have signed off on the project, Phillips Community Development Corp. and Project Pride in Living, receive financial support from the Honeywell Foundation. People of Phillips, also a supporter, has applied for a large grant as well, in part to make up for having its city funds frozen as a result of an audit that found mismanagement.

A tax-increment-financing, or TIF district, allows the city to capture the taxes from an approved redevelopment and return this money to the project's developer to reimburse its financing costs (usually for 20 years). In Minneapolis, some 13 percent of the city's tax base comes from TIF territories. The state kicks in the property taxes which would have otherwise gone from the project to the local school district. Annually, this adds up to about $120 million, roughly the equivalent of the state's cash-grant expenses for Aid to Families with Dependent Children or AFDC. The state doesn't make up the property taxes lost by the county.

Moreover, normally 95 percent of the homes built in TIF housing districts must be sold to low- and middle-income households. In Hennepin County, a family of four earning up to $65,000 year would qualify. But since Phillips is a "blighted" area, a third of the properties will be exempt from income guidelines. The project's goal is to construct a "mixed-income" community, but median income in Phillips is around $14,000 a year, which dampens the possibility that the displaced renters will be able to buy the homes.

Honeywell's foray into redevelopment reportedly came about because Sayles Belton and Herron asked the corporation to "do something big." According to Herron, at their initial meeting with Honeywell they suggested that public funds might be available to "fill any gaps." Rebecca Yanisch, director of the Minneapolis Community Development Agency, adds that her agency has been working with Honeywell to explore public-financing options.

According to Joel Michael, a legislative analyst on the state House of Representatives' research staff, Honeywell's project is highly unusual in that it won't secure TIF status before starting demolition. But since there's no tax district yet, neither Honeywell nor the city are obliged to pay tenants' relocation costs. The company has commissioned Project Pride in Living to come up with a brochure listing housing resources to be given to landlords who, in turn, are to give them to the ousted tenants. Also, Legal Aid plans to send a letter to the remaining tenants asking them to contact its office if they need help. Herron has requested that any tenants who are suffering hardship due to the move contact his office so he can talk to the MCDA and Honeywell to see what they can do.

Meanwhile, the last of the renters must be out by January 1, and the lots are expected to be cleared by the end of winter. Construction could begin next spring.

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