GRAND RAPIDS — A new 99-unit apartment complex is moving forward in Grand Rapids.
The City Council approved tax increment financing, or TIF, for the new building at its Monday, July 27, meeting. Named Elevation Apartments, the four-floor building will have the future address of 1250 SE Second Ave.
Grand Rapids Director of Community Development Rob Mattei said the project will cost around $20 million. Of that amount, about $2 million, or 10%, comes from a TIF note. TIF is a reimbursement that comes from the buildings' future property taxes.
Tax increment financing captures the difference between a property's old value and new value. For Elevation Apartments, the property value is expected to increase by over $206,000.
Mattei said instead of collecting the difference as taxes, those funds are redistributed to developers to cover costs over time until the TIF note is met or to a maximum of 26 years.
"Upon that happening, all property taxes resume full distribution to the taxing entities," he said.
TIFs, which are meant to encourage economic development, can only be used for two reasons: building public infrastructure, or construction projects that otherwise would be too financially risky to complete. Per Minnesota's TIF regulations, 20% of units in a TIF rental property must be reserved for low-income housing.
Mattei said 20 units would qualify at Elevation Apartments. However, he noted these regulations do not impact the rent prices themselves. Instead, tenants who qualify would receive discounts from the management company.
Alexandria-based Herzog Property Management is one of the companies developing Elevation Apartments. The company opened Riverview Apartments, located at 225 NE Second St. near KAXE studio and the Grand Rapids Area Library, this summer.
At the Monday meeting, owner Samuel Herzog said TIF will play an important role in the new complex even after the construction ends.
"Roughly 40% of the TIF that comes in every year is just going to cover the rent discounts that we're giving to the tenants that live there," he said. "So, in one sense, the TIF is getting the project off the ground. It's making it feasible. But a lot of that's going right back to these low and moderate-income tenants in the property."
Elevation Apartments is projected for completion in summer of 2028.
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