An agreement between La Crosse and Doerflingers Second Century Inc. proposed Thursday would help fund renovations to the Doerflinger Building to facilitate Duluth Trading Co.’s upcoming move into the first floor.
The city’s Economic Development Commission unanimously approved the deal, which calls for the city to provide a $94,000 loan and a $98,810 grant funded by Tax Increment District 6 to the La Crosse company owned by Mike Keil. The agreement will go before the city’s finance committee next week.
Under the agreement, Keil and Duluth Trading Co. would commit to completing $1.8 million in improvements — including a new staircase, electrical upgrades and façade improvements — by Jan. 1, 2017.
“This is a very significant investment in that building, given its base value,” city planner Jason Gilman said.
Duluth Trading Co. announced Monday that it had signed a five-year lease to occupy the entire first floor of the building, which previously housed multiple tenants. To accommodate the change, Keil will renovate the outside of the building, as well as update the first floor.
Gilman recommended the commission approve the request, citing the increase in tax revenue and the impact a national retailer would have on consumer activity downtown.
“It’s a solid improvement to the building that makes that building more viable and it stays with the city,” Gilman said.
Gilman told the commission that the improvements will have a positive impact on downtown, making it more attractive for other downtown investors and allowing the city to better market downtown. Keil provided a detailed analysis of the additional income he expects to be generated by Duluth Trading Co. in closed session.
According to city staff, the TID was specifically created for projects such as Keil’s and has a cash balance of more than $200,000.
City officials estimate that the improvement would increase the assessed value of the building by $300,000. Gilman added that the increase in tax revenue would pay for the grant before the TID expires in 2021.
“Given the four years left in TID 6 and the likely $25,000 in new tax revenue, we can assume that the $98,000 grant will be paid back within a four year period,” Gilman said.
The $94,000 loan would be paid back over eight years at a 1 percent interest rate.