Image courtesy of BKV Group Viewed from Levee Park at Center Street, Sherman Associates proposed an E-shaped building with four floors of apartments and hotels above a two-story parking garage. City officials had originally hoped developers would maintain or increase the number of public parking spaces at 60 Main Street. There are 128 spaces currently. Sherman Associates was the only developer to propose any public parking: 45 spaces.

Winona reviews downtown hotel plan, last of 3


(4/18/2017)

by CHRIS ROGERS

If city leaders achieve their goals, downtown Winona could look very different in two years. As he presented the last of three proposals for a hotel, apartments, and parking ramp at 60 Main Street — where a city-owned parking lot currently abuts the local movie theater — architect Mike Krych showed a slide that hinted at the potential for other new developments on neighboring blocks.

“This first slide, I don’t want anyone to be alarmed by it. It’s just a slide about thinking bigger about this part of town,” Kyrch said, as he showed aerial sketches of hypothetical developments on either side of Main Street. “We should think big about that, and how to make it actually work and get people there and utilize the river,” he added.

“We feel that our downtown needs something — a catalyst if you will,” said Fastenal Vice President for Real Estate Dana Johnson. Johnson is one of five appointed business people — plus two elected City Council members — who sit on the city’s Port Authority Commission. Together with Winona Health CEO Rachelle Schultz and Winona State University (WSU) Vice President for Finance and Administration Scott Ellinghuysen, they will decide which — if any — of three different proposals for building a parking ramp/hotel/apartment complex to accept.

Last summer, Port Authority officials put out call for proposals to build a parking ramp/hotel/apartments on the lot, and on April 6, Rochester-based Hamilton Real Estate presented its concept to do just that. Streetfront Development, of the Twin Cities, pitched the Port Authority on a hotel and parking ramp on April 7. Last week, George Sherman, of Minneapolis’ Sherman Associates, and Krych, a partner at BKV Group, presented a final proposal, while local hoteliers Mike Rivers and Jerry Papenfuss looked on.

All of them call for subsidies of some kind — from multi-million-dollar expenditures by the city to six-digit tax breaks. In interviews two weeks ago, City Council members George Borzyskowski and Al Thurley said those public investments may be a necessary step to achieve the city’s goal of revitalizing downtown.

Discussing both the 60 Main Street project and the city’s recent purchase of the former Hardee’s site, Port Authority Commission Chair Mike Cichanowski said in an interview, “Ten years from now, it’ll be a different city. That’s what you want.”

 

Sherman: more apartments,

smaller hotel

Minneapolis-based Sherman Associates has a number of waterfront developments in Duluth, Minneapolis, and Des Moines under its belt. In Winona, owner George Sherman proposed a 94-unit apartment complex linked to a 60-room hotel — both sitting above a 169-stall parking garage. Compared to the other two proposals, Sherman would build more apartments, more parking spaces, and a smaller hotel. The parking garage would occupy the first two floors of a six-story building, with a hotel lobby and restaurant or retail space on the ground floor at Center Street and an apartment entrance on the ground floor at Main Street. Above the parking ramp, the building would be E-shaped with two wings of apartments and a third wing of hotel rooms facing the river.

Like the other two proposals, Sherman said rent at the building’s apartments would be high: around $1,200 per month for a one-bedroom unit and around $1,600 per month for a two-bedroom unit.

Echoing statements from Streetfront Development and Hamilton Real Estate, Sherman said his goal is to own developments long-term, not sell them off. “We do the things that matter for 30 years, not for two years,” he told city leaders.

 

Some public parking

Sherman’s design is the only one of the three proposals that includes any public parking. According to Sherman, the ground-floor of the parking ramp would include 45 public parking stalls. At the 60 Main Street site, there are 128 public parking spaces today, so Sherman’s proposal would produce a net loss of 83 public parking spaces. 

For downtown Winona, the city’s proposed new zoning ordinance would require one parking space per apartment unit after the first four apartment units, so a 94-unit apartment building would need to provide 90 spaces. Because downtown commercial uses are exempt from off-street parking requirements in both the current and proposed new zoning code, the city’s zoning rules would not require Sherman to provide any parking for his proposed hotel. After reserving 90 stalls for tenants and 45 stalls for the public, a 169-stall parking garage would have 34 spaces left for the hotel.

The other two proposals did not include any public parking, though Streetfront Development said it might be possible — at great expense — to add another level of parking to its plans. Sherman’s team said they, too, could add another level of parking, but warned the city against mandating an overabundance of expensive parking stalls and said there might be opportunities for sharing parking spaces between the hotel, the apartments, and the public. “We have room to add another floor. At $25,000 to $30,000 per stall that’s pretty expensive parking that would need to be funded,” Krych said.

All three developers said that constructing underground parking at the site would be impossible or infeasible because of the high groundwater table.

 

Funding, tax breaks

Sherman asked the city to pay for environmental clean-up at the site, which the city might be able to fund with state grants. The only other financial assistance Sherman specifically asked the city for was tax increment financing (TIF) — a tax break on the future property taxes a new development would generate. Streetfront Development asked the city to fund the construction of its proposed parking ramp at a cost of $2.5 million. Hamilton Real Estate also asked the city to fund its $4-million to $5-million ramp. Sherman did not ask the city to pay for his proposed parking ramp. 

Asked to elaborate on what financial commitment from the city he was asking for, Sherman said he would likely use a variety of non-city funding sources, possibly including federal new market tax credits, state economic development grants, and state and federal housing funds. “It’s going to probably take five to six sources of financing to make it work,” Sherman said. Sherman added that if his firm was selected, he would likely take the next year to 15 months to develop a financing package. Unless the city has “some wonderful salt mine or gold mine,” Sherman said he would probably ask for TIF and environmental clean-up funding.

“He didn’t really throw it down there. That’s the biggest question I have,” Cichanowski said when asked exactly what sort of financial assistance Sherman requested. “Beside the TIF and the lot clean-up, I couldn’t tell if he asked for anything else,” Cichanowski added. Sherman was not immediately available for comment.

TIF could be a significant chunk of assistance on its own. Hamilton Real Estate’s proposal for 60 Main Street estimated that its proposed hotel-apartment-parking ramp would generate $250,000 in new property taxes annually. An apartment complex near WSU valued at $3.2 million is slated to pay $48,000 in the taxes this year. Sherman estimated his proposed building would be worth 10 times as much.

Federally-funded new market tax credits are meant to incentivize investments that will benefit areas where the median income is well below the state average, such as Winona. According to the Internal Revenue Service: “These investments are expected to result in the creation of jobs and material improvement in the lives of residents of low-income communities."

 

What’s next?

Winona City Manager Steve Sarvi said that Schultz, Ellinghuysen, and the Port Authority Commission probably will not decide which proposal — if any — to select until May.

If the city decides to move forward with one of the developers, the next step would be for city officials to work out and approve a development agreement between the Port Authority and the developer. Such an agreement would spell out what both parties were committing to do, including the specifics of any financial assistance from the city. That could take months to negotiate and prepare.

Port Authority members may know more about the proposals than the public does. City leaders and the developers chose to release some information on the proposals now: one-sheet summaries and the information discussed at their meetings. However, developers gave the Port Authority Commission full packets of information on their proposals. The city will not be legally required to release that until/unless it selects a firm.

 

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