The St. Paul, Minn., City Council is taking a dim view of Concordia University's plans to take a nine-story medical office building at least partially off the city's tax rolls.
Concordia has partnered with the St. Paul Port Authority in hopes of buying the Central Medical/Central Midway building at 393 N. Dunlap St., just south of University Avenue and the Green Line near Lexington Parkway.
Concordia already leases office space on four floors for its Doctor of Physical Therapy and Nursing programs, as well as the Office of Advancement, Office of Alumni Relations and a number of graduate program faculty offices. It plans to buy the building to expand its health-science clinics, as well as business programs, and is asking the city for help.
Port Authority officials appeared before the St. Paul City Council last week to request that the city back $5.5 million in conduit bonds — a type of tax-exempt financing arrangement that would lower the university's interest payments to the bondholder, Bremer Bank. All debt payments would be made by Concordia.
They said city planning staff had approached them about helping Concordia, and they were not expecting pushback from the council.
Rather than approve the issuance of the conduit revenue bonds by the Port Authority on Wednesday, the city council chose to delay a vote until Feb. 6.
"It just strikes me as very odd that the Port Authority is backing this," said city council President Amy Brendmoen.
It's not uncommon for the city of St. Paul to help schools, senior care centers and other nonprofits expand or remodel using public bonds. However, city council members said they were taken aback by the effort to acquire an occupied medical office building on a busy transit corridor.
Over the years, the Port Authority has sometimes fought efforts to convert industrial land into housing or nonprofit uses.
"It does surprise me in view of the fact that the Port has been such a strong voice for not converting property from commercial and industrial for other uses," said council member Jane Prince.
In addition to the tax exemption, the city's involvement in the bond issue would secure a favorable interest rate of 4.25 percent.
The nine-story Central Medical/Central Midway building, which dates back to 1967, is home to a variety of medical uses, including plastic surgery, dentistry, chiropractic care, a spinal clinic and hearing specialists. The building underwent some remodeling improvements around the debut of Metro Transit's Green Line light-rail corridor on University Avenue.
"I don't believe I have enough information to move forward with a vote here today on this item," said Brendmoen, introducing the proposed conduit bond issue to the council on Wednesday. "There's a few folks here on the council who have raised some concerns about this item. ... We do approve conduit bonds for different nonprofit uses, particularly for charter schools."
"It's our understanding that at least for the city — and that's not including the school (district) and the county — we'll see a reduction of $46,000 a year," Brendmoen said.
That estimate may be high, said Peter Klein, a vice president of financing with the Port Authority. He said the sale and financing was expected to close on Jan. 31, and that the portion of the building occupied by private enterprise would continue to contribute to the tax rolls.
"Only the nonprofit portion of the building would go off the tax rolls," said Klein, noting no zoning changes are required. "It certainly is close proximity to Concordia. ... They do occupy one-third of the building right now. It does make sense for them to own it rather than continuing to lease."
A final purchase price for the building is still being negotiated, and the bond issue would be part of the overall financing.
Council member Rebecca Noecker noted, however, that if Concordia chooses to expand within the building, the taxable revenue to the city would drop. Noecker said the city needs further study and a formal policy about when to support reducing private property in the city.
"I'm really concerned about death by 1,000 cuts when it comes to these individual votes that we take in terms of taking property off the tax rolls," she said.
Prince agreed. "I guess I'm not sure what we should do, but it does seem like a huge policy issue that I wish had caught my attention much earlier," she said.
In a written statement, university officials said "expanding Concordia's presence in the building serves both the university and community."
They said the building acquisition would allow the school "to expand academic programs including business and health science. ... The facility also provides a location for Concordia students to engage in community clinics."
