Staff photo by Clay Schuldt The construction site of the M&D properties townhouses at 2229 N. Highland Avenue. The city of New Ulm granted a tax abatement for the project.

NEW ULM – The tax abatement for the M&D townhouses will move forward following formal approval from the New Ulm City Council authorizing staff to prepare an abatement program at 2229 N. Highland Avenue.

A tax abatement program allows a city to rebate a portion of the property taxes back to the property owner, who then uses the money to offset development or redevelopment costs.

New Ulm currently has six existing tax abatement programs and one pending abatement program. The six previously established programs were for industrial businesses. The pending abatement program is for the former Lamplighter building, which is being redeveloped into a winery. The property is classified as commercial.

This project would be the first abatement for a residential development. The goal of this abatement is to ease the cost of building the properties and allow rental rates to be affordable to residents in New Ulm. The project would also help address the city’s housing needs.

During the city council’s previous meeting on Tuesday, Jan. 7, staff was authorized to begin preparing information for this tax abatement; specifically how much a rebate this project could receive. Community Development Director David Schnobrich informed the council at their latest meeting that the city’s portion of the property tax generated by the project was estimated at $9,946 per year. Staff was recommended a 10-year term for this project. Over this period, the project would generate a $99,460 rebate.

The council favored granting the abatement. The project would help cover the cost of eight rental townhouses. Each townhouse would be two stories and each would have two bedrooms.

Councilor David Christian asked if other cities are starting to use tax abatement to expand housing.

Schnobrich confirmed other cities are assisting residential development through abatement. Some cities are focusing on single-family homes. Others are focused on apartments.

“The biggest need in our community is more affordable housing,” Councilor Eric Warmka said before making the motion to authorize the tax abatement program. Councilor Christian seconded the motion and was unanimously approved.

“I am just glad we have tools like this to give developers options,” Councilor Larry Mack said.

With the council’s formal approval, staff can proceed with the preparation of appropriate tax abatement documents.

The establishment of a tax abatement program will require a Development Agreement. A Public Hearing on the project is required and will be held following the preparation of the Development.

Agreement.