Financial Snag Hits Fort Snelling Upper Post Affordable Housing Project

A plan to turn 26 long-abandoned historic buildings at Fort Snelling's Upper Post into 200 affordable apartments has hit a financing snag that could scuttle the project.

About a year ago, the Minnesota Department of Natural Resources struck a deal with Plymouth-based Dominium to revive the 41-acre Upper Post site. Construction has not started. Now Dominium said it's worried it may not get essential financing through bonds authorized by the federal government and distributed by the state.

There's intense competition for what’s known as private activity bonds.

"Our understanding, from discussion with Dominium, is with the current level of bonds that are allocated, it would reduce the scope of the project too much and it just wouldn't be feasible anymore,” said Larry Peterson, the Fort Snelling Upper Post project manager with the DNR.

In an email, Dominium vice president and project partner Owen Metz said the Fort Snelling project is significantly more complicated and costly than initially expected.

"The construction market is so busy it has significantly inflated construction costs compared to original estimates," Metz wrote. "These types of complex redevelopments aren’t done until the financing is closed and the task at hand has proven more difficult than anyone anticipated."

Metz said he expects intense competition for the bonds Dominium needs for the project. He anticipates the bonds will be distributed by lottery to qualified applicants. And Metz said the odds of Dominium getting all the bonds it needs for the project are 1 in 5, at best.

“The main holdup at this time is getting sufficient tax-exempt private activity bonds in order to allow the development to proceed," Metz wrote. "Without additional bonds, which will be significantly oversubscribed when they next become available in January of 2020, this redevelopment can’t proceed.”

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