City Council Meeting Date: May 19, 2026
To: Mayor and Members of Council
City Administrator
From: Scott Wopata, Community Development Director
Emery John, Program Associate
Title
Consideration of a resolution modifying the Master Development District and the establishment of the Harvest Hills Tax Increment Financing District
Body
Action Requested:
Staff recommends a motion to approve Resolution modifying the Master Development District and the establishment of the Harvest Hills Tax Increment Financing District.
Summary Report:
Below is a copy of the staff report prepared for the May 19, 2026 Public Hearing regarding the Development Program for the Master Development District and for the Tax Increment Financing (TIF) plan for the Harvest Hills TIF District.
Schrom Construction Inc. (Developer) is requesting Tax Increment Financial (TIF) incentives from the City of Northfield to facilitate a new mixed-income townhome rental housing development in the City of Northfield. The development is expected to consist of approximately 71-units, 20% of which will be designated for occupancy by persons at or below 50% of Area Median Income.
The project will occur in two phases on approximately 10.3 acres of undeveloped vacant land identified as Parcel ID #22.12.4.26.022. This is in the southern portion of the City, directly West of the Middle School. The first phase is anticipated to begin in 2026 with grading and infrastructure improvements necessary to construct 38-townhome units. A second phase for the remaining units is planned after completion and occupancy of phase 1.
Affordability
As is required with a housing TIF district per state statute, this development will adhere to strict affordability guidelines for 20% of the units to be affordably rented to households at 50% of the Area Median Income, as defined by the Department of Housing and Urban Development for Rice County. These affordable units are estimated to rent for approximately $1,700/month; affordable for annual household income of approximately $60k for a family of five.
80% of the units are market rate and estimated to rent for approximately $2,400/month; this is affordable for households around 80% of the area median income (AMI) or $93k annual household income for a family of five.
Past Action
The Planning Commission motioned to affirm this TIF Plan as conforming to the general development goals of the City of Northfield and the Northfield 2045 Comprehensive Plan on April 16, 2026.
The Housing Redevelopment Authority motioned to affirm this TIF Plan as conforming to the general development goals of the City of Northfield and the Northfield 2045 Comprehensive Plan and 2025-2028 Strategic Plan on April 21, 2026.
City Council previously passed an expansion of the Master Development District to encompass all City limits of Northfield in May, 2022. This allows Council greater flexibility to offer TIF Assistance without amending development districts to include non-contiguous parcels.
City Plans & Policies Relevance:
Business Subsidy Policy (9.03)
“The purposes, priorities, goals and objectives in providing a business subsidy to assist private development under this policy include.to create opportunities for affordable and workforce housing and/or a diversification of housing stock available within the City.” (2)
“Because projects vary greatly in structure and public benefit derived, each project will be considered on its own merits. Subject to the clause below regarding governing body discretion, consideration will be given to projects providing public benefits in one or more of the following categories: ... projects that result in the development of affordable senior or workforce housing… [and] projects that result in greater building efficiencies” (3)
Tax Increment Policy (9.01)
The TIF policy requires any project to meet one or more of the following uses:
“To meet the following housing related uses:
•To provide a variety of housing ownership alternatives and housing choices within the city
•To promote affordable housing for low-or-moderate income individuals within the City, generally 80% of the Dakota County median income as adjusted for family size and pursuant to State statute;” (4)
•“To meet other uses of public policy, as adopted by the Council from time to time, including promotion of quality urban design, quality architectural design, energy conservation” (5)
Staff commentary: Beyond the requirements of the Sustainable Building Policy, the applicant is using a form of stormwater filtration that exceeds code and standard procedure by filtering and recycling graywater for landscape irrigation; project also enhancing bike and pedestrian access in the area.
The proposal meets all eleven required TIF Financing Approval Criteria, including:
1. Abiding by applicable state and legal restrictions
2. Meeting one or more eligible uses (see above)
3. Must be in accordance with the City’s adopted Comprehensive Plan and applicable zoning code and other city ordinances
4. Meeting the but-for test - meaning the project would be unable to occur without the use of such a tool as TIF
5. Aligned with market and feasibility studies of the city
6. 1.2:1 debt service coverage ratio
7. Adequate financial guarantees from the developer
8. Demonstrated past success of the developer
9. Developers are retaining ownership long enough to ensure repayment of TIF and stabilize its occupancy
10. TIF funding will be lowest possible level by maximizing private debt/equity financing first, then other funding sources, then TIF
11. TIF note will be formatted in the pay-as-you-go structure, which is the best practice for a comparable development
The proposal meets additional evaluation criteria outlined in the TIF Policy:
1. All tax increment financing proposals should optimize the private development
potential of a site within site plan review criteria.
2. The developer shall demonstrate that the project is not financially feasible but for
the tax increment financing provided.
3. All tax increment financing proposals should obtain the highest possible private
to-public financial investment ratio. The Council establishes a benchmark ratio of
a minimum of 4 parts private and other funding to 1 part tax increment funding for industrial and commercial projects. Housing, redevelopment and mixed-use
projects shall be reviewed on an individual basis.
4. All City assisted projects will follow the Northfield Business Subsidy Policy (9.03) as
required by the State of Minnesota Statutes, Sections 1 16J.993 through 1 16J.995
and as established by Northfield City Council.
5. Housing Projects will target a portion of increment to create housing for families
at or below 80% of the area median income level as determined by HUD and as
defined in the Northfield Community Development Block Grant Program.
Sustainable Building Policy (8.06)
Phase 1 of the proposed development was reviewed and given formal approval as meeting the Sustainable Building Policy. Staff and a City consultant approved an alternative pathway to meet the policy. Phase 2 will incorporate more robust building improvements in line with the intent and purpose of the sustainable building policy. This includes a traditional pathway to certification in line with the US Department of Energy Zero Energy Ready homes program.
Comprehensive Plan (Northfield 2045)
Future Land Use Map Figure 4 The planned development is in a mixed-use residential zone (56)
Chapter 3: Access: Strategy 5: Design for safe access, by connecting school district trails to neighborhood streets (76)
Chapter 3: Access: Strategy 6: Design for resiliency and sustainability; Action 2: “Encourage the use of energy-efficient mechanical systems and building products and/or the use of building designs and materials that reduce lifecycle carbon and reliance on non-local energy sources in rehabilitation and new construction to decrease building operation costs and impacts on the environment” (77)
Chapter 4: Sustainable Economic Future Strategy 8: Build more housing (104)
Chapter 4: Sustainable Economic Future Strategy 10: “Create programs to support affordable and sustainable homes and neighborhoods (106)
Strategic Plan (2025-2028 Northfield Strategic Plan)
Strategy #2: Increase Housing Availability, target to add 50 multi-family homes annually through 12/2028.
This proposed development also exceeds the goals of the strategic plan by ensuring the affordability of 20% of the proposed units.
Alternative Options:
City Council could reject the resolution
Financial Impacts:
- The cost to establish the TIF district is being paid by the developer
- Specific financial impact (the amount of subsidy) is determined when Council evaluates the TIF Agreement in June.
- TIF Budget: The attached TIF plan provides an estimate of the total incremental tax to be generated from this project
- Type of TIF District: Housing Development District (26-year-Maximum District Life)
- TIF Funding Structure: “Pay-as-you-go.” The developer will incur all upfront costs and be reimbursed over time. This reduces risk to the City related to TIF obligations under this structure.
- TIF Requirements: The funding from TIF is aligned with the eligible affordable unit construction costs related to the project
Tentative Timelines:
March 17, 2026 - City Council approves Res. 2026-036: Resolution Calling for a Public Hearing Establishing the Harvest hills Tax Increment Financing District (“TIF”).
April 16, 2026 - PC Public Hearing and approves PC Res. 2026-004: Consideration of the Preliminary Plat for Harvest Hills 2nd Addition.
April 16, 2026 - PC motions affirming the proposed TIF Plan for Harvest Hills
April 21, 2026 - HRA motions affirming the proposed TIF Plan for Harvest Hills
May 5, 2026 - City Council approves Res. 2026-050: Resolution for Harvest hills 2nd Addition Preliminary Plat.
May 19, 2026 - City Council Public Hearing to establish a TIF District
May 19, 2026 - City Council to discuss resolution establishing Harvest Hills TIF District
June TBD - City Council to discuss and approve TIF Agreement
July TBD - City Council to discuss and approve Final Plat and Development Agreement