M & D Properties, owned by Dale Bushard and Mike Kral, is currently working on a townhouse project at 2229 N. Highland Avenue. In January, the New Ulm City Council authorized staff to prepare an abatement for the townhouse project. This was the first tax abatement project approved in New Ulm for a residential development. The proposed development would include eight rental townhouses. Each townhouse would be two stories and each would have two bedrooms.

Recently, M & D Properties contacted the city requesting an expansion to the abatement to allow for the construction of six additional residential units. These six additional units would also be two-story and each would have two bedrooms with a stall tuck under garages. These additional units would be constructed to the west of the original eight townhouses.

Community Development Director David Schnobrich said preparation on the original tax abatement request was suspended after M & D Properties requested the expansion. The expansion of the tax abatement would require a development agreement and a public hearing on the project would be needed following the development agreement. The development agreement would cover the payment of property taxes, continued construction and further information on the tax abatement program.

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. The six previously established programs were for industrial businesses. The M & D Properties townhouse project would represent the seventh tax abatement program.

A map of the 2229 N. Highland Avenue townhouse project indicating the two phases. The first phase of the project has already begun. M & D Properties began construction of eight rental townhouses off N. Highland Avenue. The second phase includes the construction of six more townhouses. The New Ulm City Council previously agreed to prepare a tax abatement for the first phase of the project and has agreed to prepare documents to expand the abatement to include the second phase.

Council President Andrea Boettger asked how many tax abatements the city has open before it begins impacting the city’s revenue.

Schnobrich said there were two thresholds the city needed to watch for: total abatements of $200,000 or 10% of the city’s tax capacity. He said the city is not currently near either threshold.

Councilor Eric Warmka said he was comfortable with expanding the tax abatement for this project as it was helping develop a difficult part of the community. He was also impressed with the design of the rental units.

“What they are building is beautiful,” Warmka said. He made the motion to authorize city staff to prepare the necessary documentation to expand the tax abatement program, with a second from Councilor David Christian.

The motion was unanimously approved.