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A no go: The Fergus Falls City Council terminated the letter of intent with American Covenant Senior Housing Incorporated at Monday’s meeting.

Fergus Falls City Administrator Andrew Bremseth’s voice was loaded with disappointment Monday night as he informed the city council of the latest setback in turning the Regional Treatment Center campus into a financial victory for Fergus Falls.

Bremseth was asking the eight members of the council to terminate a letter of intent with American Covenant Senior Housing Incorporated – part of a three-year effort to turn the RTC campus into a taxable advantage.

ACSHI had made plans to build two separate 40-apartment housing projects. To accommodate the Georgia-based developer, the council voted to replat the property in three parcels.

The beautiful campus, sporting architecture as much as two centuries old, became city property more than a decade ago when it was offered to Fergus Falls by the state of Minnesota.

“They gave us state bonding dollars in the amount they estimated would cover the cost of demolition,” Bremseth said Wednesday.

The city has used a portion of those state bonding dollars for a variety of projects, including the Phase II demolition project presently underway north of the Kirkbride tower and its gigantic east and west wings.

The council accepted ACSHI’s letter of intent to purchase property on the campus in March of 2018. At a June 3 meeting of the city council, the members voted in favor of extending ACSHI’s letter of intent from September to the last day of 2019 so they could obtain funding from Minnesota Housing.

According to Bremseth, housing infrastructure bonds were a key component of the development’s pro forma. When ACSHI understood it was not going to be selected to receive the bond, they also realized the gap was too large to overcome. Minnesota Housing turned down their competitive application because the group didn’t provide enough information to prove they had the financial resources to complete their RTC campus project.

“While it’s disappointing to see this potential redevelopment project stalled, we have understood for a long time that the funding from Minnesota Housing was essential to make this project work,” Bremseth said. “Since starting on this project in 2017, the development group has always been forthright and transparent in their process and have been enjoyable to work with.”

Fergus Falls Mayor Ben Schierer also expressed his regret but saw some light ahead in the city’s continued efforts to turn the property into a tax advantage for the citizens of Fergus Falls.

“I am disappointed that the project was not successful, but at the same time I am encouraged by the efforts of the city council in working with the State Legislature and the Historical Preservation Office (SHPO) in finding compromise on reducing the footprint of the campus to a size that is manageable for the city yet maintains the most historic components of the campus,” Schierer said.

Schierer, who was elected mayor of the city in 2016, likes the private development he is seeing on the RTC grounds.

“I am encouraged to see private development continuing to take place on the campus with Campus Development Group beginning work on their project at the former nurses cottage,” Schierer said. “Most importantly, I am pleased that the city has taken these steps at both preservation and development while protecting taxpayers, moving forward on other projects, and not letting this issue paralyze the city as it has in the past.”

Councilman Anthony Hicks echoed the disappointment of both Bremseth and Schierer but also felt it provided some hard truth which could profit the city in the future.

“What it does is show how deep the pockets of any developer has to be to do these projects,” Hicks said. “The city council is more than willing to divide the property to fit a developer. This is what we were willing to do with this developer.”

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