TOWER— There was plenty of optimism here 13 years ago, the last time the late Rep. Jim Oberstar paid an official visit to Tower. The longtime Congressman was on hand to help cut the ribbon on a new harbor project that city officials and residents hoped would represent an economic revival for this town of 500.
By restoring the historic connection between Lake Vermilion and the city’s downtown, city officials hoped the project would spark new commercial and residential development along a newly excavated harbor, drawing both traffic and business from the lake into town. An artist’s depiction from the time shows a busy hub of activity, with brightly-colored buildings, expansive docks, and dozens of pedestrians gathered around the site.
Yet more than a decade later, having spent approximately $6.5 million in public funds for a new highway bridge, for dredging, and for docks, walkways and lighting around the harbor, the lack of private development has left many in the community wondering where the original vision went awry and what it might take to turn hopes for harbor development into reality.
Despite the delays and false starts, some of the initial optimism surrounding the harbor’s prospects still remains. “The harbor sure looks nice right now,” said Tim Kotzian, the former city clerk-treasurer who invested many hours promoting the project to potential funders. He said he’s been pleased this summer to see the significant number of boats that use the harbor on a daily basis, even without any new development in place.
Mark Phillips, commissioner of the Department of Iron Range Resources and Rehabilitation, remains bullish on Tower’s future. “I think Tower has a lot of potential,” he said. “I think Tower and Vermilion really haven’t been discovered yet.”
A long and winding road
Back when city officials talked of the harbor development in terms of a “renaissance,” the original harbor committee had proposed mixed development around the harbor, which would attract a wide range of users. Shops and restaurants would draw transient foot and boat traffic, while second story, residential apartments overlooking the harbor would help to ensure the financial viability of the entire enterprise, either through the purchase or rental of apartments.
Docking for residents in the harbor, or at the refurbished marina located just downstream, could make the harbor highly attractive for residents wanting access to Lake Vermilion without the hassles of owning a cabin or lake home— at least that was the concept that the city began to pursue.
But the 2008 financial crisis put a pause on such development and city officials soon realized that the road to their renaissance would be a long one. As time has revealed, the road has included more than one wrong turn or false start.
An initial Request for Proposals, or RFP, issued by the city nearly a decade ago attracted no response from potential developers, other than the advice that the project was not yet far enough along to bring a developer on board.
The original harbor committee, which had broad community membership, was eventually discontinued, and was replaced a few years later by a three-person committee, comprised of the new mayor, Josh Carlson, then-clerk-treasurer Linda Keith, and then-fire chief Steve Altenburg, with consulting from Gary Lamppa and Dick Grabko, of Community Resource Development.
Over the next four years, the group met regularly to discuss options. In 2014, they signed a development agreement with Cobblestone Hotels, which would have consumed most of the harbor zone with a 35-unit hotel. That project, due to questions about the company’s business model, never advanced, sending plans back to the drawing board. The committee, in 2015, considered handing harbor development over to the Tower Economic Development Authority with the intent of developing a mixed commercial and residential project. That idea drew support from both Lamppa and Grabko, who noted that TEDA would have the advantage of obtaining lower interest rates than a private developer as well as potential grant funding to assist in advancing such a project.
In the end, however, the city kept the reins in the hands of the three-person harbor committee, which issued a new RFP for the construction of town homes around the harbor in December of 2015. That RFP, which attracted several responses, included the proposal from Tower Vision 2025, which the harbor committee eventually selected to pursue. The city and Tower Vision, which later spun off Tower Harbor Shores to advance the project, signed a development agreement for 20 town homes in early 2016. The project faced delays from the start, as the harbor committee sought a sufficient number of pre-sales before committing to extending water, sewer, and streets to the city-owned site.
Tower Harbor Shores also struggled to attract investors for the project, although it did eventually raise a few hundred thousand dollars, including a $125,000 loan through the Department of Iron Range Resources and Rehabilitation.
Phillips said he doesn’t regret making the grant to TEDA for the loan to Tower Harbor Shores, even though the prospects for the town home project appear to have dimmed. “It was part of the process of figuring out what will work there,” he said.
But the biggest challenge that Tower Harbor Shores faced was the city’s lack of clear title to some of the land that the city ultimately incorporated into its harbor plat. All parties learned in mid-2017 that the land would need to be platted, which began a more than three-year process to unwind an ownership mess that one experienced state of Minnesota title attorney called “one of the most convoluted” plat histories he had ever seen. As of this writing, that process has yet to be completed, although city officials now hope the plat will be finalized by the end of the summer.
Under state law, Tower Harbor Shores has been unable to execute purchase agreements with any potential buyers until the platting process is complete. That’s left the company and its investors stuck in neutral for more than four years, which has all but sapped the initiative behind the Tower Harbor Shores project. Tower Mayor Orlyn Kringstad, who had initially spearheaded the Tower Harbor Shores project, expressed frustration that the city had signed a development agreement with Tower Harbor Shores without clear title to some of the affected lands.  “I am extremely disappointed in the lack of sophistication of both the former harbor committee and their engineering advisors in causing the delays that occurred over the past five years,” he said.  “However, I am extremely impressed with the newly developed cooperation with TEDA and grateful to the IRRR for understanding and staying with us.”
In recent months, Tower Harbor Shores representatives have suggested they wish to hand the project over to TEDA, although the parties have yet to determine the details of how that might happen.
Back to the future?
The lack of development at the harbor to date appears to have some residents in the community willing to throw in the towel. Increasingly, some in the community have talked openly of turning the area into permanent green space, perhaps with a pavilion for picnic tables or small events.
While some green space at the harbor could be a possibility, former mayor Steve Abrahamson believes it would be a mistake to give up on the vision for development that would create jobs, create new housing, and help local businesses at the same time.
The city’s credibility is another factor, he said, particularly considering the sizable investment in the project that’s already been made by the IRRR and other government funders based on the city’s commitment to pursue significant economic development. “We could never go back and ask for money [for anything],” said Abrahamson.
Phillips also remains in favor of a development project, and he said it’s a question of finding the right fit for the location. “The most successful developments at Giants Ridge were the villas which people put in a rental pool,” said Phillips. “What you need is a business model that works for people,” he said.
Phillips questions whether the expensive town homes originally proposed by the city’s three-person harbor committee were the right fit. “I think some people who want out of their lake cabin might not want to buy a $350,000-400,000 condo,” he said.
Abrahamson agreed, and said he always worried that buyers would face sticker shock from their property tax bills as well.
Kringstad said he has long favored mixed development at the site and notes that it was the city’s harbor committee that had sought a developer for a town home project, instead.
While a 2015 market study by Maxfield Research suggested potential demand for as many as 145 town home units in and around the harbor zone, it also indicated that the site would support at least 7,000 square feet of new retail space.
The mixed commercial-residential model originally envisioned for the harbor did not include town homes, at least not immediately surrounding the harbor. Instead, second- and possibly third-story apartments were a key part of that equation and could be again depending on discussions expected to take place over the next few months. TEDA now plans to engage with the Arrowhead Regional Development Commission on a planning effort to explore next steps at the harbor, and TEDA could well take the lead in advancing development there. An initial planning session is now set for mid-August.