The Affordable Housing Trust Funds (AHTF) were established in 2024 through a collaborative partnership between the City of Mankato and Blue Earth County pursuant to Minnesota Statutes Section 462C.16. The purpose of the Trust Funds is to create a permanent and renewable funding source to support affordable and workforce housing development, preservation, rehabilitation, homelessness prevention, and related housing initiatives throughout Blue Earth County.

As housing needs continue to increase across the region, the AHTF Advisory Committee and EDA staff have evaluated long-term sustainability strategies intended to establish a stable local funding source capable of leveraging additional local, state, federal, and private investment.

The proposed funding strategies are intended to:
• Establish a renewable and sustainable local housing funding source;
• Strengthen the region’s competitiveness for state and federal housing resources;
• Provide local matching funds for grant and financing applications;
• Support affordable housing creation, preservation, and homeless response activities; and
• Advance housing priorities identified through regional housing studies and planning initiatives.

Staff recommends that the EDA consider the following sustainability funding strategies for the Affordable Housing Trust Fund:

Affordable Housing Management Fee
A major factor in considering the Public Housing Conversion to Project Based Vouchers was the ability for the City and EDA to have access to reserve funding that would promote affordable housing activities. Through the conversion process, we established management fee revenues associated with converted public housing units. This fee is not to exceed six percent (6%) of gross receipts, to support affordable housing activities under the Housing Trust Fund. Based on current projections, this funding source is estimated to generate approximately $60,000 annually and is above administrative costs allocated in operating expenses.

EDA General Fund Contribution
Authorize the designation annually from EDA reserve fund investments to support long-term Affordable Housing Trust Fund sustainability efforts.

EDA Levy Allocation
The EDA levy has remained at $365,000 since 2021. A majority of the levy continues to support economic development partnerships and community investment initiatives.

2026 EDA Levy Allocation

Southern Minnesota Initiative Foundation	$10.000
City Center Business Association	$25,000
Funding Arts and Culture (Twin Rivers and City Art)	$40,500
Funding for GMG Marketing Services (REDA Partnership)	$190,946.49
Funding for Commercial & Residential Building Rehabilitation	$98.553.51
Total 2026 Levy	$365,000

The City Council approved a new REDA Joint Services Agreement on October 10, 2023, with a term through December 31, 2029. Under the agreement, the per-capita rate used to calculate partner contributions was standardized among all participating jurisdictions, resulting in a reduction to the City's REDA contribution.

For 2026, the City's REDA allocation was reduced to $190,946.49, and the resulting savings were reallocated to the Commercial and Residential Building Rehabilitation program. Those funds have primarily been utilized for commercial rehabilitation projects.

For 2027, the City's REDA allocation is projected to decrease further to $186,581.29, creating an additional $4,365.30 in available levy capacity.

The Housing Trust Fund (HTF) Advisory Committee recommends that the Board consider allocating this $4,365.30 to the Affordable Housing Trust Fund that may support rental rehabilitation activities, consistent with Minnesota Statute 469.107.

In addition, the HTF Advisory Committee requests that the EDA consider increasing the Affordable Housing Trust Fund allocation with an increase to the 2027 EDA levy. This investment could support the rental rehabilitation of approximately four to five rental units.

Consideration of these levy funding strategies to be incorporated into the proposed 2027 EDA budget and levy. Final decisions regarding levy allocations and Affordable Housing Trust Fund appropriations are anticipated between September and December 2026. As required by Minnesota levy law, the preliminary levy adopted by the City may be reduced during the budget process but cannot be increased after the preliminary levy has been established.

Recommended Board Action:

The AHTF Advisory Committee requests that the EDA review and approve the attached resolution supporting the proposed Affordable Housing Trust Fund sustainability funding strategies and direct staff to proceed with incorporation of the proposed funding into future budget, levy, and housing funding discussions.