$4.87 Million Amendment for Magnolia Village Housing Project Heads to Salina Commission

The Salina City Commission will consider an amendment Monday that would allow nearly $4.9 million in remaining state funding designated for the second phase of the Magnolia Village housing development to reimburse eligible costs previously incurred during the project's first phase.

The agreement is between the City of Salina and Salina Destination Development LLC, the developer behind the large apartment development near Magnolia Road and Interstate 135.

What is Salina Destination Development?

Salina Destination Development is the private developer selected by the city to construct the Magnolia Village multifamily housing project. The development was created in connection with $25 million the City of Salina received from the State of Kansas to expand housing capacity as employment grew through major economic development projects.

The first phase of Magnolia Village was announced as a 254-unit apartment development near Magnolia Road and I-135, with one- and two-bedroom apartments and amenities including a clubhouse, pool, fitness center, basketball and pickleball courts, walking trails and a dog park. The development is now leasing apartments at 2500 Virginia Drive. 

Phase 2 is another large residential expansion immediately south of the first phase. City planning documents describe approximately 250 additional residential units on the west side of Virginia Drive south of Magnolia Road. 

In other words, Salina Destination Development is the company developing the new Magnolia Village apartment community on the city's south side, and Monday's agreement deals with public funding connected to that project.

$4.87 Million Remains

According to the City Commission packet, $4,874,578.34 remains available from the state funding allocated to Phase 2.

The proposed Third Amendment to the Phase 2 Development Agreement would allow those remaining funds to be used not only for eligible Phase 2 expenses, but also to reimburse certain eligible costs Salina Destination Development already incurred and paid during Phase 1.

The amendment does not simply authorize an unrestricted $4.87 million payment to the developer.

For a Phase 1 expense to qualify for reimbursement, the city must determine that it is eligible under the state's funding agreement and that it was incurred above the expenses already used to satisfy the state's $25 million matching-funds requirement.

The agreement also prohibits reimbursing an expense that has already been paid through the state funds, grant interest, city funds or another public funding source. The developer must provide documentation satisfactory to the city before reimbursement.

Salina Destination Development remains responsible for project costs exceeding the available state funding.

Sept. 30 Deadline

Timing is a major reason the amendment is coming before commissioners now.

The development agreement states that the state funds must be fully expended by Sept. 30, 2026, unless that deadline is extended by the state and city.

City staff says approving the amendment would allow the remaining $4,874,578.34 to be drawn down before that deadline by reimbursing qualifying Phase 1 expenses.

If commissioners reject the amendment, the city's staff report specifically states that Salina Destination Development would be prevented from drawing down the remaining grant money for reimbursement of eligible Phase 1 costs.

Phase 2 Changes

The amendment also revises project timing and milestones associated with the second phase of Magnolia Village.

The underlying agreement divides Phase 2 into components, including an initial 148 residential units and another 100 units.

Separate city planning documents describe the Phase 2 development as approximately 250 additional multifamily units. The development is planned on roughly 27 acres west of Virginia Drive and south of Magnolia Road. 

The City Commission previously approved a Phase 2 development agreement with Salina Destination Development in October 2024. That agreement followed the city's selection of the company through a request-for-proposals process for market-rate apartment development supported by the state housing funding and $1 million in city funds designated for workforce housing. (Agenda Suite)

City staff reports there is no direct fiscal impact to the city from approving the Third Amendment itself.

Staff is recommending approval.

The Salina City Commission will consider the amendment during its regular meeting at 4 p.m. Monday, Sept. 14, at the City-County Building.