Memo - Japs-Olson Company ParkingMEMO
To: City Council
From: Nancy Anderson
Date: August 29, 2008
Subject: Japs-Olson Company Parking
I. BACKGROUND
Japs-Olson is a printing company located at 7500 Excelsior Boulevard in St. Louis Park.
This property is just east of Powell Road, adjacent to Hopkins. Japs-Olson is
contemplating a building expansion on their present parking area and, therefore, will
need a new parking area. The Kunz Oil property is located at 7900 Excelsior
Boulevard, west of Powell Road. The property includes portions in both Hopkins and
St. Louis Park. In Hopkins, it is currently zoned and guided Industrial, but the proposed
Comprehensive Plan designates the Kunz Oil property as Business Park. The north
side of the Kunz Oil site is in St. Louis Park. Representatives of Japs-Olson contacted
the City of Hopkins regarding construction of a parking lot on the Kunz Oil site in
conjunction with the construction of a building addition on their property.
II. EXISTING ZONING
The Kunz Oil property is currently zoned I-2, General Industrial. The use of a parking lot
on the Kunz Oil site as the primary use is not allowed under the zoning ordinance.
Parking is allowed only as an accessory use. The Zoning Ordinance states the
following: Section 540.05. Permitted accessory uses. The following are permitted
accessory uses in I district: c) Off-street parking and loading spaces as required and
permitted with this code.
III. OPTIONS
The City can elect to deny the request from Japs-Olson Olson; however, in an effort to
accommodate the Japs-Olson Olson expansion, the following options have been
discussed:
• Interim use (parking allowed for a specified period of time and then removed)
• Parking structure on north side of the Kunz Oil site with a new building on the
south side abutting Excelsior Boulevard
• Parking structure on north portion of the Kunz Oil site shared by Japs-Olson and
a new building on the Kunz Oil site
• Allow surface parking as primary use with an amendment to the industrial zoning
district
Representatives from Japs-Olson have indicated they are not interested in any option
other than the last. Attached is a memo from Japs-Olson Olson explaining their
concerns.
IV. LAND USE
Even if a parking lot were permitted as a primary use in the Industrial district, there is
the issue of developing the Kunz Oil site as a parking lot rather than redeveloping it as a
business park. The proposed Comprehensive Plan designated the Kunz Oil site and
the former Rainbow warehouse as Business Park, to be redeveloped as a higher use
for these properties. Both sites are within the'/2 mile circle of the proposed LRT station
and, combined, total approximately 25 acres.
V. TAX BASE IMPLICATIONS
The Japs-Olson addition is estimated to be valued at $7.75 to $9.3 million and be
constructed in approximately three years. If a new building were constructed on the
Kunz Oil site the estimated value of the building would be $12-15 million and the
construction timeline would be market driven. The Kunz site development value and
timeline can only be estimated, but the site appears ready for redevelopment.
VI. STRUCTURED PARKING OPTION
In an effort to strike awin-win situation, staff has explored the concept under which
Japs-Olson would be allowed to purchase the Kunz property and use it as surface
parking until a time when the market supports a business park development on the site.
At that time, the proceeds generated from the sale of the land and the taxes generated
from both the Japs-Olson addition and the Kunz site redevelopment pay for the cost of
constructing a structured parking ramp.
It is estimated the increased taxes would result in a present value of approximately $4
million. The proceeds from the land sale are very hard to predict, but a projection would
be $2-4 million. The cost of constructing a 1,000 car structure would be approximately
$15 million. While those numbers do not appear to work, they are based on
speculation, and actual conditions may be more favorable.
It would be possible to leave this option open with an agreement with Japs-Olson
guaranteeing them a set number of parking spaces while giving the City development
rights into the future.
VII. TAX SHARING OPTION
To compensate the City of Hopkins for the loss of potential taxes generated from the
redevelopment of the Kunz site, atax-sharing scenario has been discussed with St.
Louis Park city staff. They have indicated they would support the City of Hopkins
receiving 213 of the tax revenue generated from the addition to the Japs-Olson building.
The St. Louis Park City Council has not discussed this option.
The following chart shows the projected tax implications for Hopkins:
Value of Building City Tax Total Tax
213 of Japs-Olson addition: $6,138,000 $55,956 $204,521
Redevelopment of Kunz site: $12,000,000 $109,725 $400,995
This assumes the high end value of the Japs-Olson addition and the low estimate for
redevelopment of the Kunz site. Land value of the Kunz site was not taken into
account, as taxable land value would likely increase under each scenario. Based on
these assumptions, the difference in taxes generated per year is $53,769.
If the tax sharing concept were supported by the City of Hopkins, we would want a
minimum assessment agreement and timeline commitment from Japs-Olson and atax-
sharing agreement with the City of St. Louis Park. A zoning code amendment would
also be necessary.
VIII. ZONING CODE AMENDMENT
If the direction the staff receives from the Planning Commission and the City Council is
to accommodate Japs-Olson by allowing a surface parking lot on the Kunz Oil site as
the primary use, the City Attorney has recommended amending the zoning ordinance to
allow a parking lot in Hopkins for a use in another city as a conditional use in an
Industrial district. The conditional use permit would be fairly specific to this area so that
we are not opening the possibility of other similar uses with adjoining cities.
This is an overall summary of how this could work. There are many details that need to
be worked out and, of course, the City Council of St. Louis Park and Japs-Olson would
have to agree to this option.
Hennepin County Property Map Print Page 1 of 1
1 1
,,
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Sale Price: $1,200,000.00
Sale Date: 03/1998
Sale Code:
httpa/gis.co.hennepin.mn.us/HCPropertyMap/Locator.aspx?PID=2011721230008 08/27/2008
Date Printed: 8/27/2008 1:38:52 PM
Current Parcel Date: 8/4/2008
Background:
Japs-Olson is a 100 year old printing and direct mailing company. It moved to its
present site, at 7500 Excelsior Blvd in 1997. This location provided Japs-Olson an
additional 170,000 square feet to grow. Since then, Japs-Olson's sales have grown by
approximately 75 percent. The company's payroll has spiked as high as 799
employees, which is an increased of 256 people since 1997. A 47 percent increase in
the labor base. The payroll has increased to an average of over $52,000 annually per
employee. This represents a 73 percent increase since the move into the area. Annual
payroll is upwards of $40 million. Japs-Olson has approximately 120 employees living in
the surrounding St Louis Park and Hopkins communities.
Japs-Olson is preparing for future expansion. The intention is to add approximately
160,000-170,000 square feet to its existing building which will probably add another 250
jobs. The expansion would displace a large portion of its parking lot. This future
development will require the company to acquire additional land to replace the
existing parking and future parking requirements. There is no further parking space on
the land it owns.
Walter Kunz has agreed to sell his nine acre parcel West of Japs-Olson which will
replace the existing parking lot lost to the building expansion and allow for additional
parking to accommodate the new addition or additions.
Concerns:
The Kunz property is nine acres, seven of which are located in the City of Hopkins. The
remaining two acres are in St Louis Park, as is Japs-Olson and the contemplated
addition. The City of Hopkins is planning to change the classification of the Kunz
property from industrial to a business park. Industrial zoning would permit the parking
use. A parking lot versus a business park, however, is not appealing to the City of
Hopkins due to a potential tax base associated of a future business park. The amount
of loss and the timing of a future business park development is speculative at this time.
Various scenarios have been advanced to address the problem. They are as follows:
Scenario #1: Japs-Olson purchases property on the East or North side for parking.
Japs-Olson has made an offer to the owners of Appliance Recycling Center east of
Japs-Olson. The offer has been flatly rejected. No counter was made. The property is
not for sale.
There has been a recent remodel and expansion to the buildings on the North side of
Japs-Olson for another organization. That property is also not for sale.
Scenario #2: Japs-Olson builds a separate building on the Kunz property.
Under the designation of a business park, Japs-Olson would be required to have 60
percent of the building as office space and 40 percent as light manufacturing. As a
result, the amount of office space required to accommodate Japs-Olson's production
space will far exceed Japs-Olson's current and future office needs if even a modest
building were built.
More importantly, Japs-Olson moves material to various manufacturing locations
through the production process. It is really a materials handling business. Adding a
second building would significantly disrupt the flow of production by moving material
from building to building across a public street. Japs-Olson struggled with this concept
prior to moving to St Louis Park. Manufacturing in one building is a key strategic
advantage for Japs-Olson.
Japs-Olson manages data files of our customers. This data may contain private
information that, if compromised, could lead to identity thefts and legal actions against
its clients. Data security and personal identity is a hot item today. As a result, a number
of security agreements with some of our major clients require us to keep all records
{printed and electronic) confined in one location until the product has been accepted
by the USPS. Once the mailing has been accepted, the data files are destroyed.
Moving material between locations to fulfill a program would constitute a security
breach with a number of the company's clients. Each program has different fulfillment
requirements where the printed or electronic data touches every area of production in
the company's facility. The "two building solution" just does not work in a continuous
flow production, secure, manufacturing operation.
Scenario #3: Japs-Olson builds a structured parking ramp on the two acres of the Kunz
property located in St. louis Park. Japs-Olson develops the seven acres in Hopkins for a
business park.
Initial estimates to build a 600-car parking ramp on two acres will exceed $12 million for
the structure alone. With the structure comes additional maintenance expense. The
parking structure will also add to the tax cost of the property. The additional expenses
of a structured parking ramp will make Japs-Olson uncompetitive in an extremely
competitive marketplace. The parking ramp concept is more expensive than the
contemplated addition to the building itself. Lastly, Kunz will not sell the two acres
piece alone leaving Japs-Olson with seven acres it cannot use with a building it cannot
rent. Japs-Olson is not a developer and is not comfortable speculating on when the
property would be attractive to a developer.
Scenario #4: Japs-Olson buys the properly and holds it for a specified future triggering
event. Then, Japs-Olson develops a portion of the property to pay for the parking
structure with the presumed increase in property value.
This scenario is based on a high degree of speculation of potential market conditions. It
assumes the future value of the property will exceed the future costs of the parking
ramp. It creates a risk that Japs-Olson cannot prudently take. Further, it would be
logistically impractical to manage the future parking needs after the addition has been
built. There would be a significant disruption to Japs-Olson's production operation and
to find other parking and transportation for our employees while the ramp is under
construction.
More importantly, Japs-Olson has not found a lender that will be willing to lend against
a plant that may lose its parking and supply the millions of dollars to build a ramp which
adds no additional value to the business.
Scenario #5: Japs-Olson puts in a parking lot at the Kunz property. A future business
park is developed at the Rainbow site, Japs-Olson allows for shared parking.
The Kunz property is believed to occupy a majority of the future parking needs. In
fairness, there is not much likelihood there will be much excess space to warrant this
option.
Scenario 6: The Cities of Hopkins and St. Louis Park negotiate an agreement with each
other that addresses their tax base concerns.
As far asJaps-Olson is concerned, the best alternative for all three entities is a
negotiated agreement between the City of Hopkins and the City of St Louis Park. The
land acquisition and future expansion will create additional tax revenue for the cities.
Japs-Olson is indifferent to how these additional taxes are allocated between the two
cities. The company can then plan on future expansion without disruption to the
business and additional expenses which makes it less competitive. The City of Hopkins
and St. Louis Park can mutually share in the tax base as a result of the development of
the property and share in the benefits of added jobs and commerce.
Japs-Olson's concern is if neither city is willing to negotiate a reasonable agreement or
has unrealistic expectations in the value of lost tax based opportunities. Scenario #6
needs to be developed between the Cities. Japs-Olson's plant and expansion can be
a win/win for St. Louis Park, Hopkins, and Japs-Olson.
ZONING AND PLANNING COMMISSION MINUTES
August 26, 2008
A regular meeting of the Hopkins Zoning and Planning Commission was held on Tuesday,
August 26, 2008, at 6:30 p.m. in the Council Chambers of Hopkins City Hall.
Present were Commission Members Tom Jenny, Patrick Beddor, Kyle Skiermont, Linda
Flynn and Bob Hatlestad. Commissioners Kate Reilly and Kathy Newcomb were absent.
Also present were staff members Nancy Anderson and Kersten Elverum.
City Attorney Jerry Steiner was also present.
CALL TO ORDER
Mr. Skiermont called the meeting to order at 6:30 p.m. in the Council Chambers.
APPROVAL OF MINUTES
Mr. Beddor moved and Mr. Hatlestad seconded the motion to approve the minutes of
the July 29, 2008, regular meeting. The motion was approved unanimously.
ITEM: ZN08-2 ORDINANCE AMENDMENT -ANIMAL DAY CARE
Ms. Anderson reviewed the proposed amendment with the Commission.
The public hearing was opened at b:32 p.m. No one appeared at the public hearing. Mr.
Hatlestad moved and Ms. Flynn seconded a motion to close the public hearing. The
motion was approved unanimously. The public hearing was closed at 6:33 p.m.
Mr. Beddor moved and Mr. Hatlestad seconded a motion to adopt Resolution RZ08-5,
recommending approval of an ordinance amendment to allow animal day care within the
B-3 zoning district.
Mr. Beddor left at this time.
ITEM: DISCUSSION DAPS-OLSON PARKING
Ms. Anderson presented the background of the parking issue for Japs-Olson.
Ms. Elverum reviewed the tax implications of a parking lot vs. a building on the property
and the discussions with St. Louis Park staff.
MINUTES OF THE ZONING AND PLANNING MEETING
Page 2
Bob Murphy, representing Japs-Olson, appeared before the Commission. Mr. Murphy
stated that in 1997 they moved from north Minneapolis. He gave the history of growth for
the company and stated that they now need additional space.
Morris Sherman, the Japs-Olson, attorney appeared before the Commission. Mr. Sherman
discussed the benefits to the City of Hopkins from having Japs-Olson remain at its current
location with the construction of a parking lot on the Kunz Oil property.
The Commission gave the following comments:
Bob Hatlestad:
Would like to find a mutually beneficial agreement for all three parties. See something
happen that works for everyone. There is an opportunity cost for a parking lot and he
would like to see greater compensation than the 2/3 -1/3 split with St. Louis Park
Tom Jenny:
Understand your position. Hope to figure out a way to make it work
Linda Flynn:
Tax revenue is something to think about - need to speak to St. Louis Park -Hopkins has
had success in waiting for what we want.
Kyle Skiermont:
We spent many hours on the Comp Plan, and there are so few sites to redevelop and no one
mentioned a parking lot for seven acres. People want to see more Opus-type development.
Higher hopes for that land other than a parking lot
Mr. Hatlestad volunteered to present the report to the City Council.
ADJOURN
Mr. Skiermont moved and Mr. Hatlestad seconded a motion to adjourn the meeting.
The motion was approved unanimously. The meeting was adjourned at 7:40 p.m.
MEMBERS
MINUTES OF THE ZONING AND PLANNING MEETING
Page 3
ATTEST:
Kyle Skiermont, Chair