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Memo CBD Grocery Store ------ . C I T Y o F HOP KIN S MEMORANDUM DATE: July 9, 1992 TO: Mayor and City council FROM: Jim Kerrigan Director, Planning & Economic Development SUBJECT: CBD GROCERY STORE ALTERNATIVE SITE ANALYSIS -----------------------------.--................. Purpose of Discussion At the July 14th workshop staff will present an overview of site alternatives for a grocery store project in downtown Hopkins. The Council will have an opportunity to ask questions and discuss each alternative. As a result of this meeting staff hopes it will be able to receive some direction as to how the Council . desires to proceed with a potential project. If the City Council desires to further consider undertaking a project on one of the sites, staff requests that the City Council narrow the number of sites down to one or two to allow for a more specific and in depth analysis. Please note that due to planning implications relative to the various site alternatives, the Planning Commission has been asked to attend the work session. overview As a result of the Hennepin County action on the 6th Avenue to 8th Avenue site, city staff was directed by the council to look at alternative sites for construction of a grocery store facility in the downtown area. In response to this request, community Development staff, along with Lyle Fuller of Super Valu and their architectural/planning division, Planmark, reviewed a variety of site alternatives. Upon looking at various potential sites, staff considered the following criteria: 0 Minimize the taking of Mainstreet commercial buildings . 0 Minimize the taking of residential structures HRA Board July 9, 1992 Page 2 . o Minimize the taking of any substantial commercial buildings, i.e. Norwest Bank, First Bank Recently, staff from both the city and Super Valu met with a variety of downtown merchants to discuss various site alternatives that had been identified~ As a result of discussion at this meeting, it was generally concluded that all logical alternative sites had been reviewed by staff. However, in response to comments, modification of certain sites was completed by staff. Alternative sites Eleven scenarios have been developed on four different sites. These are as follows: o Taits Super Valu block 3 scenarios o Bursches Park Nicollet block 2 scenarios o Rudy Luther property 2 scenarios o Suburban Chevrolet property 2 scenarios An analysis of each of these sites is attached to this report. . Analysis For each of the site alternatives. a summary sheet is attached which details the following: o Size. The sites ranged in size from approximately 2 acres to 4 1/2 acres. In previous discussions with Super Valu, they have always stated that they required a minimum of approximately 3 1/2 acres in order to construct and provide adequate parking for a 38,000 square foot facility. Therefore, it would be assumed that any site of a smaller size would potentially limit the size of a facility or its future expansion capacity. In determining the size of a potential project site which span two different blocks, the contiguous street has been included in calculating the overall square footage (8th Avenue or 10th Avenue). In reality this mayor may not be practical depending on traffic and utility issues. o proiect area description. This details the number of . properties in the project ar. ea both private and public. The public property many times includes a parking lot which is presently utilized by other businesses and - HRA Board July 9, 1992 Page 3 . therefore can only partially be incorporated into the project area. 0 site assemblaqe costs. These are estimates which had been compiled by staff and are based on the following: - Acquisition at the assessors fair market value plus 10%. It is assumed that the actual purchase would be based on a fair market appraisal and that there would be no condemnation, provided all the property owners were willing sellers. - Relocation is based upon a payment of $20,000 per tenant. Some of the smaller tenants would require a lesser amount and some of the larger a greater amount. However, the City's relocation consultant felt that the $20,000 would reflect a good average. - Demolition. Demolition figures were based on previous experience. This figure could vary substantially depending upon asbestos and environmental issues. . - Public improvements. No figures detailed as relates to public improvements. It is assumed that any costs as relates to this item would be fairly minimal. However, this would be dependent upon the fact there would be no substantial rerouting of existing utilities. - 15% of the total project cost detailed for administration/contingency purposes. Basically staff is recommending this for any overruns of the proposed project cost estimates. Based upon site assemblage costs the total funds allocated to this line item mayor may be not entirely used. 0 Revenues. These are shown with the following detail: - A developer land payment of $200,000 is shown for each one of the various scenarios. This is based upon what the developer previously stated they could provide as a payment for the 6th to 8th site with a 38,000 square foot grocery store and still make the project financially feasible. The specific amount will vary depending upon negotiations with the developer. . - The amount of tax increment generated for each site is detailed. The amount of tax increment is '1:_<"-""" ~ , ", HRA Board July 9, 1992 Page 4 . only calculated over a' five year time period. This is because the downtown tax increment district expires in 2001. As a result, very limited increment~is able to be captured. In some cases there would be a loss of increment to the district because there would be. less value with the grocery store project than what previously existed in the project area. A portion of the proposed Suburban Chevrolet site is presently not located in a tax increment district. Potentially a portion of this project area would need to. be included in a new tax increment district. This could allow for a longer period of recapture. , 0 Public costs. This figure is determined by taking the total estimated project cost and subtracting the $200,000 developer land payment and the amount of tax increment to be generated. From this gross project cost, the bond proceeds of $1.1 million which have been sold previously in order to facilitate construction of a grocery store in the CBD are subtracted. This leaves . the remaining additional public funding that would be 'required in order to make the project feasible. In the case of the Suburban Chevrolet site alternatives, staff also included as a revenue source $1.2 million which had been previously allocated for the redevelopment of_ this site. Although the alternative sites, except for one, will require some degree of additional financing over and above the bond proceeds, this varies depending on the cost of acquisition and relocation. The only alternative that would not require any additional subsidy would be alternative #3 which involves the expansion of the existing store and does not provide for any taking of Mainstreet buildings. ' However, this is the smallest site of all the alternatives and therefore would allow for an expansion of less than what is desired by Taits and Super Valu. As a point of information, the estimated costs for site assemblage for the original project area between 6th and 8th Avenue was esti~ate~ by staff to be approximately $2.2 million. However, a portion of this project was in a new tax increment district that allowed for a longer period to capture increment. As a . result, approximately $1.5 million in tax increment was available to pay additional project costs. . ~ ;# ',~~ . HRA Board July 9, 1992 Page 5 . Items to Consider In discussing this item, the City Council/HRA needs to consider the following issues: 0 What is the impact of acquiring and removing Mainstreet buildings on the "charact~r of the downtown." 0 For the most part, the majority of sites would allow for little, if any, space for future expansion. 0 There are only limited dollars available within the downtown tax increment district (Tax Increment District 1.1). with an additional future bond issue, it appears that this district has approximately $7 million available to undertake projects. Staff estimates that the cost of undertaking the various projects that have been disc~ssed by the Council at one time or another would be approximately $6.7 million. This is based on a qrocery store development costs of $1.1 million. Any additional funding of this project over and above this amount could potentially require the reduction in . funding or elimination of a separate proposed project or activity. Attached is a memo which details both expenditure and revenue sources for projects or activities proposed to be undertaken in the C.B.D. area. As noted in the attachment, the most costly project to undertake after the grocery store is the Entertainment Complex Project. It may be necessary, dependent upon the allocation of resources' for other activities, for the council to prioritize which of these two projects is most important for the Downtown and the City. If the Council were to narrow the candidate sites down to one or two, staff would attempt to provide a more detailed analysis of the financial impacts the grocery store project would have on other projects proposed for the C.B.D. 0 Because a number of these alternative sites have a fairly high value, the project as proposed would result, in some cases, in a net decrease in tax capacity being generated for that area. 0 Mike Tait and Super Valu have indicated to staff that their preferred site options are Alternative #1 (entire Taits block) and Alternative #9 (site between 7th . Avenue and 9th Avenue). .. . :..-''''' ;~ .j" HRA Board July 9, 1992 . Page 6 . other Grocerv store ProDosals To date, two other grocery store projects have been discussed for Hopkins. These are for the following locations: 0 pines Mobile Home Park 0 R.L. Johnson Property, County Road 3/11th Avenue It appsars that the developer is no longer pursuing a grocery store project for the Pines. They are now looking at a mixed use residential/commercial project. Hoyt Development recently submitted a site plan for CUP review along with an application for rezoning and a Tax Increment assistance. The Z&P commission will have their first opportunity to review the site plan at their July meeting. ,At this meeting it is proposed that. the Commission discuss the plan,r~ceive public input, and provide feedback to staff. It is' anticipated that there will be no formal action taken at this meeting. . The Tax Increment Application in conjunction with this project is proposed to be reviewed by the HRA on August 4th. Finally, the Business Council is being asked to review and comment on the Hoyt proposal. This will probably take place sometime in August. Alternatives 1. Direct staff to continue to work on one or two sites. Under this alternative the following would be undertaken: - Undertake more detailed analysis of project costs - Analyze potential financial implication on implementation of other projects, e.g. entertainment complex . - Business Council Review - Secure public input through hearing process - Develop more detailed site plans for site(s) . 2. continue for further information or consideration of other . alternatives. Under this alternative it is assumed the HRA will provide some input as to the other sites to be reviewed. .---~. -,~ . . HRA Board July 9, 1992 Page 7 . 3. Terminate any further action on down~own alternatives and explore alternatives outside of the CBD. 4. Undertake no further action at this time. JK06232A . . .. .