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7:00 P.M. June 30, 2003
ITEM 1 - CALL TO ORDER
Mayor Burkholder called the meeting to order at 7:00 p.m. in the Council Chambers, Lakewood Civic Center, 480 South Allison Parkway, Lakewood, Colorado.
ITEM 2 - ROLL CALL
Those present were: Mayor Steve Burkholder, Presiding
Ray Elliott
Jackie Herbst
Carol Kesselman
Debbie Koop
Bob Murphy
Mike Stevens
Cheryl Wise
Absent was: Tom Booher
Jean Saum
Barb Martin
Full and timely notice of this Special City Council meeting had been given and a quorum was present.
ITEM 3 - PLEDGE OF ALLEGIANCE
The Pledge of Allegiance was recited.
ITEM 4 - RESOLUTION 2003-50 A RESOLUTION FOR APPROVAL OF THE REDEVELOPMENT AGREEMENT BETWEEN THE LAKEWOOD REINVESTMENT AUTHORITY AND WAL-MART STORES, INC.
City Manager Mike Rock stated that the resolution before City Council mirrors the one on the Lakewood Reinvestment Authority Agenda, so lengthy discussion may not be necessary during the LRA meeting.
Mr. Rock stated the resolution involves the property on the northeast corner of Colfax and Wadsworth. He reviewed the progress of the site. K-mart closed its facility in 1994 and for a five-year period following that closure, private sector investors did not come forward to develop the site and the City and citizens saw general deterioration of the property. In 1999, the Lakewood Reinvestment Authority created an urban renewal project area on that corner. A potential project was then identified based on the market and the economy in 1999. Requests for proposals were forwarded to potential redevelopers. The City Council selected Goldberg Properties as the redeveloper for the site. Between the time RFPs were written and a potential project was identified, the market changed dramatically. In part, the market changed due to the economy and a change in the movie theater industry, which was needed as an anchor for retail and restaurants. A mixed-use project was nearly impossible at that site. At that time, the City worked with Goldberg Properties to look at alternatives, realizing there were significant drainage problems on the site. Because of the needed utility improvements, transportation improvements, and land acquisition issues, it became very difficult to secure financing for the project. The rough estimate of the public improvements cost remains at approximately $22.5 million.
The agreement before Council is the culmination of all those efforts and it is an agreement that makes sense for that property. The user on the site will be Wal-Mart. The facility, at this time, is planned to be 190,000 s.f. to approximately 220,000 s.f. Wal-Mart is working the numbers to optimize their sales. There will also be three pads with retail square footage of 19,000 s.f. to 20,000 s.f.
One significant change that is beneficial to Lakewood is that they are no longer talking about utilizing special districts to issue bonds that would create a debt against the property. The agreement with Wal-Mart is that Wal-Mart would provide financing for the property internally. They would receive 5.58% interest on their money, which is not a great return on investment in the retail world. It's a favorable rate for the City and the amount of debt would be reduced by approximately $3.5 million.
The agreement is structured so that Lakewood receives $1 million each year,
plus the current base of approximately $70,000 per year, no matter the amount
of sales. The balance of the revenues are the remaining sales tax and incremental
property taxes, plus a 1.5-cent public improvement fee. Exhibit C of the Agreement
references those figures. Current estimates show them paid back in 11 to 13
years. Actual agreement is written for 21-years or until paid, whichever comes
sooner. In addition, there is a provision in the Agreement that says if the
revenues from the site exceed the projections by more than 15%, then the amount
over the projection goes to pay down the debt. It accelerates the payment as
well as when the City will get all the sales tax off the site. Any excess above
the 15% are split 50/50 between Wal-Mart and the City. Wal-Mart's share has
to go to pay down the debt first.
Next steps are for City Council to approve the redevelopment agreement in substantial form. After the agreement is final, a more detailed schedule in the form of a public improvements agreement will be brought before City Council. Then, staff anticipates bringing an agreement to Council for the collection of the public improvement fee as well. Wal-Mart and their representative Mark Goldberg will work on the more detailed engineering and environmental aspects of the project. Property would then be acquired. LRA would exercise its power of eminent domain where necessary.
It is anticipated the project would open in the spring of 2005.
Public Comment:
Walt Heidenfelder, 13009 West Ohio Avenue, Lakewood
Mr. Heidenfelder asked if it was possible that the city would not collect its
full share of sales taxes for 21 years. He asked for the current collection
of sales tax on the site. He asked what would happen if the project did not
work and Wal-Mart did not stay on the site.
Jeanice Rylands, Manager of Rylands Partnership, representing owners of property
at 7335 West Colfax Avenue.
Ms. Ryland stated that the redevelopment sounded encouraging. She stated they
attempted to sell their property in the summer of 2002, and received no direct
communication from the City or Goldberg Properties. She stated the offer made
to Goldberg Properties was not accepted and they entered into a purchase contract
with Centuries, Inc. for a price of $800,000. When Centuries contacted the City
Planning Department, they were advised that city planners would not consider
looking at their proposal for development of the site because they were working
with Wal-Mart to develop the site. Ms. Ryland stated that it has restricted
their right and ability to sell their property. She stated the property owners
are wiling to sell the property for the 2002 appraisal price of $8/s.f., which
is what the City paid in November 2002 for the permanent easement for the redevelopment
and construction at the Colfax and Wadsworth intersection. She stated she hoped
Wal-Mart and Goldberg would treat the property owners fairly and speedily. She
also requested that the property owners be notified when people will be on their
properties, as surveyors have been on their private properties in the last two
weeks.
Mike Rock responded to the public comments. He stated that financing of the project was measured against a "no action" alternative. From the period between 1994 to 1999, the area's value deteriorated dramatically and there has been an increase in demands for services. The current sales tax from the site is approximately $70,000 per year. The incremental yearly gain will be a minimum of $1 million. If the project did not move forward, the current sales tax collection would remain in place. There is no pledge of any City General Fund revenues. Regarding property acquisition, Mr. Rock stated that property sales negotiations would not happen in a public meeting. There is a separate and distinct process for negotiating prices per square foot, nor would the City assume the price per square foot for a small parcel of land for use in a public right-of-way would be the same for a larger piece of land for retail development. The burden does not fall on the City to somehow make property marketable for individual property owners.
Mayor Burkholder asked about the notification to property owners.
Mr. Rock stated that if the City would be on private property, notification
would be given to the property owners. If property is being purchased, it is
normal to have survey work and environmental assessment work done on that property.
Mr. Rock stated he would speak to Wal-Mart and Goldberg and ask them to notify
property owners as well.
Another component of the agreement provides for the acquisition of Vance Terrace, which will happen in December of 2003. In addition, the public improvement agreement is not an independent obligation. Public improvements are directly connected to the construction of the store and the implementation of the project.
Councilman Elliott stated that the public improvements listed on Exhibit D total approximately $32 million. The public improvement cost mentioned earlier was $22.5 million.
Attorney Malcolm Murray stated that the $32 million included the property acquisition costs.
Councilman Elliott asked about the potential for ongoing collection of the public improvement fee after the debt is paid off.
Mr. Rock stated that the fee is a private fee and not a city tax of any kind. They are privately imposing it and, therefore, the City doesn't have the ability to say they can't.
Councilwoman Herbst asked how extensive the environmental problems are on the site.
Mike Rock stated that there are portions of the 30 acre site that have had
uses in the past that could require substantial environmental investigation
and are likely to require remediation. It is not the entire site. This is an
item that Goldberg, Wal-Mart and the City have little control over in terms
of the timeframe. Sites that have had uses such as dry cleaners, tires, batteries,
auto repair, and gas stations are prone to subsurface problems. However, this
problem is not any more problematic than any other property. It does add to
the uncertainty of the timeframe.
Councilman Stevens asked Mr. Rock to clarify his understanding that the City
is guaranteed $1 million per year regardless of store performance.
Mr. Rock stated that the City's revenue is based on the income. If there is only a million dollars, the City gets it. Mr. Rock further clarified the projected revenues he spoke about earlier.
Councilman Stevens asked if there was any consideration given to Ryland's proposal by the Planning Department.
Mr. Rock stated that a representative from Eckarts Drugs, named John House, told the press and the City that due to the drainage problems, complexity, price, and timing regarding developing on Colfax and Wadsworth, Eckarts decided not to execute a property acquisition contract.
In answer to questions by City Council, Mr. Rock reiterated the history regarding the lack of development by the private sector on that site over the past several years and the number of years it takes to develop a site of this magnitude during difficult economic times.
Councilman Murphy stated that the performance data shows a 10% spike in the second year and a 20% drop in the third year and asked for the logic behind that estimate.
Mr. Rock stated that the sales projects were prepared by Goldberg Properties in close consultation with all the potential retailers. Their projection models are driven by assumptions based on market area data, competitors, and their own investments. The data at times can have a roller coaster effect. The numbers are complex and retailers are cautious about sharing capital costs in sales projections. The numbers shown are conservative. Mr. Rock stated he believed they would retire the obligation early.
Councilman Murphy asked how the decision to keep the store open at 2nd and Wadsworth affected the sales projection numbers.
Mr. Rock stated that the numbers shown reflect having both stores open. He reminded Council that the City will still collect the full 2% from the 2nd and Wadsworth store while it is still open.
Councilwoman Koop asked Mr. Rock to explain the relocation costs for small business owners.
Malcolm Murray stated that the relocation policy was amended on April 23, 2003. It does provide for assistance for retailers including consulting services, as well as payments to help them relocate their equipment. Most of the retailers are aware of the policy and have reviewed it.
Councilwoman Koop asked when the residents of Vance Terrace would be relocated.
Mr. Rock stated it depended on the completion of the building, which is ahead of schedule at this time. Vance Terrace would have been replaced regardless of the development. It simply did not meet the needs of the residents or the Housing Authority. The relocation should be completed by December and the agreement states the acquisition would be completed by December 10, 2003.
Councilwoman Wise stated she wanted the citizens to realize the enormity of the drainage issue on the project. It equates to big dollars on the part of the developer. There's been some unspoken concern that if Wal-Mart opens the second store at Colfax and Wadsworth, it's going to divert from the City revenues. She stated that she would drive out of her way to go to Wal-Mart and she believes many others from outside of Lakewood will do the same.
Mr. Rock stated that to add $1 million, plus the $70,000 per year from the new site, plus the current site's revenues, would cause a dramatic increase in the City's revenue stream.
Councilman Elliott asked for an explanation of how the process will work regarding the audit of the usage of the public improvement fees.
Mr. Rock stated that the audit is actually done on the construction itself. It is fairly routine in nature and will be similar to those done to ensure a developer has paid the required use tax. Larger developments are routinely audited and afterwards, adjustments are made either up or down. The City has the expertise to do that internally. On this project, the auditors will be looking at items that are included in the $22.5 million that can be eligible for reimbursement. He stated he is very confident that there is substantial public improvement and public benefit that will come from the project.
Councilman Murphy made a motion to adopt Resolution 2003-50. It was seconded by Councilwoman Kesselman.
Vote: 8 Ayes 0 Nays. The motion carried.
ITEM 5 - EXECUTIVE SESSION
Councilman Murphy made a motion to hold an executive session for the purpose
of developing negotiation strategies regarding economic development at the Colorado
Mills and other sites per C.R.S. 24-6-402 and to discuss personnel issues as
it relates to the budget. It was seconded by Councilwoman Kesselman. Vote: 8
Ayes 0 Nays. The motion carried.
ITEM 6 - ADJOURNMENT
Mayor Burkholder adjourned the meeting at 8:03 p.m.
Submitted by,
Debra Brown, Acting City Clerk
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