The funding is in place, and now a development agreement is in place. A connected Main Street and an all new Valley Green Square Mall may be just around the corner.
At a June 22 meeting, following a public hearing, the Le Sueur City Council unanimously approved a redevelopment agreement which would lead to Valley Green Square Mall being redeveloped with a new layout, facade and apartments, and land currently owned by the mall being sold to the city to restore Main Street as a two-way street.
As part of the deal, a new developer acquired Valley Green Square Mall on June 30, which is planned to be converted into a mixed-use building with 47,900 square feet of retail space on the ground floor and 15,000 square feet for 14 apartments on the second floor.
The developer would also be responsible for demolishing a portion of the building and transferring around 20,000 square feet of land to the city of Le Sueur to allow Main Street to be reconnected.
City sells parking lot
In exchange for the land, the Le Sueur City Council approved a subsidy to Building Good Downtowns LLC through selling 1.37 acres of the mall parking lot owned by the city for just $1. The parcel has been valued by Le Sueur County at $180,000.
“I think, in certain regards, it’s a fair trade,” said Community Development Director Samantha DiMaggio. “When we went and looked at what was needed to reconstruct Main Street, it was a lot more of the building than what the developer initially thought.”
Another portion of the parking lot belongs to the Economic Development Authority (EDA) and was sold to Building Good Downtowns on the same day. DiMaggio said the $1 sale was worth it, in light of changes the developer plans to make to the parking lot. DiMaggio stated the developer was interested in building a drive-thru for Corner Drug and giving each business in the mall its own entrance with parking spaces reoriented to accommodate the change. DiMaggio said that these changes would make the parking lot more accessible to patrons.
“With COVID, it’s been interesting for Corner Drug not having a drive-thru,” said DiMaggio. “People have really made it work in the community, but I think moving forward people want a drive-thru.”
In addition, the developer will be responsible for taking care of all snow removal on the parking lot since it will be under private ownership. Previously, it was the responsibility of the city to clear snow from the lot. The lot falling under private ownership would also expand the tax base for the city.
“It depends on our tax rate, but we’re roughly estimating it will be between $1,200 and $1,500 in tax revenue that we will now see annually if this is approved for sale,” said City Administrator Jasper Kruggel.
Another condition the city had for selling the parking lot was holding the developer responsible for demolishing part of the mall. Previously, it was agreed that the city would take care of the demolition but after discussion with City Attorney Mike Couri, it was determined that the developer should demolish the building and in exchange the city would pay $325,000.
“We felt that demo-ing the building would actually be safer, based on Mike Couri’s recommendation,” said DiMaggio. “I appreciate that he recommended that to us because really anything could go wrong when you’re demo-ing a building and it’s better that the person that’s taking it apart will be the same person that’s putting it back together.”
While the city council unanimously supported selling the parking lot, the sale will not be finalized until it is approved at the July 13 city council meeting. The City Ordinance requires two readings before the council can sell the land.
The developer has agreed to use the land as a parking lot for at least two years. After that time has passed, the developer will be free to sell parts of the parking lot, but would be required to have adequate parking space for the mall under city regulations. DiMaggio said that she received no indication from the developer that they would plan on selling the parking lot, but if they did she believed it would still benefit the city.
“They have made it clear to us that they intend on using it as their own parking lot so I don’t foresee that happening,” said DiMaggio “But I don’t know if it hurts us that they sell the parking lot to someone that wants to develop it. That’s a new taxable parcel for us.”
Opening Main Street
It’s still unknown at this point what a reconnected Main Street will look like. There are many moving parts in the negotiation, according to DiMaggio, and both sides are discussing how much right-of-way they will retain.
The developer is seeking 5-7 feet of right of way to build a new facade for the Valley Green Square Mall; $300,000 in expenses for constructing the facade will be paid for by the city, as long as the developer pays at least $700,000 in equity. The city is looking to reach an agreement where there will be space for diagonal parking on Main Street and space for potential outdoor dining.
“We want to have plenty of room so the Bar and Green Mill can have outdoor dining,” said DiMaggio. “We want to make sure that if there are any new businesses, or a brewery that wants to go into the mall, that they can have outside dining. I think that’s something we learned during COVID is the importance of flexibility to have multiple dining options.”
What has been agreed upon is that Main Street will have space for two-way traffic. While there will be space for cars, truck traffic will still be forced to go around the street.
Constructing a new right of way of Main Street is estimated to cost $1.2 million and the total cost of the project to the city, when factoring in expenses like paying for demolition, is an estimated $1.8 million.
Not all of the burden is on the local community, though, as the city was able to secure significant funding from the state. The Minnesota Department of Employment and Economic Development (DEED) would match the city’s expenses up to $850,000 through the state’s Redevelopment Grant Program.
In addition to the terms listed above, the redevelopment agreement contains several financial incentives for the developer. This includes the city forgiving a $400,000 loan taken out by the previous owners of the mall. Of that loan, $345,000 has been paid off, leaving $54,000 to be forgiven. Furthermore, the city will provide satisfaction of mortgage payments. These incentives won’t be released until after the developer has acquired the mall.
The developer has also requested that the city of Le Sueur establish a tax increment financing district (TIF) on the mall. Through the TIF, the developer will pay taxes on the mall, but 90% of additional tax dollars that come from added value to the mall through redevelopment will be given back to the developer. The TIF would remain in place for 26 years and up to $452,000 in potential tax revenue from the mall could be claimed by the developer.
If the mall redevelopment generated more than $450,000 in additional tax revenue, the city would collect all taxes on the property from that point on.
The city will not approve a TIF on the mall until after hosting a public hearing scheduled for July 27.