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HomeMy WebLinkAbout05.29.12 Work Session Minutes City Council Workshop Minutes May 29,2012 Mayor Larson called the workshop to order at 7:11 p.m. Present: Larson,Donnelly,May Absent: Bartholomay, Fogarty Also Present: David McKnight, City Administrator;Randy Distad, Parks and Recreation Director; Cynthia Muller,Executive Assistant Audience: Tom Wartmann,Bruce Rydeen,Doug Bonar MOTION by Donnelly, second by May to approve the agenda. APIA',MOTION CARRIED. The purpose of this workshop was to discuss locations for a downtown liquor store. City Administrator McKnight stated Council has been looking at the future of the downtown liquor store for the past year. At the last meeting Council was looking at options for a new location for the downtown store. Mr. Tom Wartmann, Farmington City Center,wanted to clear the air on his stand with the existing lease. He wants to work with the City to maintain the location of the liquor store in City Center. Discussions started last September and evolved to a month-to-month lease,to reducing the rent to$16/sq. ft., same as the Pilot Knob location. He recognized the rent in this market needs to be adjusted,but was hoping for a longer term solution with the liquor store staying in City Center. Ten years ago he cleaned up the Brownfield area and seven years ago negotiated the lease for the liquor store. The real estate market has changed, and Mr. Wartmann felt we still have a strong downtown core retail area with the grocery store. We have an environment with a grocery store and a municipal liquor store being in the same parking lot. He has plans to backfill the space formerly occupied by the hardware store which has received quite a bit of interest and a new Verizon store will open in City Center the end of June. The issue is how we can facilitate the extension of the lease with a renewal rate that is workable. He recognized the proposal on the table from Tamarack and the terms of the different options. From a development standpoint, he wanted Council to consider the trade-offs in costs it will take to remodel or rebuild,versus the rent. With traffic and the destination City Center has with the grocery store,there is more future growth to that area than on hwy 3. He wanted to emphasize the pro's to City Center with the full service grocery store,accessibility,no loss of business because of down time, set up, inventory moves, and the expense. He wanted to continue to negotiate for a fair rent based on an extension of the lease versus a month-to-month or a year extension. Mayor Larson asked if Mr. Wartmann could provide any more details on filling the former hardware store space. Mr. Wartmann could only say he has a goal of having it filled in the next 90 days. Mayor Larson noted Mr. Wartmann has seen the offer from Tamarack and asked how close to that he can come. Mr.Wartmann stated you have to consider the basis of improvement costs to remodel and you would not have those costs with City Center. He recognized he will have to be competitive. He thought he was being competitive last fall with the $16/sq.ft. rate. There are more choices in downtown Farmington than on Pilot Knob, so he realized he needs to be more competitive. The goal is to have the grocery store along with accessibility to the wine and spirits. He will do the best he can to see this come to fruition knowing the City is trying to be more profitable. Part of it is the mix 9 Council Workshop Minutes May 29,2012 Page 2 of tenants and the synergy that exists. Mayor Larson stated the Council has to make the best decision for the City and under the current lease,that is not the best option. Mr. Bruce Rydeen, Cerron Commercial Properties, was in attendance to listen and hear about the next steps. The City engaged them a year ago to do a study and look at options focused on purchase. An option was brought forward and it evolved to the owner being receptive. One concern was whether the City wanted to be a landlord to the Laundromat. Therefore,an option was to condo the building and the current owner would still own the Laundromat space and the City would own the liquor store space. Councilmember Donnelly noted the list from staff does not include the current City Center location. Mayor Larson stated it is not an exclusive list. Councilmember Donnelly recalled the costs discussed before were not acceptable and thought we had already reached the lowest number at the location,which was not acceptable. City Administrator McKnight stated the City was looking for$16/sq. ft.and received an offer for$20/sq.ft.;a$1/sq.ft.reduction. Now Mr. Wartmann is saying he is open to further negotiations. Mayor Larson suggested reducing the list to three locations. Councilmember Donnelly suggested throwing out No. 1 former Rambling River Center building and No. 6 current Rambling River Center building because of remodeling the buildings. Mayor Larson agreed that neither of these locations provide the traffic counts needed. Councilmember Donnelly noted No. 1 does not provide any parking. It will take a lot of money to make it a business and if you spend that kind of money you want it to be a final solution. The same situation is true with No. 6. Mayor Larson stated Councilmember Fogarty's number one site was No.4 the site near hwy 3 and Elm Street or No. 2 the former Laundromat building. She was willing to look at Tamarack for a three to five year lease. City Administrator McKnight stated Councilmember Bartholomay preferred No. 5 Tamarack and at the same time purchase a property in Vermillion River Crossing for a potential liquor store. Councilmember Donnelly would be willing to add City Center to the list. He asked staff to explain the pro's and con's for the various sites because some he does not agree with. Councilmember May felt they are opinions. Mayor Larson believed No. 3 the south hwy 3 site should be removed from the list. Councilmember May felt they are not helping the cause. We are not paying attention to the study. We spent the last year trying to figure out why we are not making money. She was mad the Laundromat site is back on the list. The community does not want it. Mayor Larson asked to have to put back on the list. Three people in the community did not want it. Councilmember May stated we need to focus on the study. We are making very little money, it is poorly managed,we have a lot of issues before we start owning a building. She was absolutely in favor of No. 1,using property we already own or leasing. Just because a study says we can make money,we have not shown that we actually can do it. Mayor Larson stated we make money in the Pilot Knob store. Councilmember May stated our margins are pitiful. So we have not yet proven we can do it. There is no way she will vote for any type of ownership,buying any land and building anything. She is interested in the cheapest lease option we have. She is not totally against the current site,but Tamarack is downtown Farmington. She considers hwy 3 and this area downtown. It is an opinion when it says temporary solution. Tamarack has a very attractive option on the table that we should seriously consider. We should not be looking at building buildings. We have not proven to the residents that we should even be in the business. We need 10 Council Workshop Minutes May 29,2012 Page 3 to choose the most attractive option to proceed and run our business profitably. Councilmember Donnelly agreed the near term solution should be flexible enough that if we decide we cannot do it,we are done. Councilmember May agreed, if this works out,then the next Council can talk about building a building. We are not where Lakeville was at when they went from leasing to owning buildings. At this point, it is either working something out at City Center,or going to Tamarack. We should focus on making money. Councilmember Donnelly agreed we should not be distracted with building a building or remodeling. We need to focus on operating the business profitably and proving it is a viable business for the community. Councilmember May felt hwy 3 deserves a chance and it has a lot of potential. We are catching some commuters there and we will pull Empire business. People that live around 195th Street could travel easier down hwy 3 than Pilot Knob. Mayor Larson summarized Council wants to look at lease options with City Center and Tamarack. He would support that and having staff negotiate between these two lease areas. Ultimately owning our own building is the way to go,but we have to prove we can make money first. Councilmember May would like the timing of the leases for Pilot Knob and downtown to tie together. Parks and Recreation Director Distad stated it is best to stagger the leases between the two stores. We already had an issue with trying to negotiate a lease for Pilot Knob and then negotiate a lease for the other store, not knowing where we would go. It is worth considering doing a different lease term than Pilot Knob. We are three or four months into our new lease at Pilot Knob. He suggested a seven year lease at Tamarack because it offers the best lease rate plus the best money in terms of finishing the space. Then the leases would be due at different times. Lease agreements always have an option to get out of it. Mayor Larson asked if the traffic count past Tamarack is 1305 less 620 for commercial vehicles. Staff noted the counts on hwy 3 are from 2007 and the county highways are from 2011. Councilmember May noted turning into Tamarack has the same issue as getting into City Center. She was in favor of the old Rambling River Center because it has to be cleaned up anyway. She realized it may not be a long term solution, but maybe it becomes a satellite store. Mr.Doug Bonar agreed with Council's approach to manage the operation professionally, measure the space according to the demographics,and benchmark the progress in a three year cycle. He respected staff's opinion that a seven-year lease may be more beneficial,he thinks it is important to have a tremendous amount of flexibility beyond three years if future Council's decide to remove themselves from the business or become property owners and liquidate their leases in light of owning their own property. Councilmember Donnelly stated we have to show significant progress in much less than three years. Mr.Bonar agreed there needs to be continued progress of improved revenues. Council should keep their options open for future purchase. Parks and Recreation Director Distad suggested downsizing the space to 3500 sq.ft. downtown. We are in way too big a space downtown. We can get two bays at Tamarack for 1500 sq.ft. less which saves$1300 - $1400/year on the lease. We would not have as much inventory and would have to stay on top of ordering. Mayor Larson stated Council will rely on staff to bring back the best options. Councilmember May stated we have to keep this moving in a positive direction and show we are taking it seriously and want to turn it around. City Administrator McKnight will add this to the June 11, 2012,budget workshop. Mayor Larson asked for an update on operations changes also at that time. 11 Council Workshop Minutes May 29,2012 Page 4 City Administrator Update He noted the Vermillion River Crossing update was pushed back to the June EDA meeting. There was a discussion on putting in the sidewalk between the CDA housing and McDonald's and Council wanted to wait for the update. If we continue to wait,we are pushing the sidewalk back another month. He asked if Council still wanted to wait on the sidewalk for the VRC update. There is$200,000 sitting out there for amenities and do we want it to end the development contract. If we take the money,the contract is done. You will not get more than $200,000 for improvements, no matter what the update is. He asked if Council wants to wait another month and wait for the update,or bring the sidewalk approval forward to get it going because residents will be moving in. Councilmembers wanted to wait for the VRC update before approving the sidewalk. MOTION by May, second by Donnelly to adjourn at 7:50 p.m. APIF,MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant 12