City’s plans at Northland Mall advance

EDA settles on $21 million for potential bonding amount

Clint Riese
News Editor

Those on one side of the issue will be left angry and disappointed no matter how the plan to build a municipal campus at the site of Northland Mall shakes out. But even if it was hard to see, good news emerged  for proponents and opponents alike at last Thursday’s marathon meeting on the proposal.

Those who hope the plan for a combined police/fire/city hall building goes through were encouraged that it took another step and seems on course for a deciding vote on Monday, Dec. 17.

Those who take issue with the timing, location or significant impact on property taxes could at least take solace in the fact that the projected price tag has dropped to some degree.

The initial estimate – including all details such as land acquisition, improvement and building construction – came to $23.5 million. That had been lowered to $23 million by last week’s special joint meeting of the City Council and Economic Development Authority. Then, at the joint session, the EDA recommended that if the bonding to finance the project ultimately goes through, it should be for $21 million. Several members of that board and the council pledged to cut much more off the final total in the design phase, which would come after the bonding if the project proceeds.

Financial Updates

City staff opened the meeting by presenting a host of current projections. That, too, had a rosy outlook, for two reasons. First, bond interest rates continue to be at record lows. Second, the taxpayers stand to gain from the decertification of two Tax Increment Financing (TIF) districts in coming years.

Finance Director Ellie Paulseth outlined the impact of the TIF situation. The districts will be returned to the tax base; one in 2014 and one in 2016. The new tax capacity would offset much of the new debt levy if the bonding takes place, or could lead to a property tax reduction if the municipal campus plan falls through.

The TIF district expirations are projected to bring the total increase in the city share of property taxes down to 12-14 percent, rather than 23 percent. (These numbers were assuming a bond issuance of $23 million.)

“The big factor here, the big story, is that these two TIF districts are expiring,” said Paulseth. “This is a really big impact on the property taxes.”

Paulseth presented two models on the three-year impact of bonding. The council and EDA preferred a structured debt format that would smooth out the impact of the debt related to the project. It showed the taxes on the average Forest Lake home increasing $47 in 2014, $24 in 2015, and $28 in 2016. The other model, which did not adjust the debt levy in relation to the TIF expirations, projected an increase of $148 in 2014’s property tax, followed by two years of smaller declines.

Bruce Kimmel of Ehlers & Associates had good news concerning his firm’s receipt of favorable proposals from the project’s potential underwriters. He noted that Bond Buyers 20-bond index hit a record low of 3.29 percent that day.

“It shows that we are at very, very low interest rates and to the extent the authority and the council want to move forward with the project, you’re not likely to see much better interest rates,” Kimmel said.

Discussion Points

After a lengthy public comment session that produced sentiment mostly against the project, the two boards delved into the proposal. Discussion briefly touched on the proposal’s location, but the general consensus was that Northland Mall had the most going for it.

“We see what it looks like today, and if we don’t do this, I actually do firmly believe it will sit like that for another 10 or 20 years,” said Mayor Chris Johnson, comparing that site to the option of rebuilding at the current city hall location. “So you look at those two pictures in terms of kind of resetting the table for the next 30 years for the city and trying to foster growth and energy, I really think doing what we are talking about at Northland Mall and allowing those other government-owned properties to go private makes way more sense.”

Council member Susan Young perceives the lack of private interest in Northland Mall as a reason to explore a public facility there.

“Do I want to invest in this community?” she said, putting herself in the role of ‘Joe Developer.’ “I drive down [Highway] 61 and say, ‘No way. If this is what they think of themselves, that they’re willing to be happy with this, then I don’t want my development to be in an area that thinks that little of itself.’

“I’m not in favor of any Taj Mahal. That’s not where I’m going,” Young continued. “…But as I look at where I want my hard-fought tax dollars to go, I would rather have the city on the least valuable property, sell off some more valuable property, be able to do some consolidation.”

Jackie McNamara, who like the mayor is a member of both groups, cited concerns with the amount of site improvements that might be needed to build at Northland Mall.

“I think we all have driven by that place over the last 40 years and watched the parking lot continue to sink,” she said. “It doesn’t matter how many layers they put on, how many times they fix it, it still keeps sinking, it still gets potholes, and I think we have more issues there.”

Architect Bruce Schwartzman of BKV Group acknowledged site improvements estimated at $2.5 million are the project’s greatest unknown.

EDA member Mike Muske advocated for the Northland Mall site.

“There’s no question Northland Mall probably is the best site,” he said. “The only question is if this is the right deal.”

To council member Mike Freer, the development agreement with Pace Development, Inc. does not represent the right deal, due to the accelerated schedule the developer has dictated.

“Everybody understands that looking at the Northland Mall site, looking at city facilities has gone on way, way too long,” he said. “It’s the speed of this proposal, specific proposal, that is going too fast.”

Council member Jim Dufour disagreed.

“Instead of going too fast, it’s been going half fast,” he said. “We’ve been going over this year after year after year. We talk about wants and needs. Everybody realizes now that we’re beyond wants. We’re in needs.”

5-2 Vote

The point of the meeting, other than to offer the EDA a final chance to pull the plug on the project without incurring a penalty, was for the EDA to come to agreement on a number for a potential bond issuance so that the preparations for it could proceed.

Though the members generally agreed the amount needed to come down from $23 million, coming to agreement was easier said than done.

Blake Roberts presented numbers from his research of cities throughout the metro. His strong conclusion was that the proposal is exorbitant in terms of cost and size.

“What’s proposed in front of us today is way out of the boat,” he said. “We shouldn’t even be looking at anything close to that size.”

Muske, who spent many hours brainstorming with Roberts, agreed.

“I don’t want to spend 23 million bucks,” he said. “I’ve made that clear. I don’t think we have to, I don’t think we should, and anything I vote on will be to hold the budget back down. But we’ve got to do something.”

In the end, assurances about the design process helped the EDA agree to set the potential bond issuance at $21 million.

Schwartzman said there were many areas that could be cut or consolidating in the building design, and that similar projects often include 70-80 percent of the original design.

City Administrator Aaron Parrish said a building committee would spend months on design details.

“You’re going to really have the opportunity to be very transparent about what this program is,” he said. “Is it too much? Is it too little? My experience in building projects like this is there’s not a stone that doesn’t end up unturned.”

EDA members Johnson, Muske, Bob Morehead, Judy Huntosh and Ray Daninger – who was sworn in that night – voted in favor of setting the potential bond issuance at $21 million. McNamara and Roberts opposed it.

McNamara moved to back out of the development agreement, but her motion was not seconded.

  • Cameron

    As a self-confessed numbers guy, I can’t help but smile at the misinformation that the city is putting forward with regard to the Northland Malls value. Susan Young is quoted in Today’s Forest Lake Times as stating “…But as I look at where I want my hard-fought tax dollars to go, I would rather have the city on the least valuable property…” Now this isn’t a referendum against Councilwoman Young, I believe that she truly feels that Northland Mall is the least valuable property in Forest Lake, but some fact checking is desperately needed here.

    My inner nerd came out today and I went the Northstar MLS (which I have access to as a realtor) and download the tax information for all of the properties in the city of Forest Lake. In all of its glory I dove deep into spreadsheet heaven and took a look at whether or not what the city has been feeding the public is true.

    Fact #1 – Even in all of its dilapidated glory, the combined (7 PIDs) Northland Mall property pays the 10th highest property taxes in the entire city. It’s no secret that the mall is rundown, but even though its current condition has resulted in a lower assessed value (and therefore lower taxes) it is still among the most valuable, and in return, highest grossing property tax parcels in the city. For 2011 their total county tax bill comes to $94K.

    Fact #2 – If the site were to be redeveloped it would undoubtedly be the most expensive property in the city. According to the database, if you combine the 4 PID numbers for the Cub Foods property, a total of $398K in total county property taxes are paid. That’s enough taxes to garner the Cub Foods strip center the illustrious position of highest taxed property in the City of Forest Lake. Cub foods sits on 10 acres, Northland Mall 13 acres. Cubs Food’s entire strip center encompasses 101K square feet, Northland Mall is currently 102K square feet. If the city were to ALLOW Pace or another owner to redevelop the property, the revamped Northland Mall without a doubt would become the most expensive parcel(s) in the city.

    It’s time for the city to own up to the fact that they are taking an already valuable and potentially exceptionally valuable developed property off of the tax rolls and shifting that tax burden to other city businesses and homeowners.

  • http://www.EricLangness.com Eric Langness

    It’s really simple … if you’re going to spend 3 times the annual city budget and raise our local property taxes 23% each year for decades to come you should be able to convince us that it is a necessary expenditure and allow the public to vote. It’s a shame some are not on board with that.

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