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HomeMy WebLinkAboutCouncil Information Memorandum 04-12-2018CITY OF PLYMOUTH COUNCIL INFO MEMO April 12, 2018 EVENTS / MEETINGS Planning Commission Agenda for April 18th ...................................................... Page 2 Official City Meeting Calendars .................................................................... Page 3 Tentative List of Agenda Items ..................................................................... Page 6 CORRESPONDENCE Intersection County Rd 9 and I-494 Open House Set for April 17th ........................... Page 9 City Sampler Showcases Newly Renovated Plymouth Maintenance Facility, Trucks and Equipment ............................................... Page 10 Rezoning, Preliminary Plat, and Variance for "The Woods at Taylor Creek" to be Located at 5364 and 5370 Vicksburg Lane and Outlot B, Hampton Hills South Plateau (2017110) ...................................................... Page 12 REPORTS & OTHER ARTICLES OF INTEREST Lund Group Buys Site for Future Edina Luxury Tower, Finance & Commerce ............. Page 13 Miracle-Ear Parent Will Move 180 Employees from Plymouth to Downtown Minneapolis, Minneapolis/St. Paul Business Journal .......................... Page 16 D.R. Horton Pays $4 million for Lots in Plymouth, Finance & Commerce .................. Page 19 Dark Store Theory...Potential Impact on Retail Assessed Valuation, Springsted .......... Page 22 Page 2 SUN MON TUE WED THU FRI SAT 1 2 3 4 7:00 PM PLANNING COMMISSION MEETING Council Chambers 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 April 2018 3400 Plymouth Boulevard Plymouth, MN 55447 OFFICIAL CITY CALENDAR Phone: 763-509-5000 Fax: 763-509-5060 7:00 PM ENVIRONMENTAL QUALITY COMMITTEE MEETING Medicine Lake Room 4:30 PM to 7:00 PM Hennepin County Open Book Meeting Medicine Lake Room 7:00 PM PLANNING COMMISSION MEETING Council Chambers SUN TUES MON WED THUR FRI SAT CHANGES ARE NOTED IN RED Primavera Plymouth Creek Center 5:30 PM COUNCIL/HRA/ Planning Commission MEETING Housing Study/TIF District update/Senior Building Medicine Lake Room 7:00 PM REGULAR COUNCIL MEETING Council Chambers 7:00 PM HOUSING AND REDEVELOPMENT AUTHORITY MEETING Medicine Lake Room Primavera Plymouth Creek Center 5:30 PM SPECIAL COUNCIL MEETING Hotel Licensing Medicine Lake Room 7:00 PM REGULAR COUNCIL MEETING Council Chambers Page 3 SUN MON TUE WED THU FRI SAT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 May 2018 3400 Plymouth Boulevard Plymouth, MN 55447 OFFICIAL CITY CALENDAR Phone: 763-509-5000 Fax: 763-509-5060 7:00 PM PLANNING COMMISSION MEETING Council Chambers 7:00 PM ENVIRONMENTAL QUALITY COMMITTEE MEETING Medicine Lake Room 7:00 PM PARK & REC ADVISORY COMMISSION MEETING Council Chambers 7:00 PM PLANNING COMMISSION MEETING Council Chambers 7:00 PM HOUSING AND REDEVELOPMENT AUTHORITY MEETING Medicine Lake Room SUN TUES MON WED THUR FRI SAT MEMORIAL DAY CITY OFFICES CLOSED 5:30 PM COUNCIL/EQC MEETING Organics Recycling Medicine Lake Room 7:00 PM REGULAR COUNCIL MEETING Council Chambers 6:00 PM Walk with the Mayor Plymouth Creek Center 5:00 PM SPECIAL COUNCIL MEETING Fire Dept. Update Medicine Lake Room 7:00 PM REGULAR COUNCIL MEETING Council Chambers 10:00 AM Bark in the Park Hilde Performance Center 8:00 AM-12:30 PM Fire Department Waffle Breakfast Fire Station III Page 4 SUN MON TUE WED THU FRI SAT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 7:00 PM PLANNING COMMISSION MEETING Council Chambers 21 22 23 24 25 26 27 28 7:00 PM HOUSING AND REDEVELOPMENT AUTHORITY MEETING Medicine Lake Room 29 30 June 2018 3400 Plymouth Boulevard Plymouth, MN 55447 OFFICIAL CITY CALENDAR Phone: 763-509-5000 Fax: 763-509-5060 5:30 PM SPECIAL COUNCIL MEETING TwinWest Up- date/Budget Goals Medicine Lake Room 7:00 PM REGULAR COUNCIL MEETING Council Chambers 7:00 PM ENVIRONMENTAL QUALITY COMMITTEE MEETING Medicine Lake Room 7:00 PM PARK & REC ADVISORY COMMISSION MEETING Plymouth Creek Center 7:00 PM PLANNING COMMISSION MEETING Council Chambers SUN TUES MON WED THUR FRI SAT CHANGES ARE NOTED IN RED 5:30 PM SPECIAL COUNCIL MEETING State of the Streets in Plymouth Medicine Lake Room 7:00 PM REGULAR COUNCIL MEETING Council Chambers Absentee Voting begins for State Primary Election Page 5 Note: Special Meeting topics have been set by Council; all other topics are tentative. EDA refers to the Economic Development Authority Tentative Schedule for City Council Agenda Items April 24, Council/Planning Commission/HRA Meeting, 5:30 p.m. Medicine Lake Room •Draft Housing Study •Senior Building Cash Flow and Maintenance Schedule •Tax Increment District update April 24, Regular, 7:00 p.m. Council Chambers •Consider Rezoning and Preliminary Plat for “The Woods at Taylor Creek” for property located at 5364 and 5370 Vicksburg Lane and Outlot B of Hampton Hills South Plateau (David Hackenmueller and Tim Hidani – 2017110) (Tabled from April 10, 2018) •Announce Fire Department Waffle Breakfast on May 6 at Fire Station III •Approve Cooperative Cost Participation Agreement with Hennepin County for the CSAH 9 (Rockford Road) and TH 494 Project (ST190003) •Approve Final Payment for the 2017 Contractor Mill and Overlay Project (ST179004.002) •Approve Final Payment for the Schmidt Lake Road Mill and Overlay Project (ST179002.001) •Order and Accept Preliminary Engineering Report, Order and Accept Plans and Specifications, Call for a Public Hearing, Order Advertisement for Bids, Declare Costs to be Assessed, and Set Assessment Hearing for the 2018 Contractor Mill and Overlay Project (ST189004.002) •Order and Accept Preliminary Engineering Report, Order and Accept Plans and Specifications, Call for a Public Hearing, Order Advertisement for Bids, Declare Costs to be Assessed, and Set Assessment Hearing for the Troy Lane Reconstruction Project (ST180002) •Approve purchase of Cartegraph Asset/Operations Management software •Approve 2019-2024 Recycling Contract •Approve Final Plat for Plymouth Reserve (Serenity of the Green Inc. – 2017105F) •Consider Rezoning and Preliminary Plat for McConn parcel on property located at 18550 County Road 47 (R & R Island View, LLC – 2018014) May 8, Special, 5:00 p.m. Medicine Lake Room •Fire Department update May 8, Regular, 7:00 p.m. Council Chambers •Project hearing on the Kilmer Park Street Reconstruction project (189001.001) •Project and assessment hearing for the 2018 Public Works Mill and Overlay project (ST189004.001) •Public hearing on providing host city approval for the issuance of Health Care Facilities Revenue Refunding Bonds for Presbyterian Homes May 22, Council/EQC Meeting, 5:30 p.m. Medicine Lake Room •Organics recycling May 22, Regular, 7:00 p.m. Council Chambers •Project and assessment hearing for the State Highway 55 frontage road construction project (13002) June 12, Special, 5:30 p.m. Medicine Lake Room •TwinWest update •Budget goals Page 6 June 12, Regular, 7:00 p.m. Council Chambers June 26, Special, 5:30 p.m. Medicine Lake Room •State of the Streets in Plymouth June 26, Regular, 7:00 p.m. Council Chambers •Appoint election judges for the 2018 Primary and General Elections July 24, Regular, 7:00 p.m. Council Chambers August 21, Special, 5:30 p.m. Medicine Lake Room •Budget and CIP •If necessary, conduct regular meeting at 7 p.m. and then recess back to study session August 28, Special, 5:30 p.m. Medicine Lake Room •Budget and CIP August 28, Regular, 7:00 p.m. Council Chambers September 4, Special, 6:00 p.m. Medicine Lake Room (if needed) •Budget and CIP September 11, Regular, 7:00 p.m. Council Chambers •City Manager’s 2018 Financial Overview •Consider 2019 proposed budget, preliminary general property tax levy, HRA levy and setting budget public hearing date September 25, Regular, 7:00 p.m. Council Chambers October 9, Regular, 7:00 p.m. Council Chambers October 23, Regular, 7:00 p.m. Council Chambers November 13, Special, 5:30 p.m. Medicine Lake Room (if needed) •Budget and CIP November 13, Regular, 7:00 p.m. Council Chambers November 27, Regular, 7:00 p.m. Council Chambers December 11, Regular, 7:00 p.m. Council Chambers •Public hearing on 2019 budget, general property tax levy, HRA levy, and 2019-2023 Capital Improvement Program Page 7 BUDGET PROCESS Budget Calendar 2018-2019 Biennial Budget Preparation & 5-yr Capital Improvement Plan Date Category Description April 23, 2018 Budget Departments receive budget instruction June 12, 2018 Budget Council Study Session – Budget Goals April – June 2018 Budget Departments prepare budgets May 7, 2018 Budget Personnel changes submitted to HR June 11, 2018 Budget Budgets submitted to Finance July 9 – July 13, 2018 Budget Department meetings August 10, 2017 Budget Council receives budget materials for upcoming meeting August 21, 2018 Budget & CIP Council study session (Budget & CIP meeting #1) August 28, 2018 Budget & CIP Council Study Session (Budget & CIP meeting #2) Council Regular Session (Financial Overview) September 4, 2018 Budget & CIP Council Study Session (Budget meeting #3) (if needed) September 11, 2018 Budget Council adopts preliminary levies & budget (Budget meeting #4) October 3, 2018 CIP Planning Commission public hearing November 13, 2018 Budget Council Study Session (Budget meeting #5) (If needed) December 11, 2018 Budget & CIP Budget Public Hearing, CIP, Budget & Levy Adoption December 26, 2018 Budget Levy is certified with Hennepin County Page 8 City of Plymouth News Release For Immediate Release April 5, 2018 Contact: Jim Renneberg City Engineer City of Plymouth 763-509-5541 jrenneberg@plymouthmn.gov Open house set for April 17 to hear feedback on preliminary plans for replacing County Road 9 bridge over I-494 Plymouth, Minn. – The City of Plymouth and Hennepin County will host an open house 3:30-6 p.m. Tuesday, April 17 at Plymouth City Hall, 3400 Plymouth Blvd., to share preliminary plans for replacing the County Road 9 (Rockford Road) Bridge over Interstate 494 and improving the intersection. Staff from the city, county and Minnesota Department of Transportation will be on hand at the open house to hear comments, take suggestions and answer questions. The feedback from the public will help the agencies further refine design options. Because project funding has not yet been secured, the City of Plymouth is seeking $10.7 million in state bond funds to reconstruct the 53-year-old bridge. Though the bridge is not city-owned infrastructure, the city has teamed up with Hennepin County and MnDOT to develop design options. This will allow the project to move ahead quickly, once funding is in place. The existing interchange was built in 1965 without dedicated left turn lanes – and the area has seen considerable development over the past five decades. This interchange is the site of daily congestion and has averaged 33 crashes per year over the past five years. The proposed project would improve public safety and reduce congestion by constructing a wider bridge that can accommodate dedicated left turn lanes onto I-494. For more information and to sign up for project updates, visit plymouthmn.gov/CR9BridgeProject. Cutline: An open house is set for Tuesday, April 17 to hear feedback on preliminary plans for replacing the County Road 9 bridge over I-494. City and state officials toured the bridge in November 2017 as part of the city’s advocacy for $10.7 million in state bonding to fund replacement of the 53-year-old bridge. -30- Page 9 City of Plymouth News Release For Immediate Release April 6, 2018 Contact: Helen LaFave Communications Manager City of Plymouth 763-509-5090 hlafave@plymouthmn.gov Kelli Slavik Plymouth Mayor 612-708-5355 kslavik@plymouthmn.gov City Sampler showcases newly renovated Plymouth Maintenance Facility, trucks and equipment Plymouth, Minn. – The Plymouth City Sampler is set for 9-11:30 a.m. Saturday, April 28 – in a new location. Traditionally held at City Hall, this year’s annual City Sampler takes the show on the road to the state-of-the-art Maintenance Facility, 14900 23rd Ave. N. The venue change showcases recent upgrades to the facility and gives residents an inside look at the city’s range of maintenance vehicles and equipment. This year’s event will include a Touch-a-Truck feature, as well as 3-5 minute motorized tours of the equipment bays and walking tours of the water treatment plant. Get to Know Your City City Sampler offers crowd favorites and staples of the event – featuring the mayor, Plymouth City Council members and city staff who are available to answer questions about street maintenance, public safety, water quality, recreation activities and anything else residents are curious about. Coffee and light refreshments will be served. Attendees can enter a drawing to win prizes, collect giveaway items and get advice about the best trees and shrubs to plant in their yard. Prizes in this year’s drawing include: •Punch card for Fieldhouse open play (adults, children or teen) •Tour of the Plymouth Police Department and a chance to meet a police K9 •Birthday party package at the Plymouth Ice Center that includes free open skating for 10 children, 10 skate rentals and one hour use of the Blue Line Meeting Room -More - Page 10 Attendees will have the opportunity to meet city staff members from Police, Fire, Public Works and Engineering, Forestry, Economic Development, Administrative Services, Community Development, and Parks and Recreation. Both new and long-time residents are encouraged to stop by anytime during the morning. Touch-a-Truck, Tours To help showcase the Plymouth Maintenance Facility and city equipment, this year’s event includes a Touch-a-Truck feature and tours. A variety of trucks and equipment – backhoe, bulldozer, skid steer, wacker dump cart, tractor and compact front-end loader – will be available for children and adults to explore. City staff will offer five-minute motorized tours of the equipment bay, salt shed and storage areas. Tours of the city’s Central Water Treatment Plant will also be available at 9:30 a.m., 10 a.m. and 10:30 a.m. Tours will take about 25 minutes and space is limited to 15 participants per tour. Children must be accompanied by an adult. Maintenance Facility Upgrades The Plymouth Maintenance Facility underwent a major transformation through the first part of 2017. Now complete, the building is better suited to serving the needs of a growing community. The facility houses all equipment, vehicles and staff needed to maintain roads, parks, trails, and the water, storm water and sanitary sewer system, as well as the city fleet. The facility was last expanded in 1990, when Plymouth had considerably less infrastructure to maintain. The $10 million expansion makes operations more efficient and provides better protection for the millions of dollars in equipment and vehicles maintained and stored there. The project also includes updated office space, redesigned reception area and new meeting space. Plymouth was able to use reserves to fund the project without incurring debt or increasing property taxes. Cutline: This year’s City Sampler event, April 28, showcases recent upgrades to the Plymouth Maintenance Facility. Attendees may meet the mayor and Plymouth City Council, explore vehicles at the Touch-a-Truck feature, take tours of equipment areas and the Central Water Treatment Plant, and win prizes. -30- Page 11 Page 12 4/10/2018 Lund group buys site for future Edina luxury tower – Finance & Commerce https://finance-commerce.com/2018/04/lund-group-buys-site-for-future-edina-luxury-tower/1/4 A luxury apartment building planned at 3650 Hazelton Road in Edina has grown to 19 stories and 186 units since it was proposed last December. Developer Tom Lund and investors have purchased the site. (Submitted illustration: ESG Architects) Lund group buys site for future Edina luxury tower By: Matt M. Johnson April 4, 2018 3:37 pm 0 A group of investors led by developer Tom Lund paid $4.25 million for the Guitar Center site in Edina, where they plan a 19-story luxury apartment tower. Six entities that share an address with Edina-based Trautz Properties closed the deal for the 3650 Hazelton Road site with seller StuartCo on March 29, according to a certificate of real estate value made public on Tuesday. Page 13 4/10/2018 Lund group buys site for future Edina luxury tower – Finance & Commerce https://finance-commerce.com/2018/04/lund-group-buys-site-for-future-edina-luxury-tower/2/4 Developer Tom Lund and a group ofinvestors plan to build a 186-unitluxury apartment tower on the site ofthis Guitar Center store at 3650Hazelton Road in Edina. (File photo:Bill Klotz) Those entities are all identified as iterations of 3650 Hazelton LLC. The $75 million project planned near the Galleria shopping center received a set of development approvals from the Edina Planning Commission on March 28. The developers recently revised the project design, increasing the height from 17 stories to 19, and adding 16 units to bring the total to 186. The level of finish in the apartments will bear similarities to condominiums at The Carlyle and apartments at Nic on Fifth in downtown Minneapolis, Lund said Wednesday in an interview. He said he worked on both projects when he was an executive at Minnetonka-based Opus Group. The 3650 Hazelton project, which doesn’t have a formal name yet, will set a new “super-luxury” standard for Edina, said Lund, who owns St. Louis Park-based Lund Real Estate Partners. “I’m taking it to the suburbs for the first time,” he said of the concept. The 1.25-acre property is in the southeast quadrant of 70th Street West and France Avenue South. It is behind a SuperTarget store and is one block south of the upscale Galleria Edina shopping center. The property is currently occupied by the 41-year-old Guitar Center store. The purchase works out to $3.4 million per acre. Hennepin County values the property at $2.68 million for tax purposes. Edina developer Luigi Bernardi made a similar purchase last year when he bought an older office building on 1 acre at 6950 France Ave. S. for $5.18 million. That property was to have been part of the two-tower Estelle Edina condominium project. The Edina City Council in October rejected the 26- and 22-story Estelle due to concerns about its height and density. The price the developers paid for the Guitar Center site shows that Edina redevelopment property is in demand, said Gina Dingman, president of Minneapolis-based Everest Real Estate Advisors. “I’m not surprised at the pricing,” she said in an interview on Wednesday. “Edina is certainly one of the most sought after submarkets in the Twin Cities.”  Page 14 4/10/2018 Lund group buys site for future Edina luxury tower – Finance & Commerce https://finance-commerce.com/2018/04/lund-group-buys-site-for-future-edina-luxury-tower/3/4 Bloomington-based Stuart Cos. had owned the site since October 2013, when it paid $3.39 million for it, Finance & Commerce reported previously. The project is a joint venture by “five local real estate veterans,” Lund said, adding that he and Trautz Properties principal John Trautz are in the partnership. The project goes to the Edina City Council on April 17 for a vote on rezoning from commercial use to planned unit development use, and for a comprehensive plan amendment. The amendment is needed because the maximum building height in that area of Edina is eight stories, according to city documents. Council members in February praised the concept. Unlike Estelle – which would have been built next to single- family homes – the 3650 Hazelton building would be in the center of a nearly six-block commercial area bounded by France and York avenues. The building will be a block south of the Westin Edina Galleria hotel and condominium tower, and will be 20 feet shorter than the Westin. Construction is expected to begin late this year, Lund said. The project will take 18 months to build. The 3650 Hazelton LLC joint venture has yet to choose a general contractor. ESG Architects of Minneapolis is designing the building. Apartments will range in size from 400-square-foot “micros” to 3,400-square-foot, three-bedroom units, Lund said. Most of the apartments will be on the “larger” side, he said. The building will have no affordable units. A city policy requires 10 percent of the units in a new rental building to be affordable, or for project developers to pay into the city’s affordable housing fund. The 3650 Hazelton project will pay $1.86 million to that fund, Lund said. The building will include a number of walk-up units, as well as 298 parking spots. Related: Edina likes Lund’s proposed apartment tower Apartment tower pitched for Edina Guitar Center site Page 15 4/6/2018 Amplifon will move 180 employees from Plymouth to Fifth Street Towers in downtown Minneapolis - Minneapolis / St. Paul Business Journal https://www.bizjournals.com/twincities/news/2018/04/06/miracle-ear-parent-will-move-180-employees-from.html?s=print 1/4 From the Minneapolis / St. Paul Business Journal: https://www.bizjournals.com/twincities/news/2018/04/06/miracle-ear-parent-will-move-180-employees-from.html Miracle-Ear parent will move 180 employees from Plymouth to downtown Minneapolis  SUBSCRIBER CONTENT: Apr 6, 2018, 1:18pm CDT Global hearing aid distributor Amplifon will move its North American headquarters from Plymouth to downtown Minneapolis. Amplifon, which is best-known for its Miracle-Ear brand and network of stores, signed a lease for just under 50,000 square feet in Fifth Street Towers. The company will occupy the 23rd and 24th floors in the 150 Tower, the taller of the two.  The company has 180 employees in Plymouth, but will have 200 when it makes the move in October or November.  CEO Marc Lundeberg and Deb Gran, senior vice president of human resources and corporate services, have been talking to employees for the past five months about their office search.  Lundeberg said the hearing aid industry is growing and attracting young people who want to work in the field. “It’s a really attractive sector, with younger people coming in looking for this sense of purpose,” he said. “What we also see is that this generation, they don't like Plymouth and the suburbs anymore. They like downtown and they like to be where the action is.” Lundeberg also said he wanted the office to showcase the company as the leader in the hearing aid industry. The company currently offices in a single-story building at 5000 Cheshire Lane N. FOR THE EXCLUSIVE USE OF BLANDHAUSER@PLYMOUTHMN.GOV MENU  Account  Page 16 4/6/2018 Amplifon will move 180 employees from Plymouth to Fifth Street Towers in downtown Minneapolis - Minneapolis / St. Paul Business Journal https://www.bizjournals.com/twincities/news/2018/04/06/miracle-ear-parent-will-move-180-employees-from.html?s=print 2/4 FILE PHOTO Amplifon is moving its 180 employees into Fifth Street Towers in the fall of 2018. “We wanted an office that reflects we are the leaders and we wanted the office to reflect the modern and innovative nature of our sector, despite our patients being old,” Lundeberg said. “And we wanted to offer our employees a great place to work — one that is vibrant, connected and allows for opportunities inside and outside of the office.” Another big factor was the transit access. Amplifon’s training center brings in Miracle-Ear franchisees and employees from all over the country and now they’ll be able to hop a Blue Line train from the airport and stay in a nearby downtown hotel.  Amplifon surveyed its employees and 40 percent said they couldn’t wait to move downtown; another 40 percent had neutral feelings about the move and 20 percent said they hated it, said Lundeberg, who took over as CEO a year ago.  “We are taking those 20 percent very seriously,” Lundeberg said. “We are spending time to make sure that those 2 out of 10 get a really good support structure.” Amplifon is planning to have a car on site in case someone who took transit needs to, for example, pick up a sick child.  Gran said the firm is planning monthly employee meetings and launching an internal website about the relocation. They will also have a meetings with Metro Transit to help employees map out how to get downtown. And the company will offer some sort of transportation subsidy, though details haven’t been finalized.  “We're really trying to be as proactive as possible to give our employees as much time and as much information to help them map it out,” she said. “We know when they have the right path to determined they're going to be so excited about what they see in building that it is all going to make complete sense.” The Amplifon jobs are in human resources, finance, IT, call centers and training. In addition to the 180 employees in Plymouth, Amplifon also employs another 220 elsewhere in the U.S.  Page 17 4/6/2018 Amplifon will move 180 employees from Plymouth to Fifth Street Towers in downtown Minneapolis - Minneapolis / St. Paul Business Journal https://www.bizjournals.com/twincities/news/2018/04/06/miracle-ear-parent-will-move-180-employees-from.html?s=print 3/4 Downtown Minneapolis has an office vacancy of nearly 20 percent, according to a recent Cushman & Wakefield market report. However, that’s mainly been due to new construction and companies shrinking their square footage, not their employee base. There’s been several years worth of migration from the suburbs to downtown Minneapolis, most recently when Select Comfort last fall also departed Plymouth and moved 900 employees downtown. Fifth Street Towers has one of the highest vacancy rates in downtown — at 43 percent — due to the recent departure of law firm Stinson Leonard Street, but building owner Zeller Realty Group has invested in a multi-million dollar renovation that includes an outdoor patio, bike storage and locker rooms, a large fitness center, tenant lounge a new skyway-level bar.  “This shows the importance of building owners making smart investments and freshening up their space and making it more attractive to tenants,” said Minneapolis Downtown Council CEO Steve Cramer. “This is a company that needs to attract the kind of workforce that wants to work in a downtown environment.”  Ted Carlson of Carlson Commercial was Amplifon’s real estate advisor. Minneapolis-based ESG is the architect for the new office space.  The Minneapolis office of Transwestern handles leasing for Fifth Street Towers.  Nick Halter Staff Reporter/Broadcaster Minneapolis / St. Paul Business Journal Page 18 4/12/2018 D.R. Horton pays $4 million for lots in Plymouth – Finance & Commerce https://finance-commerce.com/2018/04/d-r-horton-pays-4-million-for-lots-in-plymouth/1/3 Fort Worth-based D.R. Horton’s purchase worked out to $160,000 per lot for sites within this Summers Edge single-family residential development at 4240 Brockton Lane in Plymouth. (Staff photo: Bill Klotz) D.R. Horton pays $4 million for lots in Plymouth By: Brian Johnson April 12, 2018 7:02 am 0 D.R. Horton is bulking up in Plymouth with the purchase of more than two dozen finished lots within the Summers Edge development on the west side of town, a hotspot in one of the busiest suburbs for residential construction. The Fort Worth, Texas-based builder’s Minnesota division paid $4.16 million in cash for 26 lots in the development at 4240 Brockton Lane, according to a certificate of real estate value. Lakeville-based Summergate Development Page 19 4/12/2018 D.R. Horton pays $4 million for lots in Plymouth – Finance & Commerce https://finance-commerce.com/2018/04/d-r-horton-pays-4-million-for-lots-in-plymouth/2/3 was the seller. Plymouth, whose population was 77,216 in 2016, has established itself as trendy destination for homebuilders. Through March, the west metro suburb had issued permits for 89 new single-family and townhome units, up from 88 during the same period last year, city officials said. Steve Juetten, Plymouth’s community development director, said the city approved 14 new residential subdivisions in 2017 with a total of about 350 housing units. Going into 2018, another 350 finished lots were available or soon to be available, he said. The D.R. Horton purchase works out to $160,000 per lot. That’s consistent with the going rate in Plymouth for builders who are “buying in bulk,” said Casey Wollschlager, chief operating officer of Summergate Development. The per-lot cost would be higher for lower-volume sales, he said. Two other Summers Edge lots are listed at $174,900 apiece, according to a Builders Association of the Twin Cities inventory of residential lots for sale. D.R. Horton’s offerings in the Summer Edge development range in price from $473,900 for a 2,641-square-foot home to $549,900 for a 4,260-square-foot dwelling, according to the builder’s website. D.R. Horton representatives didn’t respond to a request for comment. When fully developed, Summers Edge will have about 127 single-family houses. Construction has started on the first and second development phases, with the third round of construction slated to begin this year. “We are going to start construction in the next 30 days if it stops snowing,” said Wollschlager, who is working with multiple builders on the development. The Summers Edge site is a “pretty desirable piece of land,” said Herb Tousley, director of real estate programs for the University of St. Thomas. “It’s a good location and there are not a lot of other great alternatives out there that would be a lot cheaper.” Juetten said the city is seeing more variety in its housing stock, from workforce apartments to empty-nester products. As Finance & Commerce reported earlier this month, Waite Park-based Sand Cos. is pitching a 58-unit workforce housing complex and a standalone coffee shop on a vacant parcel within the Crossroads Commons development area in Plymouth. Page 20 4/12/2018 D.R. Horton pays $4 million for lots in Plymouth – Finance & Commerce https://finance-commerce.com/2018/04/d-r-horton-pays-4-million-for-lots-in-plymouth/3/3 In addition, the St. Paul-based Beacon Interfaith Housing Collaborative and Interfaith Outreach and Community Partners of Plymouth want to build 44 affordable apartments on 45th Avenue North near Old Rockford Road in the suburb. “A few years ago we were probably seeing one or two product types,” Juetten said. “We are seeing a broader array of product types that appeal to a broader sector of the market.” Wollschlager said the area is attractive because it’s close to good schools, shopping, parks and other amenities. “It really has to do with the Wayzata School District,” Wollschlager said. “That is an extremely sought-after school district.” Elsewhere on the west side of Plymouth, Golden Valley-based Gonyea is pitching 111 single-family homes on a property just east of the Medina-Plymouth border, near the intersection of County Road 101 and Prairie Creek Road. The Gonyea development, known as The Enclave at Elm Creek, would include 69 traditional single-family homes and 42 one-story “villa-style” houses aimed at empty-nesters. Prices range from $500,000 to $800,000. Juetten said the city has not seen plans for that development. In October, Pulte Homes of Minnesota presented plans to the city for its Greenway West development, which offers 78 new single-family houses on a 40-acre site just west of Troy Lane at 58th Avenue in Plymouth. Pulte received approvals for the first phase and should start to move dirt soon, Juetten said. Related: Gonyea buys 75 acres in Plymouth for homes, school Pulte pitches 78 homes in Plymouth Certificate of real estate value Copyright © 2018 Finance and Commerce | Suite 900, Campbell Mithun Tower, 222 South Ninth Street,Minneapolis, MN 55402 | (612) 333-4244 Page 21 White Paper – Dark Store Theory…potential impact on retail assessed valuation Page | 1 April 11, 2018 Dark Store Theory…potential impact on retail assessed valuation by: Doug Green, Vice President Executive Summary Over the past few years, big-box stores, including Home Depot, Lowe’s, Menards, Walmart and Target, have taken a new, aggressive approach to challenging the assessed value of their properties. Dubbed the “Dark Store Theory” by assessors, these retailers are claiming their buildings are functionally obsolete to other users due to their specific characteristics. The retailers have been successful in certain parts of the country, resulting in large property tax refunds and lost future revenue. Given the challenges brick and mortar stores face from Amazon and their own e-commerce efforts, the belief is these challenges will continue and expand to other parts of the country. Some municipalities are more vulnerable than others, especially those where current law limits property tax growth or smaller communities where big-box stores are some of the largest taxpayers. Municipalities would be wise to understand the risks, get out in front of the issue at the state level, and, if appropriate, conduct contingency planning. Introduction Municipalities are used to property owners of all kinds challenging their assessed value. After all, every state has their own formal process for notifying property owners of their assessed value on an annual basis and providing a formal process for challenging the value. But over the past few years, big-box stores, including Home Depot, Lowe’s, Menards, Walmart and Target, have taken a decidedly more aggressive approach in challenging their assessed value. The actions of these retailers – cleverly dubbed the “Dark Store Theory” by assessors – has a potential profound impact for all levels of government and reshape how taxes are allocated. The Issue At the heart of the issue is simply how retail properties are valued. Generally accepted assessing practices values properties on their “highest and best use,” which inherently assumes commercial properties are operating. But over the last few years, these retailers have claimed the buildings they occupy are built-to-suit and constructed with such specific features, that they are functionally obsolete to any other potential user. As a result, they should be valued as if they are empty and abandoned – a Dark Store. Assessing Methods To understand the argument, a brief overview of commercial property assessment methods is warranted. There are three methods to determine the assessed value of commercial property: 1.Cost Approach – The cost method adds the purchase price of the land and the cost of construction, less annual depreciation. The cost approach does not take into consideration the amount the property would garner in an arms-length transaction. 2.Income Approach – The income method utilizes the revenue the property generates to determine a value, regardless of the cost of constructing the building. 3.Sales Comparison – The comparable sales method looks at the sales prices of comparable poperties that have sold in the market and is the most common method used for property tax assessment purposes. Page 22 White Paper – Dark Store Theory…potential impact on retail assessed valuation Page | 2 April 11, 2018 Assessors use all three methods when setting a value for a commercial property. Both facts and subjective, professional judgements on behalf of assessors are involved with all three methods. The question is: What method should be used or given greater weight? The Retailer’s Argument Modern day big-box stores range in size from 50,000 – 150,000 square feet. The stores are typically new construction with specific features that can include grocery stores, doctor’s offices, bank branches and auto shops. The retailers claim these buildings have no other functional purpose or would require a massive investment by a new user, that the assessed value should be significantly discounted. In other words, the cost method overvalues the true market value of the building. In addition, their argument is bolstered by the fact that it is increasingly difficult to re-tenant a building due to the growth of e-commerce. Complicating the issue is a common financing structure that is oftentimes used to finance original construction. At the risk of over-simplification, new construction is internally leased at above-market rents, which increases the assessed value under the income method. Retailers claim this arbitrarily inflates their income and thus, their assessed value. Lastly, retailers point to the market value of shuttered stores that have sat empty for months, if not years, and sell at a deeply discounted amount. The Assessor’s Argument First and foremost, as previously stated, general accepted assessing practices consider the highest and best use for a building. And if a business is operating and profitable, assessor’s claim it violates the basic concept of highest and best use. Secondly, assessor’s claim the comparable sales argument presented by the retailers is spurious because the shuttered stores are oftentimes in a less desirable location or the retailer has purposively sold the building to a non-competitor, which likely isn’t the highest and best use for the building. As a result, the sale of the previous building is not a good comparison to value the new building. A Brief History Based on research by Springsted, assessment appeals based on the dark-store argument have been isolated to Michigan, Indiana, Texas, Wisconsin, Florida and New York. The first known case in which a major retailer successfully challenged their assessed value was Target in Detroit, Michigan, back in 2010. Since then, Michigan has been on the front line of the debate, with the Michigan Tax Tribunal largely ruling in favor of retailers, which has resulted in municipalities at all levels returning over $200 million in past property taxes. In 2007 the Indiana Supreme Court declined to review a lower court ruling that lowered the value of a Kohl’s store by 40% and required the County to repay three-years of taxes. The decision also validated the dark store assessment methodology under current law, which will allow appeals to continue in the state. Texas counties, including Harris County (Fort Worth), have been involved in arbitration proceedings with Lowe’s since 2016, which has also resulted in lower assessed values in a state that is heavily dependent on property taxes. Page 23 White Paper – Dark Store Theory…potential impact on retail assessed valuation Page | 3 April 11, 2018 Surprisingly, given the crux of the dark-store assessment argument that buildings are functionally obsolete to other users, smaller retailers such as CVS and US Bank have challenged their assessment value using the same argument. The Most Vulnerable Municipalities While every municipality in every state is affected by reduced market values, the impact will vary greatly. Below are the factors that will dictate the extent of the impact: 1. Property Tax Assessment Limits – Municipalities that operate under state imposed property tax limits, including constraints on tax rates, tax levies and/or assessed values, will not be able to backfill the lost revenue without a change in current law. When Big-Box is in the Top 10 – Big-box stores including Walmart and Target are often one of the top ten taxpayers in communities with smaller tax bases and populations. These communities are oftentimes regional centers with populations ranging from 5,000 – 30,000 with a market value under $1 billion. A recent analysis conducted by Springsted of eleven regional centers fitting these characteristics showed that big-box retailers comprised between 2% - 4% of the City’s tax base. 2. Diverse Mix of Property Classes – Communities with a more diverse mix of property types - such as commercial, residential and industrial - will be better insulated from potential reductions in commercial values. 3. Level of Reliance on Commercial Property Taxes – Most states already place a higher rate on commercial properties compared to residential; however, some do more than others and, therefore, are more reliant on their revenue. 4. Current (and Future) State Laws – Current and future state laws will have a significant role in determining any impact on municipalities in their state. In some states, current law holds school districts harmless for any adverse tax judgements in their jurisdictions. No doubt some states will attempt to come to the rescue of municipalities legislatively in response to actions by retailers or court decisions, while other state legislatures and executives will welcome the prospect of lower property taxes for businesses. What’s Next With brick and mortar stores continuing to be challenged by Amazon and their own e-commerce efforts, it seems inevitable that these retailers will seek to cut costs whenever possible. And given the fact that they have been successful in different regions of the country, the chances seem high that challenges to assessed values are on the horizon. In January 2018, Standard & Poor’s published an article saying the dark-store tactic could put pressure on the budgets and credit quality of U.S. municipalities. They noted “the potential exists for the growing use of dark store theory to contribute to widespread fiscal pressure for certain types of issuers.” Municipalities at all levels would be wise to understand the issue, quantify the potential risk and prepare contingency plans, and consider legislation that could mitigate their risk. If you would like more information on this topic or would like assistance identifying the potential risk to your community, please feel free to contact Springsted at 651-223-3000 or your Springsted representative directly. Page 24