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5.2. SR 08-09-1999 rll ---'\j ( ); tl~ Item # 5.2. MEMORANDUM River TO: Mayor and City Council FROM: Pat Klaers, City Administrator DATE: August 2, 1999 SUBJECT: Allina Medical Clinic Development Site Request . Tom McKee of Timco Construction, Inc. is representing Allina in its effort to purchase a site (3 acres min.) for a new medical clinic in Elk River. A variety of sites have been pursued, and one that came before the City Council for discussion on July 26, 1999, is the Hartman neighborhood commercial (C4) property. This issue came before the City Council because the city owns the middle lot of a three lot plat for a future Westbound Liquor Store. Everyone believes that Allina will be a valuable addition to the community and staff was instructed to continue having conversations with Mr. McKee regarding Allina's possible acquisition of the city liquor store site. An option includes Allina exchanging property with the city, so that the clinic could have approximately three contiguous acres for its project and the city could retain a liquor store site. Allina Medical Clinic Please see the attached 7/29/99 offer letter from Mr. McKee, and the background letter and maps from the last City Council meeting. Allina's offer to the city is: 1.) $6.50 per square foot for our 1.5 acre site or approximately $65,000 more than we paid for our lot, or 2.) to have the city "switch" lots from the center to the west. Also attached is a memo from the Director of Planning in regard to the proposal and the public hearing process/timeframe. As I understand the situation, Allina has been looking at Elk River as a location for a medical clinic for the past five years or so. The medical industry has changed slightly, whereby Allina's site selection criteria requires highway frontage, compared to a few years ago when no such criteria seemed necessary for Mork, nor apparently for Fairview. Mr. McKee tried to purchase the southwest corner of Main Street and Highway 169 for this project but, in the end, negotiations fell through. . 13065 Orono Parkway · P.O. Box 490. Elk River, MN 55330. TDD & Phone: (612) 441-7420. Fax: (612) 441-7425 August 2, 1999 Page 2 . In discussions with Mr. McKee, staff indicated its strong preference for Allina to locate on the south side of Highway 10 at the future realigned and signalized intersection of Waco and Highway 10. This project would provide a great entrance into the community, would anchor the west business park, and would require the completion of the frontage road system. IDtimately, this site was rejected by Allina. I don't believe the city should sell its lot outright and a concern exists with the option to "switch" lots with Allina. This concern is that during the planning and review process it will be discovered that three acres is not large enough for the Allina project and that the city property will again be necessary for the project to happen. There are other Elk River properties available for this project, but Allina either does not like those sites as much as our property and the Hartman property or is not willing to pay the owner's asking price. The Hartman property, including the city site, is the best location at the best price for Allina, but it is not the only available site. If both Allina options for our liquor store site are not acceptable to the City Council, I believe that Allina will continue looking for an Elk River site in order to do what is best for their long term future. . It should be noted that if the city does not find either option from Allina to be acceptable, then it can expect future pressures to sell this site to other businesses hoping to locate within the community. Until we actually construct Westbound, there will be other requests for our lot because it is a great commercial site. The City Council took an excellent long term planning step in obtaining this good piece of property for its Westbound Liquor Store. Liauor Store Backeround State law allows municipalities to own and operate liquor stores for the primary purpose of regulating and controlling liquor traffic. Municipal ownership eases the job of controlling liquor because it generally reduces the number of stores in the community. Additionally, voters can exercise greater influence over liquor policies through the election of public officials. Finally, municipal liquor stores enable all taxpayers to enjoy the profits of the liquor industry through reduction in taxes by the transfer of liquor store profits into the general fund. In a quick check of the city records, it was discovered that the city has been involved in a municipal liquor operation since at least 1946. . Over the last ten years, the Elk River municipal liquor store has averaged a net profit, including interest revenue, of $303,109. Of this amount, an \ \ Elkriver \ sys \SHRDOC \ADMIN\ALLINA.DOC August 2, 1999 Page 3 . average of 56 percent has been transferred out to the general fund or to help with public projects. This amounts to an average of $170,617 per year. The new Northbound Liquor Store site on Highway 169 was purchased in the summer of 1995 for about $7.03 per square foot or $386,217. When the Northbound store was being planned in early 1996, the City Council decided to pursue a future Westbound Liquor Store site based on the belief that the city would need at least one additional municipal liquor store. In February 1996, negotiations started for a Westbound Liquor Store site with the selection criteria being a site on the north side of Highway 10, at a signalized intersection and on the west side of town. Eventually, the city purchased the center parcel of the three lot Hartman commercial plat for $5.50 per square foot, or approximately $358,172. The city could not obtain the eastern-most parcel of this plat, which is right at the signalized intersection, because it was planned that this site was going to be sold to SuperAmerica for a gas station. . The city wanted a site on Highway 10 near a signalized intersection based on some of the municipal liquor store business coming by way of drive-by traffic. Traffic counts on Highway 10 (at Main Street) have increased from approximately 26,000 in 1992 to 32,000 in 1999. Similarly, traffic on Highway 10 (at Main Street) has increased from approximately 19,000 in 1992 to 24,000 in 1999. Based on my understanding of the municipal liquor industry and the expertise of the current and past liquor store managers, it is strongly believed that the city will need at least one more municipal liquor store to adequately serve our constituents. Recommendation It is recommended that the city reject the offer to purchase our site by Allina (Option I). In order to plan for the long term, the city needs to retain a liquor store site at this time, as good, quality sites are difficult to purchase. In order to accommodate Allina, it may be acceptable to switch lots and utilize the western parcel of this three-lot subdivision, but this "lot swap" would be more attractive if the city was offered some money for this exchange of a very good commercial lot for a less desirable parcel. (If the city really wanted the western parcel, we would have purchased it three years ago.) Finally, it would be better to have the eastern lot right next to the signalized intersection versus the western lot. . \ \ Elkriver\ sys \ SHRDOC \ADMIN\ALLINA.DOC ~\} \. ') '1.1 \~~i& .. . .... ....TIM~() CTRUCTlON. MANAGEMENT. DEVELOPMENT. CONSULTING IICommitted to Excellence Since 1957" July 29, 1999 Mr. Pat Klaers City Administrator City Of Elk River 13065 Orono Parkway Elk River, MN 55330 Re: Allina Medical Clinic- Elk River Dear Pat, . This letter will confirm our conversation with reference to the construction of an Allina medical facility in Elk River. Our efforts in obtaining a suitable site have been unsuccessful. We spent 6 months working on the Hohlen site at Main Street and Hwy. 169, to no avail. This has seriously affected our time line. We toured the site on Joplin St. and Hwy. 10 with the Allina staff and the core physicians , and determined it would be an excellent site to develop' the Allina Clinic. Convincing some ofthe decision making group to share the site with a liquor store was a more difficult task but was accomplished. The overwhelming choice would be not to have the liquor store share this site. The clinic we propose will consist of a 25,000 square foot Phase I. Phase II would consist of an additional 25,000 square feet. The following medical practices will be represented in Phase I: Family Practice, Pediatrics, ENT, Cardiology, Internal Medicine, Orthopedics, OB/GYN and Ophthalmology. The following practices will be represented on a weekly-shared space basis: General Surgery, Urology, Gastroenterology, Pulmonary, Oncology and Dermatology. The following ancillary services will be provided: Rehab/PT/Sports Medicine, Cardiac Rehab, Echo/Stress testing, Lab, Radiology, Optical Shop and Pharmacy. Phase I will also include Pro Care (Urgent Care) and a Surgery Center. We have discussed the idea of sharing this site with the liquor store situated on the . easterly parcel ofland, which I assume would be the City's first choice. This was 9421 WEST RIVER RoAD . :MINNEAPOLIS, MINNESOTA 55444 . OFFICE 612-424-8444 . FAX 612-424-3311 . . . .. unanimously disapproved and we were informed not to pursue further negotiations if this were the only option. In an effort to develop this Allina Medical Clinic I would like to propose the following for your consideration. Option I. We will purchase the City's parcel ofland for $6.50 per square foot. We assume all street and utilities costs to be paid by the seller. Option II. We will purchaSe the two end parcels ofland and effect a land exchange with the City. We would trade the westerly parcel for the center parcel owned by the City. We feel this development would significantly benefit the City of Elk River and its' citizens and would provide an excellent anchor for your very well planned and controlled development for this area of your city. We also believe this development would have a very significant economic impact on your City. Thank you for your cooperation and assistance. Sincerely, \~::;::ltJ.I'------ Thomas E. McKee rei ---'\) ( )j tIt< MEMORANDUM River TO: FROM: Mayor & City Council Michele MCPherso~ector of Planning DATE: August 5,1999 SUBJECT: Hartman Commercial Property Analysis In response to the Tom McKee request to swap the City-owned parcel for the western parcel in the Hartman Commercial plat, I prepared a preliminary analysis of the resulting three acre parcel for Allina in order to determine the impacts of the zoning requirements. Existina Zonina . The parcel is currently zoned C-4, Neighborhood Commercial. This zoning district does not permit, either by right, or by conditional use permit, offices or medical clinics. An ordinance amendment to the C-4 district to allow these uses or a rezoning to C-3, Highway Commercial would be required. It should be noted that the C-3 district does not allow off-sale liquor establishments, only on-sale. Assuming the City Council approves, in concept, a land exchange with Allina at its August 9 meeting, Mr. McKee would need to apply for the necessary land use approvals by August 30, 1999. They would then be before the Council at its October 18, 1999 meeting. Zoning Reauirements Allina proposes a 25,000 square foot clinic, with possible expansion to 50,000 square feet. After preparing a conceptual site plan (attached), it was determined that the maximum clinic that could be placed on the site, based on the parking requirements (228 spaces) would be 45,600 square feet. The conceptual plan meets the setback requirements. The site is located in the Shoreland District, however, there are no additional requirements over those in the C-4 district. The site plan has the following constraints: 1. The structure would have a foot print of 9600 square feet, and would require 4.75 stories to equal 45,600 square feet. The maximum height in the C-4 district is 30 feet, or approximately two stories. A basement would be permitted, however it is unknown at this time if it is possible. . 2. The structure would need to be located near Joplin Street as opposed to Highway 10. 13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330. TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425 Memo to the City Council/Hartman Commercial Property Analysis August 5. 1999 Page 2 . 3. There is no room on the site for a stormwater pond. The ponds located north of Joplin Street have been sized to accomodate stormwater from the road and from the Guardian Angels development. Allina may need to acquire additional land north of Joplin Street from Mr. Hartman in order to construct its stormwater pond off-site. Constructing the pond on-site would reduce the number of available parking stalls thereby reducing the amount of clinic that could be constructed. 4. Two driveways would be permitted onto Joplin Street. 5. A freestanding sign 20 feet in height would be permitted. It is very likely that due to the site constraints, the City could be asked in the future to sell the westerly parcel if a liquor store has not been constructed. Liauor Store Site . A conceptual site plan (attached) was also prepared for the westerly parcel that the City would retain as a liquor store site. The shape of the lot makes site layout difficult, but it is possible to construct a 10,000 square foot liquor store (6,000 retail floor, 4,000 warehouse space) with more than the required number of parking spaces as well as a detention pond. . -Q, ~ ,,~ ~ ~-l ~-~: ~.. ., , . / \ ~ , t? ~ , I \ '/; ~ rJJ , , \ ~ / , B , , ( - ~ - - ~ .! i , , = 0 ~ c( 0 . CO I----~-._--- ~ . ~ I ~ ~ I ~ I "' 0 ~ .... . t - I ru- eD I ~ ! ~ ~ - S ~ . en .S; . . :E < a. I 0 . "' .., Z < . I-----------~ s: ~ · . i _ j ~ ~ \ i i I rJJ ~ ~ , ~ I ~ ~ u , ~ I u , . / , . I ,,-, ~ ~ DlUtIHlll fWW::wwDeOtrN1'fWW_ JJOOidO'l:OOG IDlV'I ONOHO ~ -'^>O~ .u.l .. ....... aa1 .. .... Ui-IiiI-U .... - ....-.....--- _.nw".loWIII....--.. &:lImI.III~_.III-............. --=---........-~~I "ON'WlIIl.IWJI"'IIMJ.--NiIl'lCWIl'l"I llllImlUIIlII:l I- Z 'E w 0 ~ Q. (La: en 'E .~ as ~ 8- <C en >W c as w~ ca ~ =a O~ - <C w ca W~ :::::I C C), ca ~~ =a <(:9; - C ~ -1~ ~ <{ c 08 ~ - c i z 0 0 a: a: 0 , --~- r _u -- o c o .- .. Q. o en c .- " c e. CI) .. CiS I .... .... o . . 07/20/99 15:41 z: 341 3529 M. DRUIS&RSSOC. P.02 ~-~ -.-. - MAlU< A~t)AVI~ ASSO(jATES. ]~C. ~~=-d'~ - July 20. 1999 Mr. Pat Klaers City Administrator City of Elk River 13065 Orono Parkway Elk River, MN 55330 Cm/)(}rnrc J\",II EWA((' !\(:nlirl'~ Re: Alllna Medical Clinic Overview Dear Pat: Thank you for meeting with Tom McKee and myself yesterday to discuss possible land sites for Allina's new medical clinic in I]k River. As we discussed, Allins is very interested In moving forward to develop a multl.specialty med iCCl I clinic in your community. The difficulty we have had, as you know, Is finding a suitable 3.5 acre site which can be purchased and built on immediately. After touring the site which the City of Elk River purchased on Hwy. 10 (future liquor store location), Allina is very interested in negotiating the purchase of your site as well as the two adjacent parcels. I realize this causes a relocation issue for the future liquor store, but the site seems to work very well for Allina's use. In addition to our purchase request, I have provided information about the clinic for your review below. Based upon the program which has been developed, Allina currently envisions the property being developed in two phases, The first phase of the building will be approximately 25,000 sq. ft. in size. At full capacity. there will be 15 physicians and 60 support staff. Typical hours of operation for the clinic will be 8:00am to 6:00pm, Monday - Friday and 8:00am to 5:00pm, Saturday. In addition. AJlina will most likely add urgent care (after hours medical care) to this site which would extend the hours of operation until10pm on weekdays and from 8:00am to 10:00pm on both Saturday and Sunday. The exterior of the Building will be professionally designed and tastefully done, Exterior materials will include predominantly brick and glass, The interior of the Building will be designed and appointed as .Class A" medical clinic space. Based upon Allina's current timeline, the first phase of the medical development will be ready for occupancy by June 2000. The types of medical services that will most likely be Included in Phase J are: primary care (family practice, internal medicine & OB/GYN), specialty physiCian consultations such as cardiology and optical shop. Phase II would add a similar or slightly smaller amount of space to the Building bringing the total development to between 45,000 and 50,000 sq. ft. of medical space. Approximately 25 physicians and 135 tolal support staff would be planned for a facility of this size. It is estimated that there would be approximately 85,000 to 95,000 patient visits to the clinic each year at full capacity. The medical services that would be offered in the expanded facility would most likely include: additional specialty physician services. diagnostic center and a surgery center with 2 to 4 out-patient operating rooms. Please let me know what other information I can provide to you at this time. I appreciate all of your help with this matter, .,'dl:'\' 'li'II'I", Suil'" 1'11(1 ~21 Mal<llIl'l!" ^\"'l1l1~' ?~Jed MiIlIlL'i1I,,,lis, Minl'lL',,'l;l ,'",1 (1! cc: Thomas McKee I"'; (.)1:;-11."1.'1:' It/X: (,/7J'1JYJl\) -- / --P ~ 111M ,,, C NfF'y)fi\ '\ CllIUIlTl' 10 ~ '\ Pa~"b~ R1;: =- CiClMTY I ...... 1111'111~ l:I~. 1 'M1 -, cnr @ CCIUllT CRos4~ s 2 WUII)t , M&. J'j, - .1 '~I r +.~~~~~ L I~~~:"""~. 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