4.7. SR 10-28-1996ITEM 4.7. a-b
City of
iver
MEMORANDUM
TO:
Mayor & City Council
FROM:
DATE:
Pat Klaers, City Administrator
October 28, 1996 (/~/
SUBJECT: Liquor Store Projects
A. Northbound Options
The city is moving forward with the architectural plans for a new
Northbound store. Gary Tushie from the architectural firm of Tushie-
Montgomery and Associates, Inc., is scheduled to make a presentation
to the City Council at the November 4, 1996, meeting. The previous
land owner of the site for this project, Mr. Rick Foster, has already
seen the preliminary plans and has indicated his support for a project
of this type. If the architectural plans and proposal are acceptable to
the City Council, it is anticipated that staff will request approval to
have the architect proceed with construction documents. Once the
construction documents are completed, the Council can then decide in
February if the time is right to go out for bids for construction so that a
new facility can be opened before the 1997 holidays. The city will
know a lot more about development projects near the existing
Northbound store by February and will be in a better position to make
an informed decision.
While working on this project for a freestanding Northbound store, the
city was approached by representatives of Sax Foods to consider
locating a city liquor facility in the Sax store. We have had one
meeting at City Hall regarding this issue and Sax has submitted a
proposal for our consideration. Additionally, Fritz and I took a tour of
the building last week. While it looks somewhat unlikely, it must be
considered that the city could get a financial offer from Sax that may
be hard to refuse. Establishing a long term (10 years or so)
relationship with Sax raises a lot of "what if' types of issues and this
decision cannot be made quickly. Accordingly, at this time staff sees
no reason to delay having the architects proceed with the construction
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
documents for a freestanding facility, but it must be acknowledged
that there is an outside chance that we could have these construction
plans completed and the city may end up in the Sax store. Even if this
did happen we should still keep our Northbound site for long term
planning purposes.
B. Westbound Sites
Originally the city was looking at pursuing a Westbound Liquor store
site at the northwest corner of the Highway 10 and Joplin Street
intersection. As discussions progressed, it appeared that getting a site
in this quadrant was going to be unlikely, so the Council also directed
me to look at the northeast quadrant of this intersection for a possible
Westbound Liquor store site. After even more discussions, it now looks
very good for the city to obtain a 1.5 acre site in the northwest
quadrant of this intersection. This would be the center parcel of three
1.5 acre parcels between the frontage road and Highway 10. The price
being discussed is very competitive to the price that Guardian Angels
sold land for in this quadrant and to what the land owner wanted from
the city in the northeast quadrant of this area. Consistent with City
Council direction at the February 19 and August 5 meetings, staff is
moving forward with the drafting of a purchase agreement for a 1.5
acre site for a future Westbound Liquor store at the northwest
quadrant of Highway 10 and Joplin Street. Depending upon what
happens with a future Northbound location, it should be acknowledged
that the city may not build a Westbound store for five to ten years, but
we do need to obtain a prime site now before they are all sold for
development.
FINANCES - I previously noted to the City Council that the liquor
store fund was the internal source of money used (as a loan) for the
King/Main purchase. Since that discussion with the Council, staff has
transferred part of that loan to a less active reserve - the self insurance
fund. Part of the King/Main internal loan is still in the liquor store
fund, but this is the $225,000 that is the anticipated purchase price for
this property. It is scheduled that this property will be sold to Mr.
Chuba in July, 1997. Accordingly, the liquor store fund will be made
whole in 1997 in time to finance any type of construction
project that is desired. Assuming that the liquor store fund is made
whole in July, 1997, the finances for a Westbound site and a new
Northbound store looks something like the following:
1/97 Cash Balance
Westbound Site
7/97 King/Main Revenues
Northbound Profits '97
Operating Reserves
$675,000
(3?5,000)
225,000
525,000
125,000
650,000
200:000
$450,000
A new Northbound store is estimated at $960,000 plus bond issuance
costs. Accordingly, the debt for a new Northbound store would be
approximately $550,000. This debt could be repaid in about a six year
time frame with profits from the Northbound store.
The above scenario assumes a continued contribution out of the liquor
store profits of $163,000 annually to the general fund. This
contribution includes the payment for part of the City Hall and Fire
Hall projects. This contribution is based on the assumption of
$293,000 annual profits being made by the Northbound operation.
Accordingly, about $130,000 annually will be available for debt. More
funds could be available for a project debt if the profit estimate is low
or if the city transfers less money into the general fund. The above
scenario is viewed as a worse case scenario and the financial situation
could be much better than the above review. Staff prefers to not go
into debt for a new Northbound store, but even if we waited one year
we would still be in debt to a certain extent. The debt would be less
and more manageable, but at this time it does not appear that we can
construct a new Northbound by only using the liquor store reserves.
As long as the debt is manageable, this situation is not a major
concern.
council\liqstrpj.doc