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HomeMy WebLinkAboutItem 10Memorandum To: Mayor and City Councilmembers Steve Mielke, City Administrator From: Brenda Visnovec, Liquor Manager Date: April 22, 2014 Subject: Co. Road 70 Land Acquisition BACKGROUND: City of Lakeville Liquor Department Lakeville Liquors currently operates three municipal liquor stores with a total square footage of 29,917 ft. and a sales volume of $15.3 million dollars. The city's primary mission is to improve public safety through proper sales and distribution of alcohol in the community. Secondary, but also important is that we provide convenience and service to the residents, while funneling profits from the business back into the community. Over the years, the City Council has made numerous business decisions in which to ensure we remain fiscally responsible while maximizing profitability. In 1997, after the Kenrick store was built, the city operated four liquor stores with a total square footage of 27,000 sq. ft. The fourth location which was at 175th and Hwy 50 closed in 2000 due the lease ending, and it's close proximity to the new Kenrick location. The Galaxie Liquor Store was the latest site acquisition made in 2006, and was a relocation of the Cedar Ave. store. This was done due to sales outgrowing the 5,400 sq. ft. Cedar facility as well as impending roadway changes on Cedar Ave. When Galaxie was constructed in 2007 the sales at the Cedar location were $3.9 million. With the relocation they have increased to $5.1 million last year, or 31% over the past 6 years. The Galaxie location is on pace to be our highest volume location this year, with sales estimated to be $5.3 million. The importance of the background information above is that with the opening of the Kenrick store, the closure of the 175th St. location, and the relocation of the Galaxie Store, the liquor operations has only increased facility space by 3,000 sq. ft. since 1997 while our product sales have doubled. CURRENT CONDITIONS: The chart below compares the increase in the city's population, households and sales from 1995 to present. Household/Population/Sales Comparison 150000 -- 130000 110000 90000 70000 50000 30000 10000 -10000 Notes - From 1995 through 2010: • Population increased by 63% • Households increased by 72% • Sales increased by 211% Households W Population ■Sales in Hundred Thousands Why are Lakeville Liquors Sales increasing when according to the National Institute for Alcohol Abuse and Alcoholism continues to show downward trends in alcohol consumption? Lakeville Liquors has been successful in increasing sales for the following reasons: • Providing convenient aesthetically pleasing facilities • Becoming a destination location by carrying a wide range of products • Changing the behavior of our consumers through wine club and brew club memberships and events. Transitioning customers to consume less but consume better! • Reaching outside of our own community for our customer base • Partnering with other businesses and organizations such as the Minnesota Zoo and Lakeville Rotary to maintain and improve our customer base. • Effective utilization of social media. The need for an additional location is necessary for the following reasons: • As noted above, over the last 17 years, our floor space has increased by approximately 13% while our sales have increased by 211%. • Increased commercial and residential growth in the central and southern portion of the city. • Our documented threshold of sales per sq. ft. has been recorded at $600 per sq ft. The Kenrick and Heritage locations are both currently running approximately $560 per sq. ft. LOCATION: A market study completed by Dakota World Wide stated that County Road 70 and 1-35 would be a location well prepared to service the residents of southern Lakeville, as well as the rural area south including the Elko New Market area. At the time of this study, it was determined that the actual construction of the building may be premature (study was completed prior to Walmart construction), but that if there was to be increased retail or residential development in the southern section of the city, time frames may need to be accelerated. Following this report, staff evaluated and monitored activity on several parcels in the northwest quadrant at County Rd. 70. With the addition of Walmart and the upcoming construction of SuperAmerica, we determined that we had to proceed towards land acquisition before all land opportunities were procured by other parties. The site that evaluated and scored the highest in the study was the parcel(s) that would be just south of the soon to be constructed SuperAmerica and north of Harry's Cafe. City staff had negotiated the purchase of both parcels, a total of $4.52 acres at $10.00 per sq. ft. SuperAmerica paid $13.00 per sq. ft. The city also looked into comparable properties in the south metro and found this price to be extremely competitive to the market. The recommendation to purchase both lots 2 and 3 is that we will design a store and grading and ponding systems on the lot. If land is not needed after the design, excess can be sold. PROS FOR PURCHASING BOTH LOTS: • As shown in the conceptual site plan attached, we can maximize the efficiency of the future liquor store site parcel, increasing the size of the adjacent property to nearly a 2 acre parcel. • A two acre parcel will be much more conducive to a wider variety of users than the existing 1.18 acre site. • Ponding and drainage for both parcels can be placed on the secondary lot. Thus meaning that we are not paying for land designated for ponding. • Topography of the land exhibits that the future liquor store site will require extensive grading and export of soils. The secondary lot is much lower, thus the soils from the future liquor store site can be graded to the secondary lot, rather than being exported off site. • The need to establish access points within city ordinance to meet minimum requirements will provide the city the ability to establish and design the shared entrance. • Ultimately, we would sell the remaining property as a pad ready site. We will recoup some of our initial investment, while being able to control the buyer. Ultimately ensuring a business that would enhance or be conducive to our customer base. • The sale of the adjacent parcel as a pad ready site will provide a return on investment. STAFF RECOMMENDATIONS: The Liquor Fund allows for $2 million dollars for future location land acquisition. Staff is recommending the purchase of both parcels at the reduced cost. Once our site is efficiently designed and graded and subdivided, the secondary lot should be sold. Dakota County, MN _ -- - _ --- 224434001020 224434001031 LAKEVILLE LAND LTD © LAKEVILLE LAND LTD i Disclaimer. Map and parcel data are believed to be accurate, but accuracy is not guaranteed. This is not a Map Scale legal document and should not be substituted for a title search,appralsal, survey, or for zoning 1 inch _ 335 feet verification. Dakota County assumes no legal responsibility for the information contained in this data. 4/25/2014