The Free Press, Mankato, MN

January 5, 2014

Construction in city expected to reach $128 million

$128 million in private construction expected

By Mark Fischenich
The Mankato Free Press

---- — MANKATO — This year will bring at least $128 million in private construction in Mankato if city estimates are realized, and the figure could go substantially higher if several tentative projects move forward.

The $46 million Wal-Mart distribution center, set to begin construction in May, is the largest single project. But numerous other multi-million-dollar projects are in the pipeline, said City Manager Pat Hentges, and 150 new homes with a combined value of $20 million are projected to be built in 2014.

All told, the construction value of the 2014 work should reach $128 million — matching the figure from 2001, when the housing market was booming and numerous big-box stores and strip malls were being constructed in Mankato.

Hentges credits the Mankato area's designation as a metropolitan statistical area for the growing interest in private development in the city.

"All of a sudden, you hit the map and they realize this is a small urban area and it has a regional draw," he said.

The area has also withstood the Great Recession better than many others and appears ready to take full advantage of a recovering economy.

"We probably weren't hit as hard as most, and we've recovered quicker than most," Hentges said, adding that the recovery may be most obvious to construction firms and their workers in the months ahead. "At least for the construction industry, there should be a huge rebound."

Along with the Wal-Mart distribution center, a second as-yet-unidentified distribution center is expected to be constructed on the east side in 2014 and is projected to cost as much as $10 million. Two new downtown buildings between Front Street and Riverfront Drive will total $12 million and a large apartment complex on long-vacant land north of the Madison East Center is projected to cost nearly $9 million.

The construction cost of the new Kia dealership just west of Rasmussen College is projected to be $7 million. The apartment complex east of the Hilltop Hy-Vee, where one large apartment building is completed and another is under construction, will see a third $2.6 million building added later this year. A facelift and expansion of a Stadium Avenue strip mall will bring another $2.5 million in construction work.

City staff are also projecting $20 million in cumulative construction on repairs and remodels of commercial, industrial and residential buildings.

Large retail and commercial projects also are being explored, but several of those might not occur until 2015, Hentges said. They weren't included in the $128 million total, but there is evidence — ranging from land purchases to soil borings to initial inquiries with city staff — that the projects are under serious consideration.

A Mankato retail store, for instance, is planning a 40,000-square-foot, $4 million expansion in late 2014 or early 2015.

"I can't say who they are because nothing formally has been submitted to us," Hentges said of the variety of potential developments in the next two or three years. "... I can tell you we're receiving inquiries and site-development explorations for a couple of very large commercial developments."

The largest of the possible retail developments would total $7 million.

In virtually all cases, the projects are planned for land already within reach of streets and utilities. That means the new taxes generated by the development won't be gobbled up by new expenses related to extending infrastructure, Hentges said.

"This is all very good, sustainable development ...," he said. "It's roads we already plow. It's areas where sewer and water are serviced. It's areas where fire stations are in place."

The tax benefit of the projected development is expected to be $300,000 to the city alone by 2016. Blue Earth County and Mankato Area Public Schools should also experience something of a tax windfall. And the total could top $500,000 in additional tax receipts to the city if several of the more tentative projects are constructed this year or next.

By 2018, another $1 million in city tax collections could come from the Wal-Mart project and the end of a tax abatement district on the northeast side that for years has captured taxes paid by existing retailers to cover the cost of road construction in the area.