By Mark Fischenich firstname.lastname@example.org
The Mankato Free Press
---- — City officials quickly granted approval in June when a private developer came forward with a plan to demolish a long-vacant gas station/convenience store on Madison Avenue and construct a nearly $1.1 million office building. Ten months later, the project is stalled after substantial pollution was found on the site, and the Mankato City Council will be asked tonight to help cover the cost of the cleanup.
Developer Jon Kietzer, owner of Century 21 Landmark Realtors, said the contamination wasn't a surprise based on Minnesota Pollution Control Agency reports.
"We knew there was contamination in the ground left behind by Super America since we had all the MPCA reports," Kietzer wrote in his application for city financial assistance. "... What we didn't expect is the degree of contamination. A very strong odor came out of the ground during excavation. It was so strong I could smell it just by driving by the site in my car with the windows up."
Further investigation showed not just the contamination but also "old debris from past residences on the site that were just covered up and buried," Kietzer wrote.
Already, the cost of the project has increased by more than $112,000, according to Kietzer.
"We didn't expect this to be a problem and thought that if we did run into a problem that SA would be liable. That turns out not to be the case," he wrote. "In order to recover any further funds from SA we would have to file a lawsuit against them, and that is not something we want to get involved with."
Kietzer said attorney fees could reach $100,000 and wouldn't be recoverable even if he won a suit against Super America.
Documents filed by Kietzer with the city show that he paid SA $395,000 for the site at Madison Avenue and Dane Street. Combined with the $1.1 million cost of the 8,200-square-foot building, $112,000 for soil contamination clean-up, nearly $130,000 for a pier-based foundation to avoid further disruption of the contaminated soil and other fees, that brings the cost of the project to $1.88 million — just above the projected market value of the completed building.
"This has put this project in jeopardy for completion," Kietzer wrote. "We are asking for whatever financial incentives are available for this type of situation to allow us to complete this project."
The City Council, acting as the Mankato Economic Development Authority, had previously identified the property as one eligible for redevelopment assistance for blighted properties and approved $25,000 in EDA funds for site rehabilitation. Staff is recommending another $25,000 grant plus a $152,000 loan to Kietzer at a 3 percent interest rate. A portion of the grant money would have to be repaid if Kietzer sells the property in the next 10 years.
City Manager Pat Hentges said similar contamination problems have cropped up with downtown redevelopment projects. Although this is the first time the grant funds have been used outside the city center, Hentges said it's likely to be required again when development occurs on sites previously occupied by gas stations, dry cleaners and other businesses that might have leaked pollutants into the soils.
"It's a crap shoot in a city that's 170 years old," he said.
Kietzer maybe should have negotiated more protections for himself in the sales agreement with SA, but if the city denies the requested assistance the site would likely sit vacant until another developer agreed to purchase it, Hentges said. And that new developer probably would make the purchase contingent on cleanup assistance, he said.
"I think we would have been back to the same point," he said. "That gas station sat there empty for 10 years. ... If we really wanted to see that site developed, we would have had to assist with the cleanup."