The Free Press, Mankato, MN

October 14, 2013

Council hesitant to set land parcel aside

MTU Onsite Energy not committed to expansion

By Mark Fischenich
The Mankato Free Press

---- — MANKATO — The Mankato City Council wasn't quite ready Monday night to spend $550,000 to keep 6.3 acres of east-side industrial land in reserve in the hopes that MTU Onsite Energy will expand there in coming years.

But council members, acting as the Mankato Economic Development Authority, also repeatedly attempted to send a message all the way to Friedrichshafen, Germany: Our hesitance doesn't mean that we don't like you, MTU Onsite Energy, because we really do.

"They're a tremendous asset to the community," said Mayor Eric Anderson.

Councilmember Karen Foreman also strongly emphasized the value of the company, which was called KatoLight before being purchased by the massive German-based Tognum corporation. The company employs about 350 workers at its Mankato production facilities, which produce large power generators.

But Foreman questioned the price the city was being asked to pay for the land, just west of MTU's current facility in the Eastwood industrial park, and Foreman and other council members wondered why the private marketplace wasn't handling the transaction.

The proposal would involve landowner Tim Lidstrom of Lidstrom Commercial Realtors selling the parcel to the city, with the city giving MTU the right-of-first-refusal to purchase the land whenever the city sells it.

"Why wouldn't (MTU) want to do right-of-first-refusal with Lidstrom?" Foreman asked.

City Manager Pat Hentges said he believes Lidstrom had discussions with MTU or Tognum officials but no agreement was reached. The parcel later became one of three possible locations for another commercial project.

That development, which hasn't yet been made public, will occur on a different parcel. But the close call made city officials worry that the most logical place for MTU to expand might be lost as the east-side industrial area rapidly fills up, something that's expected to accelerate with the construction next year of a 420,000-square-foot Wal-Mart distribution center in the area.

"We know they are looking at pretty substantial international expansion," said Hentges, who joined Gov. Mark Dayton on a European trade mission earlier this year primarily to meet with Tognum officials. "... They obviously need somewhere to expand to."

The company is already leasing nearly 200,000 square feet of space in Mankato to supplement the roughly 90,000 square feet in their own facility in Eastwood, he said. The company also has North American operations in South Carolina and Michigan.

Hentges emphasized that MTU is making no promises to expand, and Todd Riemann, who heads MTU's Mankato operations, didn't either.

"There is no expansion discussion at this point," said Riemann, who also noted that land availability would be "a critical aspect if we were ever to expand."

Council President Christopher Frederick wished the city could get more of an assurance that the half-million-dollar investment would bring a big return.

"All I'm going on is ambiguous statements — 'Well, maybe if I get a warm and fuzzy feeling in a year ... ,'" said Frederick, while also making sure to mention that he recognizes the value the company brings to the city.

Hentges said he anticipates the city, if it purchases the land, would actively market it to other buyers by mid-2015 and is confident it would draw interested buyers at the $87,000/acre price the city is being asked to pay.

Foreman asked staff to provide more documentation, beyond an appraisal, that the price reflects comparable sales in the industrial park. And the council, on a voice vote, decided to delay any decision until its next EDA meeting.