Minneapolis poised to buy part of Kmart site needed to reopen Nicollet Avenue

Thirty-eight years after Minneapolis allowed a Kmart parking lot to block one of its prime streets, Nicollet Avenue, efforts to reverse the unpopular decision are finally gaining momentum.

The City Council will take an initial vote next week on buying a parcel of land formerly occupied by a Supervalu grocery store, which comprises part of the 10-acre "Kmart site" at Lake Street and Nicollet Avenue. The action will also allow city staff to enter a two-year exclusive option to purchase the land beneath the Kmart itself, which is owned by a New York investor.

The plan announced Thursday marks perhaps the most significant breakthrough in talks to reopen the corridor, more than 15 years after the city began seriously considering it. Negotiations have been bogged down, in part, by a complex web of owners and tenants who occupy the site, including Kmart, whose lease there extends until 2053.

Officials were careful Thursday to temper expectations about the speed of the development, since it will take time to reach consensus with Kmart, develop a design for the street and determine how to pay for the project. "People should not be expecting bulldozers or construction any time soon," said Peter Wagenius, the mayor's chief policy aide.

It will cost about $5.2 million to purchase the grocery site — with a closing expected in December — plus another $800,000 to move forward with the Kmart land option. City staff expect those costs will initially be paid through an account largely funded by city-owned property sales, which would be repaid with leftover money from old tax subsidy districts.

Other funding questions haven't been decided, including how the city would pay for the remaining $7.2 million cost of purchasing the Kmart land or other project expenses like building a new street. The city would recoup at least some of the costs in the future by selling land for private development.

Kmart would like to have a new store in the development. Despite Kmart closings around the country, the company has said its Lake Street location is one of the most successful in the country. "We look forward to seeing a new workable redevelopment and financial plan for the site that includes a new Kmart store," Kmart representative Darin Broton said in a statement Thursday.

The parcel formerly occupied by the Supervalu was previously expected to be purchased by a developer representing Walgreens, but the sale never took place.

A redevelopment plan released last year envisioned mixed-used retail, office or residential buildings on the site — as well as high-density housing. The city would likely issue a request for proposals once the public goals for the area become clearer.

"In the future … we won't be the owners of this," Frank said. "It will be privately owned property and we'll have sold off pieces and paid ourselves back."

The reopening of the street intersects with a number of proposed transit projects nearby, including a major new bus rapid transit center at Interstate 35W and a Nicollet Avenue streetcar line running from Lake Street to downtown. It is also adjacent to the Midtown Greenway, the city's most prominent piece of bike infrastructure.

"I think we should ask questions about how should this street look and feel," said Council Member Lisa Bender, who represents the area. "This is a really transit-rich walkable part of the city that's been interrupted right at Lake Street."

The closure of Nicollet Avenue in 1977 was not without controversy.

Hoping to transform a seedy part of town into a gleaming new shopping center, the city spent millions in the 1970s to demolish buildings and relocate businesses. The debt was expected to be repaid by new tax growth in the area — a now-common tool known as tax increment financing — but the plan took a turn when difficulties finding an "anchor tenant" for the site led to mounting and unanticipated public costs.

After years scrambling to find a business, the city announced in 1976 that Kmart was interested in building a store under the condition that the development span two blocks and therefore close Nicollet. The plan spurred vocal neighborhood opposition, but ultimately passed the City Council. The mayor refused to sign or veto the action due to concerns about closing Nicollet, allowing it to move forward.

"I still talk to residents who were around organizing against the closure of the street," Council Member Elizabeth Glidden said. "So the memories are long in this neighborhood."

Eric Roper • 612-673-1732

Twitter: @StribRoper