Sterling council puts redevelopment incentives for Kmart site on short hold

STERLING – The City Council Monday held over a vote on economic incentives for the developer who plans to spend $14 million to redevelop the former Kmart site in the East Lincolnway business corridor until its Aug. 1 meeting.

Chris Williams of Highlands Development LLC, based in Kansas City, Missouri, bought the long-vacant property at 2901 E. Lincolnway in 2020 for $1 million. It includes not only the Kmart building, but also two other mostly empty retail/office buildings.

Williams plans to redevelop the site into a mix of business and retail space.

The delay was attributed to some changes Highlands made Monday morning to is draft redevelopment agreement – the roadmap it gives the city outlining its plans for the site – that the city’s attorney hasn’t had time to review.

“I don’t think it’s anything major by any means,” Williams told the council via Zoom. “We’re ready to move things forward.”

Highlands already redeveloped and leased part of the 50-year-old department store, empty since January 2014, to the Department of Veterans Affairs, which moved its outpatient VA clinic formerly at 406 Ave. C to the new, larger space this January.

Williams plans to turn the rest of the 100,000-square-foot site into commercial space that will include national junior box retailers, national restaurants and other local and regional tenants and has been in “active negotiations” with such.

That, however, will require extensive improvements to the interiors and exteriors of the buildings, which Highlands has outlined in its proposed redevelopment agreement with the city.

In addition to facade work, Highlands plans to re-roof, add energy-efficient upgrades to the lighting and the plumbing, completely redo the parking lot and landscaping, repair and replace damaged concrete and sidewalks and maybe add new buildings, among other things.

The goal is to get the property “to a condition that the city of Sterling is proud to have as an asset to their community,” it said in the draft agreement.

The agreement is contingent upon the city creating a tax increment finance and business development district that includes the site.

It’s a plan that’s been in the works for East Lincolnway for some time and will help not only Highlands but also other developers.

TIFs and BDDs are economic development tools that allows money raised through property taxes and other revenue within their boundaries to be used to reimburse developers who take on blighted or underdeveloped areas. It can include deferred or shared sales taxes, as well.

In this case, in addition to receiving property tax revenue, Highlands would get a share of the 1% sales tax revenue raised at the site for the next 15 years – in most cases, a 50-50 split, but in some cases with some of the retailers, 85-15.

City staff recommended the council approve the agreement:

“Changes in the economy have certainly had an effect on development and negotiations. Staff feels this is a very good offer to the developer to assist in their efforts to rehabilitate this long dilapidated and vacant property.”

Also at the meeting, the city agreed to spend up to $466,000 to rehabilitate some aging sewer lines.

Old sewer lines and manholes will be given cured-in-place liners on Avenue G from West Fifth Street to the south side of the railroad tracks; on Fifth Avenue from East Fourth to East Fifth streets; and on the 16th Avenue easement from East 20th Street to 2203 16th Ave.

These three areas “need rehabilitation sooner than later to prevent possible breaks and sinkholes and fix blockage issues,” city staff reported on its agenda for tonight’s meeting.

Hoerr Construction of Goodfield submitted the lower of two bids received, $464,219. The city budgeted $466,000 for the work.