WORKSHOP ITEM - Erik Thorvig, Community Development Director
Title
FRESH PICKED PIZZA ASSISTANCE REQUEST
Background
In July 2019, Fresh Picked Pizza received approvals for construction of a new restaurant at 8683 Central Ave. The owner of the restaurant is proposing to construct a new 5,000 sf. restaurant with take-out, dine-in and patio seating. The property currently has a dilapidated former nursery building which will be removed for the new restaurant. Many other significant aesthetic improvements will occur on the site.
The following is information from the restaurant owner:
“I, Lee Anderson, have over 30 years restaurant experience and have already invested most of my life savings--over $430,000 into this project. I will be on site daily to make sure standards are high and our guests are pleased. Fresh Picked Pizza has been successful for almost twelve years and I couldn’t be more excited for the opportunity to open our second location in Blaine.
I searched for two years before deciding the Central Avenue location provides the best chance for success. My goal is to build the perfect neighborhood spot for a simple Italian breakfast in the morning and the most delicious pizza, pastas, and salads throughout the day and into the early evening. Our brightly lit store will make people feel safe and comfortable. We hope to replicate the success of our Shoreview store on a grander scale. We will have a drive-thru pickup service offering Italian coffee, espresso, fresh-baked pastries in the morning. In the afternoon and evening we serve pizzas, pastas, and salads. We serve both baked (ready to eat) and take & bake (bake at home) pizzas and pastas. Weekday lunches we will offer pizza-by-the-slice. During the warmer months we will have an outdoor garden patio with fresh herbs and flowers. We will also offer a limited selection of beer and wine that will pair nicely with our delicious food.
The consultants helping me on this project are seasoned professionals each with long track records of success, including: Izzy Khrach of Taffer Dynamics and Thomas Ullo of Ullo Designs. Our general contractor is Geoff Benedict of Vanguard Construction who also has 30 years of experience building commercial buildings. The nursery that was operating about a decade ago has overgrown considerably, making it expensive to clear the land, level the current unusable building, and paving the lot.
Building costs have skyrocketed in the last decade. The property taxes will be going up from $15,000 to an estimated $41,500/year. The margins in the hospitality industry are lower than most other businesses and it sometimes takes time to become profitable.
I am requesting a forgivable loan of $27,765 for SAC fees to help me get started. I would also like a 50% match for the earthwork in clearing the lot for paving and demo of the building. The bid my contractor has is $145,813 for this work.
I am the sole owner of Fresh Picked Pizza and do not have the resources many owners of chain restaurants have at their disposal. I appreciate any help the City Council can provide. I truly believe this is going to add value to the neighborhood and to the City of Blaine. My customers love us and many drive from the Blaine area for our products. Expanding what we do with Italian coffee, espresso, wine, beer, a pickup window, an outdoor patio, and a location with much more visibility will add to the wonderful reputation Blaine has as a popular place to work and live.”
Since last July, the restaurant owner has been determining project costs and attempting to secure financing. One of the challenges that the restaurant owner has expressed is the ability to make a project financially feasible.
The SAC is a fee by the Metropolitan Council to maintain wastewater infrastructure. SAC fees vary based on the type of use and the amount of discharge they produce into the wastewater system. Based on information provided by the Metropolitan Council, the SAC fee for the restaurant will be approximately $27,765. The city has an account with approximately $125,000 that was collected from SAC credits available to the city from building demolitions. Typically, the city acts as a pass-through to the Met Council for SAC payments. The money available was collected by the city however did not have to be distributed to the Metropolitan Council because credits were available.
Staff is proposing to provide a forgivable loan to the restaurant owner for the SAC fees. Funds from the account referenced above would be used to pay the Metropolitan Council for the SAC charges. The loan could be structured where if the business is open for a period of five years, the loan is forgiven. However, if the business closes prior to five years, the loan must be paid back with interest. SAC is a fee that can be assessed against a property so the loan is secured as the city can collect funds through an assessment if needed.
The restaurant owner is also requesting a $72,500 grant to assist in the overall $145,000 demolition costs. It’s not uncommon for a developer to ask for assistance with demolition costs under a redevelopment scenario. Demolition is an additional significant expense for developers who buy a redevelopment site. Redevelopment of blighted sites is a benefit to the city, so the EDA has provided demolition assistance in a variety of ways including grant and loan. Assisting a developer in demolition is often a less expensive for the EDA than the EDA purchasing a blighted property.
If there is interest, the EDA could assist in one of two ways. The first is a grant to assist in the demolition in an amount determined by the EDA. The other option is to provide a loan through the EDA Small Business Loan Program that was established in 2019. This program was established for projects like this and offers favorable terms and rates to assist small businesses.
Recommendation
Discuss the project and requests and direct staff accordingly.