Proposed Apartments at Former K-mart

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Proposed apartments at the former K-mart in West St. Paul are getting a lot of attention. It’s a huge potential development for West St. Paul at a difficult site, but there are concerns about adding more apartments and drama over a prevailing wage requirement.

I’ll explore the facts of the case, some of the issues raised, and my perspective.

Jan. 29, 2021 Update: This project has been approved and finalized. Demolition is expected to begin any day now. City Council meetings on July 13, July 27, and August 31 detail some of the debate not reflected below.

What Is Being Proposed

Dominium is the second largest affordable housing developer in the country, and they’re proposing two apartment buildings at the former K-mart and Signal Bank sites, which have been vacant since 2016 and 1997 2001 respectively.

Two buildings: 

• Senior: 247-unit, five-story building
• Workforce: 146-unit, four story building

All units in both buildings will be income restricted to 60% of area median income, with maximum rent prices set by the Department of Housing and Urban Development (HUD).

The total project cost is $122 million.

West St. Paul is being asked to contribute a $5 million, 16-year tax incremental financing (TIF). This would be West St. Paul’s sixth and largest TIF since the first one in 2002 (though Dakota County has also created TIF districts in West St. Paul, including an existing one at Signal Hills). It’s also worth noting that TIF is not cash pulled from the city budget—basically TIF diverts property taxes from the increased value back into the project. But TIF is notoriously complicated so don’t take my word for it (maybe this helps?). 

Dominium estimates a one-year local income impact of $29.5 million and 457 jobs created and an ongoing annual impact of $9.2 million and 123 jobs created (based on a 2010 study from the National Association of Home Builders). Now we should take those numbers with a grain of salt because they come from the developer, but even if they’re inflated that’s quite a positive impact for West St. Paul.

Project Timeline

• July 13 – EDA work session to review project and provide direction (i.e., the initial yes or no)—here’s our recap of that meeting.
• July 21 – Planning Commission review of site plan, re-zoning, and re-plat.
• July 27 – Council approval of site plan, land use approval.
• August 31 – EDA meeting to hold public hearing and approve TIF agreements.
• October – Construction can begin with an October 2022 completion date.

What Are the Concerns?

Here are some of the various concerns that have been raised about the project.

Do We Need More Apartments?

Some residents ask if West St. Paul really needs more apartments. The answer is a resounding yes. Every single long-term planning document recommends more multi-family housing, including a plan that looked specifically at Signal Hills.

But what about retail? We’re talking about the location of the former Signal Hills mall. It had JC Penney, Herbergers, and more—and they all failed and were torn down. If people in West St. Paul want more retail options or sit-down restaurants, we need more people to support them. Which means more housing. 

Why not more owner-occupied housing? The apartment building at the corner of Robert and Bernard started out as owner-occupied condos. They were never fully sold and had to be converted to apartments (which might be more because of the financial crash). But the market isn’t supporting condos and townhouses aren’t dense enough to be feasible.

Whether you like the project or not, West St. Paul needs more housing and apartments are a good fit for this site.

Other Options

What about other options for the former K-mart and bank building? Since closing in 2016, the K-mart building briefly housed a Halloween store and local auctions. Otherwise it’s been empty. In 2017 the city council rejected the idea of a shooting range. Apparently go-karts and mini-golf have also been proposed for the building. 

The bank building has sat empty since 1997 2001. There have been multiple proposals since then, including a funeral home, youth shelter, a banquet hall, and a combined restaurant/dog park. 

But none of these proposals for either building came with a serious plan and support. They also don’t fit with the long-term plan for the site—which says a community center won’t work, big box retail is a bad idea, and the market won’t support condos. Those plans point to apartments.

West St. Paul doesn’t have developers lined up for this site. If the Dominium deal is rejected, other proposals might come. But they might not. History has shown that those proposals are few and far between—especially serious proposals.

Cost Increase From Prevailing Wage

The project has changed a few times since it was initially proposed in August of 2019. As the negotiations went back and forth, Council Member John Justen asked in January if this was following the city’s prevailing wage requirement. The project was not, which threw a major wrench into the works. Apparently the city never notified Dominium that they would have to offer a prevailing wage if they applied for TIF funds. Dominium said at the January meeting that prevailing wage would significantly increase costs.

In March the Council briefly considered repealing the prevailing wage ordinance, but with public pressure they backed off. 

In June Dominium came back with new figures, reworking much of the project to include the prevailing wage requirement. Those changes include a $23 million increase in the total project cost (roughly 20%). Lower interest rates, more units, a $500,000 decrease in the purchase price of the property, an increased TIF request from $3.6 million to $5 million—and the biggest increase—a $17 million increase in construction costs (From $57 million to $74 million) all made the project feasible with the prevailing wage requirement. Dominium itemized all these changes.

Some union groups are charging that Dominium tried to get the prevailing wage ordinance repealed, is artificially inflating the construction costs, and is asking for too much in public subsidy.

Those charges are debatable. City Council considered repealing the prevailing wage ordinance, certainly because of this project, but there’s no proof Dominium mounted a campaign to repeal the ordinance. Dominium said up front that construction costs would increase substantially. 

The size of the subsidy is perhaps the best argument against this project. It is a large TIF request. But it’s also blighted property that’s sat empty for too long (23 19 years?!). If the city wants to redevelop, it’s going to require some investment. TIF is a relatively painless way to do that because we’re not dipping into our already cash-strapped budget.

Ultimately, this should be a project where everybody wins: Workers are getting a fair wage, the city is getting much needed redevelopment, a developer is making a project happen, and residents will see needed growth that can help support local businesses and eventually add to the tax base.

Is Dominium a Bad Landlord?

Another concern raised is over Dominium as a landlord. Opponents have pointed to articles and reports showing a series of complaints from tenants. 

You can find plenty of scathing articles and online reviews, like the MinnPost story about Dominium selling a Brooklyn Park apartment. Dominium argues that they bought an existing problem property and did their best to make improvements. Their Google Reviews (if that means anything), show 2 out of 5 stars from 118 reviews. Dominum says they’re a large company and there are bound to be complaints, but they do their best to address them. 

Dominium points to many glowing reviews and accolades they’ve won.

In the end, it’s easy to hate on landlords. It’s a tough job. In this case, it’s up to the City of West St. Paul to hold Dominium accountable. The city has tools to deal with bad landlords, and they’ve used those tools in the past. 

Rent Too High?

Some have pointed to the rent prices—from $1,100 to $1,600 for one-, two-, and three-bedroom apartments—as too high. The buildings are income restricted to 60% area median income and those rents maximums are set by HUD. If you think the prices are too high, your complaint is probably with the apartment and affordable housing industry as a whole and not Dominium. 

It’s important to note that this project is not intended to serve the lowest income bracket of affordable housing. 

Too Fast?

Another concern is that this project is happening too fast. In June, Dominium did say they need to move quickly to lock in interest rates and compete for limited Dakota County Community Development Authority money. 

But since the project was proposed last August, it’s been discussed in six EDA meetings. Additionally, there are a series of meetings this project will have to go through to get approved (outlined above), including at least three public hearings. 

The City Council actually held off on approving this project at the June 22 meeting, asking for more time to get full details. Dominium held an informational meeting on July 7 so the community could learn more about the project (as for complaints that only immediate neighbors were notified, that’s just how cities do it—it could probably be done better, but that’s not a problem unique to this project). 

Yes, the developer wants to move it along quickly at this stage and for good reason, but the project has been in the works for a while. The public has had opportunity for input and will get more opportunities.

What About Traffic?

A third-party traffic study conducted in the fall of 2019 found “no significant operational impacts are anticipated for the surrounding roadways and intersections due to the trips generated from this proposed development.” The project would see just over 1,600 daily trips, which sounds like a lot, but it’s far less than the site saw as a retail destination.

The study does include a number of recommendations to improve traffic flow in the area that should be incorporated into the project. 

Bottomline: Here’s My Take

I moved into West St. Paul in 2007. Signal Hills has been a mess the entire time. Even when K-mart was open, it was deserted. I saw more cars in K-mart’s parking lot for the informational meeting on July 7 than I’ve ever seen. And that bank building has been closed since I graduated from high school college. 

People long for the golden days of Signal Hills and a community center or a Kohl’s—but that’s not happening. Retail has sputtered and died at the K-mart site. It’s long past time to do something there, and nobody is lining up to do it. 

Dominium’s proposal is big and expensive. But it has the potential to revitalize the area and fits with plans to redevelop the entire site. The project will bring an influx of cash, and new residents will be a boon to nearby businesses. It might even spur more redevelopment in the area, like we’ve seen with Robert Street. 

West St. Paul needs more housing, especially for seniors. The Signal Hills site needs a major overhaul. Don’t let perfect be the enemy of good. This is a good step forward for West St. Paul. Let’s do it.

Share Your Input

Whatever you think about these proposed apartments, it will be decided by the West St. Paul City Council. You can contact them to share your input.

Update (July 13, 2020): Bank Closed in 2001, Not 1997

Based on a user comment, it seems Signal Bank closed in 2001, not 1997. The 1997 date came from the agenda packet for tonight’s meeting. A July 5, 2001 Sun Newspaper article, “Hmong funeral home proposed for old Signal Bank building,” confirms that the bank closed in March 2001.

Fun fact: Star Tribune and Pioneer Press articles note that Signal Bank in West St. Paul opened on January 1, 2000 to alleviate Y2K panic.

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