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Sharkee's and Mert's Repair to be demolished for future development

Subhead
Mert's Machine and Repair sells current property to city, Kracht buys new city lot on Gabrielson Road for biz expansion
Lead Summary
By
Lori Sorenson

The Sharkee's property on South Highway 75 and the adjacent Mert’s Repair property on Hatting Street may be combined into a single tax increment financing district to encourage future development.
Luverne City Council members took action on this TIF plan during their March 22 meeting.
Sharkee’s bar and restaurant has been closed since April 2014 when health code violations, mainly basement sewage backup, forced its shutdown.
Then on May 26, 2014, the building suffered damage from a fire reportedly set by arsonists. The arson remains under investigation but is essentially a cold case.
Meanwhile, the property has fallen into further disrepair, and property owner Dave Halverson has reportedly ignored notices of building code violations in April 2014 and April 2015.
As such, city charter and state law allows the city to acquire the property through condemnation proceedings, which were set in motion September 2015.
 
Two parcels, one TIF district
As city officials considered ways to encourage new development in that blighted area, they also approached Marlin “Mert” Kracht of Mert's Machine and Repair about including his property in those development plans.
Kracht has been working with planning and zoning officials about a business expansion on his current lot east of Sharkee's along Hatting Street, namely adding on to his current shop.
But since that area is zoned commercial and Kracht's business activity is considered to be industrial, the non-conforming zoning issue prompted city officials to propose a land swap.
Kracht has agreed to sell his 2-acre lot to the city for $160,000, and he is buying a new 3-acre lot from the city for $10,000 on Gabrielson Road, which is zoned for industrial use.
"He needs to expand his business," City Administrator John Call said about the land deal with Kracht. "That's really what's been driving this whole conversation."
Luverne Economic Development Director Holly Sammons said the new lot was sold to Kracht at a discount (from the $13,000 asking price) as an incentive.
“It’s a win-win situation for everyone,” Sammons said.
“We were excited to assist him with relocating his business to an industrial area where he will have a more valuable business property going forward. Plus, it opens the door for additional development to occur in our Highway 75 corridor.”
Kracht will continue his welding and repair operations at the current site through the summer while his new shop is being built.
 
Public hearing for TIF proposal set for March 24
With the city acquiring both the Sharkee's and Mert's Welding properties, discussions about future development turned to TIF, an economic development tool that promotes growth while removing blight.
“It's not unlike what happened with the new Ford dealership on South Highway 75,” Call said.
In that case, substandard properties formerly occupying the 430 feet along the west side of the highway were demolished to make way for the new $2 million Herman Motors dealership.
When a tax increment district is established, the property owner pays more in property taxes as they are calculated on the higher market value after the improvements are made. 
The original amount of taxes continues to be paid to the county, city and school district. 
The difference between the two amounts (the old taxes and what would be the new taxes based on the property’s improved value) is used to pay off the debt accrued to pay for the improvements.
Once the city owns both the Sharkee’s and Mert’s Repair properties (roughly four acres total), the plan is to demolish the buildings on the lots and use TIF as a tool to work with a private developer to redevelop the properties.
The Luverne City Council set a public hearing on the proposed TIF establishment for 5 p.m. Tuesday, May 24, in Luverne City Hall.
In related action during the March 22 meeting, the City Council approved an agreement with Northland Securities to assist Luverne's finance department in creating the new TIF redevelopment district.
Northland Securities will collect data for the TIF district, evaluate and advise on the type of TIF district, provide guidance and review basis for statutory findings and prepare notices, resolutions, development agreements (if applicable) and transcripts.
The city will pay a lump sum of $7,000 for these financial services for the TIF project, which will require another $1,500 to $2,500 in legal services.
City Councilwoman Esther Frakes said, "It's a worthwhile project going forward, so it's money well spent, I'm sure."

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