MONROE — North Kelsey Village is supposed to reshape the face of Monroe.
City leaders envisioned the shopping center north of U.S. 2 as a vibrant gathering place and a way to pump more sales tax dollars into the city.
Instead, the project has cost millions and the city’s not off the hook yet.
Monroe is stuck paying $2.3 million to Lowe’s Home Improvement for work the company completed on the shopping center.
That’s because a developer walked away from the project as the economy tanked.
The City Council on Tuesday agreed to pay Lowe’s for building a road, installing sewer lines and finishing other work on the 23-acre site.
Monroe Mayor Donnetta Walser said the price the city paid was fair and there wasn’t any way to avoid paying for the site improvements.
“This was a routine agreement,” she said. “I don’t think it’s uncommon.”
Still, the cash drain couldn’t come at a worse moment. The city is in the midst of a budget crisis. Officials cut $1.6 million from the 2009 budget and laid off employees. More cuts are expected.
A spokeswoman from Lowe’s corporate office, based in North Carolina, didn’t return calls Wednesday.
Lowe’s is the anchor tenant in what city leaders hope someday will be a larger commercial center with shops, restaurants and an open-air plaza.
Several years ago the city bought the land from the county, partly so it could wield some control over the land’s future.
An Issaquah development company, SeaCon, is talking with the city now about buying 6 1/2 acres of the property.
The original idea was to sell the property in one piece, but developers now are in no mood to take on large commercial developments, said Hiller West, the city’s community development director.
Lowe’s originally billed the city $3.6 million for the work, but the final price was negotiated down over the past several months.
In 2006 when the agreement with Lowe’s was made, a developer planned to buy the city’s property and pay for 55 percent of the improvements.
At that time it made good sense to combine the projects, since a contractor already had started developing Lowe’s property, West said. The city entered into a three-way agreement with Lowe’s and the developer, in which Lowe’s would pay its contractor to do the additional work.
The developer, First Western Development, later backed out of the project, partly because of what Lowe’s wanted to charge.
When the development was still an idea, city leaders hoped it would create a vibrant city center and bring needed sales tax dollars into town, said Robert Zimmerman, who served on the City Council 2006 when the agreement was made.
Then, Lowe’s told the city the additional work would cost the city less than $1 million, he said.
Most of the council members at the time had no professional business experience, and there may have been some naivete on how the city-led project would turn out.
“I’m not surprised we’re in this position,” he said. “(The developer) did what they had to do, and we are the ones paying the price.”
Monroe also is responsible for paying interest on the $11.2 million property. The city has paid $944,849 so far and will continue to make payments until the property is sold.
The money to pay for the interest and the site improvement will come from the city’s North Kelsey fund. About $3.9 million is in that fund, which came from the $9 million sale of the property Lowe’s is built on.
“The city is optimistic this property will be developed eventually,” Hiller said. “The infrastructure is in, the street is done and the vast majority of the property is ready to go.”
Debra Smith: 425-339-3197, dsmith@heraldnet.com.
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