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Minneapolis’ decision to buy and demolish Minnesota’s last Kmart, explained

From Kmart shoppers’ reactions to the city’s redevelopment plans, here’s what you should know about the agreement and why it’s happening now.

Since 1977, the Kmart, a grocery store and parking lots have spanned the 10 acres between Lake and West 29th Street.
MinnPost file photo by Tony Nelson

It’s a land-use dream in Minneapolis, decades in the making: to demolish the Kmart straddling Nicollet Avenue just north of Lake Street and build a new streetway connecting the busy north-south thoroughfare.

Now, city planners say that vision is closer than ever to becoming reality. On Thursday, they announced an agreement with Kmart to terminate its lease and vacate the building a milestone in a years-long debate over what should come of the 10-acre site that interrupts the city’s street grid system.

From Kmart shoppers’ reactions to the city’s redevelopment plans, here’s what you should know about the agreement and why it’s happening now:

Wait, back up: Why did Minneapolis allow Kmart to build a store in such a weird spot, anyway? 

Planning for the store was part of what was known as the Nicollet Lake Development District, an area of the city where officials wanted to generate revenue from private investors by first demolishing distressed properties and then issuing city-backed bonds. In the early ’70s, some planners envisioned a mini-Southdale Mall at Nicollet-Lake with shopping, housing, office space and a movie theater.

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But the city’s plans for development did not go as planned. Only a minimal amount of new construction took place. Taxpayers citywide paid higher bills as a result. So considering that financial position, the city in 1977 welcomed Kmart a leading discount retailer at the time to open a big box store on Lake to try to revive the area’s economy. Kmart agreed — on the condition that the city would close Nicollet Avenue so the retailer could build a massive, sprawling store.

Since then, the Kmart, a grocery store and parking lots have spanned the 10 acres between Lake and West 29th Street. Residents and businesses for decades have protested the street layout. To this day, the closure of Nicollet has been called “the worst planning mistake in Minneapolis history,” said David Frank, the city’s director of Community Planning and Economic Development

So why is the company agreeing to vacate the space now?

The city of Minneapolis for years has tried to get Kmart’s parent company, Transform Operating Stores LLC (formally Sears Holding Corp.), to enter an agreement that would allow the city to rebuild the street.

In 2015, the city purchased the western third of the property for $5.25 million, which contained a now-closed Supervalu grocery store and a parking lot. Then, two years later, the city acquired the land beneath the Kmart for $8 million. That latest financial deal maintained a lease agreement between Transform and the city with the expiration date of 2053.

But after Transform declared bankruptcy in October 2018, executives seemed more open to the idea of terminating the lease for the Minneapolis Kmart in exchange for payment from the city, Frank said. The two parties settled on a price tag of $9.1 million for the agreement.

Pending final approval by the Minneapolis City Council, the lease termination would require Kmart to shut its doors and move out of the building by June 30.

The city has $9.1 million sitting around?

Sort of. About six years ago, the council successfully lobbied the state Legislature to establish a special tax district to raise money for a 3.7-mile streetcar on Nicollet and Central avenues. The district allows the council to levy property taxes from five parcels along the proposed streetcar route. 

So far, the fund has raised about $19 million, according to Mark Ruff, the city’s chief financial officer and interim city coordinator. And while there’s no formal streetcar plan in the works, city officials said they can dip into the revenue pool to acquire property. The city used money from the fund to buy the land under the Kmart in 2017 and now, again, to pay the retailer to end its lease. 

After the Kmart closes this summer, then what?

Soon after the store closes, Minneapolis officials said they will launch environmental reviews of the site’s conditions. After that, they will take a major step in the city’s long-time land-use dream of reopening Nicollet: They’ll hire a contractor to demolish the place.

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The teardown job will include the former grocery store adjacent to the Kmart. The city would cover its costs, though it’s unclear at this point what that price tag would be.

Meanwhile, the city would begin soliciting proposals for new development along the street, an area totaling roughly 9 acres excluding the public’s right-of-way on Nicollet. That process could span months or even years. Frank said city planners will prioritize pitches that meet objectives in the city’s already-established policies for long-term redevelopment, such as Minneapolis 2040.

“There’s been a fair amount of community engagement right in this area about what would happen when this time ever came,” he said. “Don’t know exactly but something a lot like what’s already in the adopted city policy for here.”

So when is Nicollet Avenue going to reopen?

The city’s public works director Robin Hutcheson on Thursday praised the city’s deal with the retailer as a long-awaited step to establish the city’s historic grid system for streets. That land-use pattern is often considered the most efficient layout for people to get around cities.

“Opening this up gives us the opportunity to make better connections to the Orange Line, the city’s transit access project, to the Midtown Greenway,” she said. “A grid helps distribute nicely the way people travel.”

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At this point, she said city planners are open to any and all ideas for what happens in the area, including a new thoroughfare exclusively for foot or bicycle traffic without vehicles. “We rarely get to build a piece of infrastructure like this from scratch,” she said. “Other than it’s an incredibly important transit corridor for the city, we don’t have any preconceived notions on exactly what goes where within that right of way.”

But she said she’s hesitant to estimate when the new construction will finish. The city is committed to hearing from neighboring residents and businesses about what they envision for the area, and that takes time. “Typically, if we’re doing a good job, we’re going to have a long period of time for community engagement really good design takes about a year to do,” she said. “If we’re doing it right, it’s not fast.”

The city has yet to design a plan for how and where it will solicit that public feedback.

Whatever happened to the Nicollet streetcar idea?

Initial planning for a Nicollet streetcar began in 2007, under former Mayor R.T. Rybak. Using the Hennepin Avenue Bridge to cross the river, city planners mapped the streetcar to run from Central Avenue and Southeast Eighth Street in Minneapolis’ Marcy-Holmes neighborhood to the intersection with the Kmart.

Early studies showed the line would cost upwards of $200 million in construction and another $10.6 million to operate each year, while providing 9,000 trips daily and a new north-south connection between light rail lines. In 2010, the Minneapolis City Council agreed that it wanted to explore not just a Nicollet-Central line but a multi-line network across the city. The Federal Transit Administration (FTA) answered local leaders’ funding requests to study the transit option with a $900,000 grant.

Hutcheson said Thursday a streetcar is still an option. But a proposal to further study the idea is competing for federal funding against numerous other transportation projects in the region. “The streetcar is, indeed, not dead,” she said. “We had to, I’ll say, pause a little bit on the environmental document … Absolutely having this connection is a linchpin in that.”

What are the odds that council members reject the Kmart proposal?

Slim. City Council members and mayors for decades have tried to reach this deal with the Kmart, and several current council members have supported less-dramatic proposals to try and reopen Nicollet in the past.

For example, in 2017, Council Member Lisa Goodman said the store straddling Nicollet is a symbol of past mistakes. “It has been a longstanding development goal of the city to rectify the destruction of the street grid and open Nicollet where Kmart now sits as a reminder of past poor planning decisions.”

Council President Lisa Bender, who has long fought to reopen the street (even before her election to the council) and represents the area, is celebrating Thursday’s news as a win. “This is the final piece of the puzzle to make it a reality,” she said in a statement. 

The council’s Economic Development & Regulatory Services Committee will consider the proposal at its regularly-scheduled meeting Monday afternoon. With its approval, the full council will take a vote next Friday.

What about people who work at Kmart or rely on it for shopping?

The Minneapolis store has long been an affordable shopping destination for people who use the nearby bus stops or live in the area, even as the retailer’s parent company shutters dozens of locations nationwide. The Nicollet Avenue location is the last Kmart in Minnesota and might be one of the few profitable locations left in the chain. 

After news of the proposal spread Thursday, some shoppers took to Twitter to express their frustration with the city’s plans. “Sadly it is one of the few places my neighbors and I could walk to for household needs. Now what?” one person tweeted. “POC have been using that Kmart for decades and now more rich white gentrifiers got their way,” another person said.

Brad Bourn, a commissioner on the city’s park board, said the store was the closest, most affordable place for his dad to fill prescriptions and buy food when Bourn was growing up. “He was almost always pretty poor,” Bourn said. “Kmart made the area livable for so many people.”

Resident Summra Shariff, who lives just a handful of blocks from the Kmart, said she also visits the store about twice a month to buy everything from laundry detergent to batteries to milk. “They have such a wide selection,” she said. “The prices and location were also very helpful.”

Shariff said the store serves a big purpose for many immigrant, black or indigenous families who live in the area. Yet, considering the circumstances, she thinks the city’s plans make sense so long as it considers shoppers like her as it decides how to rebuild the area.

“I still don’t understand why Nicollet was blocked by the store in the first place,” she said. “We don’t need more fancy restaurants, yoga studios and breweries,” she said. “We need places where low-income and middle-income people can get the things they need without having to drive to the suburbs.”

Frank said the city is committed to making sure all residents, including those in the Whittier and Lyndale neighborhoods, like Shariff, have access to affordable stores in future development. 

As for the store’s employees, they were notified of the city’s plans Thursday morning, Frank said. 

He said the city is connecting them with information via the Minnesota Department of Employment and Economic Development (DEED) about state programs for dislocated workers. 

“We acknowledge that Kmart has been an asset to the community for the people who work there, the workers who found out some distressing news today, and for the public who shops there,” he said. “This will be a change and, that said, it’s a change that we think has good long-term benefits for the immediate neighborhood and the city.”