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In separate votes that will likely result in the largest single expansion of retail square footage in Los Alamos’ history, the Los Alamos Public Schools Board of Education and the county council have approved entering into a lease agreement with a developer for Trinity Site.
Council Chambers were filled to overflowing as the Los Alamos Public Schools (LAPS) board and county council decided the fate of a lease agreement for the Trinity Site Development.
The 5-1/2 hour meeting included presentations by representatives of the North American Development Group (NADG), Smith’s, members of the Trinity Site Revitalization Project Advisory Committee and others, as well as public comment from 43 residents, and ultimately the lease was approved unanimously by the school board and by a 5-2 vote from council. School board Secretary Judy Bjarke-McKenzie was unable to attend due to illness.
The two governing bodies came together Wednesday evening in a rare joint session to vote up or down on a proposed lease that has taken more than a year to hammer out. The complex lease agreement with North American Development Group will allow the construction of a new shopping center on prime real estate that is jointly held by the county and school district on Trinity Drive.
School board President Melanie McKinley reminded board members that “the school board must base their vote on one issue and one issue only: whether or not this is a fiscally appropriate deal for the schools.”
The agreement calls for an 110,000-square-foot Smith’s Marketplace super store concept as the development’s anchor tenant and 45,000 feet of additional retail space. The square footage of the proposed Smith’s Marketplace will more than double the grocery chain’s current retail footprint in Los Alamos.
A factor that ratcheted up the complexity of the deal involved structuring the lease so that it would generate hundreds of thousands of dollars a year in revenue for the increasingly cash-strapped school district. That lease revenue can then be used to fund anything from additional teachers to general operations.
Initial rent is set at $511,000 with escalating rents to adjust for inflation beginning six years into the lease for “base” tenants and 26 years in for Smith’s.
LAPS will receive 62 percent of the revenue, escalating by two percent over 10 years to 82 percent. The agreement is expected to raise $43 million in revenues for the schools over its 73 year duration. At the end of that period, the land and all improvements are owned by the county and schools.
School board Vice President Kevin Honnell raised questions about whether revenues would decline below fair market value over the course of the lease due to inflation. Honnell countered his own argument with questions about how much revenue would be lost by not moving forward now. Honnell advocated for renegotiating to obtain either greater adjustments for inflation, a shorter lease or “off-ramps” for all parties.
“We find ourselves this evening faced with the adage, don’t look a gift horse in the mouth. But, actually, that’s our responsibility this evening. I was talking with Mr. (Steven) Lynne yesterday, and he said, ‘You’re supposed to look a gift horse in the mouth, because you’re making a decision not only for the citizen’s who have had the opportunity to express themselves here this evening, but for the next three or four generations, and you have a fiduciary responsibility to take a look at that.”
McKinley noted that Honnell’s calculations did not take into account rent-free space the county has provided at Airport Basin or that any lost revenues should be offset when the property and all its improvements revert to the county and the schools at the end of the lease.
Board member David Foster cautioned against “overly complicating the situation.”
“I think all of us would be happy if there was something to make it a sweeter deal for the schools and help us service our students and have more teachers. But I don’t know if that’s a piece of this discussion,” board member Dawn Venhaus said.
School Superintendant Eugene Schmidt urged the board to adopt the lease. “It is to the advantage of the schools to rent the property out for an extended period of time. It creates a long-term revenue stream that gives the school certainty in its budget process,” Schmidt said. “I spoke with people at the New Mexico State land office who said 7 percent of market value is on the low end but is a reasonable return on investment given the state of the market,” Schmidt said.
County councilors had questions about the length of time it took to negotiate the lease, how much control Smith’s has over which other tenants move into the site, what would happen with Smith’s Mari Mac Center location and what additional revenue could be expected from gross receipts and property taxes.
Councilor Fran Berting asked if the county could add amenities to the green spaces beyond what NADG has proposed, which Stephen Preston, managing partner of NADG, was more than willing to agree to.
Concerns were raised about insufficient contractual assurances that Smith’s would actually build and move in, but councilor’s acknowledged that Smith’s has been an asset to the community and showed every sign of a strong commitment to the project.
“I would say the risk is on Smith’s if they don’t move in, because there are probably about 40 or 50 moms who would start tracking people down,” Vice Chair Ron Selvage said, alluding to a strong segment of public comment.
Councilors Mike Wismer and Geoff Rodgers both had strong reservations about the agreement, and voted against it. “I don’t think this is the right mix. I don’t think this will produce what we’re told it will,” Wismer said. Wismer and Rodgers also expressed concerns over “vitriolic” emails they had received in response to raising their objections on the Opinion page of the Los Alamos Monitor.
Councilor Vincent Chiravalle made the motion to pass the ordinance accepting the lease, and said he would work to get 100 percent of the revenues transferred to LAPS.
Among other things, Chiravalle was struck by the number of business people in support of the project. “They know that having something like this project is going to rejuvenate the retail sector and raise the value of what they currently have. It’s going to help keep people on the hill and doing business with our local businesses.”
Councilor David Izraelevitz noted a benefit beyond paying teachers’ salaries with the additional revenue: how the impact on quality of life in Los Alamos could help to retain good teachers.
Izraelevitz read a quote by Johann Wolfgang Von Goethe that echoed much of the public comment.
“Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative and creation, there is one elementary truth the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then providence moves too…Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now.”
Keven Todd contributed to this report.