Prior Lake is putting a short-term halt to new housing and commercial projects along County Road 42, allowing the city to take a fresh look at development prospects on the highway corridor.

Late last month, the City Council approved a moratorium on issuing building permits for a total of 1,150 acres of farmland and wooded areas within a quarter mile of the highway. The cooling-off period is due to expire Sept. 15, giving the city time to commission a study of the area’s development potential. The city has budgeted $40,000 to $50,000 for the study and is in the process of hiring a consultant.

Parcels that are part of the Jeffers Pond and Shepherd’s Path developments have been exempted from the moratorium because they are part of larger projects previously approved by the city, according to Don Rogness, community and economic director. Both development areas will be included in the study.

Rogness said the idea for the temporary halt grew out of discussions by city planners on the need to update the community’s long-term vision of development, something that hasn’t been done in about eight years.

“We felt the need to revisit some of the assumptions we had back in 2005 when things were going gangbusters,” Rogness said.

As in most communities, the recession had a significant impact on both residential and commercial development in Prior Lake. Single-family construction permits fell to about 60 in 2009 compared with more than 100 in the home-building boom that preceded the economic downturn, according to the Metropolitan Council. Plans for Summit Preserve, a large mixed-use project at the intersection of County Roads 42 and 18, were approved by the city but fell by the wayside when the economy tanked.

Home building has bounced back, with the city recording 134 permits last year, according to the Builders Association of the Twin Cities. But commercial development, which has lagged behind residential development throughout the metro area, remains sluggish.

The construction of County Road 21 leading into Prior Lake is another significant reason to reevaluate the 42 corridor, Rogness said.

“When 21 made its connection from Shakopee, that highway became more of a focal point for an entrance into the northern part our city. County Road 18 had been, but now the focus has been shifting further west to the 42 and 21 intersection. When we talk to brokers or developers, that’s the area they talk about as being the future of Prior Lake,” he said.

Both Shepherd’s Path and Jeffers Pond are mixed-used developments, with residential and commercial components. Shepherd’s Path currently includes Shepherd of the Lake Lutheran Church, a YMCA, a youth center and 142 units of senior housing. Future development plans include more senior housing and some commercial areas.

Plans for Jeffers Pond, approved in 2005, call for retail, office, residential, public institutional and municipal properties on about 336 acres. Much of it has been built, except for two phases of commercial and two phases of residential development.

Central Bank, one of two Jeffers Pond property owners, has a potential deal to sell a 4.5-acre site to a developer planning to build a retail project, according to a letter to the city from bank representatives. The possible sale could have been jeopardized if Jeffers Pond hadn’t been exempted from the moratorium.

Jenny Kilkelly, a commercial broker listing the parcel, declined to comment on discussions with prospective buyers. But she said the exemption is important. “This parcel had gone through the planning process with the city. [The exemption] allows our client to sell to a developer for a use included in the original plans,” she said.

The other Jeffers Pond property owner, the Jeffers Foundation, has no deals in the works with potential buyers, said CEO Paul Oberg. He believes the moratorium is a sign the city may finally be changing a traditionally dim view of commercial development.

“There’s been this desire to keep Prior Lake a rural small town,” Oberg said. “We let all kinds of commercial development go to Savage.”

Now, Prior Lake appears to be rethinking the notion that housing development is enough to bolster its tax base, Oberg said. “It makes sense to take a good look at what commercial there should be on 42. It should have been done before.”