To settle a lawsuit against the city by Mendota Mall Associates, Mendota Heights will pay the developer $150,000 and allow construction of a smaller assisted-living residence than the developer had proposed near Hwy. 110 and Dodd Road.
City Council members approved the settlement in a special meeting before Thanksgiving.
It frees Mendota Heights from the developer's attempt to force the city to move a sanitary sewer line at a cost of more than $250,000 to make way for a high-rise assisted-living residence.
To eliminate the need to move the sewer line, Mendota Mall Associates agreed to reposition the building and downsize it from four stories and 100 apartments to one story and 50 or fewer apartments.
In return, the city will pay the firm $150,000 to "address costs related to the redesign of the building and the reduction in potential income of the project.''
"The City Council considers the terms of the settlement ... to be in the best financial interest of the city," interim City Administrator John Mazzitello said.
The settlement gives Mendota Mall Associates a green light to sell property to White Pine Holdings Co., which proposes to build and operate the assisted-living building.
The story of the dispute began in May 2009, when the city approved Paster Enterprises' plans to renovate the Mendota Plaza shopping area and go on to a second phase to build new high-rise housing and other retail structures at the 21-acre site.
To renovate the center, the firm tore down a third of it and replaced it with a Walgreens store. The project, which included a new facade and landscaping, was finished last year.
To support the four-story housing development, the city agreed to move a sanitary sewer line out of the way of the building.
Because the sewer line serves a third of the homes and businesses in Mendota Heights, the city wanted direct control of the relocation project and had applied for a Dakota County community development grant to help pay for the sewer work, thinking initially that it would cost $50,000 to $75,000, court records show.
But when the city subsequently called for bids on the sewer work and learned it could cost more than $250,000 to relocate the sewer line, the City Council decided not to do the work.
City Attorney Robert Alsop argued in a court brief that "the substantial cost and extreme complexity of the sewer relocation were neither known nor anticipated by either party.''
When the sewer line was not moved, the developer filed suit in May of this year, charging that the city had defaulted on its contract. The settlement ends the dispute.
Laurie Blake • 952-746-3287