The Eureka Board of Aldermen has paved the way for an Aldi grocery store to be constructed in the city by approving a property tax abatement for the grocery chain.
Vern Wunnenberg, Aldi’s director of real estate, said crews are slated to start work at the store’s site on May 5. The store will be at 1421 and 1425 W. Fifth St.
Wunnenberg said the store may open by the end of this year.
The Chapter 100 abatement will offset the cost of preparing the site for the store, Wunnenberg said. He said the ground conditions at the Eureka site were more complex than other nearby Aldi stores, such as the location at 15907 Manchester Road in Ellisville, and that is why the company sought the abatement.
“We did not have to use Chapter 100 in Ellisville because the infrastructure was already set up,” he said. “We went into the space, remodeled it and fixed up the parking lot, but everything was already there. This one is very unique, because we’ll be building into a hill. We’re building a 15-foot-high wall in the back of the site.”
The board voted 5-1 at a special meeting on April 24 to approve the abatement. Ward 2 Alderwoman Carleen Murray voted against the abatement.
The tax abatement was initially on the agenda for the April 22 regular
meeting. However, Murray said she needed to research the Chapter 100 designation before she could vote on the matter, and a special meeting was scheduled.
The city’s legal representative, Mark Grimm of the public finance law firm Gilmore Bell, said that under Chapter 100, the city will own the property and lease it to Aldi during the abatement period of 20 years.
“This is a very common structure,” he said. “Our firm has done hundreds of these types of deals over the last 25 to 30 years, and no city or county has ever incurred any liability as a result of any of those transactions.”
Grimm said Aldi will pay lower property taxes until it receives a total benefit of $1.4 million or for a maximum of 20 years, whichever occurs first. The property is now generating about $22,000 a year in property taxes, he said.
“We’ve got an immense amount of site costs, about $2.3 million,” Wunnenberg said. “We’re asking for $1.4 million, but we’re still carrying a large (amount of the costs). We’re doing our part and also investing $8.5 million to open the store.”
Taxing districts
The Eureka Fire Protection District will collect 100 percent of its property taxes from the site, but the Rockwood School District will not, Grimm said.
“The statutes give special treatment to fire and ambulance districts in that regard,” he said.
Rockwood Chief Financial Officer Cyndee Byous said the district will receive approximately $9,800 this year in property taxes from the site of the Aldi as it is currently assessed.
Over the next 20 years, the district would receive about $230,000 from the property as it stands currently without the store, she said.
“All taxing jurisdictions, with the exception of the fire district, are abated 100 percent under the proposed plan,” Byous said. “Therefore, the school district will not receive any taxes on this property over the next 20 years. Based on the estimated assessed valuation of the completed project, Rockwood will lose approximately $40,000 per year in tax revenue.”
Ward 2 Alderman Kevin Kilpatrick was in favor of the abatement, saying that the benefit to the city in sales tax revenue would be greater than the loss in property tax revenue.
Aldi will pay about 26 cents per $100 of assessed valuation in commercial property taxes after the abatement expires.
“People have the perception that real estate tax brings in a ton of money, but we actually receive a very small portion, if I’m not mistaken, we even voted to have the lowest allowable real estate tax for our city,” Kilpatrick said. “Our city coffers would certainly benefit by, I would predict, a huge increase in sales tax. I think we’re going to be far better off financially for doing this.”
Shoppers pay about 9.24 cents in sales tax for every dollar spent in Eureka, with the city collecting about 1.5 cents for each dollar.
Construction to begin soon
Wunnenberg said Aldi is in the final stages of awarding a construction contract for the new store. The company will be using Bill Martin Construction and rYse electric, both based in Eureka, to complete the project, he said.
“We’re providing jobs for Eureka and the St. Louis metropolitan area, so we’re very proud of that,” Wunnenberg said.
Mayor Sean Flower said a side benefit of the agreement is the timing of the construction of the new store. He said the dirt at the Aldi site is perfect fill material for the Old Town floodwall.
“(The dirt) matches up very well with what we have,” Flower said. “They’re going to be trucking that dirt to us, which is a savings to the city.”
Aldi is a chain of supermarkets headquartered in Batavia, Ill., but began as a discount grocery store in Germany in 1961. Aldi has more than 2,000 stores in 36 states.
The company specializes in “no-frills shopping,” according to its website, with items displayed in their original shipping boxes. More than 90 percent of the products in the store are Aldi-branded.