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LARKIN, HOFFMAN, DALY & LINDGREN, LTD. The Honorable Mayor John Kysylyczyn City Councilmembers February 18, 2000 Page 2 Section 1006.02C of the Code establishes a maximum allowable lot coverage in the Shopping Center District. It states that "[n]ot more than twenty-five percent (25%) ofthe lot area shall be occupied by buildings." There is no restriction on lot coverage in any of the six other Business Districts established in the Code. The City Council's recent interpretation of "lot area" includes only developable or usable land (including outlots and the buildings thereon) and excludes all street easements. This interpretation essentially renders all of the shopping centers in Roseville, including Har Mar Mall and Roseville Center, nonconforming us€s. While the existing shopping centers would be allowed to continue under the Code, there are serious consequences that follow from the mere classification as a nonconforming property that cloud the title of Har Mar Mall, Roseville Center and all other Shopping Center District properties in Roseville. These consequences are discussed in greater detail below. Concerns Related to Nonconforming Use Classification under the Code Under Section 1011.04 ofthe Code, if a nonconforming use is discontinued for a period of six months, it may not return to the original nonconforming use or to any other use which is nonconforming. Similarly, if a nonconforming structure is damaged by fire, flood, explosion or other casualty to an extent greater than 50% of its replacement cost, any subsequent reconstruction must conform to the Code (Section 1011.03). This is a very serious concern because in many cases the owner of an affected property will be unable to rebuild its shopping center to even its current size. This possibility significantly affects the value of a shopping center. Like any other commercial real estate, the value of a shopping center is based primarily upon the likely future income stream. If a shopping center must be downsized after casualty damage, its current value must be discounted from what it would be if the shopping center could be completely reconstructed. In addition, under Section 1011.02 of the Code, each and every extension, expansion, intensification or change to the nonconformity is prohibited without City Council approval. In processing such requests going forward, which are likely to be numerous, the City will almost certainly encounter many knotty interpretation issues under the current Code. This has the potential to consume valuable staff time and result in costly and lengthy delays for the property owners. Prior to the recent City Council Code interpretation, the City was apparently unaware that most shopping centers in the Shopping Center District do not comply with the lot coverage restriction. This is likely the case because the City issued zoning compliance letters to prospective buyers and lenders which stated that the shopping centers were in compliance with the Shopping Center District provisions. Presumably, the City will no longer be able to issue clean zoning compliance letters for the affected shopping centers and Bradley and the owners of other shopping center developments may have an obligation to disclose the nonconformity to prospective buyers and lenders. Nonconformance with the Code may also represent a breach of contractual obligations under existing leases.