Several Denver City Council members have reservations about a proposed $4 million loan to help see a Target open on the downtown 16th Street Mall.

The city’s budget and management office is requesting a $4 million supplemental appropriation for the Office of Economic Development’s Business Incentive Fund. That office wants to loan the funds to a developer, 16 Cal, LLC, to help a Target general merchandise mass retail store open on the mall at 1601 California St.

Supplemental appropriations are used for unforeseen expenses and other unbudgeted, difficult-to-anticipate expenses.

Chief Economist Jeff Romine said the Target loan is a 20-year contract, with $2 million paid to 16 Cal upon the store’s opening on the mall. The second $2 million will be paid based on 50 percent of quarterly sales tax collections received from the Target store, Romine added.

“We estimate around $10 million will have been collected over that 20 years,” Romine said, “and the loan will be paid off in 16 or 17 years.”

During a Finance and Governance Committee presentation, concerns over how much say the city would have on the lease of the building to whether existing small businesses would suffer were voiced.

Councilwoman Robin Kniech said she may not support the supplemental appropriation when it comes to the full Council.

“The business investment fund was created to attract high paying jobs, not particularly for what you get with retail,” she said. “I’m also concerned the city is not dictating these lease terms and we should be if we’re paying for a Target.”

Councilman Kevin Flynn noted that when Target left their Sheridan and Evans site to move to Lakewood, “they cemented in 20 years of blight” that the city and developer is only now beginning to move forward to improve.

Councilman Rafael Espinoza asked how the Target store would affect existing small business competitors on the mall.

Romine said city officials had talked about wanting to have a retailer like Target downtown for the last six to eight years.

“We know more activity will help the mall, including direct competitors,” he said. “This will be a 28,000-square-foot store, while the average Target is about 100,000 square feet. So you’ll see a different mix of goods. Less clothing, more household goods. It’s an urban mix of goods, focused both on the daytime workers and nighttime residents.”

Still, Romine said it’s possible some cannibalization may occur of other existing stores like Walgreeen’s, Rite Aid or small clothing stores.

“But we also know that competition is good for the consumer and other stores will benefit from the greater activity” Target brings to that area of the mall, he stated.

Espinoza said just focusing more people into one particular part or parcel of the mall was not enough.

“Certainly it’s an economic driver and there’s a reason on the math side to do this, but I have a concern with the mall itself,” he added. “If we continue to put a huge injection of money into that facility, and we’ve already had the Denver Dry Goods and May D&F and the Pavilions go through phases of success and failure there. I’m worried about the history of struggles there and injecting so much resources into one specific part of the mall and not taking a more balanced approach to encourage a better orientation of that whole block.”

Other Council members voiced support for the loan arrangement.

Councilman Albus Brooks said a big picture view of the advantages of having Target on the mall includes better lighting, the ongoing “reimagining” of the mall and flow of transportation “all need consideration when we look at packages like this, and not in a siloed convention.”

“It’s quite important to think about the whole investment and reality of walkability and urban experiences,” Brooks added. “This adds to everything we’re doing.”

Councilman Paul Lopez said he was glad the city was setting a precedent with this appropriation. “Now that I know we can incentivize these types of big boxes to locate in other neighborhoods, particularly grocery stores.”

Romine said a lease between Target and 16 Cal will be signed once the Council approves the $4 million supplemental appropriation. Romine also noted the upfront $2 million payment to the developer includes a lien on the property to ensure the city is eventually repaid. If the Target store closes before the end of the 20-year period, 16 Cal must reimburse the city the $4 million over that time.

Target will get a 10-year lease from the developer, with two 5-year options. If Target leaves within the first 10 years, they could sublease the space. If Target does not sign the lease, the loan is not made to 16 Cal, Romine added.

Loans from the business incentive fund are never more than 50 percent of the estimated fiscal outcome, Romine said, and this loan cannot be for more than $4 million. “It’s actually set up to pay the lower of 50 percent of the sales tax collected or the maximum of $4 million.”

The city is not part of the lease negotiations between Target and the developer, according to Romine, and is not putting any conditions on the developer to include in the lease to receive the loan money.

“We have every anticipation this store will help create the catalytic change we want to see on the 16th Street Mall and they will be so successful they’ll want to continue to operate at this location for a long time,” Romine said.