That project, proposed for the big parking lot across from Saint Marys, was withdrawn Feb. 19 by St. Cloud-based developer Larry Brutger after nearly six months in the City Hall grinder. Brutger told the city that "without a clearer path and a realistic timeline for DMC/EDA approval to allow our project to move ahead, we regrettably must withdraw our application at this time."

Among other hurdles, it went through three visits to the city Planning and Zoning Commission. As far back as late October, Brutger expressed frustration with the cumbersome review process, and that was before he encountered the brand-new DMC process for seeking "enhanced" TIF for the project.

Several people I've talked with have said the way this went down was a black eye for the city at a time when major developers from the Twin Cities (such as Opus and Ryan) to Abu Dhabi (such as Bloom Realty, which is working on a riverfront deal) are watching closely. They want to know whether the city and DMC are ready for prime time.

What happened to Brutger's project wasn't an auspicious debut.

Staver told the Post-Bulletin last weekend, "The most important thing now is what are we going to do fix this. We have multi-million ideas on the horizon. We have got to be able to up our game. We need to make sure we aren't throwing up unnecessary barriers."

He also said, "We need the DMC EDA to pull in the same direction. Quite frankly, I think they need to create a greater sense of urgency in terms of how they are responding to some of these projects."

Staver told me Friday he expects to have a draft proposal of ways to "fix this" within days.

Kvenvold's memo to council members clarifies how neighborhood input, advisory committees such as CUDE, and the Planning and Zoning Commission are to provide input on applications but not request changes and delay them. He makes the obvious point -- one that appears to get lost at times -- that "the mayor and City Council are the only authorized decision makers in the development approval process."

Kvenvold is especially pointed about the P&Z's role: "The Planning and Zoning Commission is not a development design entity and (it) should not expect that a proposed development be redesigned to their satisfaction in order to pass on an approval recommendation to the mayor/council. (The commission) should make their advisory opinion to the mayor/council on the development application as it is presented to them."

The city's determination to respond quickly to this debacle makes clear how big a deal it was. Aside from the $63 million value of the project, which is nearly half of what Gus Chafoulias says he'll spend on Broadway at Center, here's what Brutger promised:

About 120 construction jobs would have been created. Sales tax revenue from construction would be have $1.3 million. Payroll tax revenue during the construction phase would have amounted to about $2.1 million. Direct tax revenue from construction and property-related taxes was estimated at $3.4 million, and local tax revenue from indirect economic impact was estimated at $1.4 million, for a total tax impact of $4.8 million during construction.

Property taxes after completion were estimated at $728,000 per year, versus the current $81,000. About 90 percent of the property taxes could have been directed to tax increment financing, still leaving about $145,000 in local property tax revenue.

The hotel would have generated about $460,000 in lodging and hospitality taxes annually, based on 80-percent occupancy. And in addition to the new town homes on the First Street side, additional parking, etc., it could have advanced the city's goal of launching a pedestrian tunnel system around Saint Marys.

Not to mention, it would have employed about 200 people.

Total it all up and it's easy to understand why many people in town want to know what happened, and deal with the process so that applications of this kind aren't doomed for reasons of delays by advisory commissions, confusion between the city and DMC, nitpicking, personal animus or whatever.

One intriguing question is whether Brutger would return to the table with a clearer path forward. Sources tell me it's not out of the question if the TIF issue could be resolved in a timely way.

Other notes from conversations I had last week with key people involved:

The financial viability of the project was a concern from the start: The price Brutger planned to pay for the site, which is owned by Kahler owner/executive Javon Bea, was said to be lofty for what was planned. Sources say the land cost amounted to nearly 20 percent of the project's total cost.

There were concerns about what, if anything, DMC EDA was doing to move the application for enhanced TIF forward after the DMCC board meeting in December. The next meeting is set for March 24, and DMCC action was needed for the council to act in early April.

The EDA's reaction after Brutger withdrew was muted. For the record, the EDA felt that the P-B should have gotten comments from them for last Saturday's story, and ideally we would have. That said, EDA's comments when we called last week were vague and emphasized the long view.

Maybe that's fine for DMC's 20-year outlook, but as Staver and others have said, it's clearly not in sync with what the city needs or expects.

This was the third time the project by St. Cloud-based developer Larry Brutger has appeared before the board, as the project faces concerns from the Kutzky Park Neighborhood Association and some commission members.

There were six commission members at the meeting, but two — Brittany Wilson and Brian Childs - recused themselves because of involvement. That left Michael Walters, Steve Sherwood, Kraig Durst and Paul Sims to decide what kind of message the commission would send the Rochester City Council about the project.

The two previous meetings ended with the developer being asked to modify the hotel design because of public and staff concerns. After hearing more criticism of the project from neighbors, the board voted to recommend the development to the Rochester City Council, but it did not approve five variances necessary to build the hotel.

The variances were for floor area, height, transitional yards, signage and landscaping. The city staff had recommended approval for them.

Sims said the applicant's claim that the development's location was "extraordinary" in Rochester and required special consideration didn't make sense. Durst countered that the city staff, "who do this for a living," believed it is extraordinary.

"They didn't convince me," said Sims.

Walters also opposed the variances. He acknowledged the city's "rules didn't line up," which presented a problem for the developer.

"We have to vote no because this area needs to be truly unique for these variances," he said. "Here, I'm not seeing it."

After discussing it at length, the four members voted on approving the variances. They ended up with a 2-2 tie, which means the motion failed. Durst and Sherwood voted in favor of it, and Sims and Walters voted against.

The one thing the four did agree on was to send a clear message to the city council about the situation.

"Let the record show that this body has come to an impasse on the issue of variances; as such, I move for denial of all five variances before us tonight with the sincere hope that the city council will be able to provide further guidance and resolution to the issue," stated Sims in the final motion of the night. It passed unanimously.

Now, it's up to the council to resolve the issue.

Brutger submitted his plans to the city Sept. 16. The developer could potentially appear at a Rochester City Council meeting by Nov. 16.

The developer can appeal the denial of the variances. Chris Colby of CRW Architecture, who designed the hotel, said afterward his team will argue against the denial of the variances, and "We'll shoot it so full of holes that it will be ridiculous discussion."

He added that the commission's arguments were disingenuous and the development obviously fits the city's vision for the future.

"The Second Street Corridor Study and the future plans for the city of Rochester demand density on Second Street," said Colby.

While the opposing neighbors and the developer have different views of the project, they agreed the process did not work very well.

"It didn't hit the mark on this one," said KPNA member Jesse Welsh. "I'm here for a third time."

Brutger, who has done developments in other Minnesota cities, also acknowledged his first attempt to build in Rochester has not been easy.

"I look forward to being part of the community. It's been a difficult process. I can't deny it has been frustrating," he said after the meeting.

Having the commission continue the hotel project to three meetings made acquiring the land needed for the development much trickier than expected. The purchase agreements Brutger signed with property owners Javon Bea of Second Street Parking LLC and Peter Pasilis gave him 120 days for due diligence before closing on the acquisitions. Those 120 days ran before the third commission meeting.

Brutger said Bea did give him an extension on the deal, but Pasalis did not. Pasalis, who owns the Carousel Floral building at 1227 Second St. SW, had his attorney, Rick Dold, urge the commission not to approve the development.

Brutger characterized the situation with Pasalis as "ongoing negotiations."