Kroger claims zoning change in Fishers will hurt business

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More businesses on the I-69 corridor in Fishers to open soon. John Tuohy/IndyStar

The Fishers City Council passed an ordinance this week that appears to put it on a collision course with Kroger Co.

The council voted 8-1 Monday to require shuttered grocery stores to remain supermarkets when the sites are redeveloped unless the city gives special permission for another retail use. The intent is to avoid what the city considers undesirable development at the hulking buildings, such as flea market or dollar stores.

"As these sites transition in use, there is a growing concern that they may be used for a variety of unwanted uses before the new commercial standards and uses are adopted," a report by the city's Planning Department read.

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Kroger opposes the council measure because, company officials say, it intrudes on the company's ability to compete in the open market.

“What the city wants to impose would devalue our property and restrict our freedom to do business,” Kroger spokesman Eric Halvorson said in a text to IndyStar. “We would like the city of Fishers to reevaluate its zoning concept.”

Vacant stores became a concern when Marsh Supermarkets declared bankruptcy earlier this year and closed 44 Indiana stores. Kroger bought 11 stores, including the lease at one at 116th Street and Brooks School Road in Fishers. But the company is uncertain about whether it will re-open it as a Kroger, and market analysts have said the company may have gobbled it up to prevent another grocery from opening there.

In a couple of years, the Kroger at 116th Street and Allisonville Road will be vacated when the company moves into the abandoned Marsh building across the street. The owner of Fishers Crossing Shopping Center next to the soon-to-be-shuttered Kroger fears the city ordinance will result in abandoned stores staying vacant for longer than they normally would.

“This would mean that the property would remain vacant in perpetuity, rendering the properties useless and creating significant economic impact to us as the 'shadow anchor' to the property,” Jerry Wise, of Brad Management, Los Angeles, wrote the city in an email. “This would severely impact our property as well as all the surrounding retail parcels, potentially creating a blighted corner.”

Wise could not be reached for further comment.

The ordinance would also apply to a closed Marsh at 96th Street and Lantern Road that Kroger did not buy.

"How these sites transition is critical for the vibrancy of nearby neighborhoods and our city” the planning report states, adding that homeowners associations adjacent to the stores support the ordinance. Representatives of the three HOA's the report cited did not respond to requests for comment.

Councilman Pete Peterson said the ordinance gives the city control over the quality of development at the sites and said it is similar to how it scrutinizes businesses that open in other parts of the city. For example, after the council approved the 289,000-square-foot Ikea, it passed an ordinance that restricted other big box stores in the area of 116th Street and I-69.

‘It doesn’t prevent another use, but it assures that we will get to review whatever that planned development is,” Peterson said. “It gives us another bite at the apple.”

Peterson said the ordinance will not cause the stores to stay vacant longer.

“Those areas are too vibrant. Someone is going to want to develop there,” he said. "And we usually get things done pretty fast here."

Because grocery stores are so large there aren’t a lot of options for how to redevelop them, said Councilman Richard Block, a real estate broker who voted against the city ordinance. But the stores are usually in high traffic locations with plenty of parking, which would be a draw for several types business,  he said.

In some cities,  stores are being converted to charter schools, high-end gyms or family entertainment centers.

Block said developers won't like the idea of an extra level of vetting for their proposals. But he said his objections are based on free enterprises principles.

“I don’t feel like we should be trying to control the market,” he said. “This can set a dangerous precedent.”

Call IndyStar reporter John Tuohy at (317) 444-6418. Follow on Twitter and Facebook.