Costco plans distribution center in Owatonna.

Byline: Matt M. Johnson

Discount retailer Costco could start construction of a new distribution center in Owatonna this fall, a center that would likely be the largest new construction industrial building ever proposed for the southern Minnesota city.

Issaquah, Washington-based Costco is planning to build a 354,000-square-foot distribution warehouse less than about a mile west of downtown Owatonna on land designated for industrial park use, according Troy Klecker, the city's planning and development director.

The facility would join 24 distribution centers Costco operates worldwide, according to figures in the company's most recent 10k filing with the U.S. Securities and Exchange Commission. Those facilities contain a total of 11 million square feet of space, or an average of about 458,300 square feet of space each.

Costco plans to start construction in September on 173 acres of land at the northwest quadrant of 18th Street Southwest and 39th Avenue Southwest, Klecker said in a Thursday interview. The site is about one-quarter mile west of Interstate 35. The building would be the largest initial phase of any industrial project in the city, he said. There are other larger industrial buildings in Owatonna, but they were built in multiple phases.

"For an initial building this probably ranks as our largest," Klecker said.

It will take about a year to complete the distribution center, he said.

Costco is seeking $9 million in tax increment financing from the city to go toward the project. The city has estimated that the finished distribution center will have a value of about $34 million, Klecker said.

Costco declined Thursday to comment on the proposed project.

The distribution center has room for future expansion, according to a site plan filed with the city. The land on which it will be built is just outside city limits in Owatonna Township. The Owatonna City Council will hold a public hearing on July 16 at which the city will consider annexing the project site.

Costco has...