Whitefish City Council decided it needs to abide by the city’s downtown master plan when it comes to selecting a business to lease the retail space inside the under construction parking garage attached to the new City Hall.

Once completed, the north end of the parking garage at the corner of Baker Avenue and East First Street will contain a 2,800-square-foot retail space that has been designated to be leased by a retail or similar type business.

Two businesses — Glacier Sotheby’s International Realty and Pig & Olive sandwich shop — both submitted proposals to the city to lease the space. Sotheby’s wants to lease the entire area, while Pig & Olive is looking to rent about half of the space.

In discussing the proposals Nov. 21, Council quickly keyed in on Pig & Olive as the right choice for the lease.

“One of the reasons we built that is to fulfill the downtown master plan,” Councilor Jen Frandsen said. “We wanted to create an active storefront.”

Frandsen said Sotheby’s has a strong financial proposal, but she would have a hard time connecting it to the master plan. However, she noted, Pig & Olive is the kind of business that creates that active storefront.

“I think we can be a little bit picky about what is there,” she said.

Glacier Sotheby’s proposal is to lease the entire space with a five-year lease at $55,068 annually. Pig & Olive is looking to lease half of the space at a rate of $25,416 annually.

Council last week approved moving forward with negotiating a contract with Pig & Olive, while continuing to search for another tenant for the other half of the space.

“The design of City Hall was predicated on the master plan and activating that edge,” Councilor Frank Sweeney said.

The downtown master plan, adopted in 2015, calls for the space to be retail or commercial.

City Manger Chuck Stearns said a key aspect of that portion of the plan was the desire to “activate” the corner with a ground-floor retail space that would be designed to accommodate retail uses that serve local residents.

It was meant to serve as a retail linkage from Central Avenue to the Railway District, he noted.

City Council last year approved using three years of lease revenue from the lease space and using $162,000 of tax increment finance funds to put into the cost of the parking structure project. Thus, the city needs at least $54,000 per year from the lease revenue to repay the capitalization loan.

The city anticipates a possible $100,000 in costs to finish the lease space. This amount was not part of the original cost amount and designs for the new City Hall and parking structure, which has a combined budget of $16.2 million. There is not enough funds remaining in the construction contingency to cover the cost to finish the space, according to Stearns.

The city estimates the cost to install heating and cooling in the lease space at about $60,000. There could be additional costs if a restaurant leases the space because a kitchen hood is estimated to be a cost of $20,000.

Other costs include installation of electrical and lighting and plumbing.

“It’s hard to pin down all the costs until we negotiate with a tenant,” Stearns said.

Once a lease is negotiated with a potential tenant it will be brought back to City Council for final approval.

Glacier Sotheby’s is currently located across Baker Avenue from the new City Hall building in a small building behind American Bank. The lease proposal the business submitted to the city includes an option to renew a lease for two additional five-year terms.

Pat Donovan, with Glacier Sotheby’s, said the business includes about 20 to 30 local brokers and agents selling real estate.

“We have a pressing need for an office,” he said. “This location would be to showcase properties and also an area where people can come in for scheduled meetings. We think this would be a difficult location for retail.”

Pig & Olive is currently located inside Stumptown Marketplace on Spokane Avenue.

Molly Burns, owner of the sandwich shop, said she realizes more infrastructure is needed for a restaurant to operate in the space, but she said it would be worth the investment for the city.

“We pride ourselves on being a local restaurant, which uses local suppliers,” she said. “We do think we could extend foot traffic into the Railway District.”

The city’s real estate committee reviewed both proposals, but did not make a recommendation on which business to select. The committee did weigh the pros and cons of each proposal.

For Glacier Sotheby’s, the committee noted that the proposal is to lease the entire space and could have less turnover than another tenant. It also noted that the business may not be geared toward local clientele the way a retail or restaurant might be.

For Pig & Olive, the committee noted that the business will generate additional resort tax revenue and should create a lot of foot traffic in the area. It also found that the sandwich shop does not have the long-term financial track record of a business like Glacier Sotheby’s and would require additional costs for installing infrastructure required for a kitchen.