Most Ann Arbor residents and retailers agree that the sagging stretch between Main Street and State Street should be developed to give the area a more exciting, downtown feel. But few agree on how it should be done.

At the center of this debate is the McKinley Towne Centre, a mixed-use development on Liberty Street.

On Monday night, the Ann Arbor City Council unanimously approved expansion plans for McKinley Towne Centre. The development, which houses Google’s AdWords division and several other businesses and retail stores, plans to replace the vacant National City Bank building with two stories of retail space.

The company hopes to begin construction in April, if construction permits and a small ownership issue with the city concerning the building’s lobby are approved, said Frances Todoro-Hargreaves, assistant director of commercial operations for McKinley.

The project is expected to be completed the end of the year, Todoro-Hargreaves said.

With the expansion, the center will stretch from Division Street to the Michigan Theater building, with the exception of the Lamplighter Building housing Encore Records and Orchid Lane, a clothing and folk art store.

In its proposal to the city council, McKinley expressed its intention to acquire that building this year, but it will not be included in this phase of expansion.

Beaner’s coffee shop and Poshh clothing, which are a part of the Michigan Theater building, will not be affected by the expansion. Encore Records owner Peter Dale praised his landlord, Ruth Fitzgerald, for refusing to sell the building when McKinley approached her two years ago.

“Anyone who didn’t care about Ann Arbor would have sold it,” he said. “It hasn’t affected me at all, besides people coming in here and thinking that I’m going out of business.”

Encore Records’ lease does not expire until 2011.

Dale said he might move out of the city if the building is sold because of climbing real estate prices in the area.

The store has occupied the location since the 1960s, though it changed its name in 1992.

Leif Elias, the second-generation owner of Orchid Lane, said she has no plans to leave but was concerned about being forced to move if McKinley acquired the building.

“With the rent they would charge, I doubt we’d be able to afford it,” she said. “We have a lot of loyal customers that will follow us, but if it affects the store badly, it will affect prices.”

Several State Street and Liberty Street business owners spoke in favor of the expansion during the City Council meeting Monday night. Many said the opening of the McKinley Towne Centre has revitalized a previously dead section of Liberty Street by bringing more foot traffic and restaurants to the stretch and bridging the gap between Main Street and State Street.

McKinley had also planned to narrow the alley next to the proposed expansion between Liberty and Washington streets from about 25 feet to 10 feet wide. But the change was met with heavy opposition from residents and shop owners, who complained that narrowing the alley would hurt pedestrian traffic.

Residents said the alley was an essential shortcut for shoppers.Developers conceded and are now considering turning the alley into a shopping district similar to Nickels Arcade between State Street and Maynard Street.

Lee Pickett, owner of Campus Jewelers, said the development could help the neighborhood.

“They alley has never been utilized,” he said. “Goods and services – not coffee and books – would serve the area better.”

Corby Gillmore, manager of Dawn Treader Book Shop, said he welcomes the expansion, but hopes McKinley’s new clients will add something that would give Ann Arbor more character.

LSA sophomore Scott Launius said the city should expand naturally. “If it’s distinctly Ann Arbor, like campus, and fits in, I don’t care,” he said.

Most Liberty Street shop owners and employees agreed that such expansions are inevitable.

“If it wasn’t McKinley, it’d be somebody else,” Dale said. “It’s just kind of too bad.”

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