Conceptual approval was granted Wednesday to a shopping center at Shepard Lane and U.S. 89 in Farmington, but final approval will depend on the developer agreeing to numerous conditions and stipulations from the city's planning commission and city council.

Approval moves construction of a K mart store on the northwest corner of the intersection a step closer.The conditions attached to the approval cover landscaping, access roads and lighting and require decorative stonework on the store's exterior.

Final approval will come when agreement between the city and the developer, GFI III, is reached on the cost and engineering for storm drain, water line and street improvements.

A study of the development's financial impact on the city shows the shopping center will generate between $118,000 and $186,000 annually in sales and property tax revenue.

But the city anticipates having to spend between $275,000 and $312,000 on street, sewer and other improvements to service the development over the next two years.

According to the study prepared by city manager Max Forbush, the K mart store will generate between $50,000 and $88,000 annually in sales taxes to the city, the range depending on the store's sales volume. It will pay about $6,500 a year in property taxes and between $5,000 and $8,000 annually in utility franchise fees.

But to open the shopping center, the city has to widen and improve Shepard Lane and install a storm drain system and a larger drinking-water line.

Expenses directly related to the development are estimated at $106,000 to $140,000, with the rest going for improvements to serve future growth the project may engender, Forbush said.

Some of the expenses can be covered by impact fees the developer will pay, but the city will have to either dip into future state road money or sell revenue bonds to cover the rest, in addition to earmarking some sales-tax revenue from other stores, Forbush said.

The council agreed, along with giving the project conceptual approval, that future road and sales-tax money should be committed to the improvements instead of selling revenue bonds.