LONGMONT — The clock is ticking for Twin Peaks Mall developer Allen Ginsborg.

By March 1, Ginsborg’s company, Fort Collins-based NewMark Merrill Mountain States, must sign an agreement with department store chain Dillard’s Inc., on a redevelopment plan, according to a schedule laid out by the city of Longmont.

Dillard’s (NYSE: DDS) currently can prohibit any new development on the mall site, based on an existing agreement between the retailer and mall owners that was signed several decades ago, Ginsborg said. The good news, according to Ginsborg, is that Dillard’s representatives have said the company wants to continue to operate at the site.

Dillard’s spokeswoman Julie Bull in Little Rock, Arkansas, had a polite “no comment” when asked about negotiations.

Ginsborg plans to demolish the 550,000-square-foot mall at 1250 S. Hover St. and create an outdoor shopping village that will include a new movie theater, a natural-foods grocery store, a separate 100,000-square-foot retail store and other stores and amenities.

“We have worked hard on it for a year,” Ginsborg said of negotiations. “To deliver the project for Christmas of 2014, it’s important that we come to some understanding with Dillard’s.”

To help move negotiations along, Longmont City Council members recently approved the capability of exercising eminent domain to remove “blighted conditions” that exist at the mall property, according to a city council note put out in advance of its Feb. 5 meeting. The council has created an urban renewal area around the mall and elected officials can act as an urban renewal authority to make decisions about the area. Eminent domain is a process by which elected officials can vote to take property from a private property owner.

“Members of council have said that eminent domain is a tool in the toolbox of the urban renewal authorityw, but it’s the last tool we want to use,” said councilman Gabe Santos, Longmont’s deputy mayor. “If we need to use it, hopefully everybody will negotiate in good faith.”

Councilwoman Katie Witt agreed, adding that she doesn’t believe the urban renewal authority will have to act.

“We will use it if we have to, but I do not believe we’re going to have to,” Witt said. “All parties are working hard to complete negotiations according to the timeline.”

Eminent domain traditionally was used as a tool for government to move forward on public works projects such as highways. A Supreme Court decision in 2005 held that the process was constitutional to use in economic development as well. Since then, it has been used several times in Colorado and across the nation to help push economic development projects forward.

“Hopefully it’s providing a motivational tool for all of the parties to work through all of the issues and come to a solution,” said Brad Power, economic development director for the city of Longmont. “Obviously, it’s a high priority for the community.”

A government authority’s capability to exercise eminent domain can become a “backstop” to negotiations between a developer and property owners, said Kenneth Skogg, who is an eminent domain lawyer in Denver, a recognized expert who gives classes on the topic, and NewMark Merrill’s lawyer.

By discussing the power of eminent domain, an elected urban renewal authority recognizes a developer’s potential dilemma in negotiating with property owners, Skogg said. Those property owners may believe there is leverage in delaying a decision, Skoggs said, but eminent domain can help level the playing field.

(Property owners) “may try to continue to delay at risk of the viability of the project,” Skogg said. “While one can argue the levelness of the playing field, there are protections constitutionally mandated that the developer get fair compensation in the eminent-domain process.”

Ginsborg said the city’s action has helped him make progress with Dillard’s negotiations. “All parties are at the table now. If we all stay level-headed, we’ll figure this out,” he said.

At the same time, Regal Entertainment Group has signed a preliminary lease agreement that helps NewMark Merrill’s plans move forward. Regal spokeswoman Rachel Lueras said Regal expects to meet all deadlines. Regal, based in Knoxville, Tennessee, operates the existing 10-screen United Artists theaters at the site.

“Our real estate department is working closely with the developer. They have agreed upon schedules, and they have every expectation to meet them,” Lueras said.

NewMark Merrill bought the aging indoor mall for $8.5 million last year. Since then, Ginsborg said he has spent “hundreds of thousands of dollars” on the project. He characterizes the mall project as the biggest risk he has taken in 30 years as a developer on the Front Range.

Newmark Merrill has met the other two key points needed to receive $27.5 million in urban renewal authority bonds, Santos said. One point was to sign an agreement with the 100,000-square-foot retailer, he said, and the other was to sign a letter of intent with the natural-foods grocery store, he said. Ginsborg declined to release the names of the retailer or the natural-foods grocery store, citing nondisclosure agreements.

“Both sides seem to be working as diligently as they possibly can. Sometimes these deals are done in the eleventh hour or the eleventh-and-three-fourths hour. That’s how it works sometimes,” Santos said.

Once an agreement is signed with Dillard’s, the city, acting as the urban renewal authority, can issue the bonds, Santos said. The debt is to be repaid through sales and property taxes generated by new development in a process known as tax-increment financing.