By Andy Mannix
By Caleb Hannan
By Olivia LaVecchia
By CP Staff
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By Jacob Wheeler
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Jeff Schoen thought the spot was perfect. Tucked into the shadow of the majestic Grain Belt Brewery in northeast Minneapolis was a piece of land the city owned, and wanted someone to develop. Schoen's vision when he first saw the property in late 1991 was to build a commercial sound stage there, designed to cater to the local advertising industry. The Minneapolis Community Development Agency (MCDA)--the city's development arm--liked the idea: a state-of-the-art sound stage on the scale Schoen had in mind, the agency reasoned, would surely boost prospects for film producers in and around town, and it would make a good fit with the area's emerging arts scene.
The neighborhood where Schoen intended to set up shop has an old-world character. The corridor between the Mississippi River and Marshall Street on the east bank, as well as on the other side of the river, has long been home to a host of lumber companies, concrete manufacturers, scrapyards, and other heavy industry concerns that recall the sawmills and foundries that had sprung up with the settling and industrialization of the city. Conceptual plans for recasting the upper river with more parkland and so-called mixed-use development had been bandied about at city hall for years, and Schoen was given to understand that his project, an innovative union of art and commerce, was just the kind of light-industrial use city leaders wanted to encourage along the riverfront. The MCDA happily sold the two-acre site to Schoen for one dollar, and he set about building his dream.
Schoen, a graduate of the Minneapolis College of Art and Design who is now 36 years old, had founded a set-design business called Harmony Scenic Studios in 1985. The new building would house under one roof that business, a sound stage ("The Harmony Box"), and office space for independent film and video companies. As the project proceeded, Schoen made several accommodations to the MCDA's requests, including that the building be set back a good distance from Marshall to allow for a possible widening of the street and the addition of bike paths.
As Schoen recalls, his undertaking was praised by civic and political leaders alike as the harbinger of a new generation--vital, enterprising, plugged into a high-tech future--in a neighborhood in need of a boost. "The spirit of our negotiations was to work with them in their future plans," he says. "They looked upon us as the beginning of redevelopment. We took over blighted industrial land and privately redeveloped it. We were sought after. There was lots of discussion and lots of methodical planning that went into us building here."
By the time Harmony opened its doors at 1414 Marshall St. NE in the fall of 1995, the cost of the project had climbed to $1.7 million--about $250,000 over the original budget--and had taken a year and a half longer than Schoen and his backers had counted on. In addition to financing from the bank and a small-business loan, which Schoen signed personal guarantees for, the MCDA provided a $150,000 low-interest loan on favorable terms: Schoen wouldn't have to start paying it back until 2001. The agency kicked in the money to help offset the costs of cleaning up polluted fill that an MCDA contractor had dumped on the site.
Clad in a denim jacket, Schoen beams with parental pride as he walks through the building. From the street Harmony looks deceptively small and bunkerlike, but the sound-stage area inside is a 60- by 80-foot room with 31-foot-high ceilings, and the windows in the upstairs offices grace the rooms with gold, late summer light.
For all the risk he had taken on a short four years ago, Schoen says, he enjoyed the support of Third Ward city council member Joe Biernat. Schoen recalls that Biernat, whose ward includes the upper riverfront, was consistently supportive of the project; at one point, during a delay caused by MCDA red tape, Biernat dashed off a note to the head of the agency telling him, in essence, to get the project moving. "The reason I supported the Harmony Scenic development," Biernat says today, "was I believed that film and video was the way to go in this area."
And until now, it might have been. Schoen says his sound-stage business has done quite well and remains busy--it's been used by local and national ad agencies to shoot everything from Gold'n Plump Chicken commercials to Alanis Morissette and Tori Amos spots for Best Buy. As for the other enterprises in the building, the local production of commercials has been stagnant of late, and Schoen concedes that his set-design business has suffered and accrued debt. His financial troubles, coupled with a recent health crisis in his family, prompted Schoen to put Harmony on the market last spring.
Unfortunately for Schoen, his property sits just a little too close to the Mississippi River. That puts him smack-dab in the middle of a corridor along Minneapolis's upper riverfront that city officials now say they have other plans for--plans that don't appear to include Harmony. While nothing is definite at this point, Biernat says he thinks high-density housing might be the next best thing to occupy the land at 1414 Marshall St.
It seems the cutting edge Schoen was perched on when he undertook the project has dulled, and a new vision has taken its place, of parks, promenades, marinas, amphitheaters, and clusters of tony condominiums and rental units up and down the riverbanks. Although turning that vision into reality is still a way off, Schoen is feeling the pain today. The future according to city leaders has already scared away a series of interested buyers--who wants to buy a building city hall wants to tear down?--and left Schoen in a chokehold with a business he can't sell. As for his former allies--council member Biernat and the MCDA--he can't quite figure out what went wrong. "We had mutual goals," Schoen says somewhat wistfully. "Unfortunately, those goals seem to have shifted."
Schoen he looks to be the first casualty in a brewing battle over what the best land use is on the upper Mississippi. Before the end of the year, city council members, private developers, and public officials with a say in the riverfront's fate will see the unveiling of a much-anticipated report authored by a private consultant concerning the destiny of the river above the Plymouth Avenue Bridge. Judging by late-stage drafts, they expect that report to recommend phasing out heavy industry on the river and replacing it with a fair chunk of greenery, plenty of housing, and a host of recreational amenities.
It is no surprise that business owners and operators in the corridor--from the concrete plants to the metal-salvage yards--aren't fond of the scheme, because it means they're history.
To that end the city council has imposed a moratorium on all business development and expansion in the corridor, and is in the process of overhauling the zoning code to make the freeze permanent. Biernat, as the chief advocate of what's called the "master plan" for the upper river, says he believes the riverbanks can ultimately be emptied of heavy industry through the process of "attrition." Those who own the targeted businesses are more likely to call it the squeeze, brought about by the tactics of a city government willing to force longtime industry off the riverfront by any means necessary.
Plans to recast, re-imagine, rethink, and retool Minneapolis's upper riverfront are hardly new. The current thinking can be traced back to a city document dubbed "Mississippi/Minneapolis," published in the fall of 1972. The years since then have seen redevelopment of the lower and central stretches of the river, bringing parkways and upscale housing; and there have been a host of proposals for altering the upper riverfront, which is generally defined as the area north of the Plymouth Avenue Bridge along both sides of the river, all the way to the city limits.
This time around, though, city shakers and movers appear determined to bring all those blueprints into being. A $600,000 study--financed with public money--by urban planning consultants BRW, Inc. is being prepared for the Minneapolis Park and Recreation Board, the MCDA, the Minneapolis Planning Department, and Hennepin County, with delivery expected within the next few weeks. When the park board sent out the original request for proposals, it clearly noted that a primary objective was "the development of a riverside park corridor." The size, scale, and cost of the study signals a readiness on the part of city leaders to get on with transforming the land above the falls.
At a September 30 informal presentation to the Minneapolis Planning Commission, BRW staffers unveiled the tentative master plan in the auditorium at Franklin Junior High School in north Minneapolis. Once the lights were lowered, they began showing slides: of the revamped waterfronts in Seattle, Portland, and Milwaukee--once industrial, now all high-density housing and public leisure space. The hometown version, BRW told the audience, would include, among other features, 2,500 condos, townhomes, and apartments, and would finally make use of the Mighty Miss as the "great amenity" it is, one the city has too long overlooked by allowing heavy industry to occupy the banks.
As the lights went up, area residents, business folks, politicians, and gadflies rose to speak to the plan. Some praised it, others said it looked good but could use a few more parks. But many were critical. Randy Kouri, who has lived in one of the few houses on the east bank for 25 years, stood and denounced the scheme as an affront to those facing displacement: "This is a kick in the ass to us," he told the planning commission.
During the hourlong presentation, there was little concrete discussion of the final price tag for a revamped upper river. But a copy of the working draft proposal from BRW estimates that more than $200 million in public money will be spent on the works, even after land sales to private developers of an anticipated $41 million; acquisition, relocation, and demolition of existing businesses and homes are projected to cost $102.5 million. (The bottom line does not include costs for cleaning up any soil contamination.) Plan advocates are hopeful that some property can be acquired by private interests, without the public sector--via city, county, regional, and federal governments--having to get involved. Private investment from developers is estimated to reach $500 million. BRW also recommends that the city establish a private, nonprofit corporation for the exclusive purpose of overseeing the whole enterprise from start to finish, rather than relying on the MCDA.
The first, and so far only, sure funding source for the project was green-lighted by the city council on September 17. The vote gave the go-ahead to a strategy that will take the profits from the city's own Upper Harbor Terminal, which sits on the west bank near the Lowry Bridge, and deposit the money, via the MCDA, into an account earmarked for the river revamp. But there have never been any profits at the Upper Harbor Terminal: the average deficit on the port since 1991 has been $700,000 a year, in part because the city is still paying off bonds issued to build the terminal. Once that happens, in 2000, net income is projected at $350,000 per year. At that rate, it will take a good many years for the account to reach $200 million. If anything, the vote was at least a show of support for the recasting of the upper river; where the real money will come from is yet to be determined.
None of which addresses Jeff Schoen's situation. "My question, specifically, is, Have you identified the use for my site at this point in time?" he stepped to the microphone and asked at the meeting that night.
It was a simple question. But getting a simple answer has been difficult. And that lack of an answer is what led to Schoen's current predicament: He's stuck with a property the city won't allow him to sell and won't step forward to purchase.
Why? The not-so-simple answer is this: In December 1998 the city council slapped a moratorium on the corridor north of Broadway Avenue, including all industrial uses within 300 feet of the river. The purpose, the council made clear, was to freeze industrial development in order to give the city time to come up with its master plan. The moratorium, which was recently extended for another year--prohibits all affected business from making any changes to their properties which would require a city-issued permit. No expansions, no big improvements. It also prevents any alterations in what the property is currently used for. To be excepted from the moratorium, a business has to apply to the council for a waiver.
When Schoen put Harmony on the market last spring, an interested buyer quickly surfaced: the Minneapolis Public Schools. The schools wanted the building for a program designed for kids with emotional and behavioral problems. They were willing to pay the $1.95 million asking price and were looking for a space they could occupy by the start of the 1999 school season. But despite this potentially happy union of a willing seller and buyer, the deal would require a waiver.
Biernat made it clear from the start that he opposed to the sale, saying it wouldn't make sense to put a school on land that the grand plan would ultimately recommend using for a different purpose. According to protocol, council members generally defer to their colleagues' desires for development within his or her ward. Without Biernat's support, there was little point in the schools' applying for the waiver. No deal.
Meanwhile, a second potential buyer came forward: Chrysalis, a women's center based in south Minneapolis. But Chrysalis soon walked away from negotiations, after deciding they couldn't afford the buildout costs at the site. Strike two.
Then a third buyer surfaced. Jim Nygard wanted to keep the building's current use as a sound stage and set-design studio, where he would house his two companies: Nygard & Associates and Nygard Set Design. Schoen was excited by the promise that the business he'd poured so much of his time, creativity, and money into would continue to operate. What's more, he figured this sale wouldn't require a waiver from the moratorium, because the same use would be continued.
By mid-July Schoen and Nygard had a signed purchase agreement in place, with a closing date set for September 1. But Nygard wanted to know for sure what the city's long-term plans in the area were before proceeding. He says the MCDA's director of housing, Jerry Boardman, told him that a developer was working on a proposal for new housing north of the Grain Belt building--right where Harmony stood--and that the city was set to begin purchasing the land within 15 months. Nygard balked, and he pulled out of the purchase agreement, leaving Schoen once again in the lurch.
And so it goes, Schoen says, with the city making it impossible for him to sell to anyone except, perhaps, the city itself. As Schoen's attorney John Roth puts it, "No one's going to buy the building under these circumstances. Basically what it brings us down to is probably having to bring suit against the city. If the city's going to prevent somebody from selling, they ought to buy it or pay the consequences."
The city's plan to overhaul its entire zoning code, which should be completed by the end of the year, only tightens the hold. (Zoning codes govern what type of property can legally exist on a given piece of land.) As for the upper river corridor--including Harmony's property--the rezoning will likely switch land that has long been used for industrial and commercial purposes into land dedicated to high-density, upscale housing, office buildings, and public leisure space.
That means that any existing business not included in the city's grand plan will be deemed "nonconforming." Properties that don't conform to the zoning code run into all kinds of trouble: most notably, any expansions or improvements requiring a permit aren't allowed, which business owners say devalues their properties. In short, rezoning the upper river corridor will do permanently what the moratorium was able to do only temporarily: freeze current-use development there, and give city leaders time to shore up the money and the momentum needed to clear out the old and bring in the new.
What will become of Schoen's property in this equation isn't yet settled. At the September 30 meeting, a BRW architect suggested that the Harmony building might fit in with a "mixed-use" plan. Council member Biernat appears to favor housing as a "viable use in that location." The MCDA's Boardman says that the Minneapolis-based Brighton Development Corp., which has built hundreds of high-end housing units farther down the river, has expressed interest in the site. Brighton partner Peggy Lucas concurs, but adds that her firm would proceed only if Harmony were "empty and boarded," which it isn't, at least not yet. Schoen now says he is seriously considering declaring bankruptcy, as well as allowing the bank to foreclose on his property; should the latter occur, the property's value would arguably be lower for a prospective buyer such as the city.
And should the city come calling, the only thing left to be settled is price. Eminent domain statutes allow government entities to forcibly acquire land from private owners via condemnation, if it can be successfully argued that redevelopment will serve a "public purpose." Repeat the maneuver a dozen times, and the attrition rate along the river may fall right in line with the grand plan.
Within the month, BRW's upper river blueprint will be formally presented to the Planning Commission for approval. Biernat expects it to then come before the city council sometime after the first of the year. While council members have voiced their general support for the redevelopment scheme, they have yet to begin what is sure to be a contentious argument about the particulars: What will the riverfront finally look like, what will it cost, and where will the money come from?
"Waterfront reclamation" projects have become all the rage in cities across the nation, says Judith Martin, who directs the urban studies program at the University of Minnesota and serves as president of the Minneapolis Planning Commission. She points to the work of the Rouse Company, whose recent projects include the South Street Seaport in New York, Harborplace in Baltimore, and Pioneer Place in Portland, as a model for urban planners. The company's formula calls for the wholesale overhaul of longtime industrial areas along city waterfronts, and the installation of retail stores, hotels, condos, parks, and boardwalks.
Martin says the Minneapolis plan is right in keeping with the trend. Still, she wonders whether there will be enough political and public will to pay for it. "I think there are more people around now asking questions about the ways that public monies are being spent," she says. "There's a much more informed citizenry. They are less likely to believe that the planners or the people promoting these sorts of changes really know what they're doing."
Those spearheading the Minneapolis "reclamation" beg to differ. Biernat is quick to stress that the city's vision is the product of years of careful study and analysis. Furthermore, he points to BRW's proposed timetable for completing the plan--a minimum of two decades. Many of the industries facing removal from the upper river, he adds, aren't in immediate peril. The grand plan is divided into three phases: the first focuses on creating new park space, and calls for relocating the Lafarge Corporation's cement storage facility and, perhaps, the Riverview Supper Club near the Broadway Avenue Bridge. The second and third phase, according to BRW's recommendations, will involve moving heavy industry off the river--exactly when, no one involved in the planning can predict, because the timetable depends on the city's fundraising success.
Jeff Schoen may be the only business owner currently caught between the city's desire for a new riverfront and its ability to finance the dream. But he's hardly alone in feeling the long shadow being cast by Minneapolis's long-range vision.
John Isaacs, CEO of American Iron & Supply Co., which sits upstream and across the river from Harmony, has been fighting the city for a decade over his company's plans to install a metal shredder (brand name: Kondirator) on land it has occupied for 50 years. As for the BRW proposal, he says, "I've referred to this plan as an unfunded fairy tale." What would it take for American Iron to cede its property to, say, a new housing development? Isaacs narrows his eyes and responds: "A lot."
Cement distributor Holnam Inc., which since 1967 has operated on the west side of the Mississippi just south of the Lowry Avenue Bridge, was planning an expansion when Biernat first floated the idea of a moratorium. Holnam is one of three private companies along the disputed stretch that ships goods by barge. The distributor wanted to add a 5,000-ton silo to increase capacity at the terminal, for one simple reason: The building boom in the Twin Cities meant Holnam's customers wanted more cement.
But just as company owners were set to apply for a permit last October, they learned of the proposed moratorium. (Although the council didn't actually approve the moratorium until December, it took effect when it was first introduced by Biernat in September 1998.) Terminal manager Ken Farrar says that Holnam decided it would be prudent to let the moratorium run its course rather than challenge it by applying for a waiver. The company had already spent 16 months doing the engineering work and analyzing financial projections for the silo, and didn't want to risk raising the council's ire.
Holnam says the decision to delay its waiver application has come at a high cost: "Our analysts figure that the moratorium is costing us $250,000 to $300,000 per month," says Farrar--eight months annually, during the shipping season. "About $2 million, that's what it's cost us so far," he says; that's revenue the company would have realized had it been allowed to erect a new silo. And now the moratorium has been extended, and rezoning is in the works. "I've got a lot of pent-up aggravation with dealing with this," Farrar adds. At the BRW presentation to the Planning Commission, a staffer suggested that the Holnam site would make a nice park.
Farrar says his company has been asked to move locations for redevelopment projects in Salt Lake City, St. Louis, and Detroit, but there's one key difference about the situation in Minneapolis. "In all those instances, we've been treated a lot more fairly than we have by these folks. All we ask is that they treat us with some respect," says Farrar, who voices the concern of fellow business operators by adding that little if any effort has been made by the city to work out a compromise plan that might allow some industry to remain on the river. "We're willing to work with them, but we're not willing to be zoned out of existence."
Over on the east side of the river at Marshall Concrete, which employs 85 people and has been doing business in the same spot for 45 years, general manager John Fischer says that the moratorium--and the specter of rezoning--is putting the crunch on business. After decades of use, some of the walls near the kilns are beginning to deteriorate. But the company doesn't want to just fix the problem, believing that it is financially preferable to undertake more extensive maintenance, which would involve bolstering the walls and reconfiguring the kilns. Problem is, that would require a permit. "That's not something we can do with a moratorium on. We're just having to live with this problem right now," Fischer says. "As a person who's trying to run a business and provide jobs, it doesn't feel real good."
Down the river at CAMUS Minnesota, a sand and aggregate firm, the talk of overhauling the river has a strangely familiar ring. Until the late 1980s, the company was located below the falls, south of the Stone Arch Bridge. But then the city wanted to redevelop the lower river, supplanting industry with parkways, so CAMUS (Shiely Sand and Gravel at the time) and another company, Cemstone, were relocated to the upper corridor.
"The City of Minneapolis condemned us out of that site," explains Jonathan Wilmshurst, president of CAMUS Minnesota, "and relocated us at considerable taxpayer expense." The logic at the time, he recalls, was that moving the companies might help to invigorate the commercial viability of the upper river. So much for long-term planning. Total acquisition and relocation costs to the park board topped $7.5 million.
The city's moratorium and pending overhaul of the zoning code, Wilmshurst figures, are nothing more than strong-arm tactics to effectively control the real estate market on the upper river: "I'm frankly at a loss to try to figure out what they're trying to do except gradually tighten the noose until all the businesses leave. Essentially, it's a quiet taking."
Eminent-domain lawyer Leland J. Frankman, who has been in the business for 33 years, agrees. "It's what the lawyers call a 'cloud of condemnation,'" he explains. "When there's a moratorium, it freezes any purchasers from buying the property--why would they want to buy into a moratorium? It prevents the owners from improving the property. So at the time that it's taken by the government, when it's eventually acquired, the property is in kind of a depressed state."
All that's left to argue about then is how much the property is worth. In light of recent court decisions in eminent-domain cases, Frankman doesn't offer much optimism to the corridor's business owners hoping to fight city hall.
"The bottom line," Frankman concludes, "is that...I'm convinced that in Minnesota the chances of overturning a determination by the government that what they're doing is for a public purpose are slim to none." In other words, when it comes to private property that Minneapolis shakers and movers want, the outcome is almost written in stone: thanks, and good-bye.
As for Jeff Schoen, Biernat has little comfort to offer. "Jeff is a great guy who has worked 20 hours a day for a number of years at his business," the council member says. "Unfortunately and ironically, at this point in time he's caught up in a great deal of riverfront momentum."
Schoen couldn't agree more. But, he figures, that momentum toward a cleared-out, revamped, upscaled riverfront has a dark underside for those not invited to the celebration. Schoen says he's not blessed with the resources, or the patience they can buy, of some of his larger riverfront neighbors: He owns a building the city won't buy and is crippling his ability to sell; because of that, he now stands a good chance of losing his property to the bank. Call it attrition. Schoen, with resignation in his voice, calls it a shame: "Time--and money--is not on my side."
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