By CP Staff
By Olivia LaVecchia
By Chris Parker
By Jesse Marx
By John Baichtal
By Olivia LaVecchia
By Jesse Marx
By Olivia LaVecchia
In August, not long after the new Central Library opened in downtown Minneapolis, city leaders convened a meeting for some of the high and not-so-high rollers in the downtown development scene. Nearly 100 representatives from real estate, construction, and parking lot interests attended the weekday afternoon event. According to Diedre Schmidt, a vice president of Brighton Development, "It really was a who's-who of downtown developers."
The issue at hand was the city's parking ramps—namely, that some of the 24 structures owned by Minneapolis were operating under such bad debt troubles that the city had decided to sell off nine of them. (One ramp has since been pulled off the market.) All of the structures lay in white-hot sectors of what is apparently an ongoing, odds-defying development boom in downtown real estate. Some ramps, city reps suggested, could be used as part of residential or office projects.
"Some of them had opportunities for housing and retail," offers Bill Bloomberg, who brokers development deals independently. "It was, I thought, an unusual offering."
So unusual, in fact, that most folks can't recall another recent time when the city held such a sale of its assets. The scenario laid out by the city goes like this: For nearly 10 years, a section of the budget called the Municipal Parking Fund has been racking up debt, in part, to prop up the general fund. In short, the city has been taking extra money from the parking fund to the tune of $1 million a year to ensure that other basic services don't go wanting. And in the process, the parking fund has actually become a drain on the city's coffers.
But that begs the obvious common-sense question: How could the city actually lose money on something as seemingly low-maintenance as a parking ramp? Part of the trouble is that downtown has seen a staggering amount of office space sit vacant, causing a significant dip in the number of monthly parking contracts. On top of that, the city had many parking projects in the pipeline before the office recession hit, and went on to build too much capacity too fast. There are also those who believe that Minneapolis has made a bad habit of offering to build ramps as an economic development tool—specifically by luring big-name residents like the Walker, the Guthrie, and the Federal Courthouse with the promise of additional parking rather than outright cash as a subsidy. (The ramp across the street from the new riverfront Guthrie, open for barely a year, is one of the ramps for sale.) All factors have conspired to make parking a sinkhole for Minneapolis.
"When these ramps were going up, we felt the parking fund could sustain a level of revenue," says the city's chief financial officer, Pat Born. "But suddenly there was more and more pressure on the fund. There was a downturn in the office economy downtown. And in some cases we were too optimistic."
There's no indication that the city is out of the woods yet. Many of the properties that are for sale may be unattractive to buyers. "They're asking for $69,000 a stall in at least one case, when the market rate is 15 to 20 grand," says one prominent downtown developer who asked to not be named. "And the bond debt on some of these [buildings] is outrageous. Who the fuck is going to buy these?"
As it stands now, there are eight ramps for sale, and the city collected proposals from prospective buyers at the end of October to be reviewed in early 2007. Not all of the ramps are losing money, and some cannot be turned into developments other than parking, but nearly all of them are in desirable parts of downtown.
There is the St. Anthony Ramp, built in 1980, with 901 spaces above ground, which carried an income loss of $260,537 in 2004. A more attractive purchase might be the Loring Ramp, at the south end of Nicollet Mall, which was also constructed in 1980 with 750 spaces above ground—but that ramp made nearly $1.3 million in 2004. Newer ramps seem to have the most trouble. The nine-year-old Courthouse Ramp under the Federal Courthouse, for instance, is losing $1.7 million a year due to outstanding construction costs. The so-called Downtown East Ramp, which was built under the light-rail station in front of the Metrodome, lost a total of $746,930 in 2004, its second year of operation, between bond debt and operating losses. And the facility built for the Guthrie, the Riverfront Ramp, carries a $33.6 million dollar debt, coming out to $33,000 per space.
The city has received proposals from 12 companies, seven of which are local and the others from parking and development interests as far-flung as Oklahoma City, Chicago, Philadelphia, and New York. (Chicago recently sold off a number of ramps to a private developer for $563 million.) The city declined to give out contact information for any of the prospective buyers, but only one, Alatus Partners of Minneapolis, submitted a proposal to buy all eight ramps. When reached by City Pages, Bob Lux of Alatus declined to comment, citing to the need to "be respectful of the process."
"Some of these groups are simply parking ramp investors and operators," offers Born. "Others are developers who own property near an individual ramp or who may want to develop near the ramp."