Haste Laid Waste
The way Jerry Flannery sees it, the four-alarm fire that brought down Dania Hall last month was an unmitigated tragedy. "So many people have worked for years on this project," he mourns, "and to have it all end up like this, well, it's a tremendous loss to everyone involved." Flannery would know: He heads St. Paul-based Flannery Construction Company Inc., the firm that had been renovating the 113-year-old landmark at 427 Cedar Ave. just east of downtown Minneapolis. By the time the blaze began on February 28, Flannery's company was well on its way to transforming the hall into a vibrant community center and performance space, complete with retail shops.
Of course, when all is said and done, the fire might not cost Flannery Construction much at all: The company was insured for its equipment, and Flannery has already filed a claim to recoup his losses.
The Cedar-Riverside neighborhood and its West Bank Community Development Corporation might have a tougher time finding someone to make them whole. The two groups had earmarked more than $1.5 million in Neighborhood Revitalization Program (NRP) funding for the $2.7 million renovation project; nearly $1 million had been spent when the building burned. And Dania Hall itself was not covered by an insurance policy. Its owner, the City of Minneapolis, was self-insured. (In order to avoid the costs associated with purchasing insurance, municipalities commonly "self-insure" by guaranteeing that losses will be covered by existing assets.)
John Hulkonen, director of economic activity for the West Bank CDC, says he expects the city to figure out some way to get the neighborhood its $1 million back: "Whether the city is self-insured or has a carrier, it has a responsibility to cover its losses," Hulkonen reasons. "How could the neighborhood bear the brunt of this?"
To Hulkonen, no doubt, that's a rhetorical question. But Gary Winter, assistant development counsel for the Minneapolis Community Development Agency (MCDA), has an answer--and it's one Hulkonen won't like. The city has no obligation to make good on Cedar-Riverside's losses and doesn't intend to, Winter asserts. In fact, he says, the neighborhood has only itself to blame for the financial fiasco.
For one thing, according to city requirements, contractors on NRP projects must "carry insurance policies in amounts and content adequate to cover their NRP activities." But Winter says the West Bank CDC shrugged off the requirement and let Flannery begin construction last August without arranging for the proper coverage.
Moreover, Winter says, the CDC went forward with the project despite the MCDA's recommendation to wait until the city negotiated a deal to sell Dania Hall to the private developer who was slated to take over the project. Had the building been sold, it would have been the responsibility of the developer, the Dania Hall Group Limited Partnership, to purchase insurance. The partnership also would have been responsible for bringing in a contractor, sparing the city and the neighborhood that headache as well. "It was the neighborhood and its leaders, ignoring the advice of the MCDA, that overzealously pushed forth this project before we had completed negotiations to at least create a risk-assessment with the developer," Winter contends. (Representatives of the Dania Hall Group did not return phone calls requesting comment for this story.)
Still, Hulkonen stands by his assertion that the city, as owner of the property, should be required to cover the damage. He says members of his organization felt they had little choice but to aggressively pursue the project. "You need to have development begin in order to attract tenants, and the developer wasn't willing to start at ground zero," he explains. "We had to begin the process." The neighborhood, Hulkonen notes, had been waiting nearly ten years to see Dania Hall reborn. Various renovation plans had fallen through during the past decade, and when the latest plan--to turn the 17,000-square-foot building into retail storefronts and restore its two-story auditorium--won approval in 1998, he says, everyone was anxious to get it under way. "We wanted to create a positive influence for potential tenants to see, with all of the unsuccessful renovation projects for Dania Hall in the past," Hulkonen recalls. "There had to be some tangible evidence of something happening in order to do that."
Hulkonen's line of reasoning fails to impress Gary Winter. "By insisting that this project go forth in what was to our minds a premature fashion, they put their interests at risk," says the MCDA attorney.
Blame aside, it remains unclear what might happen once the mess gets cleaned up. Neighborhood leaders and city officials say they're still coming to grips with the collapse of a project they had hoped would be ready for ribbon-cutting in June. "There's so much that needs to be taken care of that we just aren't to that point yet," says Brian Steeves, the MCDA's Dania Hall project coordinator: Neighborhood leaders and the city, he explains, need to figure out whether Cedar-Riverside will get its community center, and where the money for such a venture might come from. The issue of insurance--or the lack thereof--does loom, Steeves acknowledges. "The loss is going to come from somewhere," he muses. "And nobody is going to want to take it."
In the meantime Jerry Flannery waits for his insurance check--and so, it turns out, does the MCDA. Gary Winter says he intends to file a claim for a portion of any settlement Flannery negotiates. The proceeds, he's quick to point out, would go toward defraying the MCDA's Dania Hall-related losses (a comparatively paltry $260,000 and change), not to refilling Cedar-Riverside's depleted NRP coffers.
Flannery won't comment on any aspect of his insurance negotiations, including the MCDA's possible involvement. "The real focus shouldn't be on the insurance money," he insists, but on the loss to the community."
Easy for him to say.
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