Pay Now, Pay Later

For a few dollars more: Extra assessments have John Kolstad and other business owners pondering their futures on Lake Street
Jana Freiband

In 1992, John Kolstad went on a little shopping spree on East Lake Street, not far from where Minneapolis's main east-west thoroughfare runs into the Mississippi. At the time, Kolstad was looking for some office space to house Mill City Music, his record-distribution company. He had plenty of real estate to choose from--empty storefronts and abandoned buildings were common up and down Lake Street, which had been in decline as a commercial corridor for many years.

Kolstad found a vacant two-story brick building on the northwest corner of Lake and 39th Avenue South, purchased it for $107,000, and soon was running his business out of the 10,000-square-foot space. In time he found a tenant, who opened the Blue Moon Coffee Café.

"People in the neighborhood tell me I helped turn Lake Street around," says the 63-year-old Kolstad.

Lately, though, Kolstad has been wondering how much longer he can stay put. His worries are spurred by the multi-phase reconstruction of Lake Street, a massive rebuilding project spearheaded by Hennepin County that started last summer and is scheduled to wrap up in 2008 at a price of $31 million. The project will tear up five of the six miles of road that stretch between Lake Calhoun and the Mississippi River. Bureaucrats and politicians pushing the project have pointed out that Lake Street hasn't been touched since the 1950s and is in desperate need of repair. But critics have argued that the renovation is driven mainly by the wishes of corporate interests--Wells Fargo and Allina Hospitals and Clinics each have campuses nearby--at the expense of the small-business owners, many of them immigrants or people of modest means, who have revitalized the street in the last decade.

The first phase of the project began last summer in a stretch that is now being referred to as Midtown--from roughly 5th to 15th Avenues. That part of the project gave an indication of things to come: heavy construction, street closings, and assessments that threaten businesses both old and new, for a rehab that in the end will amount to little more than a cosmetic upgrade (see "Extreme Makeover: Lake Street," 10/19/05).

So it's not as if Kolstad was completely in the dark about what would occur along the portion of Lake Street running from Hiawatha to West River Road. He had sat in on numerous advisory committee meetings, and had discussed the project with residential and business neighbors alike. But on February 11, Kolstad got something he wasn't expecting: a notice from the city of Minneapolis that Mill City Music was to be assessed $27,000, including nearly $5,000 for "special improvements."

"Either it's blatant corruption or stupidity on the part of the city of Minneapolis," Kolstad says. "There is absolutely no accountability. They're just going to force us to pay."

In addition to the county's costs in rebuilding the road, the Hiawatha to West River Road phase includes $4.3 million in city-financed upgrades to sidewalks, lighting, trees, and other amenities. The way Kolstad sees it, the assessments he received are a violation of an agreement that property owners and the city reached last summer regarding "base-level" enhancements. But by August, according to Kolstad and other business owners, the city began collecting petition signatures to add further assessments.

Kolstad isn't the only Lake Street business owner feeling screwed by the latest assessments. "I was a chump," says Scott Cramer, who owns Northern Sun Merchandising on 27th and Lake, "because I thought I could deal with the city in good faith." Cramer says his total bill for the project will come to some $37,000 over the next 20 years, while property taxes are going up as well.

Both Kolstad and Cramer point out that Gary Schiff, the Ninth Ward council member who represents most of the stretch set to be torn up later this year, is behind the push. Schiff, for his part, maintains that he "always" cares about independent business owners, and points to a public hearing the council's Transportation and Public Works Committee held on February 14. "They collected the 60 percent of the signatures required [for the additional upgrades]," Schiff argues. "At the hearing, there were only three people out of some 100 property owners who showed up to speak against them."

Kolstad, Cramer, and a handful of other angry business owners did find a sympathetic ear with new council member Cam Gordon (Ward Two) who last week unsuccessfully tried to seek a delay on the City Council's vote to approve the increase. At Friday's council meeting, Gordon couldn't even get a second on his motion to postpone the assessments for two weeks, and Schiff spoke in favor of moving the project along. "If you were opposed to the deal early on, you were cut out of the loop," Gordon agrees, adding that he's a latecomer to the process. "Property values and taxes are going up, and every bit extra can hurt."

Which is exactly where Kolstad and Cramer stand. The additional enhancements they're being assessed for--ornamental lighting, iron grating around trees, extra benches--is decidedly geared to a more upscale thoroughfare. The two point to anecdotes they've heard from business owners who have been enduring the Midtown rehab and have seen business drop by anywhere from 20 to 70 percent. Cramer, for one, says he's ready to bail even though retail on Lake is only 5 percent of his business.

"I'm doing $160,000 here annually, and I expect to lose $50,000 of that because of this," Cramer says. "The businesses that don't have the deep pockets of corporate interests can't handle this."

Kolstad, who says he will now try to organize fellow entrepreneurs on Lake to take legal action, agrees: "This is just designed to get rid of all of us."

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