Shakopee's growth spurt comes to a dead stop

Steep city fees among reasons cited for Shakopee's stagnation.

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In 2008, a home under construction was surrounded by lots for sale along Hackney Avenue in a subdivision in Shakopee.

Photo: Jim Gehrz, Star Tribune

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Shakopee, for years the big dog in suburban development, has come up with a mystifying limp.

The suburb, which last decade led all others by far in the growth of its population, now trails badly in the creation of new homes.

At a time when other major growth centers such as Lakeville, Woodbury and Maple Grove are charging back, Shakopee is in outright decline -- the only community south of the Minnesota River where construction has sagged for two consecutive years. Its homebuilding activity in 2012 was actually less than in 2008, the year construction nationwide plummeted.

The problem doesn't seem to be its location in Scott County. Prior Lake and Savage are recovering; both have surpassed Shakopee in new housing units for the first time in recent memory, according to newly available figures for calendar year 2012.

The decline comes at a time of widespread concern within Shakopee about its competitive stance on a range of issues affecting quality of life. Concerns range from an increasing exasperation with flooding-induced bridge closures to so-so amenities, including a community center that many think pales beside those of nearby cities such as Chaska.

City planners point to a more direct explanation: a sparse inventory of lots. "From 2007 to last year," said top planner Michael Leek, "we essentially had no new plats submitted."

It's an explanation, though, that raises more questions than it answers.

Builders and land brokers say the problem is the cost of building in Shakopee -- primarily land prices, but also the city's fees, a contentious issue for years and one the city is reexamining.

Just last week, under fire for the size of one project's park dedication fees, the city's staff acknowledged in a memo to City Council members: "The results [of a 16-city survey] indicate that Shakopee is among the higher rates for single-family residential and multi-family developments, and approximately $1,400 [per unit] over the average fee."

Inexpensive lots are few

Early in the housing bust, the experts say, Shakopee actually experienced a mini-boom as lots taken back by lenders were resold at bargain-basement prices to other developers and builders.

A bunch of them from a 400-plus home project called Countryside landed with Shamrock Companies, which bought them after the original developer went through foreclosure, said Laurie Karnes, a Maple Grove land broker. "Shamrock was really peddling those lots to other builders at pretty attractive prices," she said. "That's what was spurring the growth in Shakopee until last year."

Other bank-owned subdivisions in Shakopee include Glacier Estates, where Ryland Homes has built 30 single-family homes in the past two years.

Surrounding communities also are continuing to work down their supplies of bank-owned lots, but have more of them than Shakopee, said Charlie J. Pfeffer, a sales associate at Maple Grove brokerage firm Pfeffer Co.

"You look at Prior Lake, Savage, New Prague," he said, "and see that their bank-owned inventories are not gone. So you can buy in a neighboring city just a few miles away and get a lot for $45,000 versus $70,000 in Shakopee. People will drive a few miles for that, especially if the school district is similar."

The discounts on land are even more pronounced in outlying communities such as Belle Plaine, which are still languishing, Pfeffer said.

But the continued torpor in those exurbs, which were booming until gas prices soared, makes Shakopee's situation doubly puzzling: Why is it not scooping up those buyers?

Builders and land brokers say that with fewer bank-owned lots available, home builders increasingly are turning to conventional landowners, who mostly aren't willing to sell at deeply discounted prices.

"Shakopee was on fire for many years," Pfeffer said. "The expectations of these property owners haven't adjusted to the new marketplace."

Ryland President Mike DeVoe agrees. "It's one thing to work with a lender that's taken back a parcel. It's not in the business of holding those types of assets. Some landowners want to think back to what things were like in 2004 or 2005. There's just a big gap between their expectations and what things are worth today."

Why should that be any more true in Shakopee than in other places? There are hints that the nearby, casino-rich Shakopee Mdewakanton Sioux Community may be playing a role, at least on one edge of town. Landowners hope the tribe will someday swoop in and pay top bucks.

"Shakopee is one of those markets that are still challenging to deal with," said Steve Logan, who heads the Minnesota division of Mattamy Homes. The company built fewer houses in the city last year than in 2011, mostly because it was finishing off the last few houses in its Riverside Bluffs.

But Logan said his firm isn't actively looking for other places to build in Shakopee. "We struggled selling the last phase of Riverside Bluffs. That doesn't give us a lot of comfort going into another housing community in the same market. We'd prefer to go someplace else."

Logan said his firm has been more active in neighboring communities such as Prior Lake, where the return on investment is better. "We're looking at other opportunities in the south metro," he said, "but Shakopee is not one of them."

It's unlikely Shakopee will see a significant resurgence in home building, he said, until development costs -- not just land prices, but city fees -- come down.

"There's a lot of large development being looked at about town these days," he said, "and to be honest, I haven't heard Shakopee mentioned in any of those conversations."

Shakopee's City Council did agree last week to re-examine the city's developer fees in light of a study being done by an outside consultant.

"We need to be competitive with other cities," said Mayor Brad Tabke.

susan.feyder@startribune.com • 952-746-3282 dapeterson@startribune.com • 952-746-3285

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