March 3, 2000: Block E project will be good for Minneapolis and its taxpayers

  • Article by: Sharon Sayles Belton, Jackie Cherryhomes and Joan Campbell
  • March 2, 2000 - 10:59 AM

Over a decade ago, Minneapolis identified Block E as the vital link in the Warehouse entertainment district and acquired and cleared the blighted, crime-ridden block.

But to be blunt, attracting top-flight entertainment, hotel, and restaurant tenants is not easy. Now, after years of hard work, Minneapolis finally has a great proposal, ready to go, with signed tenants and full financing.

The tenant mix assembled by the McCaffery development group is hardly a ho-hum suburban lookalike. Instead, it includes the single most sought after attraction in entertainment today, the
Disney-owned ESPN Zone Cafe, a mix of live broadcast studio, interactive games and restaurants. The ESPN Cafes in Times Square, Chicago and Baltimore are wildly successful. For Minneapolis to attract this operation backed by the entertainment prowess and financial clout of Disney is a great coup.

Equally important, the block would include a Marriott Renaissance, the city's first all-luxury, four-star hotel, widely regarded as a missing piece in the downtown hotel mix.

Block E's second entertainment anchor is Crown Theater's 17-screen, stadium-seating movie complex - again, a great coup. Movies are noticeably missing from the district, and Crown is proposing a real palace with finishes far above the quality found in many suburban competitors.

The design of the complex does everything the city asked for and does so with style. It provides the long-sought skyways connecting downtown to the Warehouse District, Target Center and the TAD
Garages. It provides public open spaces along First Avenue, and public ways through the site at sidewalk level. It provides a lively urban streetscape along Hennepin Avenue with individual
storefronts and a grand theater marquee to complement those of the historic theaters. The  developers have given the city everything it sought, and at a remarkably high quality that has increased the private investment to $118 million, almost double that of earlier proposals.

Yet, incredibly, just two days ago on these pages, City Council Member Lisa McDonald argued that we should abandon this effort and start over. Let us take a moment to dispel her doomsday scenario about the risk to taxpayers. The city and Minneapolis Community Development Agency (MCDA) staff have worked diligently to minimize the risk to the taxpayers and to maximize potential benefits to the city:

City and MCDA staff, at our direction, have taken a very conservative approach to calculating tax revenues for purposes of tax-increment financing (TIF) debt repayments. TIF is repaid from the increased property taxes generated by the development. In this case, those calculations left a gap that is proposed to be filled using $550,000 annually of entertainment taxes generated by the project. Even modestly optimistic revenue projections would eliminate the need for use of that tax.

Total hotel and entertainment-related (food, liquor, etc.) taxes are expected to be at least $3 million per year. That leaves net income of $2.5 million a year for the city.

Minneapolis retains title to the land until the debt is repaid.

The MCDA negotiated a major profit participation in both cash flow and sale proceeds for the taxpayers, equal to half the developer's upside in the project. This is comparable to the position the city took in the Hilton Hotel, which netted the city $40 million to further its other development goals.

Also, the city has used two legal mechanisms, a holding rent provision and an assessment agreement, to further solidify its position and protect taxpayers.

When the debt is repaid, the taxing jurisdictions will enjoy additional property tax income of at least $3 million per year they would not otherwise have.

The truth is that this is a good deal for the taxpayers. Minneapolis has a long and successful track record of helping projects in blighted areas while ensuring that taxpayers are well protected and enjoy the benefits of our investments; this is no exception.

We all wish that Block E had happened sooner, but this proposal was worth waiting for. It is twice the value of the project we approved two years ago, and we are getting the national-caliber tenants and first-class hotel we have long sought. Block E will be everything we had hoped for and will bring new visitors and energy to Hennepin Avenue.

- Sharon Sayles Belton is mayor of Minneapolis; Jackie Cherryhomes is City Council president, and Joan Campbell is City Council majority leader.


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