$400 million Downtown East deal is left hanging amid a legal challenge

The fate of one of the largest development deals in Minneapolis history — a $400 million plan to transform land next to the new Vikings stadium — is in the hands of a Hennepin County judge who heard a last-minute legal challenge Thursday.

The lawsuit could prove perilous to the development if Judge Mel Dickstein agrees with plaintiffs when he reaches a decision, expected next week. The City Council is on track to give the project final approval Friday morning.

Ryan Cos. has proposed building more than 1 million square feet of office space for presumed occupant Wells Fargo, as well as apartments and retail, on land currently owned by the Star Tribune. The city has agreed to borrow up to $65 million to build an adjacent parking ramp and nearly two-block public park.

The suit, which seeks an injunction, claims that the city is violating spending limits of the Vikings stadium legislation by paying extra for the parking and parkland, both of which were required in that bill. The stadium legislation limited the city's stadium contribution to $150 million, in addition to an estimated $189 million to operate the stadium over 30 years.

The city attorney's office stressed Thursday that the deal could crumble. Ryan's agreement to buy the Star Tribune land expires Dec. 27, which is also Wells Fargo's deadline for Ryan to finalize the project.

"The whole thing can and may well fall apart because of delay," City Attorney Susan Segal told the court.

Representatives of the city, Ryan Cos. and the Star Tribune gathered in a downtown courtroom Thursday, less than 24 hours after the lawsuit was announced. They were joined by the three plaintiffs: former City Council President Paul Ostrow, software executive and city Audit Committee member Stephanie Woodruff and Planning Commission member Dan Cohen — a City Council president in the 1960s. Cohen and Woodruff ran for mayor earlier this year, and Ostrow was Woodruff's campaign manager.

"This is critical because the cap on the state and city contributions was a very significant and integral part of this legislation," Ostrow said.

Deputy City Attorney Peter Ginder argued that the parking ramp and park were spurred by the Ryan development, rather than the stadium. He said they are unrelated to the stadium legislation.

"This is not a stadium deal. This is not a stadium parking lot, per se," Ginder said. He added: "I suggest the court does not need to look at the stadium legislation at all."

But the Minnesota Sports Facilities Authority, which is overseeing stadium construction, must sign off on the project because it's committing $16.3 million for one-third of the parking ramp. The authority is also paying $10.3 million for skyways. Both come from a budget made up of city, state and Vikings funds intended for stadium-related construction.

Ostrow argued that the team should be covering costs beyond the public dollars the Legislature authorized for the stadium. "The obligation to build this ramp is clearly and unambiguously the responsibility of the Minnesota Vikings," he said.

Ostrow and plaintiffs also challenged whether the city has the ability to develop a park under its charter and whether city officials were appropriately invoking Port Authority powers to execute the deal. City finance officials have said the Port Authority power merely adds financial flexibility, but it also reduces the number of votes necessary for passage and bypasses the city's semi-independent Board of Estimate and Taxation.

"There are rights that are lost, procedures that are bypassed by using the Port Authority," Ostrow said.

Unlike the polarizing Vikings stadium vote, the City Council has remained largely unanimous in support of the Ryan project. Its final vote on the deal is expected at the council's last meeting of the year on Friday, which is also when the Sports Authority's vote is expected.

Key components still hang in the balance, such as presumed tenant Wells Fargo's commitment to buy the office towers. Ryan Vice President Rick Collins said Dec. 27 is their final contingency date in the agreement with Wells Fargo, after which the company "may have to move on."

Ginder reiterated the importance of the project. "The ramifications not only to the city, but the parties that have worked for years on this, are huge," he said.

Asked why the Port Authority is paying for part of the parking ramp, she said it was "one of the advantages. This actually is sort of a win-win situation where we are using some of the stadium resources to help financing for this Ryan development."

Eric Roper • 612-673-1732