Hopkins officials are moving ahead with eminent-domain proceedings to purchase land for a downtown luxury apartment complex area after negotiations with the properties' owners broke down last month.
Lawyers representing the owners of the properties where the complex would be built -- on Mainstreet, between 5th and 6th Avenues -- said their clients have asked for two years to be left alone or fairly compensated.
"They've offered us $5.5 million, and we [originally] had a purchase agreement for $6.7 million," said Timothy Welch of Leonard, Street and Deinard, which represents Rixmann Properties, co-owners of the 45-unit Hopkins Park Plaza building. "We anticipate that if they do proceed, they're going to pay significantly more [for the property] and pay our fees."
Cities typically view eminent domain -- the public seizure of private property for a community goal -- as a last resort, because months or years of legal battles can delay development projects. Hopkins officials said they have not used eminent domain in recent memory.
They said they moved forward with the proceedings because the purchase agreement they entered into for the Park Plaza property in late 2006 had mushroomed out of control and recent negotiations with the owners weren't fruitful. The apartments would be built by Doran Development.
"We had a purchase agreement that was growing on a monthly basis," said Kersten Elverum, Hopkins' economic development director.
The property owners and the city could land in Hennepin County district court later this year over the eminent domain and related condemnation proceedings and Rixmann Properties' 2005 lawsuit challenging the city's creation of a tax increment financing, or TIF, district. The suit was postponed while the two sides tried to work out a purchase agreement.
Tax increment financing districts allow cities to use a portion of the increased property taxes generated by completed development projects to pay for roads and infrastructure, demolition, environmental cleanup and other development costs.
Elverum said Hopkins' $6.2 million agreement with Park Plaza had grown to $6.74 million by May, based on fees resulting from project delays. She said city officials offered Park Plaza's owners $5.5 million and the owner of Mainstreet USA, a nearby used car dealership, more than $480,000 this spring. Both properties appraised for less, she said.
"We really view it as a gateway to our downtown," Elverum said.
Welch said Park Plaza's owners, however, estimate that the value of their property is closer to $9 million and that luxury apartments don't serve a greater good for the west suburban community.
City officials said rents for the 254 units would likely range from $1,100 to $1,900, and that the units could attract younger, more affluent residents to the city's historic downtown.
"My clients deal with a low-income housing clientele and the city wants to relocate them," Welch said. "They're basically dislocating a lot of their workforce housing."
Jon Morphew of Schnitker and Associates, who represents Mainstreet USA's owner, Alexander Teplitski, said the tougher eminent domain laws approved by the Legislature in 2006 require the city to compensate his client based on the value of the business and costs associated with relocating to a comparable property.
"The city's appraisal only looks at the first step," Morphew said. "This is essentially my client's sole source of income, and 90 percent of his business comes from a 5-mile radius."
Tom Grundhoefer, general counsel for the League of Minnesota Cities, said the restrictions have made it more difficult for cities to seize private property, even in some cases that involve blight, pollution or public nuisances.
Still, he said, it's not impossible because the law gives cities a fair amount of leeway to complete projects that were well into the planning stages or under construction at the time.
Patrice Relerford • 612-673-4395