Civic leaders on Tuesday proposed paying for half of the $50 million Nicollet Mall renovation with a special assessment on downtown Minneapolis property owners that's based on their distance from the signature street.
The plan, unveiled by city officials and the Minneapolis Downtown Council, aims to raise the $25 million that is not being paid by the city and state with an assessment that will become part of the property taxes of downtown owners for 20 years.
The rates will vary based on the property type and proximity to Nicollet Mall. An office building on the mall valued at $10 million would pay $55,500 over 20 years, or $2,775 a year. Meanwhile, a $250,000 condo three or more blocks away from the mall would pay $200 over 20 years, or $10 a year.
"Those that get a special benefit and have a particular increase in value because of the project will be assessed for more money," said Robert Strachota, president of Shenehon Co., a Minneapolis real estate appraisal firm that was hired to do the assessment model.
"The offices have more economic value than the residential properties. And the users of those buildings are numerous and the rents are greater," Strachota said. "It is the engine that pulls downtown."
On Wednesday and Thursday, city officials, council members and appraisers will host four public meetings to discuss the idea.
Refreshing the urban artery, proponents say, is paramount in supporting the downtown residential boom. The city's signature street hasn't been updated since 1990, when the downtown core served a different purpose as a daytime center of work and shopping, said Steve Cramer, president and CEO of the Downtown Council.
Under the assessment plan, proximity is classified in three zones, with those that abut the Nicollet Mall paying more than those along 1st Avenue, which in turn pay more than those in the North Loop. Property types are broken down into eight categories with descending assessment rates: office, hotel, retail, parking industrial, institution, residential and non-parking land.
Unlike the Downtown Improvement District tax that is levied against commercial property owners, the Nicollet Mall assessment would include a wider swath of more than 7,100 properties, and all classes of property except federally owned property.
Sites such as the Federal Reserve Bank, which does not own its property, will be taxed. The total assessment area contains property valued at nearly $7.9 billion.
A primary concern with the new tax is the pass-through cost for building tenants in rent rates. But Strachota said the effect will be nominal.
"We have a lot more property value downtown to carry the project than we did in the 1990s, so there's more properties sharing the costs," he said.
Wendy Cell, vice president at Shenehon, said that the increase for the most heavily taxed zone would amount to 4.4 cents per square foot in office, 2.5 cents for a $250,000 condo and $20 more for a hotel room each year.
The Legislature agreed last year to contribute $21.5 million for the renovation, and the city of Minneapolis kicked in $3.5 million.