Stitched together by developers from fields and gravel pits, Apple Valley has worked for years to build the kind of downtown where residents can leave home in the morning and walk to the bus, their jobs or local stores.

New restaurants and a hotel, townhouses and a park with water fountains where kids can play have already sprung up in the Central Village, but right next door, there are still empty fields.

The housing market slump caused a slowdown in development that forced city leaders to plead earlier this summer to hang onto public funding that is key to their vision: a $2.3 million Livable Communities grant from the Metropolitan Council to build underground parking below an as-yet-unbuilt complex of housing and businesses on Galaxie Avenue.

In the last year, Met Council officials have fielded an unprecedented number of requests from city leaders who already have Livable Communities grant money in hand, but say they need to change plans to make their community's project. And for the first time in the program's history, a shortage of deserving proposals led the Met Council to hold back about $3 million last year in money available through the program, which helps metro-area cities create thriving urban villages by cleaning up contaminated property and building affordable housing near businesses and public transit.

Since last fall, Minneapolis, St. Paul, Chaska and Apple Valley have all gone back and gotten the OK to swap out condominiums for apartments or -- in Chaska's case -- erase housing entirely from blueprints.

The requests are new to the 13-year-old program, which awards about $14.5 million a year in a competitive process that has helped fund such highly visible, anti-sprawl projects as the Midtown Exchange in Minneapolis and Burnsville's Heart of the City.

"Those [requests for changes] are the only ones that we've ever had," said Guy Peterson, director of the Met Council's community development division. The development downturn has also caused an uptick in cities asking for more time to complete projects, he said. In June, the Met Council responded by laying out specific criteria that a city must meet if it wants a grant deadline extension.

"You have to be flexible to the changing times," said Ruth Grendahl, who chairs the Met Council's Livable Communities Advisory Committee.

In each case, the Met Council used a scoring system to ensure that amended plans still stacked up favorably against unsuccessful grant applications, and it wouldn't give cities the leeway to change plans if a project "appeared to be dead," Grendahl said. But in downtown Apple Valley, for example, where Grendahl serves on the City Council, "Things are happening -- just not as fast as what people might have hoped."

Several Met Council officials said they're not concerned about the project changes, and in cases like St. Paul's, where revisions added more affordable housing, they were pleased.

"For a city to step up and do that, that's incredible," said Met Council Member Natalie Steffen. "We don't see a lot of that."

But if tough times persist, she said, and cities still have trouble pitching projects they can finish, it might be time for Met Council leaders to ask themselves, "Has this program outlived its usefulness?"

"I don't think we're anywhere near that," she added. "Cities catch on very fast. They will know what kind of projects work."

The Met Council budgeted more than $17.5 million for Livable Communities grants last year, but chose to award only $13.5 million. It put another $1 million toward helping cities update long-range plans, an unusual use of the funds. The dip in awards was largely because the economic downturn resulted in fewer grant proposals than the previous two years, and fewer were fleshed-out enough to merit funding, especially proposals from the suburbs, Met Council officials said.

Instead, the Met Council put leftover funds into a one-time, $4 million pot of loan funding that cities can use to buy land and then hold it for up to five years, waiting for better market conditions to build affordable housing.

For now, "Yeah, there's a slowdown. Yeah, we don't have quite as much competition," the Met Council's Peterson said. But demand for the program's grants won't evaporate, he predicted. "It's considered a very valuable tool by communities."

Sarah Lemagie • 952-882-9016


APPLE VALLEY asked the Met Council for another year to build underground parking in the city's 65-acre Central Village. Setbacks led the developer to revise plans, leasing units originally planned as owner-occupied condos and moving about 100 more parking spaces from the garage to street level.

MINNEAPOLIS got the thumbs-up to hang onto more than $1 million in grants after it eliminated condos, added more rentals and made other changes to redevelopment plans for Longfellow Station, a mixed-use project near the 38th Street light-rail station on Hiawatha Avenue.

ST. PAUL got a thumbs up from the Met Council, when a developer decided to build affordable housing instead of 75 condos in a historic Art Deco office building on 4th Street. The council also allowed the city keep $380,000 in grant money to remove asbestos and lead-based paint.

CHASKA leaders have long wanted to spruce up a downtown corner at Hwys. 212 and 41. But a developer backed out when the market went south, and the city had to abandon plans for an apartment building with ground-floor storefronts. Now, a new developer plans a one-story retail building with no housing, and the city got permission to keep about $150,000 in grant money for environmental cleanup.