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Minneapolis’ solutions to downtown parking-lot glut: pleasure or pain

MinnPost file photo by Marlys Harris
At a recent debate, Jackie Cherryhomes said that as mayor, she would do something to make sure that some of downtown's 120 surface parking lots get developed.

Apparently I’m not the only person in town who shuns the surface parking lot as a soul-deadening blot on the landscape — or who thinks it’s not exactly the highest use of God’s tundra.

Among the throngs of candidates vying for public office in Minneapolis this election cycle are at least two who — in contrast to Ronald Reagan (“Tear down this wall, Mr. Gorbachev!) — want to see some walls go up. They are mayoral candidate Jackie Cherryhomes, former City Council president (1989-2001), and Diane Hofstede, who is battling a challenger to keep her 3rd Ward council seat.  

At a recent debate, Cherryhomes said that as mayor, she would do something to make sure that some of downtown’s 120 surface parking lots get developed. I think there may be as many as 140, but the final count doesn’t matter. They stretch like ugly fungi next to or across from some of the city’s proudest buildings — the Cowles Center and the Central Library, to name two. Likewise, in a recent mailing, Hofstede says she’s for “proposed new residences and businesses to replace surface parking lots.” 

I am totally with these ladies. Hofstede’s vision seems to be rather limited; she’s for projects already in the works, such as the Wells Fargo office and residential complex in the Downtown East neighborhood that would, one hopes, complement the new Vikings stadium, assuming that the Wilfs and the Wellses don’t bug out on us. 

Cherryhomes, however, has a more expansive approach. She wants to see new buildings rising from the blacktops. Obviously, that can’t happen with the wave of a magic wand.

“I don’t have any specific ideas,” she says. “The real challenges are legacy lots.” By those, she means lots handed down among families that produce a lot of cash flow. “We have to convince those people that they don’t need to own those anymore.” The problem needs a lot of analysis, she adds.

She was happy to hear when I told her that the analysis was done. HR&A Advisors, a consulting group, had recently completed a $40,000 study  (PDF), which by the way, focuses on Downtown East — the neighborhood most plagued with lot fungus — for the city’s department of Community Planning and Economic Development (CPED); Cherryhomes didn’t seem put off by the fact that it was 84 pages long. (Would-be mayors, I guess, are gluttons for work.)

Anyway, the analysis makes it obvious that transforming parking lots into buildings will be a tough task; the financial incentives just aren’t there — at least not yet.

The study divides owners into three groups:

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• First, there’s the legacy group of individual owners Cherryhomes spoke of. They have no incentive to sell their land unless it fetches a whopping price because their return (from parking fees) is so high right now. And even if they were tempted to sell, there would be no place to invest their wad that would produce a comparable return. Money market funds or bank accounts? Somehow 0.2 percent per year doesn’t cut it. The stock market might work, but, unlike a downtown parking lot, it’s risky and volatile. And, because the city has put a damper on new surface parking lots, these owners can’t just buy or create a new lucrative lot elsewhere. So they hang on.

• The second group is made up of employers, and their parking lot is a perk they give to their staffers. They could sell off their land to a developer, but that would mean either infuriating their workers or finding them new parking elsewhere without significantly upping their expenses. 

• Developers themselves are the third group. They bought land in hopes that someday it would be worth building something on. As long as the money they collect from parking fees is enough to pay the property taxes and interest on their loans, they’re satisfied. So what are these guys waiting for? Well, they told HR&A in interviews that the Hennepin County buildings and Medical Center and lack of neighborhood amenities have held them back. Oh, and there are too many parking lots, separating Downtown East from the rest of the city.

The report offers several complicated solutions to this problem, but I will boil them down into two categories for you: pleasure and pain.

With pleasure, the city offers developers incentives to build — tax rebates, tax incentives, outright grants and so on, a la Block E. Sometimes such programs work; sometimes they produce white elephants. Or on the “build-it-and-they-will-come” theory, the city creates amenities, like transit and parks that people want to be near. Of course, that takes years and years to show an effect, and the results are also iffy, although Rome wasn’t … you know.

Then there’s pain. The city could hike parking lot owners’ taxes, although the report’s authors suspect that they would merely pass the extra cost of doing business along to their customers. HR&A put some faith in a city effort to enforce its parking lot landscaping ordinances more strictly than it has in the past. For example, lots are supposed to be screened with a specified number of trees. Trees take up space, actually spaces — parking spaces, reducing revenue. If revenues are reduced, parking lots will cease to be quite as lucrative, and selling might start to look like a better deal.

Smart candidates don’t generally speak about inflicting pain on their potential constituents; but if they mean to get stuff done, it should be at the back of their minds.

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Comments (7)

  1. Submitted by Alex Cecchini on 10/03/2013 - 10:57 am.

    Market Response

    “The city could hike parking lot owners’ taxes, although the report’s authors suspect that they would merely pass the extra cost of doing business along to their customers.”

    Exactly. Fine. If we’re not willing to curb VMT with carbon taxes, say no to further freeway capacity expansions, etc, Minneapolis can make choices like this as a city to reduce congestion and pollution while making downtown more viable for both potential residents and businesses. With the increased cost of parking being borne by parkers, some (not all) will choose not to drive. Some may choose to carpool, some might take transit, others may move closer in. We’re building the Green Line(s) and making other major investments to transit for a reason. A reduction in demand for parking as prices go up makes certain lots more lucrative to sell off, providing more residential and business downtown. Cycle feeds itself.

    Do this by implementing a land-value tax (rather than our current system which taxes improvements much more heavily than the land itself) across all of downtown, not just focusing specifically on parking lots (which may have unintended consequences). Pittsburgh has proven this works marvelously.

  2. Submitted by Nathaniel Hood on 10/03/2013 - 11:50 am.

    Land Value Taxation

    The answer to this is to tax land at a greater emphasis (Land Value Taxation), based on proximity and other amenities, and not punish small land owners for putting up the type of buildings we actually want for our urban environment. By modifying this element of our tax code, we are essentially incentivizing people to use their empty lots and encourage them to create better places.

    The way this needs to start is through an experiment; by advocating for a “Land Value Taxation Modification Zone”. The idea goes like this: draw up an area similar to what you’d do with a tax increment financing district. Inside the area, make it a zone where land is taxed at a higher rate, but capital improvements are not (or taxed at a lower rate). This needs to happen in Downtown East.

    • Submitted by Steve Elkins on 10/03/2013 - 03:43 pm.

      Land Value Taxation

      This is absolutely the right approach. Implementing split role taxation to tax land at a higher rate than structure would require changes to State property tax law but downtown Minneapolis would be the perfect place for an experiment. The key is to set the tax rate for the land high enough so that surface parking no longer “cash flows”. Lowering the tax rate on structure to make the overall property tax burden revenue neutral would also make developing the land more lucrative to developers. There’s the proper incentive on both sies of the equation.

      Under state law, local assessors are already required to assess the value of land and structure separately, so the requisite land value assessment data is already there.

      Where can we get a copy of the parking study?

      • Submitted by Todd Hintz on 10/03/2013 - 04:39 pm.

        Land Value Taxation

        You guys are brilliant. Thanks for the excellent suggestion on how to fix a sticky problem. While the new tax type wouldn’t get all surface lot owners to move off the dime, it will get enough going that we can see some progress and get at least some of these ugly lots developed. That in turn will make downtown even more attractive, which will attract more people and more businesses.

        Someone below said “businesses follow rooftops” and this will bring in a heck of a lot more rooftops.

  3. Submitted by Laura Hoffman on 10/03/2013 - 01:39 pm.

    Surface Parking Lots

    Third Ward City Council candidate Jacob Frey has suggested that we provide surface parking lot owners with incentives to sell:

  4. Submitted by Ray Schoch on 10/03/2013 - 02:30 pm.

    Not quite a cure

    Allow me to interject a note of skepticism to the solution(s) proposed by Messrs. Cecchini and Hood. One other very possible consequence of jacking up the taxes of surface lot owners, especially if such action more or less forces them to raise their parking rates, is not to take mass transit downtown, not to move closer in, but simply to go somewhere else to shop.

    I believe that’s a primary reason / lament given by downtown merchants as shoppers go to MOA, Maple Grove’s gigantic land-eating collection of businesses and surface parking, Southdale, the still-building replacement for Brookdale, etc., etc.

    I like the idea of emphasizing land value in taxation, and would like to see alternatives to the single-person, single-car metric we’ve been addicted to for the past several decades, but it won’t happen automatically just because we make parking more expensive. An initial reaction — it’s certainly my initial reaction — is simply to avoid those places where parking is more expensive.

    There *is* a certain circular quality to the arguments, but my own particular circle is based on the fact that there’s no convenient transit from my part of the city to the places I might go downtown. Asking customers to transfer from one bus to another — twice — for a single, one-way trip downtown, will not attract me as a transit customer, and I live *in* Minneapolis. That lack of service convenience turns a trip to a clothing store to buy some new socks into an all-day excursion that requires 4 transfers and takes 3 to 4 hours. In January? Here? No, thank you.

  5. Submitted by Faith Cable on 10/03/2013 - 03:57 pm.

    Shop where downtown? If you’re going to get in your car to go shopping, you’re most likely going to end up at a mall today, whether it be the MOA or Maple Grove. We have a lot of parking downtown and retail still died. There are so few shops downtown right now, it would be rather illogical to drive there as a retail destination. It seems that most of the downtown retail customers are people who work downtown or who come by bus.

    As the saying goes, “retail follows rooftops.” More stores are not likely to open downtown until there are more people living downtown to support them. Replacing surface parking lots with residential buildings seems like the only way for downtown retail to ever be more successful than it is today.

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