Hopkins will pay additional $8 million to developer Doran to settle parking-ramp issue

The city of Hopkins will pay an additional $8 million to Kelly Doran, the apartment developer, to cover the $10.5 million cost of a 189-stall public parking ramp that Doran built for light-rail commuters in his Moline project downtown, at the request of the city.

Doran and Hopkins officials expected most of the cost to be covered by federal congestion-mitigation funds sought by the Metropolitan Council.

The Met Council balked at the arrangement in 2018, which prompted Doran to sue the city, as the developer accrued up to $1.5 million in interest and related costs involving a loan he had to take to cover the ramp. It was built into the $50 million-plus apartment complex.

Hopkins earlier had loaned Doran $5.2 million, or about 10% of the apartment building cost, in the form of a tax-increment finance loan, which would be paid back over years with incremental property taxes generated by the complex.

The total amount is now $13.2 million that Doran is required to pay back through 2023.

The new agreement was approved late last month by Doran and city officials. The parties entered settlement talks last fall, after a no-winner ruling by Hennepin County District Judge Edward Wahl.

Doran asserted that the city and Met Council ordered a public ramp, in addition to 255 underground stalls that he built to accommodate tenants and guests.

The Moline project was built on land near downtown Hopkins that was once the site of a Minneapolis Moline tractor plant and more recently an office and warehouse.

According to court documents and Doran, the developer financed what is ­supposed to be a government transit center with an additional $10.5 million bank loan. When a purchase by the city didn't close in 2018, Doran had to carry the ramp and pay an additional $1.5 million in interest, management expenses and related costs for more than a year.

"The city is in default," Doran asserted. "The bank thought this agreement was bulletproof. I had to pay $3.5 million down on the loan. The city was supposed to buy it and they haven't."

Doran blamed the Metropolitan Council, which monitored the agreement as it was assembled in 2016 and then started picking it apart before the planned closing in early 2018.

"The agreement from the outset was that the ramp would be open to the public at large, including transit riders," said Dan West, general counsel for Doran. "The Met Council was well aware of that agreement. It was not until years after the initial documents were signed that the Met Council changed its position and insisted that only transit riders would be able to use the ramp if they purchased it — and that members of the general public would be prohibited."

The Met Council said that it couldn't apply for the federal funding because of Doran's insistence that he be allowed to use some of the public ramp, as space permitted.

"Doran Companies desired incidental use of the federally funded 'Moline' parking structure by Moline residents," the Met Council said in a November statement.

"Incidental use is approved limited use of the transit property that doesn't interfere with transit capacity or use and is only permissible under conditions that permit the transit agency to [control] the transit property. Doran Companies was unwilling to agree to the terms of use based on federal guidelines governing incidental use," the Met Council statement said.

The settlement talks ensued after Wahl ruled against both parties' bid to dismiss the case.

"Doran maintains that it is essentially stuck with a parking garage it never planned to own, having to pay out-of-pocket to cover the bank loan, and also assume all costs ... into the future," Wahl ruled last year. "Under these circumstances summary judgment in favor of the city on the basis of unconscionability is not appropriate."

Neal St. Anthony • 612-673-7144