Minneapolis aims to retain public control of Upper Harbor Terminal concert venue

Minneapolis planners say they have discovered a way to keep public ownership of all the land in a project to redevelop an old Mississippi River port into a residential and commercial hub on the city's North Side.

A draft master plan previously called for the city and Park Board to retain most — but not all — of the 48-acre Upper Harbor Terminal land, with developers paying ground-leasing fees to construct buildings on it. One key parcel of the terminal project was slated to pass into private hands: the polarizing 10,000-seat First Avenue concert venue at the project's core.

Officials believed they had to sell it because of legal restrictions on state bond-funded projects, they said, but they learned recently that those restrictions were relaxed more than 10 years ago.

"There is a path where the city could own the music venue … and that would then make it so that none of the lands at the Upper Harbor would be sold to private hands," Minneapolis Economic Development Director Erik Hansen informed the project's collaborative planning committee, a panel of community representatives, last month.

Because the state contributed a bond-funded grant of $12.5 million to construct the concert venue, the city had been under the impression that state rules required the property owner to keep the site as a music venue in perpetuity — a burden it did not want to assume, Hansen said.

Instead, the city planned to partner with First Avenue, which would buy the property, receive the state funds and raise the other half of the development costs. The city would take control of the property for 125% of its useful life, or 62.5 years, while First Avenue would operate it. At the end of that period, the city and state's interests would expire. First Avenue would be left with a controlling 51% stake in the concert venue, while a yet unnamed "community entity" would have a 49% minority stake.

The plan was similar to the way Minneapolis had managed other state bond-funded art venues, such as the Guthrie Theater, MacPhail Center for the Arts and Orchestra Hall, in order to avoid having to run those institutions forever, Hansen said.

But this spring, city attorneys discovered that Minneapolis had been following outdated state rules.

Since 2010, property owners need only operate bond-funded facilities for 125% of their useful life before the state's interests ended, according to the Minnesota Management and Budget Office. That meant that since the very beginning of planning the $302 million Upper Harbor Terminal redevelopment, the city had the option of retaining possession of the concert venue without having to shift ownership to First Avenue.

In an interview, Hansen said the city's mistake had been an honest one. State bonded projects are complicated to begin with, he said, and the state didn't make a big announcement when the rules were changed more than a decade ago.

"We're not trying to pull any fast ones," Hansen said. "People think this all came out of nowhere, and yeah, it did when we found out about it. ... This is new information. We're not going to hide from it."

First Avenue CEO Dayna Frank said had she known it was possible for the city to retain full ownership of the concert venue, she would have supported that from the beginning.

"It really solves a lot of problems, namely what we heard through engagement that there not be private ownership of the land on the river, that it remains in the public domain," Frank said during a June 9 collaborative planning committee meeting.

The committee voted July 13 to recommend changing the draft master plan to reflect unbroken city ownership of the concert venue. It will go before the City Council for a vote in late September.

The council, which had previously directed staff to explore options that did not require the sale of public lands, is not expected to resist the change.

"This development could spearhead changes in how the city and private developers conduct business in the future with other communities, but especially communities of color," said Markella Smith, committee co-chair and McKinley Community executive director, in a news release. "I am immensely proud of the work we have done."

The concert venue had always been the most controversial aspect of the Upper Harbor Terminal project.

Conceived in the earliest stages of planning — before deeply affordable housing and a community wellness hub became part of the schematics — the First Avenue "community performing arts center" had been established as the project centerpiece.

Some community members had misgivings about using millions in state bonds to help a private business develop a concert venue in north Minneapolis. Subsequent planning resulted in the idea of taking $3 from every concert ticket sold to feed a fund controlled by a "community entity," which would distribute the money for antidisplacement or wealth creation in north Minneapolis.

Critics maintain the benefit to the community is too small and the city could come up with something better.

"It's a stadium deal, so it creates a lot of part-time, minimum-wage jobs. … I don't know why we would say that is the kind of economic development we would want to start with in north Minneapolis," said Paul Bauknight of Friends of the Mississippi River, a North Side architect and former member of the project's collaborative planning committee who resigned in protest.

The First Avenue concert venue was incorporated into the plan after surveys showed residents wanted music on the riverfront, said Brandon Champeau of developer United Properties.

United Properties then recruited First Avenue to the development team because they believed a local brand would receive more support than a large corporation like Live Nation or Clear Channel.

"You're never going to get 100 percent of people who are in agreement on things but that was really kind of the genesis of it," Champeau said. "We thought that it was very responsive to what the community was asking."

The Upper Harbor Terminal project has undergone many changes since its inception, taking cues from the community committee to incorporate social benefits including affordable housing at 30% of area median income, senior housing, urban farming and a 19-acre riverfront park to reconnect north Minneapolis to the Mississippi River after Interstate 94 tore through the community in the 1960s.

Fees that developers pay to use the land will fund projects benefiting the rest of north Minneapolis.

Throughout the process, developers had to educate themselves on the historic roots of some community members' distrust, including redlining, racial covenants, unfair land use and zoning practices that over time contributed to Minnesota's racial disparities, Champeau said.

He recalled a public meeting in which a resident explained that if people couldn't imagine themselves living in the designer developments portrayed in United Properties' pretty pictures, they'd rather not have them at all.

"That was a moment for us where we said, 'OK we have to rethink our approach here and do something different,' " he said.

"We have to be more intentional, and we really have to focus on figuring out what the right thing is for the community."

Upper Harbor is a former barge shipping terminal that became obsolete in 2014 with the closure of the Upper St. Anthony Falls lock and dam.

Susan Du • 612-673-4028