Minneapolis, developers to lose millions without 2040 Plan as judge's order takes effect

Minneapolis has put aside its 2040 Comprehensive Plan after a judge declined to delay an earlier order blocking its implementation.

The city has now updated its website with an announcement that until further notice, it would return to 2030 land use ordinances. Those guidelines, which reinstate single-family zoning and roll back requirements that a certain proportion of new units be affordable, inject uncertainty into dozens of ongoing projects.

The Envision Community — 20 microhomes for people who are or have been homeless — was to go before a city planning board when Judge Joseph Klein ordered Minneapolis to drop the 2040 Plan.

Envision had been poised to buy land from the city at 21st and Penn avenues in north Minneapolis, development consultant Chris Wilson said. But because half the project would be possible only under 2040 zoning codes, the group had to go back to the drawing board, which translates to higher construction costs, interest rates and design fees.

"If the project is delayed significantly, there will be problems that may result in the loss of $1.2 million in [COVID relief] capital funding for the project," Wilson said. "This will likely derail Envision's work entirely."

A group of Minneapolis residents successfully sued to block the plan, saying it required an environmental impact study under the Minnesota Environmental Rights Act. City leaders did not conduct such a review before approving 2040 five years ago because comprehensive plans — which local governments submit to the Metropolitan Council every 10 years — have never been subject to them before.

Klein ordered Minneapolis to revert to its older and less controversial 2030 Plan within 60 days of his Sept. 5 decision. The city quickly appealed, asking to stop the clock pending a decision because "regional planning will be fundamentally compromised" and hundreds of housing units will "die" even if the Court of Appeals ultimately salvages the 2040 Plan, said Assistant City Attorney Kristen Sarff.

The plaintiffs, Smart Growth Minneapolis and Minnesota Citizens for the Protection of Migratory Birds, argued against delay. Their lawyer, Jack Perry, said continuing to implement 2040 would make any environmental study that the city might conduct a foregone "sham."

The judge did not rule on the city's request for a stay before Saturday's deadline, making it moot.

Complying with the court requires Minneapolis to undo years of exhaustive work aligning city maps, laws and planning practices.

In the immediate days after Klein's order, Dean Dovolis of DJR Architecture said developers speculated among themselves about what would happen to projects in mid-development that would be allowed only under 2040.

"My take on it is that there's a window … before the judge demands a reversion … to rush through your projects and get them approved," Dovolis said. "But if you're not close enough to be approved … then you're out."

A proposed 498 market-rate units and 69 units of affordable housing that have received land-use approvals weren't likely to get building permits in time, city Planning Director Meg McMahan warned in a September legal filing.

The city would also lose $9.7 million that it has already invested in the creation of affordable housing for ownership, she said.

Todd Smith, developer of a midsized apartment of 20 market-rate units at 5005 Lyndale Av., asked the Planning Commission in October for site plan approval. The commission gave him the green light, but now he's run out of time to get the necessary building permits.

Smith, who was visibly frustrated with the circumstances, lamented the 2½ years that it took the city to update its zoning codes after 2040 took effect as well as a last-minute historic preservation review for holding up his project in the critical months before the deadline to revert back to 2030.

"At this point, a best-case scenario is to receive entitlements and at some unknown date in the future to be able to pull a construction permit," he said.

Minneapolis could still comply with state law by conducting an environmental study. The city has hired engineering consultant Stantec to perform an analysis, but has declined to disclose any information about it.

In its appeal of Klein's order, the city wanted to tailor a gentler restriction of the 2040 Plan rather than throwing it out entirely. Sarff, the assistant city attorney, said rejecting the plan would force the city out of compliance with the Metropolitan Land Planning Act.

She had proposed capping the total units of multifamily housing built on land once zoned for single-family housing at 100,000 — less than the maximum buildout permitted under 2040 yet realistically will never be met at the current rate of construction.

But Perry, the environmental groups' lawyer, is adamant that only an environmental study can determine the density threshold at which point air and water quality begin to degrade. He called the city's predicament "self-inflicted."

The case has riled other environmental organizations, who have denounced the plaintiffs as being NIMBYs in disguise. The Sierra Club, which filed an amicus brief in support of 2040, argued the plan's goals of increasing housing density along transit corridors would reduce carbon emissions by eliminating the need to own a car.

Rep. Michael Howard, DFL-Richfield, accused Smart Growth Minneapolis and Minnesota Citizens for the Protection of Migratory Birds of using "frivolous litigation" to "uphold the status quo of exclusionary housing policies." He urged the Legislature to act swiftly next year to save 2040 by amending the Minnesota Environmental Rights Act.

But degrading Minnesota's landmark environmental rights law has drawn opposition from still other environmentalists, such as the Minnesota Center for Environmental Advocacy. The group is urging Minneapolis to prove that 2040 will not harm natural resources "rather than seek an exemption from a bedrock state environmental law."

Rebecca Arons of Smart Growth Minneapolis said despite how some opponents of the 2040 Plan have celebrated their lawsuit, she does not oppose density and supports the plan's premise that walkable cities are a tool for suppressing urban sprawl. Still, she said she wants a robust environmental study of 2040 done the same way that the city of Seattle assesses its comprehensive plan.

"All of the things that you'd want to know about the current state of the city, the number of trees, how often the city floods, where it floods … how would [2040] either exacerbate these problems or solve them, and all of the information goes up transparently for the public to see," Arons said. "This is what we're asking for."