Going with the flow // Plans for the Minneapolis riverfront favor light industry and housing over existing barge-dependent industriesSteve Brandt; Staff WriterPublication Date: March 8, 1999 Page: 01D Section: BUSINESS Edition: METRO

Perhaps the first sign that the Upper Harbor of Minneapoliswould fall well short of the dreams of civic boosters arrived withthe first lockage through the St. Anthony Falls locks in 1963, anupstream barge laden with 750 tons of 24-inch water pipe.

After the dedication of the locks, the barge quietly slippedback downriver to unload at Savage, where its cargo was shifted ontoa truck to be hauled to Minneapolis. Although Minneapolis boasted anew harbor above its falls, it had no dock.

The completion of the two-lock extension of Mississippinavigation fulfilled a dream of Minneapolitans to lift barges 74feet to bypass the falls and its downstream rapids.

After generations of lobbying, boosters in the 1950spredicted that the harbor would attract hundreds of acres offactories to the upper waterfront to take advantage of cheap bargerates. The two locks, a new lower dam and dredging to deepen theriver channel cost more than $200 million in today's dollars.

It was a massive public work, more than four times the cost ofanother notable contemporary, the original Metropolitan Stadium inBloomington.

Yet the harbor failed to deliver the factories and jobs thathad been predicted. Those businesses that did move in don't matchfor jobs and tax base the light industry favored by developmentofficials today.

So Minneapolis is starting to debate a vast shift in land usefor its riverfront above Plymouth Avenue. Such a shift wouldthreaten the future of river shipping in Minneapolis and the debateraises the issue of whether the locks even will operate in the longrun.

The team of planners proposing this shift is working for theMinneapolis Park and Recreation Board, Hennepin County, the city ofMinneapolis and the Minneapolis Community Development Agency. Amaster plan will be proposed for adoption by those agencies later

this year, to be followed by zoning changes.

The proposed riverfront makeover would unfold over severaldecades. It would be most dramatic on the west side, where heavyindustry would yield to housing, offices and light industry. Parkswould line both banks.

The proposal would complete an evolution of the city'sriverfront that began a century ago with the first of the parkwaysthat line the gorge south of the Franklin Avenue bridge.

More recently, the central riverfront up to Plymouth Avenuehas yielded its vacant rail yards and mills to a strip of parks andrenovated buildings, stimulating new housing and offices. Areas oncefilled with factories, such as the south end of Nicollet Island, ornearby Boom Island, now offer tranquil spaces for recreation. Thisconversion has followed the river's improvement from an open sewerto cleaner waters.

The upper river plan doesn't explicitly call for an end tobarge traffic through the locks. But continuing the land conversionupriver to the Camden Bridge threatens the long-term river access ofthe city's few remaining barge shippers. The draft riverfront planwould relocate them, plus some other riverside industry.

Businesses on the river

John Isaacs, president of American Iron & Supply Co., has beenamong the most outspoken business owners questioning the plan. "Weare much more economically viable on the river," he said.

His scrap business just south of the Lowry Avenue bridge sends80 to 90 barges a year downriver to steel mills. During theApril-to-November shipping season, 90 percent of what he ships ridesa barge. He ships by rail during winter.

American Iron is the smallest of the four upper river shippers,in terms of volume, shipping 120,000 to 130,000 tons annually. (Thefirm projected yearly river shipments of 150,000 tons in 1954 whenthe navigation extension was being debated.)

Any effort to relocate the firm is complicated by the firm'slawsuit against the city, seeking damages for the city's delay inissuing all permits for American Iron to install its controversialKondirator metal shredder. The shredder would allow the firm to

triple its tonnage, Isaacs said, but many neighbors already find thenoise of loading barges objectionable. Several competitors shipfrom St. Paul, but Isaacs said moving there would distance him fromsuppliers of scrap.

"We know for a fact, though, that we need to be on the river.That's a given. That'll never change."

Just downstream, Camas Inc. is Minneapolis' largest rivershipper, last year importing 800,000 tons of sand, gravel andcrushed limestone from mines below St. Paul. Its yard already hasbeen moved once for park development, when the firm was known asShiely. In the mid-1980s, the park system bought a former yard,located just below the falls.Barging rates cheaper

River shippers cite clear evidence that utilizing bargesis the most energy-efficient, cost-effective way to move goods.Shifting freight from barges to trucks or trains would increase fueluse and emissions, increase accident rates, add to highwaycongestion, and consume more tires, a state study found.

Economic studies also have found that river rates help keepdown rail rates for commodities that can be shipped by eithermethod. "We have the river, and the railroads know it," saidIsaacs, who is able to use that leverage in negotiating freightrates.

According to figures from the U.S. Army Corps of Engineers,which runs the locks, scrap can be shipped from Minneapolis toArkansas, one American Iron market, for about $8 per ton less bybarge than by rail. But the difference is only about $2.60 per tonfor wheat sent to Louisiana, when all shipping costs are included.

Other river shippers include the privately operated, city-ownedUpper Harbor Terminal, opened five years after the locks, and itsneighbor, cement importer Holnam Inc., which has requested a cityexemption from a riverfront development moratorium so it canincrease annual tonnage by 75 percent.

Holnam built on the harbor in 1964 for barge access, and ifthat ceases, "We'll probably say goodbye to the city," said facilitymanager Ken Farrar. Holnam employs six people in Minneapolis andhas an off-river terminal in Burnsville.

But these harborside businesses may be doomed by the numbersimportant to city officials and planners. The combined employmentof the three private shippers and the city terminal barely reaches100 people at peak periods, an average of about one worker per acre.City development officials seek job creation of at least one jobper thousand square feet of plant in assisting light industry, anemployment density 17 times that of shippers. Moreover, propertyvalues on the west bank north of 24th Av. N., which includes theriver shippers, are far lower than the city-assisted light industrydevelopment to the south. Those newer businesses between thePlymouth and Burlington Northern bridges were set back from theriver, allowing public access.

In contrast, planners have sketched one redevelopment schemefor just the west bank of the river north of Lowry Avenue that wouldadd 1,030 housing units and 380,000 square feet of office-retailspace. They estimate a combined market value of $184 million,yielding more than $4 million in property taxes annually, comparedto about $1.1 million now. They say the entire redevelopedriverfront could generate $10 million annually in tax revenue.

But some have ridiculed the assumption of planners that peoplewill rent or buy high-density housing sandwiched between noisyInterstate Hwy. 94 and the dominating Riverside power plant acrossthe river. Those planners reply that housing would face downriverto capture more of the river and the downtown skyline.

Redeveloping the upper river is expected to cost at least $400million. North of Lowry alone, the cost of acquiring land,relocating businesses, and rebuilding streets and utilities has beenestimated at $58 million - not including potentially expensive soilcleanup and park costs.

The draft river plan doesn't explicitly call for ending bargetraffic. But it urges nearly continuous ribbons of green forrecreation that would deny barges a dock.

Ironically, the drive to create the Upper Harbor was rooted inthe river's early 20th century decline as a channel for commercenorth of St. Louis. Grain and passenger traffic had shifted torailroads, and the vast rafts of timber floated downriver fromnorthern forests were gone with the trees. Only short-haul trafficremained, despite a series of congressional actions that directedthe Corps of Engineers to create a 6-foot-deep channel. Even so,the river just south of St. Paul was shallow enough to cross by foot

in the fall, according to John Anfinson, the corps' districthistorian.

The stimulus to revive river traffic exploded out of a federalrailroad rate case in the 1920s that essentially declared rivercommerce dead, allowing rail rates to double or triple. Shockedshippers, led by those in Minneapolis and St. Paul, lobbied for thefederal government to build a 9-foot-deep channel. But when theysucceeded in 1930, the legislation omitted the Upper Harbor, leavingthe head of navigation the West Bank flats under WashingtonAvenue.Debating the benefit

The Corps of Engineers recommended several times againstextending the channel above the falls, and questioning whether rivertraffic would justify the cost. It restudied the issue in 1937, butbefore it could finish, Minneapolis grain merchants andmanufacturers successfully lobbied Congress to authorize theextension. World War II delayed initial construction until 1948.In 1954, with the lower lock and dam mostly completed, Congressdirected that the corps review the project. For the next two years,the city struggled to justify the project.

Initially, when the anticipated economic benefits of rivershipping were weighed by the corps against the entire cost of theextension and its annual maintenance costs, it found only 78 centsof benefit for every $1 spent. But when only the cost of theremaining work was considered, the benefit was $1.26.

City leaders painted an almost apocalyptic picture of jobs andfactories moving away from Minneapolis if the extension weren'tcompleted. They feared that St. Paul's huge increase in rivershipping since 1940 would help it eclipse Minneapolis, whereshipping was stagnant.

U.S. Sen. Hubert H. Humphrey, who pushed repeatedly forcongressional appropriations for the project, predicted a new harbor"will raise sharply the pace of industrial and mercantile activitythroughout Minnesota and the entire Northwest."

Desmond Pratt, for 16 years a member of the Minneapolis CityCouncil's Commerce and Harbors Committee, told army engineers:"There were two things in those 16 years that I can truthfully sayall the members of the City Council agreed on: They were againstsin and for the completion of the harbor project."

Finally, in 1956, the corps recommended that the project befinished. The month before the first barge passed through in 1963,Life magazine excoriated the project as a "glaring example of pork."Worse, in the 26 years between the congressional authorizationand those first barges, there were important transportation changes.Nationally, the interstate highway system was under construction,favoring truck transport. On a regional level, the St. LawrenceSeaway opened a competing route.

Locally, another new barge route siphoned much of the grainshipping the Upper Harbor had been expected to capture. CargillInc., which had built military shipping on the Minnesota Riverduring World War II, later began shipping grain from a terminal inSavage. By 1954, shipments on the Minnesota River already exceededthe Minneapolis river tonnage.

As the head of navigation, the Minneapolis harbor also is thefarthest from markets. The 15-barge tows that sweep upriver to St.Paul must be broken into two-barge tows to fit through the threeupper locks.

Well below capacity

By 1983, 20 years after the new harbor opened, Minneapolisshippers were using only 24 percent of terminal capacity. NorthernStates Power, which once shipped hundreds of thousands of tons ofwestern coal annually through its Riverside plant to be shipped bybarge to downriver power plants, switched to all-rail delivery.

Shipping has topped 2 million tons for the Upper Harbor onlyonce in the past 20 years. A 3-million-ton tonnage prediction wasused to sell the project. The corps says it's hard to justify itsdredging and operating costs for anything below 1 million tons ayear. That doesn't include the cost of the original capitalinvestment and major rehabilitation since then for the three locks,about $430 million in 1999 dollars.

But 1 million tons is a theoretical threshold. Dennis Cin, thecorps liaison with Minneapolis, said he's not aware of any precedentfor closing commercial locks, and said that such a decision wouldprobably be up to Congress.

"Knowing what we know now, we probably should not have builtthe locks," said Jerry Fruin, a University of Minnesota

transportation economist.

A key initial decision influencing the riverfront's developmentwill be whether the city closes its 30-year-old terminal. It makesmoney on operating expenses, but loses several hundred thousanddollars annually when capital costs are included. Bonds financingits equipment will be paid off this year.

Another important factor to the city is that less than 10percent of traffic through its terminal originates or is destinedfor city locations, meaning that Minneapolis bears the whole cost ofa facility while benefits are primarily outside the city, and eventhe region.

Planners favor converting the terminal's tax-exempt site tohousing that could pay an estimated $775,000 annually in taxes.Closing the facility could cut shipping by 800,000 tons.

Some river shippers contend that the debate over parks vs.shipping on the river edge can be compromised to allow both uses.

But some river-area residents argue that river shipping isdoomed.

"It's inevitable. It's when you decide to nail the coffindown," said Fran Guminga, a northeast Minneapolis activist whopraised planners for addressing neighborhood needs, and encouragedresidents of northeast and north Minneapolis at one public hearingto speak up for the plan. "Damn it, we're worth it!" sheexclaimed.

Reshaping a riverfront

A master planning process for the upper riverfront ofMinneapolis has rated areas along the Mississippi according to howdifficult they would be to redevelop. The latest draft of this plancalls for shifting the river toward light industry, housing, officesand parks.Tonnage falls short

The actual tonnage barged through the Upper Harbor ofMinneapolis has fallen short of the volume of shipping predictedwhen Minneapolis was lobbying for the project.

Minneapolis planning commission, 1937: 10.3 million tons

Level projected by Corps in 1950sto justify project: 3 million tonsPeak shipping year (1975): 2.3 million tons10-year shipping average (1989-1998): 1.58 million tonsCorps benchmark for 1:1 benefit cost ratio: 1 million tonsLowest shipping year (1989): .66 million tons

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Going w ith the f low // Plans for the Minneapolis river

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