Just 10 years ago, Lake Street was a scary place. Crime was high, drug dealing was rampant and prostitutes walked nearly every corner. Shop owners like Manuela Barraza were afraid to walk around the neighborhood.
“I never felt safe in the area,” Barraza said about the location of the boutique she opened at 1508 E. Lake St. nearly a decade ago.
But with the crime, drug dealing and prostitution came low property taxes and shop vacancies that were soon filled by immigrants and small business owners.
“Nobody cared about streets like Lake in the early ’90s,” said Julie Ingebretsen, whose father and another business partner own Ingebretsen’s Scandinavian Gifts, which is located at 1601 E. Lake St. “But a lot of people moved in because property was cheap. Now the neighborhood has really changed for the better.”
Part of this change is because of the increased development on Lake Street. Besides the numerous small businesses throughout the area, things like high-priced condos, chain retail stores and projects like the Midtown Exchange, a complete remodel of the old Sears store, have been the most recent additions to Lake. But with this increased development has come an increase in property taxes.
“My property taxes have almost doubled in the last year,” said Mark Simon, owner of Robert’s Shoe Store, which has been located at 740 E. Lake St. since 1937. “This makes it so much tougher to do business. It’s just an added pressure on top of all the other pressures to keep my business open.”
In 2004, property taxes for Robert’s Shoe Store were $873,000, according to Minneapolis property tax records. In 2006, the taxes rose to $1,540,000, up $667,000 in only two years.
Like Simon, Ingebretsen has experienced fluctuation in her store’s property taxes. For the last two years, property taxes have been set at $345,000. In 2004, however, the taxes rose to $417,500, up from $284,000 in 2003 and $111,800 in 2002.
“Property taxes are really going through the ceiling,” Ingebretsen said. “A lot of people can’t afford to stay here. It’s hard even for us, and we’ve been here for more than 80 years.”
Both Simon and Ingebretsen own the property for which they are taxed. Other business owners, like Ernie Krasselt, rent property along Lake Street.
“My rent went up about a year ago,” said Krasselt, owner of Chicago Lake Florist, located at 2840 Chicago Ave. “The property owner has to pass along the costs to someone. I know my rent will go up again, but I can only absorb so much of it.”
With the increase in property taxes in the area, both Lake Street business owners and renters have expressed frustration to the Minneapolis City Assessor’s Office, said Patrick Todd, a Minneapolis city assessor.
But, he said, the increase is part of a cyclical trend. For the last 30 years, Lake Street had experienced a decline. Now, the area is experiencing phases of revitalization and growth.
“It’s a very desirable place to be. The long-term projections for Lake Street are rosy,” Todd said. “But the area will eventually hit a phase of stability, where growth will level out. It’s a very cyclical thing.”
The reason property taxes have gone up, he said, is related to the amount property is selling for in the area.
“The increase in property taxes is sales driven,” he said. “Sales indicate that the area is changing. Taxes wouldn’t have changed if the sales didn’t change.”
Besides looking at property sales in the area, city assessors physically look at about 20 percent of the property in the city, Todd said. On these property visits, assessors often notice things like new carpet or siding that affect the value of a piece of property. Assessors also look at permits taken out by property owners for construction, remodeling and demolition. These permits provide hints as to which properties have undergone significant changes.
“When we see changes like this, we have to increase the value of the property right away and taxes go up,” Todd said.
To avoid slamming a property owner with a huge increase in one year, the assessors try to look at property more often and adjust taxes more frequently, Todd said.
“We aren’t perfect,” he said. “Sometimes people are hit with a 30 percent increase. We can’t see every single piece of property every year, but we’re getting better at spreading the increase out over several years.”
But even with this attempt to spread out the increase, some property owners continue to feel frustrated with the taxes they are now expected to pay.
“These property taxes just make it so much harder to do business,” Simon said.
Krasselt doesn’t see an end in sight. “I don’t think property taxes are going to stop going up,” he said.
The increase in property taxes could not have come at a worse time for many property owners along Lake Street. In the last few years, Lake Street has experienced a major road construction project. Property owners have been hit with added costs as they’ve been assessed for the project.
The project, started by Hennepin County and the city of Minneapolis, involves reconstructing nearly all of Lake Street, from Dupont Avenue near Uptown to the Mississippi River. This is the first complete reconstruction of the street in 50 years and includes rebuilding the road and sidewalks and adding decorative lighting, bike racks, trees, landscaping and signage.
The assessments for the construction project are completely separate from property tax assessments, Todd said. The construction assessments are based on either front or side lot square footage on Lake Street. For example, if your store has a certain amount of square footage on Lake Street that totals 1/16 of the construction being done, you will be assessed 1/16 of the cost left over after federal, county and city funds are used.
The project began last spring, when a 12-block stretch of Lake Street near the Chicago-Lake intersection was torn up. The road was completely gone and the area was crammed with trucks and construction equipment, Krasselt said. This made it difficult for local business to continue operating.
“In the last year, both Lake Street and Chicago Avenue have been shut down,” said Simon of Robert’s Shoe Store. “It’s impossible to do business. I couldn’t have even sold my business then if I wanted to.”
Krasselt, whose floral business was also affected by the construction at the intersection of Lake and Chicago, estimates that the construction cost his shop about $1,000 a day.
“There was no road in front of my story from May to Thanksgiving,” he said. “Customers couldn’t even drive by the store. We were totally cut off from everybody.”
The construction reached the area near Ingebretsen’s in March 2006.
“We have to pay for this construction on top of the property taxes that are already going through the roof,” Ingebretsen said. “It’s difficult, very difficult.
“The construction project is very intense,” she said. “They close off half the street. It’s a mess.”
Despite the costs and inconvenience of the construction, Ingebretsen believes the construction will ultimately benefit the area. She said she’s look forward to “a nice new street, bump outs, sidewalks, more landscaping and new streetlights.”
“Hopefully this will improve business and more people will come to Lake Street,” she said.
Even with the increased costs of property taxes and construction assessments, the property and business owners said they wanted to stay along Lake Street, and they agreed the future for Lake Street looks promising.
“The new Midtown Exchange is going to be amazing,” Ingebretsen said. “It’ll be the crown jewel of all the revitalization, and it’ll have a ripple effect. I see this continuing for a long time.”
Now, Todd said, Lake Street has come full circle. “People want to be here,” he said. “Great things are happening to this area.”
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