Minnesota law is increasing demolition costs for riot-burned buildings

As ccording to a recent report by the Star Tribune, more and more businesses are realizing that they will not be able to afford the high costs of demolition that contractors are giving them.

One day after rioters destroyed the Sports Dome retail complex in St. Paul, a construction crew hired by the city knocked the building down because it was dangerously unstable.

Then the city presented the property owners with a $140,000 bill for what it would cost to haul away the debris.

“We were really upset about that,” said property owner Jay Kim, whose insurance policy covers a maximum of $25,000 in demolition costs. “We thought that was high. But we didn’t know how much demolition would cost at the time.”

Like dozens of other investors whose properties were severely damaged in the May riots, the Kim family was stunned to discover that the money it would collect from its insurance company for demolition won’t come close to the actual costs of doing the job. Most policies limit reimbursement to $25,000 to $50,000, but contractors have been submitting bids of $200,000 to $300,000. In many cases, the price of the work is not much lower than the actual value of the property, records show.

Worse still, this is due to a Minnesota law,

Contractors acknowledge that prices for riot-related work are far higher than usual, but they said that is because government regulations require them to treat all debris from a burned-out building as hazardous. Industry veteran Don Rachel said those rules can double demolition costs.

“We aren’t taking advantage of anybody,” said Rachel, CEO of Rachel Contracting, one of the largest demolition contractors in the state. “Some people might have sticker shock, but how do they know? Most of these folks have never had to wreck a building.”

This has stalled demolition as well as rebuilding efforts among some businesses and could spelll trouble for the future of Minneapolis.

Demolition costs are so high that many rebuilding projects remain stuck in neutral, leaving large sections of Minneapolis and St. Paul with scorched buildings and piles of rubble that will linger for months.

“It’s been a big barrier to getting the street cleaned up,” said Allison Sharkey, executive director of the Lake Street Council. “I am becoming really concerned that people who want to reinvest won’t be able to.”

This is not the first obstacle that businesses are facing when it comes to rebuilding that has to do with regulation. Up until about 2 weeks ago, businesses could not get permits to demolish burned up building up until they had paid their second installment of property taxes. It will not be surprising, therefore, if the city does not see a lot of businesses rebuilding. At some point, all of these obstacles will prove too costly for some businesses to wedge through.