In an effort to avoid a lengthy legal battle, the Savage City Council has agreed to pay a local business owner over half a million dollars.
On Sept. 17, the council approved a settlement with Motor Mart Owner Cory Townsend, who claims that the permanent closure of the intersection at Princeton Avenue and Highway 13 destroyed his business at 4905 Minnesota Highway 13. The city will pay Townsend Properties, LLC a total of $600,000: $500,000 for lost revenue at the store and $100,000 to replace the pumps at another gas station owned by Townsend, which is just three-tenths of a mile away on Highway 13.
The council favored the measure 4-1. Mayor Janet Williams was the only dissenting vote. In fact, she challenged Townsend's contention that the business was dead in the water. As of Wednesday afternoon, the gas station was still open.
"From what I've witnessed I don't agree. I can't accept that," said Williams, who described herself as a daily customer. "And I'm not willing to settle in deference to other businesses that have been affected by road construction."
Though the property has an address on Highway 13, it has been cut off from the road since April 17, 2012, when the intersection was turned into a dead end.
The closure at Princeton is part of a larger, long-term project to improve Highway 13 that began over 10 years ago. So far, over $6 million has been tied up in the project, including a considerable chunk of federal and state aid.
Initially, city and state authorities intended to build a frontage road system on both north and south sides of Highway 13. At the outset, the plan called for closing off Ottawa and Natchez Avenues, but leaving Princeton and Lynn open. The South Savage Frontage Road was finished in 2007, but its counterpart in the north was thwarted by higher costs and pushback from the railroad.
City officials were obliged to change the design, but risked losing $3.9 million in grant funds if it did not pass muster with the Minnesota Department of Transportation. According to a memo written by City Administrator Barry Stock, MnDOT asked the city to completely eliminate the north frontage road and close Princeton. The city agreed and the plan was approved by council in October 2011.
Early in 2012, Townsend Properties and its legal counsel petitioned the city to take the property on Princeton via eminent domain. Inverse condemnation, as it is legally known, is an unusual claim, said Savage City Attorney Ric Rosow.
"By filing this, (the claimant) is saying that your actions have effectively taken my property as much as if you had come in and condemned it. You have taken it in fact, but haven't initiated the process of paying me," Rosow explained.
From a financial standpoint, Townsend's claim put the city in a tight spot, Rosow said. If the city were to honor the petition and acquire the property, the cost would amount to about $1 million, a total that includes purchase of the land, tank removal, asbestos treatment, and demolition. By contrast, the resale value would be less than $200,000, leaving the city with an $800,000 loss.
On the other hand, if the city decided to fight the claim in court, they could stand to lose even more if their case were unsuccessful. Rosow estimated that the tab could amount to about $1.7 million.
In Rosow's opinion, the financial risk of going to court outweighed any possible reward. Most of the council was inclined to agree. Most felt that a jury would be more likely to rule against the city.
“The convenience was kind of taken out of the convenience store," said Council Member Gene Abbott. "It’s unfortunate, but I think this is the lesser of the evils we have to deal with.”
Likewise, Council Member Christine Kelly said that she was unwilling to "go to Vegas," as she put it.
"A lay person wouldn't see it as anything other than the city ruining this poor man's business," Kelly said. "As distasteful as it is I am willing to cut our losses."
At this point, it is unclear where precisely the settlement money will come from. Stock suggested that the city allocate the cost to the Highway 13 project's account, and if need be transfer funds from another source, perhaps from community investment, the debt service revolving fund, highway state aid or the general fund.