The growth of downtown Mankato over the past 20 years offers a case study in redevelopment, but it also helps answer bigger political questions looming today: Can government build wealth and bring economic prosperity to the private sector?

The government’s role in the economy filters through dozens of hot political debates today from the Vikings stadium to tax policy from whether Obama is bringing a European style economy to the U.S. to privatizing Medicare and Social Security.

At the local level, the debate is playing out on the question of whether the city-owned Verizon Wireless Center should get state bonding money.

Could downtown Mankato be where it is today without government assistance? There may not be a yes or no answer, but one that offers more than a little food for thought.

Our case study is only 20 years old, so it’s still relevant.

Downtown Mankato was dying a slow and painful death in 1992.

The River Hills Mall had opened in July 1991 and almost all of the businesses in the Mankato Mall moved to the hill. Even longtime downtown businesses not in the downtown mall like Readmore Bookstore, took up residence at River Hills.

The threat of a tumbleweed downtown was real.

The city of Mankato actually had a plan to revitalize downtown that it had been working on for years called Riverfront 2000. As retail was moving to the hill, the city held a referendum in October 1991 to impose a 0.5 percent sales tax to help pay for a new $16.5 million civic center in downtown. It was approved by about 400 votes, with 33 percent of residents voting.

But the approval of the civic center didn’t seem to encourage the private sector downtown.

Sixth months later the carnage and bloodletting in downtown could be measured in a number of ways. I covered every economic calamity as The Free Press business reporter and recently looked through my old clip files for the detail.

Mankato Mall owners had put $3 million into purchasing and renovating the mall and had recovered over about 10 years only $100,000 of their investment; they owed back taxes of $184,000 and owed 11 lenders about $3.5 million.

The major mall tenant — Brett’s Department store —  had closed earlier that year. The mall’s assessed value had fallen 80 percent.

As businesses left, downtown foot traffic was dying. There was a domino effect on other businesses.

Ruth Bloom, owner of The Deli, told me at the time her business had declined by a third. Former TJ Finnegan’s owner Ron Doty told me his building value declined and forced him to put off an expansion he was going to finance with building equity.

Six months later, the city of Mankato, because it owned land under the mall, took ownership of the mall because owners did not pay the $350,000 in back taxes and ground rent. The eleven lenders had no interest in taking control of the mall to recoup any of their $3 million investment.

I remember talking to a spokesperson for one of the investors, Northwestern National Life, and was struck by how matter of factly she said they would not really be pursuing the $3.5 million owed them.

Lyle Berman, part owner of the Mankato Mall who later came to invest heavily in Indian casinos, was asked if he would buy the mall back from the city.

His quote: “I wouldn’t take it (for) free.”

As owners by default, the city was on the hook for about $150,000 a year on basic mall maintenance but did not have to pay any of the $3.5 million debt owed by former owners.

What happened next was the turning point for downtown Mankato.

The City Council would likely be key in determining Mankato’s economic future. The council could have let the collection of mall buildings deteriorate and walked away, leaving remaining mall tenants to fend for themselves.

A mall foreclosure would have left the property empty for five years, and it would have been a “cancerous sore” (another term used by developers) on downtown.

It could have taken many additional years to get solid tenants.

The City Council could have bulldozed it at some expense.

But the council opted to seek bids to redevelop the mall into an office complex mixed in with some hoped-for entertainment uses. Ultimately, Gordon Awsumb of Minnesota Office Investments bought the mall and the Brett’s building.

By 1995, Awsumb had renovated the buildings and secured tenants to a point where 80 percent of the mall was leased. Buffalo Wild Wings had opened and had already expanded once.

But the city made its own investments as well. City Hall moved into the old JC Penney building with some renovation and co-located there with the school district offices. The project cost the city about $4 million and opened in March 1998. At the time, Awsumb said he had “no doubt” the new Intergovernmental Center helped him rent the rest of the building to tenants such as Social Security and the WorkForce Center.

To this day, Awsumb says he would not have bought the property and made the investment had the civic center not been approved and in the works. Since that time, he says he has invested $10 million in the property. He is a leading advocate for civic center expansion.

A recent analysis of business in the core area around the civic center shows 30 plus new businesses have opened in the last decade or so, many in just the last five or six years. The value of the Mankato Mall is now about $3.8 million.

An analysis by the city shows the value of civic center core area property went from about $29 million in 1995 to about $63 million today. The study estimated annual sales of about $5 million coming from businesses in Mankato Place alone.

Public investments don’t always work, and they should generally be the last choice instead of the first choice.

But our history shows that public investments in downtowns along with smart private investments made a significant difference in the overall economies of downtown and a region. There was not a private developer who was going to invest in downtown Mankato in 1992 without the government stimulus of a civic center.

Critics of government involvement in the economy often don’t seem to understand some of the nuances and the potential and that certain risks need to be taken sometimes. Could they city have done nothing and let the private sector handle it? Sure. But Mankato and its downtown would be nowhere close to the success it is today.



Joe Spear is editor of The Free Press. Contact him at 344-6382 or jspear@mankatofreepress.com