St. Paul Mayor Melvin Carter quips that when he served on the city council, he often thought of the challenges facing downtown as downtown’s problem. He’s since changed his tune, and not just because he’s the mayor.

Property taxes, like sales tax revenue generated downtown, support the entire city, said the mayor, and the city’s fate and the future of its downtown are more closely connected than many realize.

In the era of remote work and sliding commercial property values, downtown’s future looms as large as ever, putting Carter front and center in discussions around economic development, office-to-residential conversions, crime and quality-of-life issues.

“Everything’s on the table with regard to downtown,” said Carter, in a recent interview at City Hall. “I think there’s significant opportunity, and there’s significant challenges underfoot right now. But if we’re willing to tackle them head on, if we’re willing to have tough conversations, if we’re willing to invest, there’s a real bright future for us.”

“I think everything has to be on the table, though,” added the mayor, “because we’re not going to build the exciting future that we need for downtown with status quo practices and approaches.”

Properties on the market

Among the questions ahead, Madison Equities’ decision to put 10 downtown properties — including some of St. Paul’s largest, oldest and most iconic office buildings — on the market at once has raised eyebrows across the city. Many wonder what the future will hold for a central business district that had struggled to draw large office tenants even before the pandemic relocated workers by the hundreds.

The Gray Duck Tavern, an after-hours hangout for City Hall employees in Madison Equities’ Lowry Apartments building at Fifth and Wabasha streets, closed abruptly last weekend, with a printed sign on the door calling the closure permanent.

On multiple levels, the mayor sees the fate of the company’s properties entwined with the fate of everyday taxpayers.

“Frankly, the existence of the Madison Equities portfolio being on the market all at the same time, given some of the well-documented deficiencies in some of those buildings, could have a real chilling effect on our property values downtown,” Carter said. “And if that happens, the way that property values work, if our values and property tax collections dip downtown, then (the tax burdens) go somewhere else.”

TKDA, an engineering firm with downtown St. Paul roots dating to 1910, announced this year that it will relocate to Bloomington by early 2025. U.S. Bank has chosen not to renew its lease at the downtown U.S. Bank Center in October, leaving only a skyway branch in operation there. Lunds & Byerlys recently reduced public hours by five hours per day — more than a third of its sales day — at downtown’s last remaining grocery store.

Downtown still home to assets

Still, Carter is quick to point out that downtown St. Paul is home to strong assets that continue to attract and bolster major concerts, conventions and athletic tournaments, including the 2026 World Junior Hockey Championship, which is poised to draw some 250,000 hockey fans to St. Paul from around the world.

Recent bar and restaurant openings — or reopenings — include Ruam Mit Thai, Alary’s, the White Rock Lounge, Pimento Jamaican Kitchen, Jackey’s Peg Leg, Erta Ale and the new 1881 by Lake Elmo Inn bar at the Union Depot transit hub. After nearly 30 years of planning, construction of Pedro Park is finally underway at 10th and Robert streets.

The St. Paul Downtown Alliance, which is poised to double the size of its Downtown Improvement District, has published a reinvestment strategy aimed at supporting key pedestrian corridors while positioning empty office buildings for remodeling into residences. A downtown task force led by city council member Rebecca Noecker and Chris Hilger, the chief executive officer of Securian Financial, is looking at downtown prospects building by building.

The following interview with the mayor has been edited for length and clarity.

Q: When Lunds opened in 2014, it was something of a symbol of the resurgence of downtown St. Paul, alongside the Penfield luxury apartments opening next door. You and the Downtown Alliance have said you want to increase the downtown population from nearly 10,000 residents to 30,000 residents. How do you do that with one remaining downtown grocery store that’s cutting hours?

A: I think it’s a reflection of what they see the market doing right now. And as we continue to add residents, that market will continue to evolve. I take it as a reflection of what they feel like they can deliver well right now given the greater challenges that every downtown on the planet is navigating right now. Clearly, Lunds sees viability there because they’re continuing to operate there. The universe for downtowns has changed since the pandemic. And the challenge for us is to change with it.

Q: For downtowns, many of the challenges appear tied to the fact that office workers — especially government workers at all levels of government — have gone remote. Are you pressing the state, county or city workers to come back to work in person?

A: If you look at the city’s employment centers, by far it’s police, fire, rec centers, libraries, permitting, street maintenance. It’s functions for which there never was work-from-home as an option. We have been talking to our Cabinet and talking to employees about how we create uniformity (around remote work) across departments, and how we continue to be the leader with regard to demonstrating the investment downtown by virtue of our presence. It’s something that I do expect to see us continue to lead on. And it’s something that I’m hopeful that others will follow.

Q: It sounds like the state’s more or less given up and said, “Well, we don’t want to lose workers. Let them work from home as much as they want.”

A: I don’t have the expertise on that or the authority to speak for the state. Our goal is to ensure that the city’s presence is one that demonstrates our commitment to our belief in this city.

Q: How often are you in City Hall, or downtown?

A: I’m downtown most days. I still am going to intend to, you know, hit every corner of the city and get out of City Hall as much as possible. But it’s also important for us to, again, demonstrate, we’re voting for St. Paul with our feet.

Q: TKDA is leaving St. Paul after 114 years downtown. Madison Equities put 10 commercial structures on the market at once. I’m hearing there’s a 31% office vacancy rate downtown. I know a lot of that is pandemic-related and remote work-related. But is there a role for the city in turning any of that around? Is there anything the city can do in terms of office and commercial vacancy rates?

A: We have to understand the shifts that are happening. Downtowns have always been places where you had to go. That’s where your job was. The pandemic changed all of that. So really the foundation upon which all downtowns were built, the rug was sort of pulled out all over the country. The downtowns that are, I think, thriving are the places that don’t center their identity around being a place of obligation, but are a place of choice, having high-quality residential options, having high-quality environmental pedestrian right-of-way, wayfinding, having high-quality entertainment and events for people to be at.

Now, residential property has a 96% occupancy rate downtown right now. So when we think about the potential of our office-to-residential conversions, that’s really significant. Moreover, it means that workers and families and people who just want a place to live are still choosing downtown, still see downtown St. Paul as a place of choice.

We’re getting ready to host the Minnesota Yacht Club Music Festival. We hosted the Frozen Four this year, we are getting ready to host the World Junior Hockey Championship. Intriguingly, I think when it comes to attracting winning events of national and global importance and significance, we’re doing as well as we ever have as a city and getting people to choose St. Paul.

So part of what we have to do is, I think, invest to build the infrastructure for people to choose downtown in the ways that we’re already seeing people choose downtown. That’s one of the reasons I’m excited about the Downtown Investment Strategy. It’s one of the reasons I’m excited about the renovations of the Xcel Energy Center.

Q: But St. Paul didn’t get the $2 million in planning funding for the Xcel Energy renovations it had sought from the state this year. I’m hearing the total price tag on an Xcel Center renovation could be $300 million or more, much of it public money.

A: Yeah, it’ll be a significant renovation, but it’ll be a fraction of what it would cost to build a new arena. Anytime we have an arena conversation at the Capitol, I hear somebody say that the competitive lifespan of a facility like that is 25 years. We’re in year 24, where the Xcel is concerned. And so we’re either going to address it now, which, like I said, won’t be cheap. Or we’re gonna let it get out from under us and have to find ourselves in a place where, you know, we’re proposing and considering a rebuild, which will probably be twice as much, at least.

How the inside of the facility is situated is important, because it has everything to do with whether Janet Jackson’s people decide if they want to make a tour stop in St. Paul or not. What’s even more important to me is what happens outside the facility, and the emerging best practices for arenas. I keep calling it a Cinderella facility. When the ball is on, everything is great. There’s pedestrian traffic downtown, and people walk into the bars and there’s you know, livelihood. And then the clock strikes midnight. And when that ball isn’t programmed, things sort of die down. As I talk about thinking of downtown as a place of choice and opportunity, and not just a place of obligation, is the opportunity to create sort of a soft-shell exterior, and not just have sort of a wall around the thing, but to have exciting, welcoming, vibrant spaces that are exciting to be at. That’s one of the things that excites me most.

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Q: You once talked about looking at the City Hall annex building across the street, and readying that for an office-to-residential conversion and maybe spreading some of those offices around downtown. Do you think there’s still a viable option there?

A: We have on the table the possibility of converting that to a significant number of housing units, in a way that can help us move city staff out to be part of the street level of vitality downtown. That’s not something we can do with the flick of a switch. It’s something that we’re continuing to evaluate. We put dollars in the budget to hire a consultant to help us do that. I’m considering whether we need to expand the scope of that consultant’s work.

Q: Given high interest rates and the lower population growth projected for big cities, St. Paul is having a tough time attracting private development, either residential or commercial. Developers tell me rent control is not the only issue, but it’s kind of like their nail in the coffin when they seek financing. It just makes it much harder to go to a bank and say, “Oh, by the way, despite all these other challenges, like interest rates, I’m also operating in a high-poverty, rent-controlled environment.” Do you foresee a repeal to rent control, or an independent study of how it’s working?

A: You may remember some of those early public meetings around building our Community First Public Safety framework. I’m suggesting that I think we need a similar process like that around housing. I’m calling it our “All In” housing framework, where we come together as a community to say, here’s the balance that we want to draw, and here’s the values that we want to advance with our comprehensive housing framework, and not fall for a housing policy or housing conversation that’s just about one thing.

You’re right — the trajectory of interest rates has been higher than anybody imagined, and has had a chilling effect on development everywhere.

But I was excited a couple weeks ago to go to the grand opening of the new housing that we built on the West Side Flats. It’s really beautiful. It’s really exciting. And folks are moving in there. I’m excited about the Landmark Towers office-to-residential conversion. It’s incredible to drive Lexington Parkway and see the Alatus building going up. We’re building a lot of housing for a city that “isn’t building any housing.” I think it’s probably an overstatement to say little housing is under construction.

We’re adding people, which is a good thing. That means people still see St. Paul as a desirable place to live. But if we aren’t able to add units, that exacerbates a crisis that’s created by a shortage of units relative to the number of residents. I think there is a space where we can be as a city that secures the opportunity for renters to live with dignity and stability, and offers a reasonable rate of return for landlords and developers. I think we should always be considering where we lie on that balance.

It feels like sometimes our entire conversation about housing gets wrapped up into a conversation about the rent-stabilization ordinance that our voters passed a couple of years ago. One of the things I’ve learned about just about any topic that we tackle in this building is it’s very rarely about identifying the sort of one magic solution that’s going to solve everything else. It’s always about identifying the portfolio of approaches with regard to public safety, or with regard to all the different bodies of work that we’re doing. Housing has to be the exact same.

Q: The Downtown Alliance has talked about more bike patrols and funding a new assistant city attorney to prosecute quality-of-life crimes downtown, among other efforts, like office-to-residential conversions. Are you on board with those things?

A: All options are on the table. We’re still evaluating some of them. When I ran for mayor, we had a lot of conversations about our level of frustration that downtown St. Paul didn’t have a lot of buildings with larger floor plates, which is what the businesses were looking to try to move to, to create the type of commercial space that we were all looking for 10 years ago. That was a disadvantage to being able to recruit businesses a decade ago. Today, smaller floorplates create an advantage as far as the conversions from office to residential.

Frankly, today, the fact that we have downtown properties in TIF (tax increment financing) districts means there’s sort of a guardrail around the impact that a decrease in property values, like we’ve seen in other cities, would have on property values across this city. Things that were liabilities could become opportunities for St. Paul. Again, it’s likely that there’s some bumpy roads between here and there.

But I’m as bullish as ever about the partnership that exists here as much as I’ve ever seen, in my time working for the city, this connection through the Downtown Alliance between the downtown advocates, and the downtown corporate leaders in the downtown business sector, and the downtown public sector leaders. It’s inspiring and promising.

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