Second Ward, Minneapolis

This is the public policy forum of Minneapolis Second Ward (Green) City Council Member Cam Gordon and his staff. We use this space to talk about some of what Cam’s working on, explain his positions, and share a little of what life in City Hall is like. Please feel free to comment on posts, within certain ground rules. See our disclaimer, including ground rules, here:

Thursday, May 20, 2010

A Big Win for True Thai

For the past few years, Second Ward small business True Thai has been embroiled in a strange, byzantine conflict with the Met Council (and the City, which unfortunately acts as the Met Council's 'enforcer' in this case) over the issue of Sewer Access Charges, or SAC. They recently won a major victory, with the help of diligent City staff, Seward Redesign, and my office.

If you're not familiar with SAC, count yourself lucky. The short version is that the Met Council charges new developments a fee based on the expected maximum daily output into the sanitary sewer system. There are SAC "units," which are now worth $2,000, and equal one residence or eight seats in a sit-down restaurant.

I have numerous problems with SAC: these fairly massive fees on new development typically leave the core cities, where we want development and density to occur, to fund new sewers in far-flung exurbs. Basically, new density in Minneapolis is forced to fund sprawl. And because the fees are charged on new development, despite the fact that they pay for ongoing work done by the Met Council, they leave the Met Council scrambling for funds when the economy enters a recession.

This is part of what happened to True Thai. Here, as far as my office has been able to piece it together, is the whole story:

In 2007, True Thai decided to expand, adding a whole new dining area in the building they've occupied since opening. This was great news - more jobs for residents and enough capacity to meet the neighborhood's growing demand for delicious Thai food. They were charged a SAC fee of $1,675 for each 8 new seats, and paid it. But they decided, for flexibility's sake, to install some convertible tables in the new dining room. These tables are usually square, and seat up to 4 people, but they have leaves that allow them to be converted to a 5-seater. True Thai's owner thought that these tables counted as 4 seats, and put them on his plan as such.

After the economy started to turn sour in early 2008, True Thai decided to try something new to boost business: a sidewalk cafe. He went through the City's licensing process and was approved for 28 seats, though he only ever put out 20. No one informed him that there would be any SAC impact, because at that time the Met Council had not yet decided to charge SAC for outdoor seating. He used the outdoor seating for a few months, from July through September. Unfortunately, the sidewalk cafe did not increase business - existing customers simply went outside.

During this period, True Thai blogged about the new sidewalk cafe, and in answer to a question from a commenter rounded the number of seats in the restaurant up. The blog was noted by a Met Council employee - all indications are that the Met Council, since the economic downturn, has been paying people to trawl the internet for restaurants to hit up for more cash - and performed an audit of the restaurant.

The Met Council then sent the City a bill for $7,750, for "unpaid" SAC fees at True Thai, $6,000 for the outdoor seating and $1,675 for the additional seats made possible by the convertible tables. It is the City's responsibility (under State law) to pay what the Met Council demands, and pass the costs along to businesses like True Thai. Our staff dutifully followed through, sending a bill for the full amount to True Thai.

True Thai was just one of several businesses across the metro area to be hit by the Met Council's new policy - which had not been discussed, as far as I can tell, with any stakeholders, be they local governments or businesses - that outdoor seating counted towards SAC. The City, along with other local governments, businesses and business groups, advocated against the policy. It was wrongheaded for numerous reasons: outdoor seats cannot be used in the winter or inclement weather, and as True Thai shows, they do not usually increase the total number of people being served by the business.

We succeeded in partially changing the Met Council's mind. They decided that outdoor seats should not be charged 100% of a SAC unit (again, $2,000/8 seats), but instead a much more reasonable 25% rate. However, they made the absolutely unsupportable decision that this new rate would not be retroactive. True Thai, along with a dozen other Minneapolis small businesses, was caught in a Kafka-esque situation. Had they applied for a sidewalk cafe a few years prior, they would not have had to pay any SAC whatsoever. Had they applied one year (or even six months!) later, they would have had to pay only $1,500. But because they had, by an accident of fate, applied at exactly the wrong time, the Met Council decided that they remained on the hook for $6,000, for 20 seats that they had used for approximately 3 months.

I'm sure it's not news to anyone that recessions a tough time for small businesses, especially restaurants. I take True Thai's word that they could not have afforded this $6,000 hit. This fee could have put them out of business.

True Thai decided to fight the fee, and sought support wherever they could find it. Their landlord, which just happens to be Seward Redesign, the local Community Development Corporation, became a fierce advocate on their behalf. City staff appealed to the Met Council to change its mind on multiple occasions. (Deserving of special thanks: Julie Casey in Inspections, Mary Ubl in Development Review, and Henry Reimer in Regulatory Services.) I fought for True Thai in every way I could, encouraging staff to continue to argue the point with the Met Council, and pushing the issue in the Regulatory Energy and Environment committee.

Yesterday, all of everyone's hard work paid off. The Met Council has dropped the $6,000 fee. True Thai can, if they choose, apply for a new sidewalk cafe under the new rate, which will be less than $1,500. As I understand it, True Thai's owner paid the remaining $1,750 for the additional inside seats today, making this a win even for the Met Council - better to collect $1,750 today than to never collect $7,750!

Congratulations to True Thai for their big win, to staff for their tenacity and persistence, to Redesign for their effective advocacy, and to the Met Council for - albeit a little belatedly - making the right decision.


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