Lake and Knox LLC, City Reach Settlement Agreement

The following article by Michelle Bruch was published in the December 16 issue of the Southwest Journal.


Lake and Knox LLC, the developer of the 1800 Lake on Calhoun apartments, has reached a settlement with the city that involves flooding the lowest level of its basement with groundwater that is currently pumping into the Chain of Lakes.

Pending City Council approval of the settlement, the developer could pay $300,000 to the city and stop pumping by March 31.*

To offset the lost parking, the developer wants to build underground parking in a new mixed-use project on two lots east of the site, 1708 and 1714 W. Lake St., connected by a tunnel to 1800 Lake. City approval of a new development project is not part of the settlement agreement, said City Attorney Susan Segal.

“We’re very pleased that this is going to be brought to a close,” Segal said. “But we remain very frustrated that it took this long, and took this degree of effort to get to this point.”

Lake and Knox representative Nick Walton said in an email that March 31 is an aggressive stop date, but “based on all our detailed planning it is achievable.”

“I am very pleased we can settle with the city,” he said. “We live, work, develop and build in the neighborhood so having a positive outcome to this situation is important to us. In fact that’s why we’ve worked so hard for so long to come up with the fix on our own.”

Lake and Knox has outstanding claims against its architects and engineers for “negligent design of the building.” Walton said the suit would likely go to trial in the first quarter of 2015.

“We expect our claims against them to recover what we spend to implement this solution,” he said.

The developer discovered much more groundwater than expected while the project was under construction in 2011, and when construction-related permits for pumping expired, the developer continued pumping water into the storm sewer to keep the basement dry.

A Hennepin County District Court judge previously issued a ruling in favor of the city, agreeing that the water discharge violates city ordinances. Another of the judge’s rulings went in favor of the defendant, saying certain civil penalties the city sought didn’t apply.

After investigating several options to resolve the issue, Lake and Knox said in court documents that flooding the basement is the most feasible. Pumping would stop by March 31 after they waterproof the basement and fill it with aggregate sand.

The estimated cost to stop the water discharge is $1.2 million; additional cost to build new parking is $2 million.

The Park Board joined the city of Minneapolis lawsuit, but is not party to the settlement. Park Board Attorney Brian Rice said he expects to pursue private settlement negotiations to deal with lake pollution. The water pumping out of the site dumps 75 pounds of phosphorous into the water annually, according to an aquatic ecologist retained by the city and Park Board, which leads to algae growth and reduced water clarity.

“We spent millions and millions in the 1990s and 2000s to clean the lake up, and water clarity more than doubled in Lake Calhoun,” Rice said.

He said one option to clean the lake is an alum treatment, which binds the phosphorous and brings it to the lake bottom. That type of treatment was done 10 years ago at a cost of a quarter-million, he said.

“We’ll try to see what we can do to repair the damage,” Rice said.

*Walton said the dollar value is still being finalized, and it’s meant to reimburse the City for alleged past and future costs associated with the discharge.