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Skyrocketing Demolition Costs for Riot-damaged Properties Delay Rebuilding

(Star Tribune) One day after rioters destroyed the Sports Dome retail complex in St. Paul, a construction crew hired by the city knocked the building down because it was dangerously unstable.

Then the city presented the property owners with a $140,000 bill for what it would cost to haul away the debris.

“We were really upset about that,” said property owner Jay Kim, whose insurance policy covers a maximum of $25,000 in demolition costs. “We thought that was high. But we didn’t know how much demolition would cost at the time.”

Like dozens of other investors whose properties were severely damaged in the May riots, the Kim family was stunned to discover that the money it would collect from its insurance company for demolition won’t come close to the actual costs of doing the job. Most policies limit reimbursement to $25,000 to $50,000, but contractors have been submitting bids of $200,000 to $300,000.

In many cases, the price of the work is not much lower than the actual value of the property, records show.

“I think that is price-gouging and they should contact the attorney general,” said Andrea Jenkins, vice president of the Minneapolis City Council. “That is a symbol of capitalism run amok.”

Contractors acknowledge that prices for riot-related work are far higher than usual, but they said that is because government regulations require them to treat all debris from a burned-out building as hazardous. Industry veteran Don Rachel said those rules can double demolition costs.

Demolition costs are so high that many rebuilding projects remain stuck in neutral, leaving large sections of Minneapolis and St. Paul with scorched buildings and piles of rubble that will linger for months.

[Read more…]

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