Project: I-394 Minnesota

1.0 Synopsis

In 1993, Minnesota DOT completed the upgrading of an eight-mile stretch of US Highway 12 connecting downtown Minneapolis with its central western suburbs. This road was converted to Interstate 394, a limited access interstate highway. Prior the $300 million conversion, US 12 had 30 access points, whereas the new I-394 has just 10 interchanges. Due to traffic growth in the corridor, congestion levels were virtually unchanged. The project spurred a significant amount of real estate development. Land use intensified as older low density residential and retail uses were redeveloped for more intensive service and office buildings. Although the I-394 corridor lost over 3000 retail jobs after the project was completed, it gained 12,500 in other service sectors for a net gain impact of over 9400 jobs ? a 30% increase. 1,900 of these jobs are estimated to be attributable to the I-394 project.

2.0 Background

2.1 Location & Transportation Connections

Minneapolis is at the junction of I-35, running from Canada to Mexico, and I-94, linking both coasts. The City is in southeastern Minnesota 4 hours drive (235 miles) southeast of Fargo, ND on I-94 and 6 hours (340 miles) northwest of Milwaukee, WI. The MSP International Airport, in the Metro MSP region, is the national hub for Sun County Airlines. Thirteen passenger airlines operate out of two terminals. MSP is the 12th busiest airport in the U.S., serving nearly 35 million passengers in 2007. It offers non-stop flights to 131 markets ? 116 domestic and 14 international destinations. MSP Airport also supports 14 cargo airlines.

The MSP region is an important river port on the Mississippi River system, which covers 222 miles in Minnesota. There are three ports in the Metro MSP region, which transported a total of 12.1 million tons in 2007. These three ports have 32 active freight terminals serving the Mississippi River and the state's other navigable river, the Minnesota.

The Metro MSP region is served by a growing regional transit system. Metro Transit operates three major transit ways: Hiawatha light rail line, Northstar commuter rail, and the Bus Rapid Transit along I-35W and Cedar Avenue. In 2009, transit ridership reached 88.8 million rides, up 13.3% over the past decade. Building on this success, the Metropolitan Council is developing two additional light rail lines. It plans to develop three more transit ways by 2020.

2.2 Community Character & Project Context

The I-394 project area is in Minneapolis' western suburbs. I-394 connects downtown Minneapolis with the established older suburban cities of St. Louis Park and Golden Valley and with the growing young city of Minnetonka, in the outer western suburbs. The project corridor has excellent intra-regional connections to the MSP metro area.

The I-394 corridor traverses some of Minneapolis' most established suburban towns, including St. Louis Park and Golden Valley, but it also includes the burgeoning suburb of Minnetonka. I-394 is an important central commercial corridor for the Western MSP suburbs. Population within the three cities is about 10% of the total population of Hennepin County, and median incomes in these cities are higher than the state and county median incomes.

Golden Valley, in the northeast quadrant of the corridor, is the home of a number of multi-national companies, including General Mills corporate headquarters and Pentair. Another major employer in the area is Honeywell. There are over 33,000 jobs in Golden Valley, compared to a population of over 20,000. St. Louis Park, on the southeast quadrant is home to approximately 45,500 people, with employment close to 40,000.

On the western end of the I-394 corridor is Minnetonka, an affluent city with a median income of over $83,400 (2000 Census), a population of almost 51,000 and employment at over 45,000. Major employers in Minnetonka include Cargill (considered the largest privately owned company in the US) and United Healthcare.

Since the project was completed in 1993, the study corridor experienced a turnover of land uses, losing housing and older retail outlets to higher density service and office uses. Concomitantly, there was a slight loss in population and a 30% gain in jobs in the corridor.

3.0 Project Description & Motives

DOT?s motive for conversion of US 12 into I-394 was to accommodate future growth projected by travel demand models for Minneapolis' central western suburbs. The I-394 project upgraded a eight- mile stretch of US Highway 12 between S. Penn Avenue on the east side to I-494 on the west side to interstate standards. Before conversion to I-394, US-12 had 18 intersections, 6 interchanges, and seven slip ramps. Afterwards, it had 10 exits within the eight mile corridor.

The project was approved for construction in the late 1960s, but it wasn't until much later that funding became available. Construction for the interstate conversion began in 1985 and concluded in 1993. The cost for the eight-mile conversion was $300 million (including $125 million for right-of-way acquisition). I-394 has 10 interchanges with existing north-south routes. Eleven streets were closed and access to I-394 was replaced by a series of frontage roads. The project included high-occupancy vehicle (HOV) lanes, which were converted into high-occupancy toll (HOT) lanes in 2005.

4.0 Project Impacts

4.1 Transportation Impacts

4.2 Demographic, Economic & Land Use Impacts

Like many urban highway projects, I-394's main impact was to spur real estate investment that altered the face of the 1300 acre study corridor through which is passed. In 1984, the area within 1/4 of a mile of the project was 36 percent commercial, 27 percent vacant, and 20 percent single-family residential. Commercial uses included strip, general, and big-box retail; automobile dealerships; hospitality; gas stations; restaurants; and office space. Generally, vacant land, congestion at intersections, and limited vertical growth composed the pre-Interstate corridor. By 2000, vacant land and single-family residential use had declined sharply (60 and 19 percent, respectively) as single-family homes were replaced by denser uses. Commercial use increased by 13 percent, shifting from retail to service uses. Industrial uses also developed during that period, primarily in the corridor area within Golden Valley.

Population in Hennepin County, which includes both established and growing suburbs, increased 19 percent between 1980 and 2000, almost keeping pace with Minnesota's 20 percent increase. This increase was not distributed evenly throughout Hennepin; Minnetonka's population experienced a 33 percent increase, St. Louis Park gained three percent, and Golden Valley saw an eight percent decrease. Population in the census tracks along the corridor declined between 1980 and 2000 (after an eight percent increase from 1980 to 1990 and a nine percent decrease from 1990 to 2000). This decrease is consistent with the transition from residential to commercial uses, and employment between 1990 and 2000 increased 29 percent.

Land use among the roughly 1,300 acres of developable land adjacent to the corridor intensified between 1980 and 2000. Commercial land uses now make up to 40 percent of the land. Residential, agricultural, and vacant land is significantly less present. Land use changes were most pronounced in the middle of the corridor between US 169 and MN 100 (the locations of highest accessibility, traffic, and visibility).

Economic activity in Hennepin County concentrated along the corridor during the 1990s. While job growth in Hennepin County barely outpaced the increase in population (7.9 and 7.4 percent, respectively), jobs in the I-394 corridor increased by 30 %. The majority of these new jobs filled new, denser office space, as travel times along the corridor improved and the surrounding cities grew. In general, offices replaced the less employment-dense residential and retail uses.

The construction of I-394 contributed positively to the viability of offices, fast-food restaurants, "strip" commercial, and "big-box" retail. Sit-down restaurants evolved to cater to office workers and lunch demand, and general retail adjusted to become more of a destination than a "drive-by" point of sale. Automobile dealerships changed from domestic to foreign cars, along with much of the market at the time, but the number of dealerships increased after the conversion. The overall rate of business turnover for the corridor was lower than the state and national averages. The highest turnover rates were for service and office businesses. Vacancy decreased after the conversion, and multitenant buildings (including strip malls and office buildings) became more common.

According to the Mn/DOT economic impact study, there was a net increase in jobs of more than 9,400. Employment growth within the I-394 corridor was higher by almost 12 percentage points, compared to employment growth in Hennepin over the same period. Assuming that a portion of the additional job growth can be attributed to the construction of I-394, it is estimated that about 1,900 jobs were created by year 2000.

Land values along the corridor grew from $7.50 a square foot in 1980 to $12.00 in 2000 (in 2004 dollars). This is increase is similar to neighboring I-494, which provides access to the Mall of America and the Minneapolis-Saint Paul International Airport and is considered one of the most desirable locations in the area.

5.0 Non-Transportation Factors

The MSP metropolitan region has been growing at levels comparable to the growth experienced along the I-394 corridor. For example, employment increased by 25% over the 1990 to 2000 period, a few percentage points below the growth in the I-394 corridor. The analysis period was also characterized by favorable real estate market conditions that may have induced part of the growth experienced in the corridor.

In addition, the I-394 corridor was already developed with older buildings before the project was started. Some of the redevelopment to more intensive uses with higher job counts that occurred in the wake of the I-394 project would have been undertaken eventually. The net jobs estimated to be due to the project has been adjusted to allow for this.

6.0 Resources

6.1 Citations

CH2M Hill, Interstate 394 Business Impact Study, June 2007

6.2 Interviews

Organizations

Cambridge Systematics

Central Valley Planning Authority

CH2M Hill

Footnotes

Case developed by Cambridge Systematics.