Alexandria officials: B3 rules drove millions in extra costs, forced phased project and fundraising shift

City officials from Alexandria told the Capital Investment Committee that Minnesota’s B3 sustainable building requirements have materially increased the cost and complexity of a Runestone Community Center expansion funded in part by the October 2020 bonding bill.

Martin (Marty) Schultz, Alexandria city administrator, said the Legislature authorized $5.6 million for the project in the October 2020 bonding bill and that design-stage estimates changed as the city progressed. “When we got our initial full cost estimates in the fall of 2021 … we looked at approximately $3,000,000 in increased costs in order to meet the B3 guidelines,” Schultz said. By August 2024 the design team estimated about $2,700,000 in costs directly attributable to meeting B3 standards for the new construction phase.

Schultz identified three major cost drivers in the estimate: a photovoltaic system ($1,520,000), a geothermal HVAC system ($1,100,000) and the electrical service upgrade required to run an all‑electric arena (roughly $100,000 for a 2,000‑amp service). The city decided in mid‑2023 to split the work into phases so it could complete a renovation and support improvements first, postpone the new arena and avoid immediately encumbering the bonding dollars for the expansion portion that would be subject to B3.

“Council decided to kind of turn the capital campaign committee loose and try to raise money in the community as much as possible,” Schultz said. The city’s bond authorization was extended to Dec. 2028, he said, giving the city time to seek additional funding and evaluate options including a possible local sales tax referendum.

Schultz told the committee he and his design team worried that their project type — a multiplex arena that alternates ice and dry‑floor uses — may be atypical for B3 assumptions and that installers and maintenance staff have limited local experience with geothermal and large rooftop photovoltaic systems. He said city electric utility data show Alexandria’s power mix is already largely carbon‑free: “In 2025, Alexandria’s power mix will be 33% renewable, 54% carbon free,” he said, noting the city’s municipal utility purchases wholesale power through Missouri River Energy Services.

The city asked lawmakers to consider greater flexibility for project types (including off‑site renewable options and renewable energy credits) and to recognize the unique operating and capital needs of arena‑style community centers. City officials also cautioned that adding the full B3 requirements to the expansion could exhaust available local and private funds and make the project unaffordable without additional state support.

Alexandria’s testimony illustrated the local budget impact that committee members had discussed earlier in the hearing: projects vary in scale and complexity, and small and medium municipal projects can face steep upfront costs to meet the most recent SB 2030 performance steps that have tightened over time.

The committee did not take a vote on any statutory changes during the hearing but members said they would pursue follow-up and additional testimony from local officials and technical experts.