Ahmed Muhumud, co-owner of Midtown Eye Care, sought refuge for the business last fall in the Midtown Global Market after it was burned down in the aftermath of George Floyd’s death last May.
Muhumud is unsure whether his former landlord can or will rebuild along E. Lake Street.
“He terminated my lease and I haven’t heard anything about plans,” Muhumud said last week. “Business is still slow, but we’re happy with our rent and to be at the Global Market.”
At Hiawatha Avenue and E. Lake Street, pharmacist Elias Usso is back in business in a once-trashed building among hundreds of small businesses, disproportionately minority-and-immigrant owned, that were damaged and displaced by the riots in Minneapolis and St. Paul last May.
“We are one of the few lucky ones,” said Usso. He raised about $250,000 to refurbish Seward Pharmacy from family funds, insurance proceeds and a grant from the Lake Street Council.
“There are small businesses that want to reopen but can’t,” he said. “Parts of Lake Street still look like a ghost town. We have to get Lake Street back.”
Usso plans to testify soon before a state legislative committee that is considering a request by Minneapolis and St. Paul for up to $300 million in state bond proceeds to help cover more than $500 million in property damage.
Many of the old properties were underinsured. The Minnesota Commerce Department reported this winter only $163 million of $293 million in commercial-property claims were paid.
Philanthropy has led to pledges of around $20 million to help with commercial recovery. The city of Minneapolis has pledged or spent several million dollars to help with demolition and business assistance.
Meanwhile, the business community is advocating for state funds and encountering resistance from Republican legislators.
“It feels like an intensifying animosity toward Minneapolis,” said Jonathan Weinhagen, chief executive of the Minneapolis Regional Chamber of Commerce, the largest state chamber. “It’s sharpened in the aftermath of the death of George Floyd and civil unrest.”
A just-released study by the Minneapolis chamber found that the city sent $3.50 in state taxes for every $1 it received in state aid since 2004. In 2017 alone, Minneapolis paid $1.97 billion in taxes to Minnesota while receiving $543 million in state aid. The seven-county metro area also is a net exporter of tax revenue.
The data was prepared for the chamber by MacCallum Ross, a Minneapolis consulting firm.
“We hope this data-based report provides useful information … as policymakers consider investments to support small business,” Weinhagen said. “The notion that the state is ‘bailing out’ Minneapolis is inaccurate.”
The majority Republicans in the Senate say they shouldn’t have to assist Minnesota’s biggest city. They blame Gov. Tim Walz for being too slow to send in the National Guard last May to protect Lake Street and Minneapolis city leadership for being anti-police.
Minneapolis and St. Paul want the Legislature to issue $300 million in low-interest “redevelopment appropriation bonds” to the Minnesota Department of Employment and Economic Development. Minneapolis would get $200 million and St. Paul $100 million. The agreement with the state would require the cities to keep the proceeds in separate accounts to help acquire and rehabilitate damaged commercial property, beyond insurance payments and private investment. DEED would monitor the process.
The amount loaned to property owners and buyers “for redevelopment that rebuilds and retains existing small businesses and enhances economic opportunities for long-term residents” of the affected neighborhoods are not repayable for up to 40 years, unless an owner sells.
Erik Hansen, the city’s economic development director, said the program also would help solve a long-vexing problem along parts of E. Lake Street and West Broadway. Commercial lenders often won’t fully fund projects because valuations often don’t support the cost of building and renovation. The city and inner-city developers have long struggled to find “gap” financing. The riot-related damage has widened the gap.
“A commerical-property development fund … is not double-dipping on insurance or a grant to people who don’t insure,” Hansen said. “We can help an investment with this loan and the fund gets paid back on the sale of a building and the owners pay over the years through increased business, employment and taxes.”
Sen. Paul Gazelka, who leads the Republican majority in the Senate, said he’s committed to help “the people of Minneapolis with safe streets and prosperity,” but says he doesn’t trust city officials to administer a loan program. He only would support a low-interest business-loan program that needy business owners could tap through DEED.
Metro business leaders long have supported statewide investments in good schools, safe roads and public health. A $250 million, well-run loan program to help local small businesses revive damaged urban corridors will help spur more private investment and benefit the state over the long term.
Last week, Reps. Mohamud Noor and Fue Lee, DFLers from Minneapolis, publicized their bill for a 10-person commission appointed by the chief justice of the Minnesota Supreme Court to review how local government, police and military responded in the riots. The bill requires DEED to use community organizations to serve areas damaged by the unrest and provide loans of up to $500,000 to “entities” in them.
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