Funding to rebuild riot-damaged Twin Cities businesses is at turning point

Insurance claims have been paid. Pandemic relief dollars have gone dry. Online fundraisers have tapered.

Many businesses damaged or destroyed in the riots after the police murder of George Floyd have reopened in the two years since then. But for those that haven’t, there are fewer places to turn for financial help, and inflation is pushing up the cost of starting over.

“Right out of the chute there was this wonderful response on multiple levels,” said R.T. Rybak, chief executive of the Minneapolis Foundation, which is helping to distribute state-funded grants to Twin Cities-area businesses.

“But what became clear very quickly is this was going to need to be a long-term effort that needed more partners than just the private sector,” he said.

In the aftermath, with estimates of the damage hovering around $500 million, insurance companies largely delivered on claims, though the process wasn’t always smooth.

About $227 million in insured losses had been paid out by last summer to businesses damaged by the unrest, according to data collected by the Minnesota Department of Commerce. Tens of millions more have likely been paid out by insurers since.

The property damage overall is nowhere near the most that insurers have covered in Minnesota. Weather-related disasters sometimes cost more: a 2017 hailstorm in Brooklyn Park and Coon Rapids led to $3.2 billion in insured losses.

The role of insurance firms may have played out, but many businesses that were damaged in the unrest didn’t have insurance or were underinsured, leading to major funding gaps.

Help from the state is only just starting. About $45 million in state grants approved by the Legislature a year ago will flow to damaged businesses in the Twin Cities. It took months for state agencies to work out technical aspects of the program, to solicit proposals and to select community groups to distribute the funds.

To stay afloat or rebuild, businesses put together a hodgepodge of resources, including bank loans and donations from customers, friends and relatives.

“The individual burden that business owners have taken on, sort of on behalf of our community and this kind of reckoning we’ve had, it’s a lot,” said Allison Sharkey, executive director of the Lake Street Council, the business association in the area hardest hit by destruction in late May and early June 2020.

The council raised $12 million in its We Love Lake Street Fund and has already disbursed nearly $9 million of that in small grants to more than 400 businesses.

M.A. Mortenson Co., a construction firm, has spearheaded another effort called the Restore-Rebuild-Reimagine Fund, which has raised $14 million for exterior work, such as replacing windows and painting. Other corporate, business and philanthropic groups have raised millions more that have been distributed to affected businesses.

More than 1,500 businesses along Lake Street and West Broadway in Minneapolis and University Avenue in St. Paul were damaged by the riots. By this time last year, the recovery was well underway in all the areas except the east half of Lake Street, where 40% of damaged businesses had closed or not restarted.

Since then, the worst fears about Lake Street — that it would be too expensive for all but the biggest businesses to return — didn’t play out. The city of Minneapolis estimates there has been more than $175 million in permit activity related to the recovery of damaged properties throughout the city.

“We’re about halfway, we think, of things coming back of what was there,” said Erik Hansen, the city’s director of planning and economic development.

Edgar Hernandez, owner of Pollo Movil Mexican Grill on Lake Street, didn’t have insurance to replace damaged windows and stolen kitchen equipment. And he didn’t qualify for pandemic relief help.

But he received a $10,000 grant from the Lake Street Council and $5,000 from Urban Ventures, a local nonprofit organization. And his network of family and friends came to his aid so he could reopen a couple months after the initial destruction.

“One family member said I can help you with $1,000 and another family member says I can help you with $5,000 and then a window opens for you,” Hernandez said.

It took Midori Flomer much longer to reopen her restaurant, Midori’s Floating World Cafe, which was near the burned-out Minneapolis Third Precinct station.

She initially received some insurance money, but it fell short of what was needed to fully repair the space. A former employee started an online fundraiser that yielded more than $55,000, but it still wasn’t enough. This April, the cafe finally reopened in a new building on Lake Street after receiving grants from local nonprofits, including the Lake Street Council.

“If they weren’t here, we would have been finished,” Flomer said. “It’s been a frustrating few years. But we are here finally.”

Ray James’ barbershop, called Fade Factory, on West Broadway Avenue in north Minneapolis, had been in his family for four decades when a fire started during the riots destroyed the building. James, who said he had been underinsured, received an insurance payout of more than $200,000 as well as a $10,000 grant from singer Beyonce’s BeyGood foundation and the NAACP.

Those funds paid for demolition and debris clearing, but they weren’t enough to rebuild. James said he is worried he might have already missed out on grant opportunities.

“I just wouldn’t want the funding to run out and I didn’t even get my shop back,” said James, who added he felt some of the businesses with the biggest losses have been forgotten.

But the government help is just starting. Democrats initially pushed for $150 million in state aid to damaged businesses. The Legislature ultimately decided to provide $80 million across the state to also include pandemic relief and economic revitalization. A little more than half of that is heading to Twin Cities businesses.

“I think this is the largest investment the state has ever made in investment in redevelopment of the inner cities of Minneapolis and St. Paul. I can’t think of anything aside from stadiums … at this scale,” Rybak said.

It comes in the form of matching funds and requires businesses to raise $2 from other sources to get $1 from the state. That’s been a hurdle for some applicants.

Separately, the city of Minneapolis has spent $4.5 million to help businesses remove rubble, obtain technical help and waive fees. It also reduced property taxes for damaged businesses by more than $1 million.

The St. Paul Housing and Redevelopment Authority allocated $1 million in civil unrest funds to help small businesses with insurance problems and to buy or fix their buildings.

Both cities have also provided some small grants or forgivable loans to businesses in areas that experienced civil unrest.

Meanwhile, one goal of the GroundBreak Coalition, a new initiative spearheaded by the McKnight Foundation, is to help spur more rebuilding in the riot-damaged areas.

The coalition has assembled financial institutions and foundations that it wants to connect to projects that need funding. It has identified about 200 proposed projects — some of which are more ambitious than simply rebuilding what was there before — along the affected corridors that would cost $700 million to build.

While some of the larger developers and nonprofits may know how to access various financial resources, it’s the smaller business owners who need more help, said D’Angelos Svenkeson, a real estate executive heading up the GroundBreak rebuilding committee.

“It’s different to apply this to the neighborhood coffee shop, hair salon, furniture store or innovative housing project,” he said.

For Pollo Movil owner Hernandez, the calculation for recovery is simpler. If people want to help businesses affected by riots, they should frequent them, he said. The restaurant was burglarized twice this year. Customer traffic continues to be slow.

“I want customers, in my case, more than money,” Hernandez said.

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