When the U.S.-Canada border was shut down during the COVID-19 pandemic, the few businesses in Minnesota’s Northwest Angle were crushed.
The slice of land — the northernmost point of Minnesota and the lower 48 — can only be reached during most of the year by driving through Canada, catching a rare flight or boating across the enormous Lake of the Woods, all of which meant the area was all but blocked from having visitors.
The U.S. still bars Canadians from entering the U.S. for tourism by land, but vaccinated U.S. citizens can now travel through Canada, meaning the situation is improved for resorts and other businesses in the area.
But earlier this year, before some restrictions were lifted, Minnesota lawmakers carved out a $5 million forgivable loan program for the Northwest Angle. Legislators say the money will be a lifeline for businesses in the tourism-starved region, which includes a dozen or so resorts and roughly 150 residents, though there have been few details shared publicly on how the funds have been spent so far.
How the loan program came to be
Nonessential travel between the U.S. and Canada was halted in March 2020, part of an effort to stop the spread of COVID-19, though residents of the Northwest Angle could get into Canada for medical help or basic needs like groceries.
But it was nearly impossible for tourists to reach the isolated area. Flights are rare, and crossing Lake of the Woods on a boat can be dangerous and difficult. Some did reach the area this year by an ice road in the winter, but one resort owner told MinnPost in May that his revenue was down 80 to 85 percent during the summer of 2020.
Stimulus bills passed by Congress under presidents Donald Trump and Joe Biden included money for businesses hurt economically by the pandemic. The Minnesota Legislature this year also approved $150 million in “Main Street” grants and loans for businesses split between two programs aimed at economic relief in the wake of the pandemic (and in the wake of rioting in Minneapolis after police killed George Floyd).
Despite that influx of cash, some lawmakers wanted to ensure businesses in the Northwest Angle got help and created a separate loan program just for the area. State Rep. Matt Grossell, R-Clearbrook, and state Sen. Paul Utke, R-Park Rapids, proposed $5 million for “remote recreational businesses” in the Northwest Angle.
The legislation stalled, however. It did not get a hearing in the DFL-majority House or in the Republican-led Senate, and the provisions weren’t included in the budget plans for either chamber. A $2 million grant program for Northwest Angle was included in a House DFL tax plan. But when legislative leaders struck a deal on a final package of economic development legislation in what’s known as an “omnibus” bill, they did not include the $5 million Northwest Angle loan program or grant money. At that point in the legislative process, bills are rarely changed.
Shortly before a House vote on the jobs bill, however, Grossell said he approached State Rep. Mohamud Noor — a Minneapolis DFLer who chairs the House Workforce and Business Development Finance and Policy Committee — to ask if the $5 million loan program could be added at the last minute to the omnibus bill.
Grossell said Noor gave him a short list of issues to work out with the Republican-led Senate. Once Grossel cleared up the obstacles, top lawmakers agreed to amend the program onto the bill on the House floor. “I said these people have been cut off through no fault of their own through the border shutdown,” Grossell said.
At the time, on the House floor, Noor said the legislation was an example of lawmakers from different parties and disparate geographic areas working together. In an interview last week, he said lawmakers “felt we had to do something” because the “lifeline” of these businesses were cut off during the border closures.
Noor said it’s not that unusual for lawmakers to carve out specific help for certain areas or entities. There was also money for Rochester’s Destination Medical Center in the omnibus jobs bill, as well as a loan for a Duluth paper mill. But Noor said the Northwest Angle is unique in that people usually have to go through Canada to visit it, and said federal members of Congress from Minnesota had also been trying to help people there.
$2.6 million distributed so far
U.S. citizens are now allowed to cross the Canadian border in most circumstances, although there are some hurdles to entry. Travelers have to be vaccinated and test negative for COVID-19 within 72 hours. Grossell said the requirement for a negative test can be a burden and sometimes an expense for tourists.
On Friday, six U.S. senators, including Minnesota’s Amy Klobuchar and Tina Smith, sent a letter to the U.S. government urging the Centers for Disease Control and Prevention to allow Canadians to enter the U.S. by land for tourism. “The extension of the ban on land border crossings has significant impacts on states and communities along the Canadian border,” the letter says. “Before the pandemic, Canadians regularly crossed the border to shop at small businesses, visit ski resorts and recreational areas, and see friends and family.”
While the Biden administration plans to allow fully vaccinated people to enter the U.S. by air after a negative COVID-19 test, entry by land is still restricted to essential travel, which impacts the Northwest Angle, according to a Klobuchar spokeswoman.
The Northwest Angle loan program is meant to help the area address the fallout from the pandemic and the border situation. It is open to any “remote recreational business” in the area that lost more than 30 percent of its revenue between March of 2020 and 2021 and was impacted by the border closure. A loan can be worth up to 75 percent of a business’s gross annual income for the 2020 fiscal year — with a maximum of $500,000. The loan is forgiven if the business is still operating one year after when the loan was awarded.
The loan program also aims to prevent businesses from getting reimbursed for losses twice. Any business that got a grant from the state’s Main Street COVID-19 relief grant program, which helps businesses affected by the pandemic, are not eligible for the forgivable loan, for instance. And if a business got another forgivable loan from the feds, like a Paycheck Protection Program loan set up by the $2.2 trillion CARES Act, the state will subtract that amount from what is considered forgivable under the Northwest Angle program.
State law tapped Lake of the Woods County to establish the loan program, but the county contracted with the Headwaters Regional Development Commission to run it. The Headwaters commission is governed by a 25-member board made up largely of elected officials from the region.
Sarah Linda, a business loan specialist with the Headwaters commission, said $2.6 million has been distributed so far in 25 loans to resorts and other businesses, such as fishing guides. One borrower qualified for the maximum $500,000 loan, Linda said, while another qualified for a small loan of $9,554. A small handful of business that qualify for the loans are still working on applications, Linda said.
Despite the loan program being publicly-funded, the Headwaters commission refused to say which businesses have received loans, and in what amount. Linda didn’t cite any state law to justify withholding the information, but said the HRDC had reached out to Lake of the Woods County and the Department of Employment and Economic Development to ask for advice about disclosure.
“We don’t typically share information on borrowers and how much they received; this is something I adhere to across the portfolios I manage,” Linda said in an email. “We are an intermediary, contracted to process loan applications.”
DEED spokeswoman Jen Gates said the agency didn’t have the data and wouldn’t weigh in on whether the county or the HRDC should disclose the information. State law requires a report to the Legislature on the program by January 15, 2023.