Three years after George Floyd civil unrest, state offers $120 million for rebuilding businesses. Is it enough?

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Kristel Porter has been waiting for someone to help rebuild north Minneapolis since long before George Floyd’s murder.

Three years later, she is still waiting.

Yes, Porter recalls community members showing up in the immediate aftermath of the civil unrest. They brought brooms, dustpans, buckets and garbage bags to help clean up some 1,500 locations across the Twin Cities — many of them businesses owned by people of color and immigrants — that sustained an estimated $500 million in damage.

Yes, the rebuilding effort has made progress and generated success stories. This session, the Minnesota Legislature approved millions of new dollars to help boost businesses and redevelopment projects along several corridors in Minneapolis and St. Paul that saw the worst destruction — and there’s no shortage of ideas for how to use that money.

“There’s a lot of projects that are being proposed on Broadway,” said Porter, who heads the West Broadway Business and Area Coalition.

“But,” Porter added, “they’re not getting funded.”

Three years after the second-costliest civil uprising in U.S. history, there’s still a backlog of unfinished redevelopment projects. Even after lawmakers’ efforts this year, many business groups in the most-affected areas say government funding for the renewal effort has been too piecemeal — and they worry that unless the state steps in with a bigger infusion of money, some rebuilding projects will languish.

“Without government subsidy, or deep philanthropic subsidy, these projects don’t work. They will not happen,” said Cameran Bailey, director of real estate at the development and urban planning firm NEOO Partners.

Bailey’s firm is advising several redevelopment projects along Lake Street. The nonprofit Lake Street Council has compiled a list of 10 active redevelopment projects on that corridor alone that collectively need an additional $94 million in order to break ground — and that’s not counting another 15 projects that are less connected to the 2020 unrest but are still in need of likely millions more.

Compare what’s needed in just one area of Minneapolis with the Legislature’s total appropriation for civil unrest redevelopment this session: The “PROMISE Act” sets aside $125 million for a new round of grants and loans over the next two years — to be divided among several Minneapolis neighborhoods, as well as St. Paul. The Legislature also approved an $8 million grant to the city of Minneapolis specifically to boost Lake Street businesses and the corridor itself.

“In almost any other circumstance, if a calamity like this hit — if there was a flood in northern Minnesota, or a drought in southern Minnesota — there would be relief efforts that would recognize this was unprecedented damage,” said former Mayor R.T. Rybak, who now leads the Minneapolis Foundation. In the case of the 2020 unrest, though, Minnesota is “still significantly short of putting together [a response to] the catastrophe that hit this area.”

While insurance payout data suggests Lake Street saw the costliest destruction during the unrest, Porter said north Minneapolis — home to one of the largest concentrations of Black Minnesotans in the state — has desperately needed an economic intervention since well before 2020. 

Many residents have to leave the North Side to purchase groceries or other essential goods. Porter hoped any effort to attempt to transform corridors damaged in the unrest would acknowledge an even deeper well of need — which, in her neighborhood, traces through a long history of disinvestment, housing discrimination, and back even to the 1967 Plymouth Avenue uprising.

“Lake Street is now understanding what we’ve been going through for decades of not having any destination spots, no business density,” said Porter, a lifelong North Sider who narrowly lost a City Council race in 2021. “I think that they’re now seeing what we have been going through since I was a child … As long as I can remember, we’ve had empty lots everywhere, holes in between businesses.”

DFL State Sen. Bobby Joe Champion, who represents north Minneapolis, said he pushed for the PROMISE Act to recognize this complexity: $94 million will pay for “working capital” grants to help businesses that, far from trying to erect buildings, are simply trying to survive. Another $30 million will back loans to fund more ambitious rebuilding projects and other capital needs.

Limits on both grants and loans will ensure no one developer — or affected neighborhood — can claim an outsized share of the funding.

Champion wanted to ensure that business owners “who don’t have lobbyists, businesses that have been traditionally redlined and deemed unbankable” would have the opportunity to benefit from rebuilding money: “If redevelopment is only from giving you money to build these buildings, then you miss the whole ecosystem.”

“When a single business rebuilds, an entire neighborhood benefits; when a single neighborhood benefits, an entire community succeeds,” wrote Kevin McKinnon, temporary commissioner for the Minnesota Department of Employment & Economic Development, who lauded the PROMISE Act as “a significant commitment to helping the Twin Cities recovery continue.”

The business corridor advocacy groups quibble with the PROMISE Act’s structure — in particular, with the legislation allocating three-quarters of its funding for grants and not loans. The grants cover the costs of “working capital” to support expenses like payroll, rent or mortgage payments, utility bills or equipment costs — and are capped at $50,000 for businesses with gross annual revenues of $750,000 or less.

Those grants might help a small business to make mortgage payments to buy an existing building — but chamber of commerce groups doubt grants of $50,000 or less  would close the finance gap on a more complex rebuilding or redevelopment project.

Consider Lake Street Council’s list of ten projects with financing gaps. Nine of the ten projects on the list need at least $1 million in public or philanthropic subsidy, and most need far more. Six of the ten projects need at least $5 million. One larger project — an outlier on the list — has a $35 million financing gap.

“There’s no doubt that smaller, under-resourced businesses could use the help” from the PROMISE Act’s grant program, said Russ Adams, who manages recovery initiatives for the Lake Street Council. “But the missing piece is debt-free gap financing for these complicated redevelopment projects that were a result of the devastation of the civil unrest.”

“A lot of times we’re talking about BIPOC-owned businesses, we’re talking about immigrant-owned businesses, and historically, these are communities that oftentimes have had a hard time getting a loan,” said Chad Kulas, who’s been executive director of the Midway Chamber of Commerce in St. Paul since 2015.

Adams worries these loans won’t go far enough: “Isolated, individually, [these] are not huge amounts of funds,” Adams said. “They do add up, but they’re still a fraction of the actual cost of the full recovery and rebuild.”

In the immediate aftermath of the unrest, several private philanthropies and advocacy groups mounted fundraising drives, including the Lake Street Council, Minneapolis Foundation, and Neighbors United Funding Collaborative. Many businesses in affected corridors later benefitted from state-funded COVID relief programs.

But by 2021, FEMA had denied federal relief to the Twin Cities after the unrest, and Republican lawmakers in control of the Minnesota Senate at the time were leery of the idea of approving any state funding for the rebuilding effort in any of the damaged corridors.

Ultimately, the Senate GOP compromised, and the Legislature approved the $80 million Main Street Economic Revitalization Program, with half of the funds set aside for Greater Minnesota, and half for the Twin Cities.

“It was extraordinarily difficult to get the Main Street dollars out of a split Legislature,” Rybak noted.

In 2021 and 2022, the legislation tasked 18 different nonprofits from different geographic regions with reviewing applications for the dollars. These “partners” are still awarding Main Street funds to this day, and they say their application data show the need for more redevelopment subsidies still runs deep in affected corridors.

One such partner, the Saint Paul & Minnesota Foundation, received 80 applications for Main Street dollars. The foundation awarded 42 grants for a total of $7 million. The foundation will announce a full list of grantees in June, spokesperson Melanie Hoffert said.

The Minneapolis Foundation awarded 36 Main Street grants, totaling $13.9 million, to businesses and organizations at 38th & Chicago, on Lake Street and West Broadway. Demand for the grants far exceeded the amount of money available, spokesperson Sarah Lemagie said.

Still, these Minneapolis Foundation grantees’ redevelopment projects have a long way to go. Even with these Main Street grants and $55 million in matching funds in hand, these projects have a combined $87 million financing gap, Lemagie said.

Inflation, labor costs and supply chain issues continue to drive that cost higher: “One of the projects approved in our initial first rounds just contacted me on Monday saying that’s an issue,” said Jo-Anne Stately, director for impact strategies at the Minneapolis Foundation, “and, ‘Can they get more money out of Main Street?’”

Between the Main Street grants and a separate initiative, the Minneapolis Foundation has either issued or will soon issue a total of $50 million in redevelopment grants.

“We’re incredibly proud of the money we raised before any government was deeply involved in grantmaking,” Rybak said, “but the need continues, and we have not come close to helping restore what’s needed in the area.”

Bailey, the NEOO Partners developer who’s advising several Lake Street businesses looking to rebuild or replace damaged buildings, explained that these redevelopment projects face pressure on several fronts.

Many of the Lake Street business owners have aspirations of rebuilding with housing units and commercial space that will serve a working-class clientele. Bailey said the business owners hope “that type of people and employees that work in this building, will also be able to afford the rent to live here, which is super cool.”

But crucially, renting to working-class residential or commercial tenants also limits these business owners’ income — which makes working with traditional banks difficult, and makes taking on debt risky. “That’s really where the squeeze is,” Bailey explained, “because they’re being mission-driven and mission-oriented, they’re not maximizing their potential income.”

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Add to this the fact that many entrepreneurs who owned their buildings were under- or uninsured, which limited the payout they received after the unrest — and many of the businesses are cash-poor whether or not they owned their property, Bailey said.

As a result, most of the projects Bailey works with have funding gaps of at least 30%, “so something has to make up for that gap in income — and it has to be a subsidy from somebody. Right now, it’s a subsidy from a whole lot of somebodies — and these funds, they’re becoming more and more oversubscribed, relative to the amount of money available.”

The risks for displacement and gentrification seem to hang over the entire rebuilding effort.

Bailey has asked some of his Lake Street clients how long they can sustain their push to redevelop their old property without the income of running their business: “At this point, in spring 2023, they’re all like, ‘Man, I think two years is what I’ve got … If it doesn’t happen in two years, or some act of God doesn’t come down in the next two years, we either have to greatly amend our initial vision or we’ll have to let it go.”

What happens if the original business owners can’t make these projects pencil out? Might they be forced to sell to developers who aren’t from the community? Who aren’t so “mission-driven?”

The question of who owns what gets rebuilt motivated Champion to structure the PROMISE Act to require the money be spread between loans and grants, tenant businesses and property owners, and across neighborhoods.

“There has to be some intentionality so that we don’t do the same thing that we always do,” Champion said — which, he added, is to limit the definition of “redevelopment” to a concept that only benefits developers: “Redevelopment comes in many different ways. It’s not just buildings alone. What use is it if you’re building it, and then people of color aren’t even owners?” 

Porter, the West Broadway Business and Area Coalition leader, is similarly concerned that, without a different approach — one with an eye toward reparations for years of structural racism — north Minneapolis won’t see transformational change.

“Fast forward 10 years from now, if we keep doing what we always did,” Porter said, “we’re gonna still end up in a situation where Lake Street is nicely developed, and everybody can go there, spend their money there … while West Broadway will probably still be empty buildings boarded up, and businesses struggling to serve the community that they’re in.”