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Small retailers struggle to survive bridge collapse

Opposable Thumbs Books will be the first small business to close purely because of financial losses stemming from the Aug. 1 disaster.

Gopher Cleaners
MinnPost photo by Diane L. Cormany
The owner of shuttered Gopher Cleaners in southeast Minneapolis says the I-35 bridge collapse and a subsequent fire led to its demise.

Ed Hilbrich, owner of Opposable Thumbs Books, first asked Minneapolis officials for signs directing drivers to his store and other Johnson Street Northeast merchants during a September public meeting on the Interstate Highway 35W bridge collapse.

Nothing happened. Opposable Thumbs and area shops continued to suffer from a loss of traffic and business, he said. He repeated his request in late November, when Mayor R.T. Rybak and other city officials visited the bookstore and other businesses affected by traffic detours since the Aug. 1 collapse. This time he knew any help would come too late to save his own business. Hilbrich plans to close Opposable Thumbs in late January.

Though his is the first business to announce plans to close purely because of financial losses related to the I-35W bridge collapse, Hilbrich is hardly alone. Since September, revenue at Opposable Thumbs has been down 40 percent compared to the same period last year. Meanwhile, a number of other establishments scattered across affected areas have reported revenue declines of up to 50 percent.

On the whole, the I-35W bridge collapse is costing the state $113,000 per day in lost economic output, according to an analysis by the Minnesota Department of Employment and Economic Development.

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Limited resources
The federal Small Business Administration offers Economic Injury Disaster Loans at 4 percent interest to businesses affected by the bridge collapse. Minneapolis offers city-guaranteed loans at interest rates as low as 2 percent.

“I know we have the business tools available, and they are primarily in low interest loans,” said Jeremy Hanson, spokesman for Minneapolis Mayor R.T. Rybak. “City government can’t do it alone,” he added. “We need the public to recognize that there are businesses that are struggling as a result of the 35W bridge collapse, and we need to put the call out to the community to shop at the affected businesses.”

Hilbrich and other small-business owners say they can’t afford to take on debt during a time of declining revenue, no matter how low the interest  rates. They complain that public officials have been largely unresponsive and have not heeded their calls for better signs for detoured routes, for help with marketing and for interest-free financial assistance.

“People don’t have much faith in the city to really do anything,” Hilbrich said.

Ed Hilbrich says the bridge collapse has hurt business so badly that he has to close his bookstore, Opposable Thumbs, at the end of the month.
MinnPost photo by Diane L. Cormany
Ed Hilbrich says the bridge collapse has hurt business so badly that he has to close his bookstore, Opposable Thumbs, at the end of the month.

He has been financing Opposable Thumbs out of his own pocket since opening about 18 months ago. Hilbrich, age 40, said waiting for the Johnson Street area to recover from lost traffic will be like starting from ground zero, and he’s not willing to continue losing money. He has no plans to reopen in another location.

Crafty Planet plans to move into the vacated Opposable Thumbs location from Lowry Avenue Northeast and Stinson Parkway. Matt DeVries, who co-owns the craft and fabric store with his wife Trish Haskins, said he is aware of the slow sales at Johnson Avenue Northeast businesses. But their current location is suffering from the same access problems, and the new space will be bigger and at least the store won’t be off on its own, he said.

Access and awareness
Though the roads immediately surrounding the retail district on the 2800 block of Johnson Street Northeast are open as usual, drivers who once passed through the area to or from I-35W South seem to be finding other routes. Area merchants say traffic flow along Johnson is down significantly, though the city of Minneapolis is not monitoring traffic counts for the street.

Neighborhood business owners have appealed for help to the city multiple times, but nothing ever happens, said Peter Vevang, the new Neighborhood Revitalization Program (NRP) representative for the Audubon Park neighborhood which includes Johnson Street Northeast. “It’s a matter of political will,” Vevang said. “There hasn’t been priority placed on it. The city hasn’t recognized this problem.”

On Dec. 5, nearly three months after Hilbrich’s initial request, an orange sign directing drivers to Johnson Street businesses was placed on the corner of Central and 28th Avenues Northeast. Minneapolis City Council Member Paul Ostrow, who represents the First Ward including the Audubon Park neighborhood, said a sign previously posted on Broadway Street Northeast “obviously did not help.” That sign, placed at Industrial Boulevard, directs traffic to Broadway businesses, not to Johnson.

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“We probably should have talked with business owners ahead of time about where to put the signs,” said Ostrow, who is talking to the Minneapolis Public Works Department about installing additional signs near the University of Minnesota.

Mary Colon
MinnPost photo by Diane L. Cormany
Audobon Coffee owner Mary Colon says the shop’s revenue is down as much as $5,000 a month since the bridge collapse.

Appealing for help
Mary Colón, who owns Audubon Coffee at 2852 Johnson St. NE, worries that the loss of one business will cause other owners to give up hope. The combination of foreclosures, absentee landlords and floundering businesses has her worried that the neighborhood might decline in the same fashion as North Minneapolis, where she grew up, she said. “We’re not that far from having that happen to us.”

Colón’s revenue is down $4,000 to $5,000 per month on annual sales of $340,000 to $390,000. She is working about 80 hours each week and hoping for attrition so that she doesn’t have to let go of any of her nine employees. She also might cut back the shop’s hours, though worries how that will affect her employees’ income.

Deeply rooted in the Audubon Park community, she said she has never asked for assistance during her nearly 12 years in business and is reluctant to do so now. “I feel like an idiot asking for help,” she said. “People died. People are injured and incapable of working. They need help.

“But what’s happening to businesses is a tragedy too. Tragedy is not too strong a word,” she said. “I love my community. I have customers who started coming here as small children who are now going off to college. If all of these small businesses go down, they won’t be coming home to the same community they grew up in.”

Colón, 54, said she cannot afford to take on an SBA disaster assistance loan or one of the financing options from the city of Minneapolis.

“If you ever had any other line of credit, you have to exhaust that before you’re eligible for a loan (from the SBA), even if those are at higher interest rates,” she said. “When your business is down that much for 12 to 18 months, even if it’s at 3 to 4 percent interest, you can’t afford $40,000 in loans.”

The SBA’s Economic Injury Disaster Loan program offers small businesses loans up to $1.5 million. To be eligible, business owners must first exhaust their own resources and any other loan sources. The money may only be used for operating expenses, working capital and debt that the business would have been able to cover had the disaster not occurred. As of Friday, eight businesses had applied for the assistance and only one loan for $131,000 had been approved.

SBA communication specialist Carl Sherrill says the slow pace of applications does not surprise him. “We all came to the conclusion that businesses aren’t going to realize how bad they’re hurting until the end of the year,” he said. The deadline for affected businesses to apply is May 22.

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“My experience with small businesses is if they can make it on their own, even though our loan rates are good — nice and low — they’re going to try to figure out how to do this on their own,” Sherrill said. “This is a last resort.”

Businesses seek boost from city
Colón said she wants the city of Minneapolis to educate the public about the plight of the businesses and how to access them.

“People drive by and see that the building is still standing; the windows aren’t boarded up. They don’t realize how much we’re hurting,” Colón said. “Let the public know that if you love your small businesses and that’s why you love your neighborhood, you have to understand what’s happening to them.”

The November visits to Hilbrich’s store and other businesses by Ostrow, Rybak and others were intended to draw public attention to the need to support local businesses affected by the bridge collapse, said public officials. In addition to the Johnson Street Northeast area, officials visited East Hennepin Avenue.

Some business owners declined to participate in the media event because their sales had recovered and had even seen an uptick, said City Council Member Diane Hofstede, whose ward includes Dinkytown and a number of other affected business districts.

Skott Johnson, president of the Dinkytown Business Association, said most neighborhood businesses rebounded from the bridge collapse once University of Minnesota students returned this fall. In fact, he said, his print shop Autographics is having one of its best fall seasons.

Isolated instances
Not all Dinkytown businesses peg their revenue to the university, however. CenterPoint Massage & Shiatsu Therapy School & Clinic, on Fifth Street Southeast, lost 25 percent to 33 percent of expected new student enrollment this fall, said owner Cari Johnson Pelava. Calculated over the entire two- to three-year program, that amounts to about $180,000 to $360,000 in lost revenue.

Potential students assume the area will be impossible to reach, Pelava said. “There’s this myth that the traffic is so horrendous,” she said. “It’s not as bad as people perceive.”

In September the school added a new spa and resort program expected to bolster revenue after a downturn caused by saturation in the massage school industry, Pelava said. When the bridge went down on Aug. 1, she said, “we were just coming off of that, and it felt like we got another hit.”

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Because of the new spa program, which was already in the works, CenterPoint’s revenue is actually up over 2006. Even if Pelava were interested in applying for an SBA disaster assistance loan, she might not be eligible. The loans aren’t directed to losses of anticipated sales — only businesses that can’t meet existing financial obligations qualify. “My business is fine,” Pelava explained. “However we’re not growing at the rate we thought we would with the new program.”

Pelava was one of 23 business owners who submitted projected revenue losses totaling $383,000 to the city of Minneapolis. She was responding to a letter from Bob Lind, director of business finance for the Minneapolis Department of Community Planning and Economic Development, that requested information on estimated revenue losses and economic injury. “Your input is crucial to our making a determination on the need for a special program to provide assistance to impacted businesses,” it read.

The letter, included in a packet of information on the SBA loans and on the city’s small business assistance programs, was distributed to more than 300 businesses in early September, said Lind.

Since submitting her numbers Sept. 13, Pelava said she has heard nothing from city or other government officials.

Other neighborhoods struggle
Nearly three miles away from the Opposable Thumbs location, at the final exit before southbound I-35W falls away across the Mississippi River, the windows of Gopher Cleaners are boarded shut. A typewritten page taped to the door lists a phone number for customers who still have to retrieve their clothing.

Owner Debbie Allen said her sales dropped 80 percent immediately after the Aug. 1 bridge accident. An electrical fire just 10 days later put her out of business entirely. Allen blames the fire on wiring shaken loose by the massive impact of the falling bridge.

Though her insurance is prepared to pay for needed repairs to the Southeast Fourth Street storefront, Allen and the building’s owner have been unable to reach terms. A clause voided the five-year-old lease in the event of fire, and the landlord immediately tried to significantly raise the rent, she said.

Allen intends to reopen as soon as she can find a new location. Because the shop provides on-site dry cleaning, however, it is classified as an industrial property, and zoning laws keep it out of most neighborhoods within the city, she said. Allen said she cannot apply for SBA assistance until she has a new physical address.

At the opposite end of the same Southeast Fourth Street block, a green flashing Santana Foods sign stands sentry over a mostly empty storefront plastered with poster-sized “For lease” notices. Lamal Hassmeh and family members who own the business moved the deli inside their main convenience store a couple blocks away at 601 University Avenue Southeast. Sales at the Fourth Street location plummeted 50 percent along with the bridge and rebounded only slightly after University of Minnesota students returned for classes.

Hassmeh said he has no plans to apply for SBA disaster assistance loans because he does not want to take on the debt. He is also skeptical about the lengthy loan application and the numerous financial forms required. “Even if you send it in, there’s no guarantee,” he said. “This should be immediate. This is not a game.”

No grants available
Small-business owners seem to have no public financing options other than the city and SBA loans. Council member Ostrow said he looked into the possibility of tapping NRP money for business grants but ran up against a legal advisory that prohibits the use of the funds for business working capital.

“There are good reasons that the government is leery about grants for businesses; they can be really problematic,” Ostrow said. “The nature of this disaster has challenged the wisdom of [those rules].”

During its November meeting, the Audubon Neighborhood Association considered reallocating $115,000 of NRP funds dedicated to rehabilitating the Hollywood Theater to the group’s business loan program. Hilbrich, of Opposable Thumbs, joined others in narrowly defeating the proposal. “Nobody wants to take any more loans,” he said. “If you want businesses to be able to ride out the situation here, people are going to have to do something.”

Diane L. Cormany is a freelance writer and editor from Robbinsdale.

Correction: This story originally gave an incorrect interest rate of 3 percent for some city of Minneapolis business loans. The city offers a number of loan programs at a 2 percent interest rate. The story has been updated to reflect this change. These loan programs can be used for facilities improvement or for purchasing equipment. Private lenders provide half of the loan at market rate; the city makes up the other half at 2 percent interest. The city’s Working Capital Program can be used for operating expenses, as well as for inventory and equipment. The city guarantees up to one-third, or $25,000, of the total loan, which is offered at market rate.