Small Business Owners Losing Hope for Flood Aid
By George C. Ford
CEDAR RAPIDS - As the second anniversary of the June 2008 flood approaches, many business owners are convinced they won't see a penny of federal money earmarked for recovery.
"Last summer, the politicians were doing their press conferences about $85 million set aside for business flood recovery," said Gary Ficken, president of the Cedar Rapids Small Business Recovery Group. "Here we sit in the first week of June and not one penny has been put into a business owner's pocket.
"When you take nine months and can't find a way to get $1 from the government coffers into a flooded business owner's pocket, that's a sad state of affairs."
Ficken said the U.S. Department of Housing and Urban Development continues to change the rules about duplication of benefits, holding up checks from the federal Community Development Block Grant program.
"For the last 22 months, we've been told that a U.S. Small Business Administration loan counts as a benefit," Ficken said. "You're paying back the loan plus interest, but it's still considered a benefit.
"Now, in the 23rd month, we're told that any private loans also count as duplication of benefits. HUD says it doesn't feel it's right for the taxpayer to help for-profit businesses when they are creditworthy.
"So apparently the taxpayer wants to be on the hook for businesses that aren't creditworthy and probably don't have a bright future. They'd rather let businesses wither on the vine that are creditworthy, have years of experience and likely have a bright future."
Scott Swenson, senior case manager with the Cedar Rapids Area Chamber of Commerce Business Long-term Recovery Initiative, said the organization has a database of 1,200 flood-affected Cedar Rapids businesses.
"We've done assessments with about 525 business owners to determine what they need in terms of assistance," Swenson said. "Of that number, we have confirmed that 90 businesses have closed. We think that number likely will go higher as we do additional assessments."
Among the Cedar Rapids businesses that did not reopen after the flood were the A&W Family Restaurant, 1136 Ellis Blvd. NW; Bartunek's Appliance, 98 16th Ave. SW; Barron Motor Supply, 234 Third Ave. SW; Blimpie Subs & Salads, 120 First Ave. NW; City News & Books, 104 Third St. SE; City Style Clothing, 209 Second St. SE; CR Chop House, 200 First Ave. NE; Dairy Queen, 208 First Ave. NW; Dee's Place, 310 Third St. SE; E Avenue Tap, 505 E Ave. NW; Legend's Sports & Entertainment Center, 215 Second St. SE; Log Cabin Lounge, 801 E Ave. NW; Polehna's Meat Market, 96 16th Ave. SW; Quizno's, 200 First Ave. NE; Saddle & Leather Shop, 48 16th Ave. SW, and 16th Avenue Music, 87 16th Ave. SW.
Swenson said the 1,200 businesses can be classified in two groups. Between 600 and 700 sustained direct loss from floodwaters and the remainder did not have access, electricity or steam heat.
"Many of the businesses that were located above street level were able to keep operating, either from home or another location," Swenson said. "Many retained their customers and did not sustain the loss of equipment or furnishings."
Steve Hunter, a case manager who works with Swenson, said lack of sufficient cash flow and a higher debt load has squeezed many business owners. He pointed to the demise of Blend, a downtown Cedar Rapids restaurant that reopened Oct. 25, 2008, and closed Jan. 7, 2010.
"The owners of Blend virtually doubled their debt. They faced a loss of customers in downtown Cedar Rapids after the flood as well as the overall economic slowdown," Hunter said. "We have businesses that are facing the same situation and many of them are likely to go under."
The Small Business Administration has approved 1,586 disaster loans in Linn County for a total of $148.85 million since the community was declared a federal disaster area. In Johnson County, 193 disaster loans have been approved for a total of $19 million.
Ficken, president of Bimm Ridder Sportswear in Cedar Rapids, said the U.S. Department of Labor has predicted that half of the 1,200 businesses affected by the flood will be closed by June 2011 and 7,500 jobs will be lost.
"We have already lost 2,000 jobs and the government expects us to lose another 5,500 by the third year after the flood," Ficken said. "We have business owners who have paid employees out of their own pocket and haven't taken a paycheck since the flood.
"They're trying to sell their homes to downsize and use the money to stay afloat. They've exhausted every resource and leveraged all their assets, including raiding their retirement funds."
Daniel Ferguson and Thomas Werning, who own Universal Engineering in northwest Cedar Rapids, paid employees out of their own pockets in the weeks and months after the flood.
"We had our life savings invested in the company, so we really didn't have any other choice," Ferguson said. "We just had to pull ourselves up by our bootstraps and go. It was either go, or go home, so we chose to go and get it done."
Werning said Universal Engineering, which has reduced employment from 57 associates to 46 primarily because of the economy, was fortunate to get the money from its SBA loan in January 2009.
"We still feel pretty fortunate compared with the horror stories we've been hearing from other businesses," Werning said. "We applied for our SBA loan in June, so our seven months was a 'walk in the park' compared with what other people have experienced."
The potential demise of more Cedar Rapids businesses and job losses is not out of line with what happened after a 1997 flood devastated Grand Forks, N.D.
Between the first year and the second year after the flood, 40 percent of businesses failed. In year three, 10 percent to 15 percent failed, for a total mortality rate of about 55 percent.
At the southern end of the Corridor, more than 200 businesses in Coralville and 79 in Iowa City were damaged by the June 2008 flood.
Coralville officials say about 85 percent of its flooded businesses have reopened.
Among those that did not reopen in Coralville were: Lone Star Steakhouse & Saloon, 201 Second St.; Village Liquors, 411 Second St.; Mekong Restaurant, 222 First Ave.; Peking Buffet, 93 Second St.; Coral Lanes, 306 First Ave.; Saigon to Bangkok, 104 S. First Ave.; and Los Cabos Authentic Mexican Restaurant, 61 Second St.
Faye, John and Matt Swift, who owned Sluggers Neighborhood Grill at 303 Second St., decided to move to North Liberty rather than reopen in Coralville. The Swifts also changed the name of the business to Red's Alehouse.
"We had a good 20-year run, but it was time to put Sluggers to bed," Faye Swift said. "We were notified in August 2008 that our SBA loan had been approved. We were told that we could use it to move the business as long as we were renting.
"We had just found a building on Dubuque Street in North Liberty. It was more of a tavern and the Sluggers family sports bar theme just wouldn't have fit."
Swift also received a Jumpstart grant, which the SBA took to pay down her loan. She had to jump through a number of hoops, but she was willing to 'cross every 't' and dot every 'i' ' to get the money to reopen.
Two Iowa City businesses did not survive the flood, according to Wendy Ford, Iowa City economic development director.
"The Wendy's on South Riverside Drive did not reopen," Ford said. "I'm not sure if the decision to close the restaurant might have been made before the flood.
"CellMex (1930 S. Gilbert St.), a cell phone store that catered to the Hispanic community, tried to reopen after the flood. They were struggling so badly that they just never got off the ground after the flood."