While many Minnesota businesses and most of us in the real estate industry are not seriously impacted by the shutdown yet, there is still cause for concern. Now in Day 13 of the shutdown, it is already one of the longest in our country’s history. In the meantime while 22,000 state workers are out of work, the shutdown affects everyone from citizens who depend on social services to vacationers traveling to state parks to professionals who rely on state permits or licenses to do business. In the press lately are many accounts of individuals who have been affected. The question we are posing at St. Thomas, is how are local businesses and real estate being affected? If the shutdown is having an impact on your business or real estate sector, we encourage you to submit your comments at the end of this post.
Several Minnesota agencies that provide support to businesses and real estate are experiencing adverse effects or are shutdown completely. Minnesota Housing Finance, the state’s affordable housing bank, is under a partial shutdown. Loan servicing is still available but new applications may be delayed due to reduced staffing. Forgivable loans available through the state to homeowners affected by the North Minneapolis tornado are also on hold.
Commercial barge traffic on the Mississippi River may be restricted as early as this week, according to the St. Paul Port Authority, which is obligated to “keep its waterways open for commerce.” On Friday, SPPA’s counsel Eric Larson appealed the state’s move to suspend its dredging permits during the shutdown, citing that closure of just one of its four river terminals will result in 6,000 tons of commodities per week being unable to reach its destination. That’s the equivalent of 200 semi-trucks of product and includes staples such as livestock feed, water treatment chemicals, and recyclable metals, some of which are shipped from international locations.
The shutdown of the Minnesota DNR (Department of Natural Resources) may adversely affect property owners on waterways such as Lake Minnetonka, which was scheduled for aggressive monitoring of invasive species, specifically zebra mussels, during the summer months; the inspections have now been cut. It is interesting to note that this is the first state government shutdown that has affected the DNR.
Some retail owners are seeing an impact. Small business owners located near closed state parks as well as the state capitol are facing lost revenue during the usually busy tourism season. Start-up business funding obtained through the Minnesota Department of Employment and Economic Development (DEED) and business loans that require recording of security interests in personal collateral are also on hold.
Future real estate development in the Twin Cities may be affected by potential spending cuts to the Metropolitan Council. If the legislature passes the latest budget plan at the end of the shutdown, the Met Council will lose 85% of its 2012-2013 transit funding, resulting in reduction and elimination of many bus routes, especially those in suburban areas.
Already the state is losing its creditworthiness; Fitch Rating downgraded Minnesota’s bond rating Thursday meaning that once the shutdown is over, the state will be paying higher interest rates to borrow capital for road improvements and other construction projects. The current shutdown is far-reaching and will continue to have an increasing impact on area businesses if not ended promptly. The last shutdown, in 2005, concluded on the 9th day. Please send us your comments about how the shutdown is having an impact on your firm.