Millions of Flood Relief Dollars Sit Untapped

Millions of dollars in relief loan money sit unclaimed more than six months after heavy flooding hit northeastern Minnesota.

Most of the $12 million allocated by the Legislature for disaster loans to homeowners remains unclaimed while another $15 million in loans for flood-affected businesses remains untouched, the Star Tribune of Minneapolis reported Sunday.

Of the more than 1,700 homes in northeastern Minnesota damaged from the floods, only about 240 owners have received state or federal aid totaling about $5.5 million, government records show. Only 5 to 8 percent of the affected homes had flood insurance.

The reasons flood victims aren’t claiming aid vary. Some didn’t know about the loans, others haven’t applied because they knew they couldn’t pay them back, and others are waiting to see if the government will buy their property.

Sen. Tony Lourey, DFL-Kerrick, said he’s frustrated by what he calls “a huge underutilization” of the flood dollars because he knows people still need help. He said he’s willing to propose changes to the rules but wants more information first.

“We need to look deeply to what the resistance has been, and I don’t have the answer to that,” he said.

There’s been little resistance from state, tribal and local governments that needed to repair washed-out roads, bridges and sewers. About $35 million in federal money has gone to local governments for repairs to flood-damaged public infrastructure, which was estimated at more than $100 million, according to the Federal Emergency Management Agency.

Alan Johnson’s home and photography studio in Thomson sustained about $60,000 in damage. He was denied a Small Business Administration loan so he’s been spending his savings and relying on private donations.

“Even if you go out and buy 2-by-4s, the money adds up,” he said.

Still, Johnson hopes to get a $20,000 loan from a Minnesota Housing Finance Agency program that can provide up to $40,000 for home repairs. Those loans are no-interest and forgivable after 10 years, and can be tapped only if the applicant has been denied an SBA loan.

It’s not for lack of effort that flood victims don’t know about the loans, said MHFA spokeswoman Megan Ryan.

“We have extended the deadline twice, sent out direct mail, phone calls, done door knocks,” Ryan said.

Business owners have also received only limited federal and state money. State officials in July counted 107 businesses that sustained an estimated $3.6 million in damage. Thus far, the federal SBA has received 29 applications for business disaster loans, approving seven totaling $278,000.

The Legislature approved $15 million for interest-free business loans, but Department of Employment and Economic Development officials said the approval process has been slow because of the need to be transparent.

“These are public dollars,” DEED spokesman Blake Chaffee said. “This is not going to be a next step, next day interaction.”

The Legislature allocated $10 million for home buyouts. Flood victims can get anywhere from 50 to 100 percent of the appraised value of their home prior to the flood. So far, 97 homeowners have expressed interest, according to the Minnesota Homeland Security and Emergency Management division.

Ken Grey is hoping for a buyout of his home near Sturgeon Lake. He borrowed about $28,000 from the SBA, although the estimate for repairing his home is closer to $149,000. He said he’s done some repairs but his home is still a shell of what it was.

“Do we want the buyout, or do we want to fix the place up and go into debt into our eyebrows?” he said. “I’m 56 years old. Our house was paid for. Now I’m looking at the possibility of going back to square one.”