Most businesses getting rent help in flood zone are sticking around

CEDAR RAPIDS - More than 320 Cedar Rapids businesses - including banks, bars, lawyers, hair stylists, artists and a dental implant laboratory - received more than $5 million in free rent in 2009 as incentive to move back to flooded buildings.

A year after the free rent was distributed, at least 10 percent of the businesses are gone, a Gazette review shows.

Despite the losses, however, government officials and business owners say the Business Rental Assistance Program, funded with federal money through the Iowa Department of Economic Development, succeeded in luring businesses back downtown and helping landlords pay for repairs. For every business gone, almost nine remain.

“It was a lot of help,” said Van Smiley, owner of Advanced Blasting.

Smiley, who does sandblasting of industrial equipment and plastic blasting of antique cars, moved into his office at 3939 Bowling St. SW five weeks before the June 2008 floods. He helped the landlord restore the building without missing a payment until last fall. His $11,400 in rental assistance was disbursed in October 2009, just in time to keep Advanced Blasting going.

The Gazette called or visited this fall most of 327 Cedar Rapids businesses that received from $900 to $50,000 in free rent to move into a flood-affected building. The review showed 87.5 percent of the businesses were still in operation, either in the flood-affected building or in a new location they chose after the six-month qualification period.

Another 10 percent of the businesses no longer were operating at the flood-affected buildings. These businesses were confirmed defunct by owners, landlords or neighbors, or The Gazette could not reach them by phone or e-mail.

The remainder of the businesses could not be verified based on the names and addresses provided by the economic development department.

“Given the number of businesses we were able to assist, it was a very effective program,” said Peggy Russell, program manager for economic development's Disaster Recovery Office.

The $5.2 million in rental assistance to Cedar Rapids businesses is part of about $20 million the economic development department has allocated to date for businesses in Cedar Rapids. City officials anticipate requesting more funds from the $85 million the U.S. Department of Housing and Urban Development gave Iowa after the 2008 floods.

The rental assistance program came after other local and state programs that helped businesses recover from the devastating floods, said Scott Swenson, senior case manager for the Cedar Rapids Area Chamber of Commerce Long-Term Recovery Initiative. “The second generation (of aid) helped with working capital needs and debt reduction,” Swenson said.

Six months of free rent was a godsend to Lance Finch, part-owner of Dimensions Dental Studio, at 214 Fifth Ave. SW. The dental implant laboratory returned in January 2009, but was struggling to pay off credit cards maxed out buying new equipment after the floods.

The company's rental assistance, which totaled $9,000, came in December 2009.

“That was the most perfect time of anything I can remember,” said Finch, of Fairfax, who co-owns the business with Mark Whittaker of Iowa City.

Criterium-LeTellier Engineers was among a handful of start-ups that used the rental assistance to open in a flooded building. “I was looking at different opportunities,” owner Lance LeTellier said about considering whether to move his inspection and engineering business downtown in spring 2009. “The rent assistance kind of helped tip me in that direction.”

LeTellier rented a cubicle in Corridor CoWorks, an office-sharing space at 222 Third St. SE, for six months. When his $1,050 in rental assistance expired, he went to a cheaper membership that does not include a desk, but allows for use of meeting rooms and other benefits. He now operates mostly out of his house.

Free rent for six months was not enough to keep some businesses afloat.

Popular restaurant Blend, 221 Second Ave. SE, received $21,150 in September 2009, but closed in January. Toyne Services and Toyne Trucking got $21,000 each, but the new tenant of 420 Hawkeye Downs Rd. SW has torn down the Toyne signs and parked four abandoned vehicles out front.

Five Seasons Paint & Drywall, 1207 G Ave. NE, not only lost its inventory of expensive wallcoverings under 5 feet of water in 2008, but owner Randy Feaker couldn't afford the higher wages he had to pay to keep workers after the flood.

“One thing after another, it just snowballed,” Feaker said.

He received the maximum $50,000 in rental assistance in September 2009, but ended up closing shop when the money was gone. Feaker now works for someone else. “It's a lot less stress,” he said.

Sylvia Padzensky's strip mall in the 600 block of Center Point Road NE was nearly full of tenants who received rental assistance in 2009. All but two are gone now. “They all got their free rent and then moved out,” Padzensky said.

Rent checks were made out to both tenants and landlords so the money had to be used for rent.

State and city leaders said they are glad the business failure rate isn't higher in Cedar Rapids. Of 905 flood-affected businesses the chamber surveyed earlier this year, 172 - or nearly 20 percent - had closed. Compare this to Grand Forks, N.D., which reported 55 percent of businesses did not survive after the epic flood there in 1997.

Flooded businesses receiving rental assistance