What Happens to Small Businesses During Light Rail Construction

This blog post is an expansion of a post I wrote for my blog, The City Space, a couple years ago. I know the Strong Towns audience will have good insight on the issues discussed here.

Four years ago, I sat in a small Caribbean restaurant called Caribe, in St. Paul, MN enjoying some phenomenal tostones and cuban sandwiches with an old friend and thinking to myself, “How did I not know about this place before? I’m definitely coming back soon.” A couple months later, I learned that the business had been forced to shutter its doors. What happened so suddenly that this beloved cafe had to close? If you’ve been following the public transit scene in the Twin Cities for the last few years, you know the answer: a light rail line was built in front of this business and hundreds of others on University Avenue. Getting to these diverse small businesses by car--and even on foot--became a serious challenge during the construction phase, thus many businesses saw a severe downturn in profits.

One of the central tenets of Strong Towns is the conviction that, “A transportation system is a means of creating prosperity in a community, not an end unto itself.” When our leaders initiate massive projects like light rail in Minnesota (and similar projects in plenty of other places), I’m sure they do have prosperity in mind, but it is part of a long-term vision of a better city many years into the future. A rail line is meant to lay the foundation for decades of growth. One of the goals is that once the construction is finished, profits will increase beyond their initial levels for businesses that are directly on the light-rail line or nearby. However, during the construction process, it’s hard to ask a business owner in an already-fragile economy to just “hold out” until that golden day comes. How should we handle situations where the long-term goals of one entity--in this case the government and the city--clash with the short-term, day-to-day existence of another--small businesses?

As Chuck has mentioned before, a Strong Towns approach favors development-oriented transit over transit-oriented development. I’m going to go ahead and say that in the example I’ve raised in St. Paul, MN, successful, robust development was already in place along the corridor. Setting aside the more detailed, contentious issues with the light rail project in Minnesota, in this particular space, I think we can at least agree that a rail line probably makes sense here, if it’s going to go anywhere. The light rail train stops at many key locations including the University of Minnesota, the State Capitol and of course, the businesses on University Avenue.

What should the government’s role be when it intervenes positively through a long-term project like this, but negatively impacts the livelihood of local businesses in the process?

In addition, the line doesn’t just promote prosperity for businesses, it commits to a long-term vision of ending auto-dependency--a vision I hope to see realized. But in the interim, when not everyone has shifted their lifestyles toward other modes of transportation and our public transit system is not yet fully built out to accommodate that shift, what happens to the businesses affected by this construction? What should the government’s role be when it intervenes positively through a long-term project like this, but negatively impacts the livelihood of local businesses in the process?

In Minnesota, the government spent $1 million on signage and ads to encourage patronage of the University Avenue businesses, and offered some $4.5 million in loans to businesses that could “prove financial hardship.” But dozens of businesses like Caribe still closed or had to relocate, even some businesses who received the government loans. In 2013, the Minnesota Public Radio reported that on average, businesses near University Avenue who were receiving government loans saw a 36% downturn in sales “during the height of the light rail project.” That’s huge for any business, but especially small ones like the barber shops, second-hand stores and delis that dot this street.

In addition to the government’s efforts, there are independent organizations like this one who tried to mitigate the situation with grants, loans and business consulting. It’s great to see local organizations taking a stand about issues that affect their community. However, those organizations won’t always be able to come to the rescue, not when they’re up against a massive, expensive government project like the light rail line. Nonprofits encounter funding issues and other roadblocks (pardon the pun) that make them an unsustainable solution to the negative effects of light rail on neighborhood businesses. So what is the solution? Do we stake our economic future only in the most hardy businesses who can withstand this severe decrease in profit during the temporary construction period? Do we hope that a combination of government and nonprofit compensation packages will mitigate the problem? Do we just let the businesses fail in the name of this bigger project?

I’m writing this because I want to hear the input of Strong Towns advocates who have seen this issues first hand. However, I also did a bit of research to see whether there were any best practices compiled. Here are some ideas gleaned from a 2006 report called Light Rail Construction: Mitigation of Business Interruption put out by Houston Tomorrow, which looked at tactics used during several successful light rail projects across the country:

  1. Ensure that the government commits to dedicating a percentage of all project costs toward small business loans. This tactic was implemented in Salt Lake City with some success.

  2. Unite local banks to create a dedicated loan fund for small businesses affected by construction. Albina Bank in Portland attempted this tactic, but, after failing to garner support from other banks, turned to a local community development financial institution (CDFI) to spearhead the project.

  3. Create clear, meaningful channels of communication between local government and business leaders. In Salt Lake City, an independent contractor served as the main point of contact between the government and businesses. In Dallas, a North Central Task Force was created to oversee the light rail project, engaging members of the community and government.

  4. Commit to keeping at least one sidewalk or street lane open for a majority of the project. During Portland’s light rail project, the government set guidelines that guaranteed this and other traffic flow goals possible.

Do these ideas seem logical to you? What are your ideas for making this transit-building process smooth, and what is your experience with light rail projects in the city where you live?


Rachel Quednau is a Midwesterner currently working to end homelessness in Milwaukee, WI. She draws from her experiences living in New York City, Washington, DC, Walla Walla, WA and Minneapolis, MN to help her build better places wherever she is. Rachel writes for her blog The City Space, and also for Urban Milwaukee. One of her favorite ways to get to know a new city is by going for a run in it.