Minority-Owned Firms Seek Leading Role In Rebuilding Businesses Damaged In Riots

By Maya Rao Star Tribune

WWR Article Summary (tl;dr) For starters, U.S. Bank and Wells Fargo are pledging to use minority-owned contractors in erecting branches that were destroyed.

Minneapolis

Riots after the killing of George Floyd destroyed Black and immigrant-owned shops in Minneapolis and hollowed out their neighborhoods. Months later, Twin Cities business leaders say minority-owned firms should be leaders in reconstructing what was lost.

The Lake Street Council is referring owners of damaged businesses to contractors owned by people of color. Target has hired Noor Companies, led by a Somali-American entrepreneur, to rebuild its store on East Lake Street.

U.S. Bank and Wells Fargo are pledging to use minority-owned contractors in erecting branches that were destroyed.

“How do we use this as an opportunity to build the capacity of smaller women-owned, minority-owned businesses?” said David Mortenson, chairman of Mortenson Construction, one of the country’s largest contractors based in Minneapolis. “It’s not going to do any good if we go through a rebuild process and a bunch of big Caucasian-owned construction companies come in and do the work.”

Yet many obstacles exist. Unlike the Vikings stadium and other large projects that can make a coordinated push for minority participation, the rebuilding involves hundreds of private property owners with their own agendas.

Minority-owned construction firms, which are more likely to be small, also describe difficulties receiving bank loans, breaking into white people’s long-established networks, and competing on price with larger white-owned firms that can do the work for cheaper due to economies of scale.

Moreover, they say, most minority-owned firms are not unionized even as many major projects require companies to use union labor.

“What happened on Lake Street with the destruction of the businesses and the need to rebuild created a market demand for companies like me, but that spike in the market demand does not come with ... eradication of barriers for minority contractors,” said Nawal Noor, the Somali-American owner of Noor Companies.

While it’s still too early for many contracts to be awarded for reconstruction, in recent months business leaders have looked more closely at how to ease barriers for minority-owned construction firms to advance in the field overall. Though the private marketplace is harder to track, a 2017 study found that just 2.8% of state procurement dollars in the construction field went to minority-owned businesses -- and just .02 % to Black-owned firms -- a far lower rate than the study’s projection based on availability.

Native contractor Nancy St. Germaine, who owns Raven Construction, doesn’t see direct racism in the industry, especially by the larger contractors, but “I think it’s probably more cronyism, familiarity and just the fact that there’s a certain level of growth needed to sort of exist in that world.”

She’s a consultant for the Lake Street Council who refers riot-damaged businesses to minority-owned firms, and thinks it’s a “key time” to introduce such them to larger general contractors. “If you don’t have the access to capital, then you just can’t quite get there.”

Calvin Littlejohn founded TRI-Construction in north Minneapolis in 2001, gradually growing with work on major public projects like stadiums. It’s now rebuilding a Family Dollar destroyed by riots on the North Side and in talks with other businesses damaged in the uprising. Every Thursday, Littlejohn joins a conference call of construction leaders to talk about rebuilding and obstacles for minority-owned firms in the industry. TRI-Construction is larger than most of its Black-owned counterparts -- it did nearly $10 million in business last year -- but still struggles with capital.

Littlejohn noted that larger firms often benefited from intergenerational wealth that Black families were denied during decades of housing discrimination and other systemic exclusion.

“Banks lend to people that don’t need money who are a safe bet,” said Littlejohn. “If you need money, you can’t get money.”

Littlejohn once took factoring loans, in which a lender paid his invoices quickly at a high interest rate. Now he works out agreements for clients to give him accelerated payments -- weekly, instead of once every one or few months.

He said companies like his have chased opportunities to be the lowest bidder on public projects that have goals for hiring minority-owned firms, but can quickly go out of business trying to compete on price with larger contractors that can get supplies and services cheaper. He recalled a lender once even questioned why he should give money to Littlejohn when other Black-owned contractors had failed for those reasons.

Last year’s collapse of Minneapolis-based Thor Construction, one of the nation’s largest Black-owned construction companies, has also opened up a void locally. Mortenson and Thor showed what could happen when a larger company partnered with a smaller one to help it grow and win projects, said Littlejohn, “and so as [Mortenson] was looking for another partner, we got brought in.”

Mortenson has a team of representatives working pro bono in riot-damaged areas to counsel companies trying to rebuild, and in some cases connecting them with minority-owned firms such as Castilla Glass to do the work.

Ken McCraley of KMS Air Duct Cleaning said he’s talked to some owners about landing contracts to rebuild after the riots but has no definite work yet. He believes the Black construction field is small because contractors are often asked to sign project labor agreements on public and large commercial projects requiring union workers. Minority-owned firms said many don’t participate in the union in large part because of the higher overhead that is harder on smaller, less established businesses.

And McCraley noted minority-owned firms that want to hire mostly people of color have a harder time doing so through unions that are still predominantly white.

McCraley said his firm lost $150,000 in work with the St. Paul School District in recent months. After winning a construction bid, he wrote to the district in June that he did not sign off on its project labor agreement because it would preclude him from making a profit by mandating that the company pay the cost of a second benefits package to the union’s health and benefits fund for every employee on the project. And he said the union doesn’t train people to do air duct cleaning.

McCraley hired a civil rights lawyer to propose an addendum to such agreements that would allow small, certified minority- and female-owned firms to receive an exemption from using union labor by agreeing to pay their workers prevailing wages and benefits for the job.

Noor said none of the organizations that require union labor understood this would be such a barrier for minority-owned contractors. Like McCraley, she’s advocating for such an exemption to be used more widely, saying, “It’s a paradox: you’re creating a [minority participation] goal here, but you have a project labor agreement that excludes most of the people you’re trying to include.”

Bogar Construction owner Marvin Smith said big projects that try to provide work to African Americans often seek out Black employees instead of Black-owned contractors. As the vice president of the Upper Midwest chapter of the National Association of Minority Contractors, he maintains that if more Black-owned companies like his were hired, those firms could use the additional revenue to bring in more contracts and retain Black workers long term.

“If we are to create success for young African American men and women to get into the construction trade,” said Smith, “companies like mine need opportunity to grow.”

___ Distributed by Tribune Content Agency, LLC.

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