Save the Savior
The Northside Residents Redevelopment Council was formed from the ashes of the 1968 riots along Plymouth Avenue. The nonprofit group was designed to spark economic progress in the struggling neighborhoods of Near North and Willard Hay. The organization is credited with building hundreds of houses and helping dozens of struggling homeowners keep their homes out of foreclosure.
But in recent years, as several marquee projects have flopped, NRRC has seen its own economic prospects dim. The Plymouth Plaza Shopping Center, which NRRC took control of in the mid-'90s, has been plagued by vacancies and crime. The organization has repeatedly failed to make good on roughly $1 million in city-financed loans granted to refurbish the distressed strip mall.
Likewise, NRRC's ambitious plan to build condominiums, commercial space, and townhomes on a parcel of land along Plymouth Avenue went belly-up last year. And a four-home development that was part of the Heritage Park project along Olson Highway ended with two of NRRC's properties in foreclosure.
The end result has been spiraling debt and financial insecurity. As of last month, the nonprofit group and its affiliated organizations owed more than $1 million to various creditors, according to city documents.
In August, unable to meet payroll, NRRC temporarily laid off its entire staff. While the employees were reinstated within a week, the action sufficiently alarmed city officials that they stripped NRRC of its funding to provide foreclosure prevention services in north Minneapolis. At a time when foreclosures are decimating North Side neighborhoods, NRRC terminated its three employees in this field.
But a potential financial panacea now looms for NRRC. In July, the University of Minnesota signed an agreement to purchase the Plymouth Plaza Shopping Center for $1.1 million. The parcel of land is to be the centerpiece of the University Northside Partnership, the U of M's ambitious, multimillion-dollar initiative to bolster health care, improve education, and reduce poverty in the area. The real-estate deal is expected to be approved by the university's Board of Regents next month.
"This sale to the university is a lifesaver for NRRC," says Bob Miller, executive director of the city's Neighborhood Revitalization Program, which provides funding to the nonprofit group. "If this deal falls apart, this organization cannot survive."
The Plymouth Plaza Shopping Center has struggled since its inception in the mid-'70s. The black-owned shopping center was supposed to be a symbol of uplift for Near North's African American community, and was initially named the King Shopping Center in honor of the slain civil rights leader.
But by the time NRRC took over the strip mall two decades ago, the grim economic realities of the neighborhood had manifested. The shopping center had twice gone belly-up under successive owners. Nobody wanted the property.
NRRC acquired it for just one dollar. In 1991, the city's fledgling Neighborhood Revitalization Program allocated $1.45 million in loans to rehab the commercial property. NRRC created a for-profit subsidiary, the Plymouth-Penn Corporation, to run the shopping center.
It took five years for the rechristened shopping center to open for business. The grand opening arrived on May 15, 1996, and featured such dignitaries as then-City Council president Jackie Cherryhomes and then-Hennepin County Commissioner Sandra Hillary. Tenants such as Barbara's Salon of Beauty and Wash-n-Ware Laundromat signed up, but there remained a gaping hole in the strip mall's commercial lineup: an anchor grocery.
The Plymouth Penn Corporation immediately fell behind on its loan payments. A July 1997 Minneapolis Community Development Agency memo expresses exasperation with the company's failure to make good on the loan, noting that it had paid NRRC property-management fees of more than $17,000 so far that year, rather than pay down its loan.
"It is clear that there is no good faith effort here to honor their debt to the MCDA," the memo notes. "They are simply waiting to see what our reaction to all of this will be."
The shopping center finally secured its anchor tenant, Snow Foods, in 1998. Hazem Obeid, a Palestinian immigrant, says that he and his business partner were lured to the area by city officials. "They wanted this store to be running and to service the neighborhood," says Obeid, who had previously operated a convenience store in south Minneapolis. "They knew that I run a clean business."
But the presence of Snow Foods did little to improve the shopping center's economic prospects. The city made repeated attempts to keep the project afloat. In 2001, the agency provided a $130,000 grant to repair the mall's roof.
That same year, it amended the loan agreement to accommodate the company's struggles. Under the terms of the new deal, once the Plymouth-Penn Corporation made good on its original $338,000 loan, the second loan of $502,000 would be forgiven. Plymouth-Penn Corporation was given until August 1, 2007, to finish paying down the initial debt. "We have had trouble collecting on those funds since day one," says Miller. "They would never come current on it."
A constant problem for the shopping center has been open-air drug dealing in the parking lot. This criminality is particularly galling because the strip mall is located next to the Minneapolis Police Department's Fourth Precinct headquarters.
"I suspect every drug dealer in the Twin Cities knows that if you want to go to the safest place to sell drugs, it's next to the Fourth Precinct," says Sherrie Pugh Sullivan, NRRC's executive director. "It's so bad that everyone on our staff and our board has been told, 'If you drive by the shopping center and you see four people standing outside, call 911.'"
Snow Foods owner Obeid says that when he tries to disperse the drug dealers they retaliate with vandalism. Three of the store's windows have been shattered in just the last year. Worse, there's been a slew of shootings, including two people gunned down right behind Obeid's office wall. "For me to get rid of the crime outside is impossible," he says. "Unless it is a policeman that enforces the law, it's not going to work."
But Obeid argues that the strip mall could have been salvaged if run effectively. Seated in his small office on a recent morning, he grows exasperated in recounting his dealings with the shopping center's management. Obeid says that on three occasions he referred potential tenants to the Plymouth-Penn Corporation, but there was no follow-up. Furthermore, he says, the company repeatedly billed him for maintenance costs beyond his standard rent, despite performing no such services. Obeid pulls out one such bill for $30,777 that he received earlier this year from Plymouth-Penn Corporation. "They did how much?" he asks rhetorically. "A big zero."
On Friday, October 12, NRRC held a farewell party for the three staff members who provide foreclosure-prevention counseling in north Minneapolis. A couple of deli plates were ordered from Buca di Beppo for the occasion.
NRRC would no longer offer such services, despite the fact that such programs are direly needed right now, particularly in north Minneapolis. Last year, the number of foreclosures in Minnesota nearly doubled, from 6,466 to 11,207.
Two months earlier, NRRC had been stripped of city funding for the program. The Home Ownership Center, which administers the program on the city's behalf, had learned that the nonprofit group temporarily laid off its staff at the beginning of August. The Home Ownership Center was also troubled by NRRC's repeated refusal to provide adequate documentation of its finances.
"Our primary concern as we've been working with NRRC and the city on this situation is ensuring that consumers have access to high-quality foreclosure-prevention programming," says Julie Gugin, executive director of the Home Ownership Center. In the meantime, the Home Ownership Center is funneling the grant money to Twin Cities Habitat for Humanity, which already provides foreclosure-prevention counseling in south Minneapolis. For at least the next six months, Habitat will cover the entire city.
The dissolution of NRRC's foreclosure-prevention program is reflective of the organization's broader financial struggles. Over the past year, city officials have become increasingly worried about the group's financial stability and have hounded NRRC to take corrective action.
Last October, Theresa Cunningham, a senior project coordinator at the city's department of Community Planning and Economic Development, warned in an email that "we are very concerned about the financial viability of the organization." Cunningham asked to have NRRC's 2005 financial statements audited and detailed information provided to the city regarding NRRC's staffing, debts, and services.
The audit of the 2005 books, conducted by the accounting firm of Mahoney Ulbrich Christiansen Russ, made clear that the city's concerns were justified. It found that NRRC's net assets had dropped from nearly $200,000 at the end of 2004 to negative $250,000 by the end of 2005. "During 2006 NRRC experienced cash flow difficulties and was delinquent on the payment of several debt obligations," the auditor wrote.
The blighted shopping center wasn't NRRC's only problem. The nonprofit developer had gambled on an ambitious development, dubbed Karamu West. (Karamu means "a joyous place to gather" in Swahili.) The development was slated to occupy two blocks on the south side of Plymouth Avenue between Penn and Russell Avenues and include 50 condominiums, 8,000 square feet of commercial space, and eight townhomes. NRRC had secured funding from numerous sources, including a $700,000 federal loan.
But as the start of construction neared, it became clear that the project was too financially tenuous to proceed. After working on the Karamu West project for more than three years, NRRC pulled the plug last year.
The Greater Metropolitan Housing Corporation was among the project's funders, contributing roughly $300,000 to the development. "We typically get paid at the start of construction, and this project just never went through," says Carolyn Olson, the nonprofit financing group's president. "We hope NRRC has money someday to pay us back."
Sherrie Pugh Sullivan doesn't act like a woman under fire. Seated in her office on a recent weekday afternoon, she wears a yellow blouse and black leather pants and laughs often while discussing her six years at the helm of NRRC.
She bristles at criticism of the proposed University Northside Partnership. The ambitious public-health initiative has become a lightning rod in certain quarters of the black community. The Minnesota Spokesman-Recorder newspaper and the cable access show Black Focus, in particular, have been withering in their attacks.
The argument against the U of M project, in essence, boils down to suspicions that it's merely an elaborate 2007 version of the Tuskegee Experiments, in which black sharecroppers in Alabama were denied treatment for syphilis under the guise of scientific research.
"Black leadership wants to offer Black people, particularly Black children, to the joint experimental laboratory being built by the University of Minnesota and Hennepin County that will probe the Black mind in order to move us in the 'right' direction," wrote Ron Edwards in a 2006 Spokesman-Recorder column.
Pugh Sullivan says such analogies are preposterous. "Black people are smarter than to think, imagine, fantasize that a Tuskegee Experiment could happen in Minneapolis," she says. "We are not caught in time warps. We are bright, creative, thinking people."
She also disputes the notion that the only reason the project passed muster is because it's in NRRC's financial interest to make it happen. "We went through one of the most intensive community processes to get to this," she says, noting that two different community referendums were held on the project. "I feel, and I think the board feels, we have a clear mandate."
She says there's a simple reason that NRRC was forced to temporarily lay off its staff at the beginning of August. The Home Ownership Center had failed to provide the funding for foreclosure-prevention services that NRRC was entitled to receive. Over the first eight months of 2007, the nonprofit had tapped roughly $70,000 from other sources to make up for the funding gap.
She argues that, given NRRC's track record of success in a difficult neighborhood, the city and the Home Ownership Center should have worked with the group to solve its financial and administrative problems. "It was a quick, punitive action with no vision, insight, or sensitivity to the plight of people on the North Side," she says. "This is ground zero. There are no more dots. It's just a blob up here of foreclosures. There's not one block you can drive down in this neighborhood and not see a foreclosed house or a boarded property."
In July, the NRRC met with city officials and U of M representatives to discuss the pending sale of the shopping center. One major hurdle was the Plymouth-Penn Corporation's continued failure to make good on its loan from the Neighborhood Revitalization Program. Earlier in the year, the corporation had made a $35,000 payment, bringing it to within $37,619 of clearing the 12-year-old debt. Under the terms worked out in 2001 with the city, the Plymouth-Penn Corporation needed to pay that off by August 1 in order to have the additional $502,000 loan forgiven. In fact, just the previous month, NRP had sent the company a "notice of default" laying out the terms of the deal.
But during the July meeting, Pugh Sullivan says that city officials assured her that the half-million-dollar debt would be forgiven—even if NRRC missed the August deadline. "We left that meeting all feeling like this is a good deal," she says. "We're moving forward."
Wilma McKinnies, chair of NRRC's board of directors, shares this recollection. "We didn't assume," she says. "We asked the question: Was it going to be forgiven? And they said yes."
City officials dispute this. "We did not ever assure them that the $502,000 loan was going to be forgiven," says Chuck Lutz, deputy director of the city's Community Planning and Economic Development office.
Regardless of who's right, there was one key person not in attendance at that meeting: NRP executive director Bob Miller. Since the loans were made through NRP, only his agency had the authority to nullify the terms of the loan agreement.
The August 1 deadline came and went without the Plymouth-Penn Corporation paying off the remaining $37,000. That's when it became clear that Miller had no intention of forgiving the $502,000 loan. In his eyes, the company should not be rewarded for repeatedly welching on its financial obligations. "They are in default," he says. "They had a time period to cure it. They didn't."
Get the This Week's Top Stories Newsletter
Every week we collect the latest news, music and arts stories — along with film and food reviews and the best things to do this week — so that you'll never miss City Pages' biggest stories.