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Another day older, another dollar in debt

The flood residue that remains is debt. Take the case of Ken Towers. He and his business loans were scheduled to retire in 2001. But then the flood damaged his home on the English Coulee and his Italian Moon and Wendy's restaurants on South Washi...

The flood residue that remains is debt.

Take the case of Ken Towers. He and his business loans were scheduled to retire in 2001.

But then the flood damaged his home on the English Coulee and his Italian Moon and Wendy's restaurants on South Washington Street. Repairs required $998,000 in loans and no longer having retirement on the horizon.

"The flood was very difficult on our family, but there's no use in me complaining about it," Towers said. "No one had control over what happened, and the same thing happened to many people."

So many people that the Small Business Administration issued an estimated $258 million in low-interest disaster loans in the metro area. Homeowners added $167 million in debt and businesses took on an additional $91 million.

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"It's hard to find any business without an SBA loan," said Tim Fairchild of American Federal Bank in East Grand Forks. "A lot of businesses not only suffered physical damage but also economic damage from the time when their business was down."

Virtually every homeowner touched by floodwater qualified for an unsecured $10,000 SBA loan. Even those who suffered "only basement damage," as the common phrase was then, were set back at least $10,000 to $20,000.

There also were uncounted conventional loans, often taken to pay off high-interest credit cards by residents who underestimated the cost of rebuilding.

Even having flood insurance and only 15 percent of residents did was no guarantee of being made whole. Gary and Stephanie Larson of East Grand Forks received $200,000 in flood insurance, $50,000 of it for contents, when their Sherlock Park home was totaled.

But they also borrowed $60,000, setting them back 10 years financially. The loan was needed because they rebuilt the house that they had purchased from Gary's grandfather, Whitey Larson of Whitey's Cafe fame. Sentimental reasons and affection for the unique architecture prompted them to rebuild everything except the basic frame. It was more expensive to move and remodel than if they had built it new.

"We wouldn't have done it if it was just any house, but it was Whitey's house and important to keep it," Stephanie said.

The move of the house to the south end was costly in another way. Annual taxes and specials are now $5,000, compared with $1,200 when the house was in Sherlock Park.

Still, the Larsons are pleased with how things worked out.

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"Some people are still a little bitter how things went, but most East Siders have moved on," Gary said. "A lot are in better homes, but they're poorer, too. I had to borrow less than a lot of people."

Stephanie aches for others whose homes were destroyed.

"Our family was young enough to financially recover," she said. "Some elderly who lost everything that's a whole different story."

The extra debt is a burden on the community. Easing the pain is that SBA rates were less than half of conventional rates. Over many years, the savings are significant.

For instance, Towers took out a 3.8 percent SBA loan for his home, and a 4.0 percent SBA loan handled 85 percent of his business needs. A city-issued, partly forgivable business assistance loan handled the other 15 percent.

"Having an SBA loan for my businesses meant that I could have a bottom line," Towers said. "Could I have made it taking out a conventional loan? Probably not."

Towers said personal debt lowers discretionary income, and dining out is a discretionary expense.

His restaurants having added another Wendy's since the flood are faring OK, he said. But his South Washington stores aren't at their pre-flood levels, partly because the residential growth is on the south end of town and partly because of competition.

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"Our population is about the same as before, so the size of the pie is about the same," he said. "But with all the restaurants added since 1997, that pie is cut into another 47 pieces."

So, will he be able to retire soon, as he hoped 10 years ago?

"If it works out, fine. If not, well . . ."

-- -- --

Joining debt as the other major setback from the flood is the loss of the older, self-contained, low-lying neighborhoods close to the river.

Economically, the emptying of the Lincoln Park and Sherlock Park neighborhoods meant a loss of starter homes. And, culturally, it meant "a loss of some of our historical charm," said Vince Ames, whose Grand Forks home on Plum Street was lost to the dike.

"Every house was different, with a lot of them built in the 1940s and 1950s. Fancy and plain were next door to each other. Big and small were next door to each other.

"The city lost some of its uniqueness. We've become more mono-cultured in many ways."

Ames and his wife, Val, moved more than a mile from the river, west of Altru Hospital. The new neighborhood is feeling more like the old neighborhood every day.

"As the neighborhood ages, it's gathering charm," Vince said.

The Larsons also missed their old neighborhood along the river near downtown. It had mature trees and sidewalks, which often are scarce in new developments. But neither one would go back without a guarantee that it would be flood-proof.

"I miss it, but I don't know if I'd ever feel safe again," Stephanie said. "I love the feeling of security of being out here.

"We're getting used to a new normal. It's not better. It's not worse. It's just different."

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