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John Myers, Forum Communications, Published July 01 2012

Some companies booming in Duluth flood aftermath

DULUTH, Minn. – The bright yellow ServiceMaster trucks are obvious signs of the professional cleaning going on at places like St. Luke’s Hospital in the wake of the region’s most expensive natural disaster on record.

RJS Construction crews seem to be everywhere around the Twin Ports these days as the Superior, Wis.-based company supplies crews for major reconstruction projects after the flood – filling in Duluth sinkholes and restoring water and sewer service to Thomson, Minn.

Menards sold out of sump pumps for a spell until more were shipped in. Dump-truck drivers are going full-tilt delivering gravel to fill washouts. Even unemployed workers could join in the windfall as temporary cleanup jobs open.

“The biggest winners in all of this are the small contractors who have been hurting so much because no one was building. There should be work for them now for a couple years,’’ said Jerry Kortesmaki, owner of London Road Rental Center in Duluth.

Kortesmaki rents equipment to those contractors and to homeowners, and he’s been hopping since the flood.

“Is it like Christmas for me? Not quite. Does it help? You bet it’s helped me,’’ he said. “At first it was pumps and fans and dehumidifiers and washers. … That’s starting to slow down now, but pretty soon, when people start to dry out and rebuild, they are going to need sheetrock jacks and painting equipment and tile-cutters. So we’ll see a second wave of business.”

Ironically, Kortesmaki rented out everything flood-related in his shop on the first day of the crisis only to go home and find his own basement a foot deep in water from a sewage backup.

“I had to go ask the neighbors for a pump,’’ he joked.

For people and companies ready to offer help, products and services, it’s clear the flood can be a boon.

“We sold all our pumps out that Wednesday, got more in Thursday and sold them out. ... But we are getting plenty more as we need them,’’ said Brian Kehtel, who works in the service and rental department at Acme Tools on Grand Avenue in Duluth. Kehtel said rental of tools like heavy-duty saws to cut through concrete and blacktop have been strong.

“All of our big saws are out. But we just a got a humidifier in for rental,” he said. “It’s been busy, but we still have things if people need them.’’

Shannon Clark at Rick’s Tree Service in Duluth said her crews are working both public and private jobs where the floods caused tree damage.

“We’re super-swamped right now,’’ Clark said. “First we did Jay Cooke State Park. Now, we’re doing the city of Duluth and city parks. We have a three-month contract with the city. We’re still getting to residential (calls) as fast as we can.”

Pete Weidman, president of Superior-based RJS Construction Group, said the deluge of flood-related projects has been more of a diversion of resources than a profit-generator. The company has a huge fleet of trucks, cranes and workers that could be redirected to flood related work quickly.

“We have relationships with our customers that allowed us to say: We need to slow down or shut down this job for 48 hours and go restore water to a community, and so we can get it done,’’ Weidman said. “It’s not really a windfall of new business for us. It’s really not about the economics of it. It’s about trying to help put the community back together.”

Economists say the influx of added business will be noticeable for the community for weeks, if not months.

“There can be a real economic boon right after disasters,’’ said Drew Digby, regional employment analyst for the Minnesota Department of Employment and Economic Development. “You’ve got new jobs opening up for the people who need the $8 and $10-per-hour cleanup work. And you’ve got dump truck drivers out here probably working ’round the clock. They aren’t just earning their usual $25 per hour paycheck. They’re getting time-and-a-half or double-time. That’s pumping a lot more money into the local economy.”

Even volunteers coming to town to help clean up are filling motel rooms and restaurants, Digby noted.

“There’s a lot of spending going on, and there will be for some time. Think of all the things that these people whose homes flooded are going to need to replace – not just appliances but clothes and carpeting and lumber and paint,” said Tony Barrett, economist at the College of St. Scholastica in Duluth. “Speaking as someone whose garage burned down and who had to replace what was in it … they’ll still be discovering things six months or a year from now that they need to replace.”

There is also a huge amount of spending on new public infrastructure, buying and installing new culverts, tons of gravel, blacktop and concrete. Because much of that will be replaced by federal and state dollars, the impact on local taxpayers, and thus the local economy, is softened – lots of new stuff without a lot of new local money.

Longer term unclear

Some economists have found that some natural disasters – Hurricane Andrew in Florida in 1994 and California earthquakes in 1995 – led to a stronger economy for those areas for several years after the event, with construction and employment higher than before the crisis. But others, such as Hurricane Katrina in New Orleans, left a scar that the local economy still hasn’t recovered from. Cedar Rapids Iowa, despite strong growth in recent years, is still recovering from its flood in 2008.

From a purely economics professor point of view, Barrett said, the idea that disasters can be a long-term economic boon for a community just doesn’t make sense.

“If it did, we would be blowing up parts of the city we want replaced on a regular basis. The long-term numbers just don’t add up,’’ he said. “For some people, this will be a real economic disaster as well as a natural disaster.”

Downtowns and parks and neighborhoods can be rebuilt after tornadoes and hurricanes and fires and floods. But the community’s overall well-being may not recover in all ways. Some people leave. The failure rate of businesses affected by disasters is higher after the crisis, even if they reopen at first.

“There’s a big transfer of wealth going on now,” Digby said. “For some sectors – construction, home repairs – there’s a big net gain. … But for the people who actually lost their homes or had significant damage, these are going to be huge, sometimes total losses of lifetime savings.

“Even if we get some (government or charitable) help for them, they will probably never be made whole,’’ he said. “In the end, with the social losses we’ve seen, and the personal losses … I think the net impact is negative.”

Digby also noted there is an unknown cost on many businesses directly affected.

But it’s the big impact on individuals that may hit hardest for the region.

“For the families that lost everything, the social and emotional losses, you just can’t make up for that,’’ Barrett said.

John Myers writes for the Duluth News Tribune