Processing Your Payment

Please do not leave this page until complete. This can take a few moments.

October 20, 2008

From the ashes | Milo businesses and officials struggle to redefine the downtown after a major fire

By Seth Harkness

Only a month ago, Milo Town Manager Jim Gahagan’s thoughts about revamping his town’s downtown district had to do with new lamp posts, fresh façades and maybe some shrubbery.

Gahagan, like other members of this small Piscataquis County community 30 miles northwest of Bangor, was contemplating how to apply a $13,000 state planning grant the town had recently landed to spruce up Milo’s Main Street.

But Sept. 14, a day before a public meeting was scheduled to discuss the downtown initiative, those ideas went up in flames.

Early that morning, a fire authorities later said was the result of arson ravaged an entire block of 100-year-old wooden buildings in the heart of Milo’s center. No one was hurt, but the devastation left many merchants in a state of shock, unsure if they will stay in business. Local leaders were forced to shift from thinking about façade improvements to rebuilding one third of their downtown.

Milo, a town of 2,500, is not the first community in Maine that has recently experienced a catastrophic blow to its local economy, nor would it be the first to recover from such a setback. Six years ago, fire razed about one-quarter of the downtown businesses in Lincoln (see “Disaster club,” below), leaving a vacant block on Main Street that the Penobscot County community only this year finalized plans to redevelop.

And this July, one of the biggest structure fires in recent Maine history leveled Washburn and Doughty’s 800-foot-long shipyard building in East Boothbay. The same month, another fire consumed three buildings in the center of Northeast Harbor during the height of summer tourist season.

In the aftermath of these sorts of disasters, two levels of decision-making often occur as business owners and communities respond to drastic economic setbacks. First, individual proprietors must evaluate their financial circumstances and decide whether to rebuild and try to remain in business. Second, a devastating fire often requires a municipality to purchase vacant lots from owners who decide not to rebuild, to try to re-assemble the symbolic and commercial center of their communities.

At this point, Gahagan said Milo town officials are focused on cleaning up after the fire and have not yet evaluated its full financial effects. Without a doubt, though, he said the fire would singe Milo’s town budget: “Obviously there’s going to be some loss because taxes are going to be recalcuated without the building there.”

No tears

If there’s one pre-requisite to a successful recovery for a town in Milo’s position, it may be the cohesiveness and determination of the community. In that regard, Gahagan said he is certain Milo residents will do all they can to repair the charred block in the midst of Main Street.

“We’re not sitting here crying in our beer,” Gahagan said. “We’re going for it.”

The fire in Milo started in back of Hobnobber’s Pub shortly after someone broke into the business that had opened only three weeks earlier. By the time the flames were extinguished, the fire had destroyed the pub as well as Milo True Value Hardware, a downtown fixture for 50 years, and had severely damaged the Milo House of Pizza. Three other inactive businesses — a flower shop, game room, and historic movie theater — were also burned.

Along with the buildings, about half of which were insured, the fire also meant 15 to 20 jobs were lost, the town manager said. Though not in league with the Washburn and Doughty fire, which put 65 people temporarily out of work, the loss was significant in a county where the unemployment rate was 7.5% in 2007, nearly three points above the state average.

A few days after the fire, Milo received a visit from Gov. John Baldacci and a team of state, county and federal officials offering assistance. The group included Department of Economic and Development Commissioner John Richardson and representatives of the Maine Department of Labor, Eastern Maine Development Corp., U.S. Small Business Administration and the Maine Small Business Development Center.

The long roster of agencies offering help was in part related to the scale of the fire. When destruction reaches a certain scale, the governor may petition for federal disaster funds, which Baldacci indicated he would do for Milo. “A lot of this triggers on it being designated a disaster area,” said Victoria Burpee, executive vice president of the Eastern Maine Development Corp. “That allows access to funds not otherwise available.”

Each of these groups had something to offer, mostly in the form of low-interest loans for businesses looking to rebuild and even for new businesses interested in moving downtown. Richardson said state and federal programs could also help cover the difference between a business owner’s actual loss and whatever they recover from insurance.

The commissioner also said the town could qualify for additional money to cover demolition costs, and promised to double the $13,000 planning grant to help with the new, larger planning task ahead.

Learning from peers

Weeks after the Milo fire, most business owners were still undecided about what to do. Those with insurance had more options than those without, but even those whose losses were covered debated their next move.

For instance, Barbara Crossman, who owned the 7,000-square-foot downtown hardware and sporting goods store for 14 years along with her husband, said she was not sure if the couple would rebuild. Crossman and her husband had been trying to sell the store for two years before the fire. Though it’s been a profitable business, Crossman, 58, said the couple never planned to own it for more than 10 years and this may be their opportunity to retire.

In general, whether businesses survive devastating setbacks such as a major fire depends on multiple factors, from insurance coverage to personal circumstances and the availability of government support, according to a University of Maine economics professor who studied small businesses for 30 years. Rarely are any two businesses facing the same situation.

Even for business owners who can afford to rebuild, Professor James McConnon said one of the greatest obstacles to recovery is trying to maintain cash flow through a period when fixed costs continue to mount and revenue has dropped to zero.

“If they don’t have enough cushion then they’re in a situation where, as these bills come due, or even inventory ordered before the fire, then they don’t have the cash,” he said.

In some cases, McConnon said owners may have business interruption insurance to bridge this gap. Other times creditors may be willing to negotiate debt obligations to help owners meet expenses while getting back on their feet.

In any case, a business that moves quickly to rebuild will minimize problems. That was certainly the approach taken by the owners of Washburn and Doughty, the East Boothbay shipyard that suffered $30 million in damage when sparks from a cutting torch touched off a fire earlier this summer. The company laid off two-thirds of its 100-person work force immediately after the fire.

Two months later, the yard was back to 90 employees and had begun building two new tugs outdoors while simultaneously constructing a new 35,000-square-foot construction building where workers will relocate this winter.

The company’s quick recovery was aided by the fact that the shipyard had applied for state and federal permits to expand its facility shortly before the fire. But those who were involved in the recovery said it was the company’s singular focus on rebuilding and the close cooperation of employees, town and state officials and the shipyard’s customers that allowed Washburn and Doughty to bounce back.

“This company was committed to staying in business,“ said Deb Elliot, a field representative with the Department of Economic and Community Development who arrived at Washburn and Doughty hours after the fire started and stayed three weeks to help expedite permitting for the rebuilding effort. “It was a matter of what do we have to do and how.”

The multi-front effort included fast-tracking of permits by state and local officials. Moran Towing of Connecticut, which holds contracts with the shipyard through 2010, was flexible on delivery times of its new boats. Employees used to building tugs took on the work of clean up and salvage operations. And the fire provided a chance for Washburn and Doughty to redevelop two separate parcels of land the company owns into one integrated whole. When complete, the resulting shipyard should be more efficient and a better use of space than the old facility.

“A fire can be the end of business or it can be a new beginning,” Elliot said.

Though it’s been a much longer wait, Lincoln town officials say they, too, expect to emerge from disaster in a stronger position. The redevelopment plan for Lincoln, which is expected to be completed by 2010, would more than double the square footage that was lost to the fire. When the project is complete, Goodwin said she believes Main Street will be a more vibrant place than it was before the blaze. She said the new development will complement existing businesses in its architectural details and boost downtown foot traffic.

Town officials in Milo believe they can accomplish a similar transformation. Gahagan, the town manager, said the rebuilding effort could be an opportunity to re-orient Main Street to better utilize views of the nearby Sebec River. He said his initial thoughts ran to a terraced park but that the details would be worked out through a community planning process, the same one that was originally meant to focus on façades and flowers.

“That planning grant, we’ve kind of redirected, it’s taken on a whole different meaning,” he said. “As tragic as this is, the opportunities here are great.”

Seth Harkness, a writer in Portland, can be reached at editorial@mainebiz.biz.

 

Disaster club

For business owners still grappling with their losses, sorting through options after a disaster can be overwhelming, according to John Lawrence, president of the Mount Desert Chamber of Commerce. In July, Lawrence began helping business owners affected by a fire that caused $2.7 million in downtown Northeast Harbor.

"When it's all coming at you at once, it certainly is confusing," he said.

As Lawrence examined the various programs, he found many of them overlapped or had narrow eligibility requirements. To help business owners, he put together a matrix showing what different agencies can and cannot do. So far, Lawrence said only one owner has committed to rebuilding.

While money available through government aid to business owners usually has to be repaid, communities often can also qualify for grants when they are seeking to rebuild entire districts.

In Lincoln, two separate fires, the first accidental and the second arson, burned a total of 34,000 sq. ft. of downtown commercial space along Main Street in January 2002. Only one property owner chose to rebuild after the fire. The town appealed to its federal and state delegations and received $700,000 over the last six years in order to purchase and demolish several burned buildings.

In one of these locations, the town built a lakeside gazebo with donations collected from around the state and the nation. At a larger location across the street, the town held onto the property for six years while trying to find a developer who could carry out a project that fit with the community's vision for Main Street. Finding a viable investor was difficult, especially when the area's largest employer, Eastern Pulp and Paper Corp., was foundering. The first two developers who entered into agreements with the town went bankrupt.

Earlier this year, Lincoln signed a deal with a nonprofit developer, Penquis of Bangor, to build a new Main Street building with commercial space and 24 elderly housing units. The building may also become the new location for the Lincoln town offices.

It took patience on the part of town officials to find the right investor, but Interim Lincoln Town Manager Lisa Goodwin said she feels it was worth the wait. "We wanted control over what went in there," she said, referring to the empty lot on Main Street. "That's what we refer to as the hole and now we're going to fill it."

Sign up for Enews

Mainebiz web partners

Most Recent

Most Recent

Comments

Order a PDF