Stagnant Payne-Phalen corridor building momentum through local businesses again

While standing on a sidewalk along Arcade Street in St. Paul's Payne-Phalen neighborhood, Jack Byers points toward the opposite ends of the road, dotted by small storefronts.

"This is where people went," said Byers, executive director of the Payne-Phalen District 5 Planning Council. "There were no shopping malls."

Once a major route for activity, the street, also known as Hwy. 61, bustled. It was a nexus for people passing through St. Paul, where routes splintered off toward other parts of the state and Midwest.

Over the last few decades, though, economic growth and development sputtered and efforts to recruit new businesses for vacant storefronts have been challenging.

Business owners, and the organizations that support them, express a feeling of abandonment. Instead of investing in Payne-Phalen, government spending, more public safety and commercial development went into St. Paul's Grand Avenue, Summit Avenue and Snelling Avenue, they said.

"If you bring up the East Side of St. Paul to most people, they're like, 'I don't go over there,'" said Thomas LaFleche, who with his wife, Molly, owns Brunson's Pub on Payne Avenue. "There's a lot to see over on the East Side of St. Paul, but they just don't want to come because of the perception of crime. So who fixes that? I'm not sure. That's a tough one to figure out."

In Payne-Phalen, chain stores don't last long so economic leaders say they need more locally owned businesses to move in. Residents appreciate seeing owners behind the counter, walking down the street, or at other places in the community. Several current business owners grew up in the neighborhood.

"That's one of the recipes that needs to happen," said Molly LaFleche, who grew up along the corridor and is now president of Payne Arcade Business Association.

In the absence of investment, business owners and small community associations have rallied together, using lending programs and shared knowledge to boost economic activity. Starting in 2025, the intersection of Arcade Street and E. 7th Street will undergo road improvements, including street resurfacing, sidewalk repairs, curb updates and refreshed bus stops.

Byers hopes the reconstruction makes Arcade a shopping destination again. For it to become that though, vacant storefronts must be filled, said LaFleche, who is optimistic about the chance to redefine the district through new businesses.

Economy stagnation

The 1980s and 1990s leveled a series of major economic blows to the Payne-Phalen district, according to a 2002 report by the University of Minnesota. The report was done for the Payne-Phalen District 5 Planning Council, a nonprofit neighborhood improvement organization that works as a go-between for local government officials, businesses, community organizations and residents.

Whirlpool Co. closed its factory on Arcade Street in 1984 and moved production to Indiana, leaving 740 factory workers without jobs. A brewery near Payne and Minnehaha Avenue — originally belonging to Hamm's before being operated by Stroh's — shut down in 1997, resulting in another 365 jobs lost. And that same year, Canon Conveyor eliminated 165 jobs with the closing of its plant on Johnson Parkway.

The economic hemorrhaging continued into the new millennium. Globe Building Materials closed in 2001, and the next year, Maplewood-based 3M Co. announced it was cutting production by a third at its East Side factory, resulting in about 400 and 500 lost jobs, respectively, for the area.

Meanwhile, internal rifts and scandals among the planning council's members harmed progress and reputations. In 1990, district staff ousted the board president. In 1997, district staff members were found signing their own paychecks. A few years later in 2001, the district temporarily lost funding after hiring a controversial local activist as its new executive director.

Community boosters say chronic underinvestment from outside the neighborhood has stalled the area's economic prospects.

Most recently, the pandemic, civil unrest following the police killing of George Floyd, and food delivery apps and e-commerce platforms cutting into the profits of restaurants and locally owned retailers made momentum feel impossible.

The LaFleches, who also are part of the ownership group at Chances Tavern, a few blocks north of Brunson's, feel fortunate.

"People have really rallied behind us because they believe in what we've been doing," Thomas LaFleche said. "We've been lucky in that regard. A lot of people in the neighborhood, either they like what we have for food or they like what we're doing for the community, or both."

People living near Brunson's Pub don't always have extra income to spend on dining out or shopping at local clothing stores, he said. Meanwhile, the locally owned small businesses depend on residents to spend their disposable income.

It's a cycle of economic struggle, he said.

Twenty-eight percent of households in the community have annual income below $35,000, according to MN Compass.

Of all cost-burdened households in the community, 60% of those who rent in the community are spending more than 30% of their income on housing, while nearly one-quarter of homeowners in the area face the same financial situation.

Economic activity began to shift when mostly white families moved out of the community, Byers said.

In 1980, census data shows 95% of people living in the district identified as white. By 2020, people who identify as white made up less than 30% of the community. The current majority of residents — at 42% — identify as Asian or Pacific Islander.

Within the three major corridors of Payne-Phalen — E. 7th, Arcade Street and Phalen Boulevard — most of the small businesses are located at the corners of Payne and Case, Arcade and Maryland, and Arcade and Case. Over the past few decades, those business have increasingly become owned by people of color.

Success stories show a brighter future

Cerresso Fort, a former professional boxer and St. Paul native, first opened Sir Boxing Club in 2015 in a strip mall at the intersection of Arcade and Wheelock. In 2022, he relocated the gym into a 100-year-old brick building on the corner of Arcade and Case.

Fort said he could have opened a boxing gym in Las Vegas. He once trained there with Floyd Mayweather Sr. Financially, he said, he believes he could have made "hand over fist."

"But I didn't look at it like that," he said.

Fort, who attended nearby Harding High School, wanted to build a safe haven and outlet for kids living on St. Paul's East Side. He and his wife, journalist Georgia Fort, own a house there.

"My thing was to continue to build the East Side, continue to build where I've been," Fort said. "If I can make it stronger, help it and be a pillar in my community, it's a great thing to do."

Several beloved businesses — like Tongue in Cheek, East Side Pizzeria, Caydence Records & Coffee and Port & Starboard Tattoo — are among those providing stability and commerce to the neighborhood as it fights for greater vibrancy.

More are coming. Some have already arrived. Part of the vision is investment in mixed-used projects aimed at boosting commercial space for entrepreneurs and increasing affordable housing.

The St. Paul Housing and Redevelopment Authority, or HRA, has approved multifamily housing projects at 520 Payne Av. and 1570 White Bear Av. that will include public spaces on the ground floor, said Nelsie Yang, HRA board commissioner and council member of St. Paul's Ward 6 that includes Payne-Phalen neighborhood.

Face to Face, a St. Paul nonprofit serving young people experiencing homelessness, will soon begin construction a four-story building with 20 affordable-housing units at 1170 Arcade St., which is a few blocks off the main thoroughfare. Retail space is also now available on the ground floor of the new affordable housing Nova SP apartment building at 848 Payne Av.

Dining projects are also on the upswing. Checker Board Pizza has a second location brewing at 1136 Payne Av.; Juche, a Korean-influenced dinner spot, has opened in the former Cook St. Paul location on Payne Avenue; and Asian cuisine eatery Far East Restaurant, located across from Sir Boxing Club, is undergoing building improvements.

Most small capital improvement projects are being achieved with funding from the state's Main Street Revitalization program, St. Paul's Neighborhood STARs program, Ward 6′s Year Round STAR, and East Side Neighborhood Development Center's Friendly Storefronts, Yang said.

Bringing more to the East Side

The Latino Economic Development Center, or LEDC, is spending $10 million to bring more Latino-owned businesses into Payne-Phalen through Plaza del Sol, a two-story building being converted into space for restaurants, a small business incubator, a commercial kitchen, event hall, classrooms and offices.

The plaza's ownership and tenants struggled during the pandemic. This led LEDC to acquire the building in August 2020, saving it from foreclosure. LEDC is moving its headquarters into the building once the project is completed next spring.

Ramsey County is providing $90,500 for the project through its Critical Corridors program. St. Paul's Neighborhood STAR program is kicking in an additional $80,000.

The project is creating "a positive ripple effect" and bringing more people and businesses to St. Paul's east side, Yang said. In the meantime, the city will continue making more HRA-owned property available for redevelopment.

"The trend we're seeing in redevelopment is a huge focus to creatively boost entrepreneurship, incorporate public use of space inside buildings, explore co-ownership, and have a good or service that speaks to the diverse community we have in the East Side," she said. "These trends are reaffirmation that the progress made on our business corridors is aligned with the community's interests, and with that comes continued growth and transformation to our business corridors."