The small businesses that suffered the most damage in the February 2025 water main break at 50th Street and Penn Avenue are not returning to the intersection.
“The city hasn’t offered a dime to anyone,” Andy Hersey, owner of Paperback Exchange shared with Southwest Voices. “The city's position is that they have no liability for the damage, even though they caused it.”
The City of Minneapolis denied the claims filed by tenants Terzo, Paperback Exchange, and Sparrow Cafe at the mixed-use building owned by Carroll Peterson on May 23, 2025.
“State law exempts cities from this type of unforeseen responsibility,” Ward 13 Council Member Linea Palmisano said.
The building owner feels differently.
“It’s their pipe that blew through our basement wall,” Peterson said.
The pipe that burst on Feb. 13, 2025 was installed in 1922 and pipes in the area were inspected in 2007. No concerns were noted at that time, according to a statement by the City of Minneapolis.
During the water main break, it took four hours for the water to be turned off which included accessing a water main shut off under pavement on 50th Street.
Peterson said there was $1 million in damages after the water main break forced water and soil into the basement of the building. Roughly 12% of that was covered by insurance, zero covered by the city.
“They have their attorney send a letter saying, ‘It’s not our fault. We have immunity. We’re not going to pay you. We’re not going to pay any of this,’” Peterson said.
The water main break clean-up included removing three truckloads of soil, 45 cubic yards, from the basement.
“It had to be removed by hand, in buckets,” Peterson said.
Peterson bought the building with his wife in 1985 and said the building would typically provide two-thirds of their income.
“Fifty-some people lost their jobs or their homes because of what the City did,” Peterson said. “The City did a lot of harm and hasn’t helped anyone.”
Palmisano fired back at claims the City did not show up for the businesses and homeowners that were impacted.
“We all showed up,” Palmisano said. “We worked on debris removal in ways that City Solid Waste shouldn’t be doing to help.”
According to Palmisano, the City’s bridge department worked overnight for a week to build an underground wall to support the building so restoration work could be done on the building.
“We moved literal mountains to assist at that point in time,” Palmisano said.
Hersey’s parents, who once owned Paperback Exchange, live very close to the bookstore and their house was also damaged by the water main break. Insurance covered some of the bookshop’s damages.
“It really covered a fraction of the loss that we suffered,” Hersey said. “My parents’ house, their insurance company never paid anything.”
Hersey said his parents’ basement is a mess. “We don’t know if the money will ever show up to get it fixed up again,” Hersey said.
Hersey said in late December 2025 he was still waiting for a call back from the State of Minnesota for assistance in getting insurance to cover damages at his parents’ house.
“I was sort of under the assumption that I’d hear something within a week or two, and it’s been four coming up on five months since we had that conversation,” Hersey said.
By February 2026, the State finally got back to him telling him no further action would be taken.
“It basically set us back five months in proceeding with trying to get the damage at their house covered,” Hersey said.
Palmisano communicated often with constituents about the water main break and related road closures through March 2025 in her e-newsletter.
“To my knowledge, none of these business owners took up our small business team on help or financing,” Palmisano said.
Hersey referred to that financing as “insulting.”
“They offered resources that would have been available to any small business in Minneapolis,” Hersey said. “You destroyed our business, but now you want to loan us money to fix it?”
Palmisano said she felt “terrible” for the businesses but any financial assistance offered to the businesses would have been seen as a “political decision.”
Peterson credits restoration company RestPro for bringing the building back to life.
“They cleaned, they threw away 15 dumpster loads of wet stuff,” Peterson said. “Everything came out nice, but we have put it back together now.”
Since putting up For Rent signs in the windows, Peterson has had a lot of interest from retail tenants but is looking for ones that “fit with the character and neighborhood.”
A new coffee shop in the former Sparrow Cafe location, 5001 Penn Ave. S, signed a letter of intent in February. The bookstore space will be ready to rent within two months and then the former Terzo space will be worked on. All the apartments are rented.
Theisen Renovation, 5005 Penn Ave. S., is the only business that stayed in the building.
“We’re good citizens, we’re taxpayers, we were helping, we were doing our part. We have done good things with that building since we bought it,” Peterson said. “I think we’re a credit to the community.”
Even though the City of Minneapolis denied wrongdoing, there was a precedent set in 2022 just west of Minneapolis for compensating property owners after a water main break.
The City of St. Louis Park offered reimbursement to 32 property owners after a water main ruptured twice in 2022. The City’s reimbursement program cost the city about $1 million, roughly $31,000 per household.
An outside consultant determined St. Louis Park was not liable for the water main break, similar to what happened in Minneapolis.
“Liability would have required that the city either caused the failure or had previous knowledge of circumstances leading to the break,” Jacque Smith, communications director for the City of St. Louis Park said. “Regardless of liability, the city recognized that this was a devastating and disruptive event for affected residents.”
The reimbursement program was administered by an outside vendor, Berkley Risk, which acted as a “neutral third party,” according to Smith.
Beyond the reimbursement program, City engineering and public works staff talked with the St. Louis Park City Council multiple times, resulting in a pilot to identify pipe locations that “are not yet leaking but are at a higher probability of failure,” Smith said.
The City also conducted a vulnerability assessment of the city’s full underground system, noting the risk of breaks and risk of impact should there be an underground break.
“Watermain breaks are not uncommon occurrences in St. Louis Park or across the nation. In most cases, they are quickly fixed and cause little or no damage to property,” Smith said.
St. Louis Park also mailed out a four-page special edition of the city’s newsletter in Dec. 2022, called “Beneath the Surface” to help inform residents about the city’s underground infrastructure after the water main break.
Palmisano said what happened in St. Louis Park reflected its priorities at the time.“That might have been the biggest ordeal going on, and it was seen that that would be a good use of their taxpayer dollars,” Palmisano said.
The City of Minneapolis released the following statement about its denial of claims for the small business owners at 50th and Penn back in May 2025:
“Neighborhood shops and restaurants are a lifeblood for Minneapolis, and the City puts tremendous effort into supporting the success of local businesses at every stage, from inception to growth and support when challenges arise. This includes making active investments in infrastructure like our water systems, which has made us more resilient and less prone to failure than average cities our size.
“When property owners are affected by a water main break like what occurred at 50th and Penn, we evaluate each claim thoroughly based on Minnesota law, while also encouraging claimants to file with their insurance providers and connecting owners to all additional available avenues for support.”
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