Small businesses owned by women and people of color in St. Paul are bracing for tougher times after a recent federal rule quietly changed how equity programs operate. Earlier this month, The U.S. Department of Transportation ended the practice of automatically recognizing women and racial minorities as “socially disadvantaged” under the federal Disadvantaged Business Enterprise (DBE) program, a key pipeline for small firms seeking government contracts.
At a Small Business Mayoral Forum held at Pimento Jamaican Kitchen, moderators R. Lynn Pingol and Robert Harper pressed Mayor Melvin Carter, Rep. Kaohly Her, biophysicist Yan Chen, and businessman Mike Hilborn on how the city plans to protect minority- and women-owned contractors amid national rollbacks.
Now, even businesses already certified will have to resubmit paperwork proving disadvantage on an individual basis. Legal experts say the move effectively pauses or dismantles key parts of the DBE system. For St. Paul’s Black, Brown, and women-owned firms, that means more paperwork, delays, and uncertainty about eligibility for city or state projects tied to federal funding.
According to a 2025 study analyzing over 7,000 city contracts totaling $2 billion, only 13.9% of St. Paul’s contract dollars went to minority- and women-owned businesses.
“That number you just described represents a doubling of the number we inherited. We’ve doubled our spend with minority- and women-owned businesses. And I think that’s something incredible,” Mayor Carter said. He added the city is expanding outreach to identify eligible vendors and revising bidding requirements to focus on “lowest responsible bidder” rather than simply the lowest bidder.
Small business owners said government contracting can be intimidating.
“That number you just described represents a doubling of the number we inherited. We’ve doubled our spend with minority- and women-owned businesses. And I think that’s something incredible.”
“I don’t do any government contracts at all. It’s very intimidating,” said Mike Hilborn, owner of RTF Services, a pressure-washing business that hires candidates with criminal records. “The way you get a contract is by writing the RFP so only your company qualifies.”
Rep. Kaohly Her praised the city’s new Permitting and Utilities, Licensing, Inspections Engine (PAULIE), an online platform designed to streamline permitting, licensing, inspections, and complaints. Still, she said bureaucracy remains a challenge.
“We still have a disconnect between what you need from PED [Planning and Economic Development] and DSI [Department of Safety & Inspections], public works,” Her said.
Biophysicist Yan Chen criticized the city for signing off on rent control without enough housing development, saying high housing costs hurt business growth.
“If our city can provide housing for small business owners during a transition period, then we can get rid of a minimum wage,” she said.
Her added that she is reconsidering how the 2023 increases in minimum wage and paid sick leave affect small BIPOC-owned businesses.
“Sometimes it’s rare for politicians to go back and examine what they passed. It doesn’t mean we don’t care about justice or fairness, but we have to be honest about what’s working and what isn’t,” she said.
Forum moderators and business owners stressed that staffing requirements and compliance costs can be crushing for small firms.
“My competitors who are not as big as me are going to get crushed,” Hilborn said.
The St. Paul mayoral election will take place on Nov. 4, 2025, using ranked-choice voting.
Correction note: A previous article implied Rep. Kaohly Her wanted to close the Rondo Library. Her office clarified that she supports extending library hours and improving efficiency, not closure.
Clint Combs welcomes reader responses at combs0284@gmail.com
Feels like a classic “good intentions vs. real-world friction” mashup: the city’s talking progress (supplier diversity, PAULIE), but small business owners are basically saying the process and compliance costs still hit like a truck especially with workforce rules and contracting that feels rigged. If candidates can’t translate “equity + efficiency” into simpler procurement and clearer departments, this election’s going to be all about who can cut the red tape without walking back the goals.