Cities, counties debate best use of 'once-in-a-generation' recovery dollars

Afton could extend high speed internet to residents who have long gone without this modern necessity. Pine County wants to lure businesses by sending more residents to college and technical school. And Ramsey County plans to get a jump on its affordable housing shortage.

From small towns to major metro counties, Minnesota's local governments are taking stock of their biggest challenges — and hoping $2.1 billion from the federal recovery package could give them a boost in tackling the problems. While the rise of the delta variant could demand additional resources, local officials said the scale of the American Rescue Plan allows them to look beyond COVID-19.

"Counties see this, without a doubt, as a historic, once-in-a-generation opportunity to really invest in some of the transformational issues — and frankly challenges — we have had with our communities for quite some time," said Matt Hilgart with the Association of Minnesota Counties. "That's why you're seeing certain issues, like workforce, housing, infrastructure, mental health supports, rise to the top."

Some communities acted quickly on a portion of their dollars. Duluth approved a $58 million plan that spends millions on affordable housing and infrastructure. The St. Paul City Council voted last month to use more than $5 million largely to bolster their staff, including adding prosecutors, police patrols, homeless outreach workers and others. And Minneapolis has signed off on $102 million in spending, including the creation of a guaranteed basic income pilot project, small-business assistance and efforts to stem the rise in violent crime.

But communities are not facing the same mad dash they encountered last year with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, when they had fewer options for how to use the cash and rushed to get it out the door in a matter of months.

This time, they have until the end of 2026 to spend the money. Many local government leaders said they are asking residents for input, thinking about how to partner with other municipalities and hashing out the possibilities at county board and city council meetings.

And unlike during the last round of federal funding, several local officials said their businesses are not in crisis mode. Many businesses were on the verge of closing last year, and local governments channeled a significant portion of CARES Act dollars toward helping keep them afloat. That is less of a priority now, said Pine County Administrator David Minke.

The opportunity the money offers communities is clear, even if the planning has its challenges.

Dakota County Manager Matt Smith said they face the question of: "How do you put these dollars to the best use to make the community better in some significant, permanent ways in this next environment that we're going to be in?"

As local leaders debate that best use for the one-time money, they must also navigate federal guidance on exactly how they can spend the thousands, or millions, they receive.

"We probably still have more questions than answers" when it comes to eligible expenses, Rock County Administrator Kyle Oldre said.

The rural county with about 9,500 residents is set to get a total of around $1.8 million from the local aid portion of the federal legislation. A small amount has already been spent on county fair expenses, such as hand washing stations and cleaning supplies, as well as a fiber upgrade for two county-owned buildings, Oldre said. But they are also considering how to tackle bigger challenges, like improving the area's water system. Spending the money on aging, and expensive, wastewater and sewer systems is a common theme across the state.

While counties and larger cities got Rescue Plan money in May, many of Minnesota's smaller cities and towns just started receiving the cash at the end of July. The dollars are being rolled out in two waves, with half coming this year and the rest in 2022. The amount of federal aid, and local needs, differ greatly across the state.

Some communities, like St. Cloud, took a more than $8 million hit during the pandemic and need to use federal help to plug budget holes. But many county officials said they fared far better financially than they anticipated a year ago, as the pandemic was first sweeping the state.

"We had revenue loss, but not like some of the cities," Stearns County Administrator Mike Williams said.

Williams said Stearns and neighboring Sherburne County are working together to devote some of the federal dollars to a Promise Neighborhood program that helps families in an impoverished area of St. Cloud's east side. The county is also using American Rescue Plan dollars to expand broadband, hire two mental health professionals to respond to 911 calls and add "navigators" who will help community members apply for rental assistance and other aid.

"Some of these programs are unique to COVID, but I hope they have a long-term benefit, a long-term change in helping people out of poverty," Williams said.

Ramsey County Manager Ryan O'Connor told his board on Tuesday that the roughly $107 million they are getting sounds like an enormous sum. However, he cautioned, "When we think about it through the lens of transformative change, investment and being sure to make thoughtful choices about where you want to bet on the future — without creating 106 different $1 million fiscal cliffs — it does create a bit of a constraint very quickly."

The county's long-term goal is to use the federal dollars to expand the housing supply so people of all income levels can afford to live there — an aim it shares with Hennepin County, which is considering spending $46 million of its federal share toward affordable housing needs, officials said.

But during the pandemic, Ramsey County needed to expand its emergency shelter system for people who are homeless, including leasing Bethesda Hospital from M Health Fairview in December to operate as a shelter. Now commissioners, like elected officials across the nation, are trying to balance immediate financial demands with hopes for long-term investment.

"That's a careful dance," Commissioner Trista MatasCastillo cautioned last week. "To make sure that we're not displacing anyone, because we've done some really incredible work with standing up our shelters and they are in a good place. We certainly wouldn't want to just pull that rug out quickly."

Staff writer Liz Navratil contributed to this report.