The city of Minneapolis could lose $45 million to $125 million in revenue from the business closures and other measures taken to fight the spread of the coronavirus, according to preliminary estimates.
That loss — which represents up to 7% of the city’s budgeted revenue — adds to the pressure on city officials, who must decide how to allocate money at a time when many residents are asking for extra help to cope with the financial fallout of the pandemic.
Council Member Steve Fletcher noted he was proud that Minneapolis is taking precautions and that people are “acting in the interest of public health.” But he also hopes the city will continue to take a close look at its finances.
“We need to proceed in a clearheaded way, knowing the costs, understanding that we are incurring real costs to look out for each other,” he said.
He added later: “When we look at adjusting our own city budget, we are talking about people, and it’s critically important that we keep our focus on that.”
The city’s budget office began working two weeks ago to predict the financial fallout from the coronavirus pandemic, and budget director Micah Intermill presented the early figures to a council committee Tuesday afternoon.
The city anticipates the largest decreases in local taxes that it would typically collect when large events, such as conventions or sports competitions, are held in the city. It anticipates hits to its interest on earnings, as well as to parking fees and utility charges, as more people who live outside Minneapolis stay at home rather than coming to work in the city.
The city has waived some license fees for businesses but anticipates it will receive those later in the year. There could be a decline in licensing revenue if some businesses close permanently, Intermill said.
Intermill noted that “much uncertainty exists now,” and the numbers could easily change, depending on the length and severity of the coronavirus outbreak. It could also depend on how long the city and state continue their emergency orders that limit the operations of bars, restaurants and other businesses.
“I’m in no way advocating one way or another as to which way we go on social distancing,” Intermill told council members. “I’m just explaining that has an impact on revenue.”
The city is also closely monitoring its coronavirus spending in hopes that it might eventually be able to get some expenses reimbursed by the state or federal governments.
An emergency declaration signed by Mayor Jacob Frey on March 16 allows the city to bypass its normal contracting procedures to get items needed to respond to the coronavirus.
Since Frey signed the order, the city has spent roughly $500,000 for emergency supplies, mostly for protective equipment for first responders, but also for cleaning supplies and additional equipment to help city employees work remotely, according to Lori Johnson, the city’s deputy CFO.
Intermill said the city has reshuffled some money to help with coronavirus expenses so far.
Intermill said Frey has notified city department heads that they shouldn’t expect budget increases next year but instead should expect something similar to the 2020 budget.
Council Member Lisa Goodman, who was in office during the last recession, cautioned her colleagues that she doesn’t think it will be that simple.
“I’ve been through this once before, and we’re not going to be talking about current service levels,” she said. “We’re going to be talking about major reductions in service.”
She urged the city to begin conserving cash and retooling existing city programs, noting that she worried about the financial hit to businesses and housing instability.
“We need to be working together, and thoughtful about how to hold up those who are most in pain right now while remembering that we might have to make choices ... putting other people in our city family at risk by laying off staff people,” she said.