Minneapolis Mayor Jacob Frey says filling $156 million budget hole may require up to 40 layoffs

Minneapolis would rely on furloughs, up to 40 layoffs and cash reserves to help fill an estimated $156 million budget hole left by the corona­virus pandemic under a plan presented Thursday by Mayor Jacob Frey.

"This unprecedented time calls for an unprecedented approach to our budget," Frey told the City Council during a roughly 15-minute presentation that kicked off efforts to revise the city's budget.

Frey's proposal is far from final and must be approved by the City Council. Tense, fast-paced negotiations are expected to unfold over the next 2 ½ weeks.

The coronavirus pandemic and the business closures designed to slow the spread of COVID-19 dealt a sharp blow to the city's finances. The exact figures have fluctuated as the city learns more about the virus. The latest estimates show it expects to lose roughly 10% of its $1.6 billion budgeted revenue this year

With fewer people coming to the city to work, parking revenue shrank. Water usage dropped. Tax revenue that would normally flow in after large events evaporated.

At the same time, the city also racked up unexpected costs responding to the pandemic, as well as the unrest that followed George Floyd's death. The city has not yet released a full accounting of how much it spent during those crises.

While some in City Hall expect this year's budget cuts to be painful, many are expecting the decisions for next year's budget to be even tougher.

Next year, the city will begin to feel the effects of property tax losses resulting from the riots that left more than 1,000 buildings damaged after Floyd's death.

"The decisions we make today must take into account current conditions but also be made with an eye toward the future," Frey told council members.

The city says it has already saved roughly $58 million by implementing hiring and wage freezes, as well as cutting some contracts and delaying some purchases.

Frey's proposal would use just under $58 million in cash reserves — nearly a third of the total available — to help plug the remaining $98 million hole.

The plan calls for roughly four to six days of furloughs for many city workers, with the possibility of laying off up to 40 workers, depending on how negotiations unfold. The city employs about 4,000.

Frey said he would seek to minimize cuts for firefighters, police officers and 911 dispatchers, whose shifts would need to be filled by others working at a higher overtime pay rate.

"Let me be clear: Adding furlough days here would actually cost more money, not less," Frey said.

The mayor's proposal also relies on a series of budgetary transfers. It includes, for example, a $6 million "rollback" for some housing programs, but also seeks to add $4 million from a housing board established in the 1980s. The mayor's office said it is trying to keep intact programs that provide "immediate service to residents with greatest needs" and programs that allow the city to qualify for additional public or private funding.

The mayor's plan also reduces the amount of money that comes from the Convention Center to the city's general fund, so the city can minimize unemployment costs that would come from layoffs there and boost the center's ability to host large, revenue-generating events when it's safe to do so again.

Frey stressed that the proposal is preliminary and "still in flux." He said the city is still analyzing the impact of resignations and early retirements, as well as the possibilities of receiving state and federal aid to offset costs from the pandemic and unrest.

Public hearings are set for July 14 and 22.

Many will be watching to see if City Council members, during that process, attempt to resolve the contentious question of whether the city should continue to employ police officers and, if so, how many.

Frey suggested that major policy decisions are best left for next year's budget. But Council President Lisa Bender said she expects discussion about public safety, particularly in public hearings.

"I think what we hear in these upcoming public hearings will likely help inform both this July budget and the one coming forward for the 2021 year," she said.

Liz Navratil • 612-673-4994