St. Cloud will use federal relief to offset lost revenue

ST. CLOUD – While mayors across Minnesota are unveiling grand plans for how to spend millions from the federal American Rescue Plan, St. Cloud's finance director is being frugal.

And for good reason — the funding likely will cover only the income loss the city has seen and continues to see since the pandemic began.

"We're over $8 million in lost revenue," Ruth Wipper, St. Cloud finance director, said of the 2020 budget. "We are still losing revenue. You can see all of our parking lots are still empty. The hotels are far below full occupancy. A lot of the bars and restaurants aren't full or aren't open as much."

That means city income from parking systems, hotel taxes, food and beverage taxes and even electrical franchise fees is down as fewer people go downtown, stay in hotels and rent space at the convention center. The city is even losing money from decreased water sales as big users like hotels, restaurants, schools and campuses continue to see less-than-typical use.

St. Cloud is slated to receive about $16.5 million from the federal aid package passed in March, significantly less than other regional centers, Wipper said.

Minneapolis is anticipating $271 million in federal aid. With it, Minneapolis Mayor Jacob Frey is proposing affordable housing and pilot programs such as guaranteed basic income. Duluth is anticipating $58 million — and its mayor recently laid out proposals for affordable housing, infrastructure projects and new ventilation at City Hall.

The federal government's formula for funding distribution had to do with unemployment and income-related factors, but Wipper said officials "never shared the secret sauce with us directly."

So instead of piloting new programs, the city likely will use the funds to recapture lost revenue. "We have a deficit in costs that exceeds the amount of federal dollars we're receiving," Mayor Dave Kleis said. "So we're very cautious. We'll be plugging those holes."

The loss of income forced the city to implement a hiring freeze and delay road construction projects. It also had to use property taxes to cover bond payments in the parking system budget — the first time the city has done that in the 34 years Wipper has worked there.

"We can't keep levying property taxes into the parking system. That had to be a one-time deal," she said. "As a philosophy or a policy, those types of things should be paid for by the users of the system, not the property taxpayers."

Income losses linger and continue to affect this year's budget and the preliminary 2022 budget officials are planning to unveil in August.

City officials are aware that construction costs and other costs will continue to increase, including wages for part-time staffers, whose pay is written into ordinance.

"We couldn't open wading pools this summer because we couldn't find staff," Kleis said. "We anticipate fully opening those facilities next year, but we're going to have to adjust pay."

So instead of dreaming of new programs, Kleis is pragmatic about the federal funding.

"That's where we are — ensuring survival," he said. "This is a one-time appropriation. Using it for new programs would be fiscally irresponsible unless we had a way of paying for those going forward."

Jenny Berg • 612-673-7299