St. Louis County facing $15M-20M revenue shortfall, provides temporary property tax relief

DULUTH – St. Louis County officials are projecting a $15 to $20 million revenue shortfall this year in addition to the roughly $3.1 million in COVID-19-related costs racked up to date.

"We definitely are going to have to look at the size of our government," said County Administrator Kevin Gray, who has instituted a hiring freeze that leaves 65 positions open to save the county $3 million this year.

Gray said the county will also evaluate future vacancies, "aggressively" manage all non-COVID spending and limit capital expenditures as officials brace for the blows to their $407 million budget.

On Tuesday, the St. Louis County Board voted unanimously to delay late penalties on property taxes for businesses and homeowners who suffered a financial hit from the pandemic.

Those seeking temporary relief by pushing their payment deadline from this Friday to July 15 will have to apply by May 31 and must be able to prove they're facing hardships caused by COVID-19. Others are expected to pay their taxes in full this week. Those who escrow their taxes aren't eligible, nor are properties that have had a delinquent payment in the past decade.

"We are doing the best we can to help our community to the extent we statutorily and financially can," St. Louis County Auditor Nancy Nilsen said at Tuesday's meeting.

Matt Hilgart, government relations manager for the Association of Minnesota Counties, said at least 36 other counties in the state have provided a similar form of relief. The county collects property taxes twice a year for the state, cities and school districts, some of whom have said not receiving the revenue they're due in June could cause immediate cash flow problems.

So far, Nilsen said the county has received $75 million in property taxes ahead of Friday's deadline. In recent years, St. Louis County collected $133 million by May 15.

Property taxes make up $145 million of St. Louis County's 2020 budget, and officials expect a larger percentage of delinquencies this year even with extensions for some payments. County leaders also anticipate a decrease in other tax revenue streams, investment revenue and permitting and service fees.

"And in the long-term, the largest cost drivers for counties will absolutely be the social safety net services they provide," Hilgart said. "In times of need, we see our programs grow busier."

County officials are hoping to be reimbursed by the state for costs directly related to their response to the public health crisis, such as temporary shelters for the homeless and personal protective equipment for first responders. Right now, St. Louis County is using its $51 million reserves to cover some of those expenses.

The state received nearly $1.9 billion in emergency aid from the CARES Act passed by President Donald Trump in March, but only municipalities with more than 500,000 residents received direct federal assistance. In Minnesota, just Hennepin and Ramsey Counties met those population marks, leaving the state to determine how to allocate a portion of its aid to local governments.

In a letter to state legislators last week, St. Louis County Board Chair Mike Jugovich urged lawmakers to distribute at least $315 million to Minnesota's 85 other counties.

Already, Gray said he is preparing for impacts to the county's 2021 budget, which could be even more affected by sustained losses of tax revenue and potential cuts to state or federal funding streams.

Uncertainty looms over the future as St. Louis County makes short-term plans to address the pandemic's fallout with an eye on future financial implications. A COVID-19 vaccine or effective antibody tests could stave off some of the blows to local government budgets.

"That's going to be swinging the tide of financial long-term decisionmaking," Gray said. "In the short term, we're confident we can weather the storm."

Katie Galioto • 612-673-4478