How the Democrats tax proposal affects Minnesota
On Monday, Sept. 13, House Democrats released their tax proposal, which is supposed to pay for their $3.5 trillion spending plan. Among other things, the proposal raises the corporate tax…
Local government officials meeting by Zoom, under a tight deadline with a mandate to dole out billions of dollars as quickly as possible. What could go wrong?
As cities were proclaimed the front lines of COVID-19 relief, the feds did what they do best — hand out tons of money to make it better. Some $841 million in federal pandemic funding from the CARES Act fell into the laps of mayors, city managers and councilors across Minnesota last year.
The timeline for distributing the windfall was short and cities were restricted, initially, in how they could spend it. Common sense measures like tax cuts to help homeowners were off the table from the start. So was offsetting city losses due to the pandemic, such as revenue from shuttered driver’s license service centers.
Guidelines allowed city hall to bill for COVID-related costs like plexiglass dividers, laptops for employees working from home, protective masks, hand sanitizer and O.T. for police and fire. But that still left many municipalities with tens or even hundreds of thousands of taxpayer dollars burning a hole in their pockets.
“City councils are comfortable talking about streets, curbs and gutters, not handing out hundreds of thousands of dollars to businesses and families,” said one local elected official.
The pressure to rush dollars out the door and potential for reckless spending led the city of McIntosh to decline CARES funding altogether. One of just 12 cities to opt out, officials in the small northwestern Minnesota community concluded the program was a waste.
“We had masks donated to us and I already had hand sanitizer in my office for years,” said McIntosh City Clerk Melissa Finseth. “If the city needed to look for reasons to have COVID expenses, personally as the city clerk, I felt it would be a disingenuous expenditure. That is wasteful spending of taxpayer money. It isn’t free money, it’s taxpayer money.”
After scratching and clawing for every last allowable COVID expense, some cities got creative in how they allocated their bonanza by the Nov. 15 deadline, later pushed back to Dec. 31.
Maple Grove directed $53,360 to deploy park ambassadors who were “educating, informing folks about the best way to use the park system.” Lake Wilson’s fire department got a $9,443 washer and dryer “for when on accident scenes with COVID patients.” Anoka invested an unspecified sum on “utility carts for golf courses to keep one employee per cart” that led to “additional wear on the course and additional fertilizer was required to maintain courses with excessive cart use.”
Hector traded in a used John Deere along with $30,500 in CARES Act funds to procure a Bobcat for “emergency situations to assist ambulance crew with clearing out snow to get COVID patients out of their homes.” Bethel plowed most of its $38,000 into park improvements and bike trails because residents “only have one park right in town. We needed additional parking and improved the bathrooms for touch free facilities.”
These examples merely scratch the surface. Yet the Minnesota Department of Management and Budget (MMB) told American Experiment it “has not flagged any city” over CARES expenditures.
Lake St. Croix Beach City Hall got a $42,449 makeover with a “new HVAC system, touchless faucets, flushers and electrical switches, and a water bottle fountain installed.” Nearly all of Hanska’s $27,801 pandemic handout went to updating the muni bar. And Forest Lake took wasteful spending even further, with a $150,000 addition to the golf course clubhouse, something the city later rescinded following a public outcry.
“This money was earmarked from the federal government to help businesses and cities survive this pandemic,” said Blake Roberts at an Economic Development Authority meeting. “Not increase city facilities and amenities. That in my eyes is just plain wrong. That’s not what this money was intended for.”
About 22 percent of CARES Act funds spent by cities ultimately flowed to small businesses and nonprofits. Some communities went above and beyond. Chokio directed 100 percent of CARES funding — $29,307 — to small businesses, while Hutchinson passed on two-thirds of its allotment, nearly $700,000.
Many cities also provided financial assistance to food shelves, nursing homes and individuals in need. Moreover, dozens returned unspent funds to the county with Deer Creek sending back every cent of its $24,486 share.
In the end, the biggest beneficiaries were cities themselves. Cities banked more than one-third of their stash — $311 million — by collecting for the payroll of public health and safety employees already accounted for in their annual budget. Austin banked its entire federal allotment of $1,927,882 for “payroll costs related to public safety employees (fire and police) even if budgeted.”
COVID may be winding down, but the pandemic of government bailouts continues to spread. MMB will begin distributing a second round of local government funding from the $1.9 trillion American Rescue Plan Act this summer.