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COVID changes how money is spent across Southeast Minnesota

State Auditor Julie Blaha hosted a discussion among city, township and county leaders across the region.

Main Street, Stewartville
Main Street in Stewartville is seen in this undated file photo. State Auditor Julie Blaha held a meeting Monday to talk about the state of main streets in Southeast Minnesota.
Post Bulletin file photo
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ST. PAUL — Funding the business of cities, townships and counties took a hard turn during the COVID-19 pandemic.

On Tuesday, Minnesota State Auditor Julie Blaha kicked off her 2022 State of Main Street Listening Tour with a focus on Southeast Minnesota, talking to leaders from cities, townships and counties across the region.

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Focusing on the changing revenue patterns governments faced during the pandemic, Blaha asked whether the post-CARES Act and American Rescue Plan Act days were going to be a hard change for local government units that got used to federal bailout dollars.

"Is this going to be a cliff, or a crash landing where you need some foam on the runway?" Blaha asked.

Blaha said communities would be wise to spend their COVID funding on items that will expire once the pandemic diminishes, so the funding does not go to programs or staffing that will continue after the funding source dries up.

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Julie Blaha
Julie Blaha

"We got another chunk coming, and there's a dogfight over it," said Red Wing Mayor Mike Wilson. "I think it should be COVID-related. We're sitting good, but I just want it to be spent wisely."

Rochester Mayor Kim Norton said she was glad to see Blaha going around to the different regions and getting a feel for how local governments are fairing in the current economic climate.

Each local government unit faces unique challenges, Norton said, but there are also challenges that are universal. One such universal challenge is how some revenue sources come with restrictions on how to spend the money. That, she said, became evident during COVID.

Alison Zelms, Rochester's city administrator, pointed to the sales tax revenue that is often tied to road and bridge projects.

Mike Wilson.jpg
Red Wing Mayor Mike Wilson

"There's a need for flexibility for the local sales tax revenue," Zelms said. "Sales tax revenue is great, but revenue and costs don't always go together."

Showing each local government unit has its own concerns, Wilson talked about the geographic spread of Red Wing and how that contributes to a difficult task of providing services such as fire protection ranging from the south end of the city all the way up to the Prairie Island Indian Community.

Of course, the nuclear plant at Prairie Island gives the city an advantage, providing a revenue stream most cities don't enjoy. But that's an advantage that's been changing as well. The city used to get 75% of its local revenue from the taxes derived from the plant, but now only gets 52% of its local revenue from the plant.

"It's like sticking a knife in you slowly," Wilson said.

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He'd like the city to reduce its fund balance from more than 100% down to 40%.

Winona County Finance Director Patrick Moga said following the dollars during the pandemic has been a unique task in the last couple of years.

For example, CARES Act money often was a lump sum in and several small expenditures right back out. However, APRA funds stick around longer as payments are made over time.

Of course, not everything is COVID-related. Moga noted that Winona County was nearly out of debt, but the construction of a new jail means one set of debt is being replaced with another.

"Our debt is way up," Moga said.

Repeating a common theme, Norton of Rochester said, "There are tight restrictions on what we need to spend our funds on. When you're talking about infrastructure, we need flexibility to get money and use money how we need."

Kim Norton, Rochester Mayor
Kim Norton

Blaha said the point of the listening session tour — sessions focusing on the Twin Cities metro and southwest Minnesota were held Wednesday, and sessions for both northeast and northwest Minnesota will be held Friday — bring together the expertise and perspective of local government leaders with data from the Office of the State Auditor. Her office plans to compile and release the results of the discussions in March.

In the end, Blaha congratulated the local government leaders on surviving the recent upheaval of their budgets.

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"You all have gone through one of the most challenging economic times in U.S. history," she said.

Brian Todd is the news editor at the Post Bulletin. When not at work, he spends time with his family, roots for the Houston Astros and watches his miniature dachshund sleep, which is why that dog is more bratwurst than hotdog. Readers can reach Brian at 507-285-7715 or btodd@postbulletin.com.
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