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The Minneapolis Council is set to approve plans for distributing the first chunk of the city’s ARP funds. Here’s where the money is going.

Minneapolis’ share of ARP funding is $271 million, though the city is planning to spend the money in phases, with the council set to approve the first phase on Friday. 

Minneapolis City Council
MinnPost photo by Jessica Lee
The process for spending the first phase of ARP money mirrored the city’s budget process — with the mayor outlining his priorities and the City Council offering amendments and signing off on the final plan.
The American Rescue Plan passed by Congress in March will dole out $350 billion to help local governments and shore up local economies across the United States. Minneapolis’ share of that money is $271 million: $135 million that’s already been sent and another $135 million that will arrive in May 2022.

The city is planning to spend the money in phases, with the City Council set to approve a plan to spend the first $89 million chunk of the money on Friday, with Mayor Jacob Frey putting forward a proposal for allocating the remaining $180 million later this year. Here’s what we know about where the money is going:

Prioritizing housing and economic development 

The process for spending the first phase of ARP money mirrored the city’s budget process — with the mayor outlining his priorities and the City Council offering amendments and signing off on the final plan — though on an abbreviated timeline, given the need to get the money out quickly. City staff presented Frey’s spending plans to council on June 9, followed by a public hearing on the plan on June 16. The council offered amendments to the plan at a Committee of the Whole meeting on June 23 and July 1, with final approval of the phase one funding expected on Friday.

Mayor Jacob Frey
MinnPost photo by Peter Callaghan
Mayor Jacob Frey
In his spending plan, Frey prioritized housing and economic development, with $65 million in total devoted to those two areas. Frey has also outlined plans to spend another $11 million of that first chunk on public safety, $5 million on public health, and $7 million to fill staffing gaps and help administer ARP funds.

The biggest single allocation in Frey’s proposal is $17 million for small business support and financial help with licensing fees. The money would go into the Minneapolis Recovery Fund, which small businesses can tap to help cover fees owed to the city from the onset of the pandemic through December of 2021; it would also cover the reduction of fees for businesses that were forced to close during the pandemic but now want to reopen.

The Minneapolis Recovery Fund would also aim for a more equitable distribution of money. As Frey’s proposal notes, during economic recovery periods “BIPOC entrepreneurs, especially Black-owned businesses, lag white entrepreneurs, having more difficulty obtaining capital to rebound.”

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Frey’s plan also recommends putting another $10 million into the city’s Commercial Property Development Fund, which provides forgivable, long-term debt capital for commercial real estate development and acquisition.

Frey’s spending plan also includes $28 million for housing, which includes $6 million to help address homelessness, including money for an encampment response, with $1 million for health and hygiene outreach for those living in tents, $2.5 million on programs for those transitioning out of homelessness, and another $2 million for a women’s shelter.

The plan also includes affordable housing pilots, in particular: a $1 million initiative to expand homeownership to low-income households; $5 million for the acquisition and rehabilitation of 75 or so single-room occupancy units; and $4.6 million for repairing and increasing the amount of scattered-site single-family public housing rental homes.

The $11 million set aside for police and public safety includes money for contracts with outside law enforcement agencies — mostly for the use of patrol and investigative personnel — and crime intervention programs, including several aimed at youth and violent crime “hot spots” in the city.

The plan also includes funding for expansion of the city’s Community Service Officer program, which takes students enrolled in law enforcement programs and working toward becoming licensed peace officers and hires them to support the Minneapolis Police Department, which CSOs “placed in locations throughout the city as eyes for the MPD and can also give a uniformed presence and assist citizens with issues,” as the plan notes.

Still another chunk of public safety money — $1.4 million — in Frey’s plan is dedicated to “civilianization” — the process of transferring certain responsibilities to civilian staff in order to free up sworn officers to focus on law enforcement.

Council additions

During the pandemic, Minneapolis’s revenue was down $280 million, according to city Budget Director Amelia Cruver. In response, the city cut its budget by over $80 million, spent over $50 million of its cash reserves, refinanced some debt, shifted money from capital projects to debt financing, and held over 300 positions vacant.

The ARP money goes a long way toward replacing that money, but it does come with stipulations, though they are less stringent than funding that came through previous rounds of federal aid. The money can be used to cover costs associated with the public health emergency, economic hardship linked to the pandemic for families, small businesses, and especially hard-hit industries like tourism and hospitality, as well as investing in infrastructures like water and sewer systems.

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ARP Act funds can also be used for sending bonuses to essential workers for the health and financial risks they faced, and using money to replace city revenue losses that hurt certain public services. Even so, not all of the prescribed uses are totally clear to city officials, noted Cruver, and city staff continues speaking with the Treasury Department to better understand what will be authorized.

President Joe Biden
REUTERS/Jonathan Ernst
President Joe Biden
On June 23, President Joe Biden updated the ARP Act spending limitations to say the money can also be used to “rehire police officers and other public servants to restore law enforcement and courts to their pre-pandemic levels,” according to a White House press release. Frey’s proposal for the phase one spending was created before the announcement, and it doesn’t include any plans to use ARP money to rehire sworn officers.

During council’s Committee of the Whole meetings on June 23 and July 1, council members approved amendments to the plan. At the June 23 meeting, Council President Lisa Bender’s motion passed to move $150,000 from CPED into a fund that would pay to support outreach for residents who want to learn more about renter protection ordinances. So did Council Member Jeremy Schroeder’s suggestion of shifting $250,000 from the city’s senior services investment to the Neighborhood and Community Relations office to help local organizations that provide services for seniors. Also approved was Council Vice President Andrea Jenkins’ motion to put $500,000 in unallocated ARP funds into the city’s Truth and Reconciliation Commission, which implements “solutions to specific harms that create and perpetuate racial disparities.”

Also passing on July 1 was a motion by Council Members Alondra Cano and Phillipe Cunningham to put aside $650,000 of unallocated ARP funds to support local organizations with expertise in combating human trafficking and sexual exploitation. Two other amendments  — one by Council Members Jamal Osman and Cunningham to spend $1 million for after-school programs and youth outreach and another offered by Cunningham, Osman and Cam Gordon to allocate $500,000 for group violence intervention and to address health disparities among youths — also passed.

City Council President Lisa Bender
“Today the City Council came together to approve American Rescue Plan funding that addresses urgent needs of residents and businesses from the unprecedented impacts of the global pandemic,” Bender said in a statement. “The first round of American Rescue Plan spending will make a real difference on immediate COVID recovery needs in housing, economic recovery, safety, and public health and increase needed investments in our city’s youth.

The council is expected to formally approve the entire funding plan on Friday.

Reactions

Steve Cramer, president and CEO of the Minneapolis Downtown Council, said he’s never seen a circumstance comparable to the windfall the city is getting under ARP. “It is just an incredible gift after a very difficult 15 months.”

Steve Cramer
Among members of the council and business owners, Cramer said, the loudest complaints with the initial spending plan have to do with its lack of response to perhaps the hardest hit sector of the local economy: hospitality and, more specifically, hotels. “I do think the mayor’s proposal is very comprehensive and hit on a lot of key priorities,” said Cramer. “And there’s still money in the bank for this year and more coming next.”

Mike Brown, executive director of the Twin Cities Metro Independent Business Alliance, said that “big picture,” he believes Frey’s overall priorities in the spending plan to be sound, if it works as intended. “We’ll see what happens with how the money actually gets allocated and who applies.”

Brown pointed to the Minneapolis Recovery Fund allocation to help small businesses forgo certain fees and other costs as a great way to help businesses keep their cash, as opposed to signing up for loans.

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In  addition to the economic development components of the plan, Brown and Cramer emphasized the importance of the public safety measures for businesses. “I feel like [public safety] is a really complicated issue and it isn’t just about how much money is being spent on it but it’s about training and expectations of officers and citizens, community groups, and all of that,” said Brown. “It’s just a huge overarching issue.”

“Public safety does have to be the foundation on which these other investments are made,” said Cramer. “I’m not arguing that they should allocate more to public safety but I think, as I talk to affordable housing developers, folks that are doing economic development on West Broadway, they will welcome this investment. But they will certainly say privately that the security situation that their organizations and the people they serve are facing right now is a real detriment to making the kind of progress we need to make in those areas of future investment.”

On the housing front, Barbara Jeanetta, executive director of Alliance Housing, which provides low-barrier and low-income housing, said the spending plan reaches plenty of areas of housing need in the city. She worries, though, that the plan doesn’t focus enough resources on any single project, noting that issues like affordable housing for families and homeownership disparities could be greatly influenced by a huge infusion of cash.

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“This city and state are abysmal on homeownership for Black and brown and Indigenous people,” said Jeanetta. “Again, there are some good programs out there, but it’s not enough. Put a boatload of this money into some way to reach those communities and get them into some wealth building.”