Minneapolis City Council wants to take a deeper look at Frey administration’s books

The Minneapolis City Council voted Wednesday to look deeper into the financial reporting of Mayor Jacob Frey’s administration after the two clashed over the council’s recent decision to make budget cuts to save a downtown homeless shelter.

Frey accused the council of making a rash decision to make mid-year budget cuts to find $1.5 million to fund repairs to prevent a homeless shelter from closing. Some council members, in turn, accused the Frey administration of retaliating by cutting funding for a North Side park project.

Agate Housing and Services’ century-old building at 510 S. 8th St. was slated to close Oct. 9 due to plumbing and other problems. On Sept. 19, the council stepped in and voted 10-3 to cut $1.5 million from various city departments and direct the savings to Agate, contingent on Agate finding matching funds to come up with $3 million. An anonymous donor has since agreed to put up the matching money.

“The $1.5 million you set aside is not free money, it must come from somewhere,” Frey wrote to the council on Sept. 26.

Deputy City Operations Officer Saray Garnett-Hochuli said in an email to the council that its decision to cut $1.5 million from the 2024 remaining operating budget was based on quarterly budget projections, which are fluid and don’t take into account things such as filling vacancies in the second half of the year. She said their decision would require the city to suspend job classification studies, subscriptions to LinkedIn and Indeed and participation in all job fairs and recruiting events. Most controversial was a $350,000 cut to funding for North Commons Park, a 1970s-era community center and water park that the Minneapolis Park Board plans to renovate and expand for $35 million.

The administration’s decision to cut North Commons funds incensed some council members, who vowed to restore the funding. Council Member Jason Chavez called it a retaliatory budget cut that will hurt the North Side, and Council Vice President Aisha Chughtai said tax dollars shouldn’t be used as a tool for “political retaliation.”

Frey told council members the only alternative was to lay off city employees.

The city’s Chief Financial Officer Dushani Dye said in a statement the council saw in the quarterly report a $38 million surplus in expenses, but didn’t take into account revenues, where there was a $36 million projected shortfall.

Council Members Linea Palmisano blasted some of her colleagues during the Wednesday council meeting, saying they were playing some kind of game of gotcha and blaming the Frey administration when 10 council members “didn’t do due diligence” when they voted to make budget cuts.

In mid-September emails between Chavez and Budget Director Jayne Discenza, Chavez threw out several options for coming up with the Agate money before she suggested he look at the second quarter report. But when he wrote that he planned to propose using budget cuts to pay for the shelter, Discenza replied, “I’m frankly panicking.”

Council Member Jeremiah Ellison said Wednesday when the council first proposed using contingency funds, the Frey administration opposed that.

“Now all of a sudden the North Side is affected. Now all of a sudden the sky is falling. That feels like political games to me,” he said.

Frey has said the council didn’t have the 10 votes required to use contingency funds, which are intended for emergencies like natural disasters. City policy requires 1% of the operating budget to be set aside as a sort of emergency fund.

Council Member Emily Koski said the city has the capacity to spend $1.5 million on the shelter without disrupting the budget, which has been “skewed and twisted to tell a different story.” She has pointed to the fact that the city has ended each of the last six years with an average $22 million in unspent budget allocations. That unspent money goes back into the general fund, where city financial policies require reserves equal to at least 17% of the overall budget. The city usually shoots for about 25%, which helps boost its bond ratings, Discenza said. Two bond rating agencies recently gave the city the highest credit rating possible for the second year in a row.

Council Members LaTrisha Vetaw, Andrea Jenkins and Palmisano voted against doing the financial review. Council Member Michael Rainville voted “yes,” but noted any unspent dollars go to the city’s bottom line and help reduce taxes in the future.

Vetaw said North Side residents believe they lost $350,000 on a project they’ve been working on for over a decade. She vowed to make sure the North Side is “made whole” by the end of the budget cycle.