Officials clash over shelter funding

Disagreements about spending $1.5 million to help repair a shelter facility in downtown have revealed divisions in city hall about how to address homelessness and make budget decisions.
On Sept. 19, 2024, the city council approved a resolution that redistributed some funds from 15 departments to pay for repairs at the Agate Board and Lodge Housing and Shelter Facility at 510 South 8th St. That is where Agate provides a 42-bed shelter program and 95-bed board and lodge program. The resolution was authored by council members Emily Koski, Jason Chavez and Andrea Jenkins.
The cuts ranged from a maximum of $708,978.32 for the Finance and Property Services Department to $2,288.50 for the Health Department. The departments had been shown to have underspent their budgets in the past and all were expected have surpluses to cover the reallocations at the end of 2024.
The city funding was contingent upon Agate finding an additional $1.5 million, which they did, from an anonymous donor, within days of the city vote. The facility will be temporarily closed and, if all goes as planned, the funds will be used to make repairs so that residents can move back in within the next six to 12 months. 
Mayor Jacob Frey, in a letter to the council following the vote, said, “While the intent is commendable, this funding decision lacked proper vetting and was based on point-in-time budget projections, which is completely irresponsible.” Still, he declined to veto the action, and allowed it to pass without signing it.
Frey also informed the council that the cuts would result in some planned initiatives not moving forward. This included a $350,000 investment to improve North Commons Park, staff recruiting efforts, and funds to support racial equity contracted work that was already underway.
This surprised some council members.
“Accurate and regular reporting is mandated by the city’s financial policies. The council relies on this information in order to budget and deliver essential services to our residents,” said Ward 10 Council Member Aisha Chughtai. “For the mayor to assert saving shelter beds using unspent funding is a reason to cut services and programming undermines the work of the city’s finance staff who are responsible for our reporting, and causes concern for residents of Minneapolis, who need and deserve transparency in how their tax dollars are being spent.”
“The city has $1.5 million for Agate without putting the budget at risk,” said Ward 11 Council Member Koski.
According to Chughtai and Koski, the city ended each of the last six years with an average $21.7 million surplus and is projected to end this year with a $38.5 million surplus.
“The council’s action either cuts funding for North Commons or cuts city staff,” said the city’s chief financial officer, Dushani Dye, after the vote. “There is no way around it, and I stand by our city’s accounting practices, which are accurate.”
Ward 13 Council Member Linea Palmisano agreed with the mayor. “...Ten of my colleagues voted to reallocate $1.5 million to a project with no competitive bid process and prior vetting. This is not sound, responsible budgeting,” she wrote in a recent email. “There are a number of great financial needs across our city, and we can’t assess where our money is most impactful without objective, data-driven processes. Taxpayer dollars should be disbursed fairly, not simply to whichever organization can grab the attention of my colleagues.”
At the budget committee meeting on Sept. 26 Frey also called for a more “competitive and fair process,” and said that the cuts could have been avoided if council members “bothered to consult with budget staff.”
“We are losing crucial shelter and housing capacity when we’re already struggling to keep pace with the need,” said Koski. “As a result, too many of our neighbors are forced to live in unsafe conditions on the streets and in encampments within our communities. Every bed we lose is another person left without safety, stability, and dignity. I worked directly with Ward 9 Council Member Chavez to come up with a funding solution allocating identified surpluses from departments throughout the city.”

Chavez says he followed the council process from start to finish
Chavez, who started working on this in August after Agate’s Board announced the closure, and possible sale, of the building, says he did consult with staff.
“In the absence of the mayor and his administration coming to the table and working to find ways to save the shelter, the city council was left to solve the problem,“ said Chavez. “We were left to find a way to fund the Agate Rehabilitation Project.”
Chavez says that he followed the usual city process and submitted a resolution by the due date for the budget committee meeting on Sept. 16, and discussed the proposal at the budget committee agenda setting meeting on Sept. 11, where the committee chair and vice chair, a representative from the mayor’s office, and finance staff were present to review and discuss it.
Originally, he planned to use money from the city contingency, or reserve, fund that acts as a financial safety net. “I had secured the votes to move forward with this option,” he said, “but then an effort was made to swing votes against this option. This effort was successful.”
Then he began working to find alternate funding. First, he looked at federal American Rescue Plan Act funding.
“I had secured the votes to move forward with this option, but then the city’s budget director advised against this, redirecting me to look at the city’s 2024 second quarter financial report,” said Chavez.
Using the report, he said that he worked with other council offices to create the resolution that eventually passed that reallocated funds from departments that were expected to underspend this year. It reallocated 7.58% of their projected surplus, which was on average 0.74% or their total budgets.
“The budget director then advised against her prior recommendation, ultimately advising against using the second quarter financial report as a means to identify and reallocate savings,” said Chavez.
He said that he sent the amended plan to all council members, the mayor, the mayor’s chief of staff, the city attorney, all the affected departments’ directors and other staff. “I followed the adopted city council process for this item from beginning to end,” he added.
“I worked with the mayor, his staff, and my colleagues on the council to find viable, agreeable funding options,” said Chavez. “The mayor left the conversations after votes were swung against the contingency fund option, stating they were not open to discussing options for the current budget year. There was considerable back-and-forth with staff throughout deliberations.”
On Oct. 2, the council voted to investigate the financial reporting and possible discrepancies.
“The city’s quarterly financial reports are how we understand the city and our department’s actual spending. They are touted by the administration as the best source of budgetary and fiscal information,” said Koski. “If we can’t rely on these reports, then we don’t have any accurate or trustworthy information to guide our decisions.”  
“The unprecedented level of unsheltered homelessness has been declared a public health emergency by the city of Minneapolis,” said Koski. “I believe we must continue to evolve our response to make progress, with the goal of safe, stable housing for all.”
Later this month, on Oct. 15, a council committee will consider requesting a staff report that outlines a standard process shelter providers could follow to request renovation or maintenance funds and an overview of the funding available for it.
The third quarter budget report is expected to be coming out in the next few weeks. Agate has until December 2025 to use the city funds.