With the coronavirus pandemic causing massive job losses, state and local governments are exploring unprecedented measures to provide temporary tax relief for business and individuals caught up in its wrath. However, some of those efforts could come at the cost of increased fiscal instability.
On Tuesday, the Minnesota Department of Revenue announced that it would extend the grace period on sales and use tax payments for bars, restaurants and other businesses shut down by the governor’s March 16 Executive Order.
While those businesses are expected to file their taxes by the regular due date, they don’t have to make their payment until May 20. That follows the decision by the state and federal governments to delay the income tax due date to July 15.
Under state law, property taxes are due by May 15, and state law leaves little flexibility for either the Department of Revenue or local governments to change that date. However, many county governments are exploring the possibility waiving late fees for a period of time.
On Wednesday, the Minnesota Chamber of Commerce threw its weight behind efforts to delay property tax payments.
Faribault Chamber President Nort Johnson said that while he’s confident the local economy will bounce back when the pandemic ends, local businesses need help now to survive.
“Even though taxes will still be due, extending those deadlines will allow a business to take care of that obligation when their cash flow situation stabilizes,” he said.
Rice County is also examining such a policy. Board of Commissioners Chair Dave Miller said he would be open to it, although commissioners would need to determine exactly who the provision would apply to.
County governments rely heavily on property taxes to fund the bulk of their operations, so a de facto delay of property tax collection could force counties to dip into reserves. Nicollet County Administrator Ryan Krosch said that he is more concerned about struggling residents than the county’s bottom line.
“We’re just more concerned that about folks who have lost jobs or had to shut their business because of this,” he said. “At this point, we’re not as concerned about county finances.”
Still, Krosch said that the county would need to examine the effects of property tax deferment. Under Minnesota law, school districts and municipalities rely heavily on property tax revenues collected by the county, meaning any delay to property tax collection would have significant effects on those local government entities as well.
Rep. John Petersburg, R-Waseca, who sits on the Property and Local Tax Division, said that one area legislators could look at to provide relief would be Commercial Property Taxes collected by the state.
Petersburg added that legislators are more divided on the issue of whether to help local government entities that may run into difficulty with decreased or delayed revenue. That could be difficult even for Faribault’s School District, said Superintendent Todd Sesker.
While emphasizing that the district would end up in the same revenue situation in the long run, Sesker warned that a delay in payments could force it to borrow in the short term to cover payroll and other expenses, with interest on the debt creating additional expense.
Faribault City Administrator Tim Murray said that if the delay means the city won’t receive its property tax settlement by late June, it could have a huge impact on the city’s regular operations and its attempts to pay down debt.
Murray said that the city has issued bonds with the expectation of having that money available at that particular time. Without property tax revenues to fund those payments, the city would have to dip further into its reserves and potentially cash out a portion of its investments.
Lonnie Seifert, superintendent of Gibbon-Fairfax-Winthrop Schools, will soon exchange his Thunderbirds garb for Titans attire, but the Tri-City United School Board was notably split on the measure.
Based on a majority vote during a virtual meeting Tuesday, the Tri-City United School Board agreed to begin contract negotiations with Seifert to be the new superintendent of TCU Public Schools. Four out of seven of the School Board members voted yes — Ashley Rosival, Josh Beulke, Dale Buss and Krista Goettl — and School Board Chair Marsha Franek and Board members Michelle Borchardt and Kevin Huber voted against.
Seifert previously served New Prague High School as assistant principal and then principal. He also served as activities director and dean of students for ROCORI High School in Cold Springs, and activities director and dean of students for Montgomery-Lonsdale Schools before the district consolidated with Le Center.
In his application, Seifert said, “A great deal of my time has also been spent working on building a sense of togetherness in a district with a history of being three separate communities.”
He holds a bachelor’s in elementary education with coaching certification, a master’s in educational administration, a K-12 principal licensure and a superintendent licensure.
Seifert has been named Minnesota Association of Secondary School Principals Hennepin Division Assistant Principal of the Year.
The second round of Tri-City United superintendent interviews took place virtually Tuesday afternoon, and later that evening, the School Board held deliberations online. The other two candidates up for consideration were Lisa Edwards, the director of continuous improvement at Farmington Area Schools and Carmen Daniels-Strahan, a middle school principal in Mankato Area Public Schools.
During deliberations, the School Board weighed community and staff comments on each of the three finalists baed on interviews with the candidates, and Goettl read the questions she asked of the candidates’ references and their responses. Board members then shared their own perspectives on each candidate based on the interviews, and the three finalists experiences, strengths and weaknesses.
Rosival said Seifert stood out to her as “a step above all the other candidates we interviewed.” She noted that during the interview process, he described how he would, or already has, responded to various situations a superintendent might encounter. A potential concern for Rosival was how Seifert would handle modern work and strategies.
Echoing Rosival’s comments, Goettl said Seifert’s experience benefited him in that he offered realistic approaches for balancing three separate communities within a district. His philosophy is to pick three or four things to “do really well” rather than trying to accomplish everything.
“If I’m being honest, I don’t have any cons [for Seifert] at this point,” said Goettl.
Beulke took Seifert’s idea of weighing what he can commit to and doing it well as evidence that he is reasonable and wouldn’t deal with as much of a learning curve serving three separate communities as the other two candidates maybe would.
“I think Lonnie was the most consistent candidate among all of them,” said Beulke. “He didn’t change who he was from one interview to the next.”
Buss declared Seifert his No. 1 candidate, noting his leadership skills and his ability to allow other people to lead. Although Buss recognized Seifert as “more of a short-term plan person,” he believes Seifert will do well working with the TCU strategic plan.
At GFW, Seifert has not had the opportunity to work with a district strategic plan and lacks budgeting experience. GFW doesn’t have an AVID (Advancement Via Individual Determination) program, so Seifert is also unfamiliar with that structure. These were among the concerns for board members who instead favored Daniels-Strahan, who is well versed in all three of these areas.
Borchardt said she considered Seifert’s lack of understanding of school budgets a “red flag” as well as his lack of a social media presence.
Buss noted that while Seifert only uses Twitter as a social media platform, he takes various age groups into consideration when communicating and uses many of the same tools at GFW that TCU currently uses: the local newspapers, school websites and email newsletters. That cross-generational communication is something Buss viewed as a strength.
Borchardt, Franek and Huber declared Daniels-Strahan their top candidate. Her strength with relationships and communication stood out, not only to board members, but to public commenters.
“I think Carmen would take us to that level where Teri [Preisler] is going to leave us off,” said Franek.
Said Huber: “I think we have to remember [Carmen has] worked her way up from being a teacher to where she is now. Teri was not a superintendent before we hired her either and she excelled beyond what we could have ever imagined.”
Goettl disagreed; she said while Daniels-Stahan sounded carefully planned, she gave the impression that she may delegate too many tasks to teachers, taking away their classroom time.
Buss agreed that Daniels-Stahan “might be too aggressive for the three communities.”
Beulke named Daniels-Strahan as his other top candidate. He liked that she appeared to have researched TCU between interviews and noted her firm knowledge in budgeting and her clear passion for education. But if it came down to a vote, Beulke said he would choose his other top candidate, Seifert.
None of the seven board members picked Edwards as their top choice. Community commenters and board members recognized a number of her positive qualities, such as her friendliness, genuine nature and calm demeanor, but these traits couldn’t compete with experience. Edwards has never served as a superintendent and has never worked with a school budget, strategic planning or AVID.
After about two hours of deliberations, the board decided to move forward with a majority vote even though, as Franek said, “I don’t ever remember a [split] vote like this in our time on the School Board together.”
Seifert’s contract is expected to be ready for the School Board to approve during the April 13 meeting online. Once approved, he will begin with TCU July 1.
Lonsdale will soon have one more curbside pickup option for restaurant takeout, and when the spread of coronavirus subsides, the building itself will be ready for customers.
Andrew Rasmussen, who began cooking professionally about 16 years ago, entered into a contract for deed to purchase the vacant building at 115 Railway St. SW, which formerly housed Treats of Lonsdale and more recently Taste of Lonsdale. His restaurant, called Smoke, will be a family oriented barbecue restaurant that also serves beer, wine and liquor. Smoke will be among the over one dozen restaurants Rasmussen has opened since he began cooking full-time about 13 years ago.
The Lonsdale Police Department approved Rasmussen’s background check, and the City Council approved his application for an on-sale liquor license during its Thursday meeting online. According to Rasmussen, the team of head brewers in his network hand select where they distribute their products, and Lonsdale will be among its sites.
“We’re going to have some world class beer right here in Lonsdale,” Rasmussen said during the meeting.
In January, Rasmussen began the paperwork and licensing process for Smoke. He’s been making improvements to the building’s interior since the middle of March and hired a designer in the process.
“I’m trying to get that building up to my standards, something I can hang my hat on and be proud of, and something the community can be proud of, too,” said Rasmussen.
The hours of operation for Smoke will start out 4 to 9 p.m. Wednesday through Saturday. Rasmussen said he’s “not trying to drown in payroll right away,” and put monthly expenses on hold due to coronavirus. He doesn’t plan to serve lunch, at least not right away. If the community responds well, he may open Smoke on Sundays and possibly extend hours during football season.
With his wife in charge of customer service, Rasmussen said he needs about 12 people to run Smoke, most of them on a part-time basis.
City Council members were eager to approve Rasmussen’s application for an on-sale liquor license.
Said Council member Kevin Kodada: “I think it’s very exciting to have a new restaurant here in town.”
Police station update
City staff had prepared a request for proposals for a Lonsdale police facility, but the council agreed to table the approval of the RFPs until a special virtual City Council meeting at 6 p.m. Thursday, April 16.
Staff negotiated a purchase agreement for two parcels at the Fifteenth Ave. NE and Commerce Dr. SE intersection, and the City Council approved the purchase agreement during its March 26 meeting. The RFPs staff drafted since requests design, bidding and construction of a new police facility of approximately 6,000 square feet as well as the price of a “master plan” for future amenities that may be added to the site later.
The current police facility is small, approximately 1,500 square feet of office space, making it impossible for officers to comply with Minnesota Department of Corrections requirements and provide room for storage. A new police station has been discussed as a need for the past couple years.
The estimated cost of a 6,000-square-foot police facility is $1.6 million. Additional expenses include furniture, fixtures, equipment and indirect costs such as planning and designing.
The city has a couple options for financing the police station, which City Administrator Joel Erickson described during Thursday’s meeting. The city can issue general obligation bonds through a capital improvement plan, which is typical for a street project. As another option, the city could enter a lease-to-purchase agreement and lease the facility from the city’s Economic Development Authority, for example, or a trustee such as a bank with the last payment being $0 or $1.
The city may also take the financial route of entering into an agreement with a builder for a design, bid and build plan. This is similar to the city’s plan last year, when planning for a joined city hall/police station facility.
Before the council can approve the RFPs, Mayor Tim Rud asked Erickson to do more research and identify the best financial path, as this will determine how to proceed with the RFPs.
Erickson agreed to have a financial report ready by April 16, when the City Council will again meet to analyze the different options for financing the building and construction itself.
The announcement of pending furloughs at two of the state’s largest hospital systems is the latest sign that Minnesota hospitals are suffering financially in the wake of COVID-19.
Mayo Clinic on Friday announced pay cuts and furloughs for some staff beginning later this month, while Allina Health employees in non-patient care and indirect patient care roles are being required to take least one mandatory furlough in one-week increments beginning Sunday. Employees can use PTO or vacation time to cover the time off. Allina employees in direct patient care roles will be asked to participate in a phased approach to training and redeployment.
Allina Health has set up a fund, Caring for Caregiver, for employees who experience financial challenges. The system has received everything from mask donations to food along with financial donations cash.
Mayo Clinic, a world-renown facility based in Rochester, operates several southern Minnesota hospitals, including those in Mankato, New Prague and Waseca. It also operates a system of clinics throughout south central Minnesota and a standalone radiation treatment facility in Northfield. Allina Health’s system includes Abbott Northwestern in Minneapolis as well as Faribault’s District One and Owatonna hospitals and a clinic in Northfield.
In their statements, both Mayo Clinic and Allina Health noted the unprecedented challenges and significant financial pressures brought on by the pandemic, but added that the cost cutting is needed to ensure their overall and long-term sustainability.
“The decision to proactively postpone elective patient care was the right one, but it eliminated the majority of our revenue at the same time we are making critical investments to develop and expand testing, conduct research to stop the pandemic and realign our facilities and care teams to treat COVID-19 patients,” read a statement from Mayo Clinic.
In the statement, Mayo leaders say employees will receive full pay and benefits through April 28, and that temporary furloughs of some staff and salary reductions will be required after that.
Clinic officials have declined to comment further.
On Wednesday, Northfield Hospital and Clinics said its senior staff and directors are taking a 10% pay cut and that some staff will be placed on temporary leaves of absence. The cuts are to manage losses of $1 million a week brought on by COVID-19, NH+C said in a statement. While the changes are expected to be re-evaluated at the end of May, the announcement came before Gov. Tim Walz extended the stay-at-home order through May 4.
As of Friday morning, 57 Minnesotans have died from the virus, the total number of cases statewide stood at 1,336. The death toll nationwide has topped 16,000.
In a Wednesday conference call, Minnesota Hospital Association President and CEO Rahul Koranne said hospitals around the state are in a “dire financial crisis.” Earlier this week, the Minnesota Hospital Association announced hospitals in that state are losing about $31 million per day after eliminating elective surgeries and focusing capacity and supplies on COVID-19 response.
The revenue loss represents a 55% reduction of patient revenue, on average. Smaller hospitals are reporting closer to 70% revenue reductions. The loss is expected to remain consistent over the next 90 days for a $2.8 billion impact.
MHA member hospitals are spending an estimated $13.3 million per day to purchase equipment and supplies and to make physical and technological upgrades that will allow them to handle a surge of coronavirus patients. Over 90 days, those additional expenses are expected to total $1.2 billion.
“The analysis also accounted for offsetting revenues as COVID-19 cases increase,” according to MHA. “With an estimated shortfall from reimbursements, hospitals and health systems will experience over $120 million in uncovered patient-related costs. In total, this will result in approximately a $2.9 billion cash flow loss over the next 90 days.”
As Koranne did earlier in the week, Mayo Clinic lauded the work of health care providers.
“Mayo Clinic staff are doing extraordinary work leading in the response to the COVID-19 pandemic. We are proud of and committed to our staff and our communities as they come together to fight this global health crisis.”
But even that hasn’t been enough to stave off the financial effects of the global pandemic.
“We will work with our teams in the coming weeks to ensure that our staff are supported, that the duration of this disruption is as limited as possible, and that we are ready to ramp up quickly and resume full operations when it is safe to do so.”