Writer: Eleana Teran
2 min read September 2022 — While record levels of federal funds have been committed to improving U.S. infrastructure, smaller cities are having a more difficult time securing those funds and accommodating economic growth.
While Minnesota is forecasting steady population growth through 2060, that growth is not expected to happen evenly throughout the 854 cities that make up the state. “Eighty-two percent of those cities have populations of 5,000 or less and 42% of those have 500 or less,” Ron Johnson, president of the League of Minnesota Cities, told Invest:. As a result, he points out, these smaller cities face heightened challenges when trying to access federal grants, make infrastructural investments and address housing shortages and affordability.
“There are a lot of grants available, especially in infrastructure, and we’re trying to figure out a way to make things more streamlined for those smaller communities,” said Johnson. Local leaders are working to leverage and democratize the investment opportunities available for the region, particularly for small and medium-sized municipalities.
Mark Phillips, commissioner of the Department of Iron Range Resources & Rehabilitation, told Invest: that most federal programs require some local investment in order to make federal grant applications more attractive and competitive. As a result, the organization is providing financial assistance for projects tied to infrastructural needs, funding programs that “help support development, set the stage for growth and make this region a desirable place to work and play.”
Water and wastewater infrastructure, for example, are huge expenses for small cities and they rely heavily on the use of federal funds to cover the costs. Johnson detailed that there is plenty of federal money for those who are able to go after it. The League’s work to increase access to funding has allowed smaller communities to develop projects that otherwise would have been burdens on taxpayers. For example, Bemidji was able to receive $10.2 million from the state to complete a water system plant, in addition to the $4.4 million received from the federal government last spring for its wastewater treatment center.
Phillips recognizes the unprecedented levels of federal funding available as well as the broad infrastructural needs in Iron Range Township. As a result, the Department of Iron Range Resources & Rehabilitation has been receiving increasing numbers of funding requests for quality, innovative projects. As grantmaking becomes more complex and competitive, the agency must provide additional assistance to assist the region access resources that can help accelerate the economic growth of the area and create an environment that can attract more residents.
As leaders work on attracting and retaining people in the state, they must also address the challenging housing environment in the region. Christopher Galler, CEO of Minnesota REALTORS®, informed Invest: that “in 2018, 2019 and through most of the mid-2000s, we had seen about 80,000 to 85,000 transactions annually. In 2020, they bumped up to 94,000 and we closed 2021 just shy of 96,000 units.” As transactions increase, there is an inventory mismatch between the number of units needed for people looking to purchase homes compared to the number of homes available, resulting in significant price increases across the state. According to Johnson, housing is a big challenge in small towns and large cities. There is not enough availability for low, market-rate and high-end housing.
To address these issues, the Minnesota REALTORS® has been working with the Builders Association, but they report their difficulty to meet the demand. “We find that states around us allow you to build homes for significantly cheaper than you can in Minnesota,” said Galler. They have been working from a policy front to knock down regulations that increase building costs and are not necessarily needed.
There is hope on the horizon. Steve Havig, founder and broker at Lakes Area Realty, suggests things are getting better as the housing market begins to slow down, giving first-time buyers “a larger selection and more buyer-friendly terms from sellers.” Similarly, small and medium cities continue to work to meet residents’ needs and improve amenities to attract more people into their communities.
