'It’s just one more kick in the stomach:' Already reeling from COVID-19 closures, Iron Range braces for mining layoffs
Nearby businesses fear fewer customers as cities anticipate less production revenue.
Within a week, three of the six iron ore mines and pellet processing plants on Minnesota's Iron Range announced temporary idlings and layoffs as demand for steel plummeted during the COVID-19 pandemic.
Expected layoffs will total almost 1,500 — 470 at Cleveland-Cliffs’ Northshore Mining in Babbitt and Silver Bay, 375 at U.S. Steel’s Keetac in Keewatin and 650 at ArcelorMittal’s Hibbing Taconite in Hibbing — more than one-third of the approximately 4,000 total jobs on the Iron Range’s six mines.
For Iron Range cities and businesses already facing mandated closures or substantial changes in operations due to the COVID-19 pandemic, layoffs of some of the region’s best-paying jobs present another economic blow.
“It’ll just make it a lot worse than it already is,” Mike Egan, owner of Mike’s Pub in Hibbing, said of the mining layoffs.
The pub provided up to 30 meals per day to Keetac employees working overtime, but that ended as the mine took precautions to curb the spread of COVID-19. Then came Minnesota Gov. Tim Walz’s order to close dine-in service at bars and restaurants.
Since then, Egan has been providing delivery and takeout, but is lucky to get five to 10 orders per day. Sales are down about 78%, he added.
“It's not even worth having the door open,” Egan said. “But we do anyway.”
Even if restrictions are lifted and people are allowed to dine in again, Egan worries people will still be laid off from the mines and other businesses.
“They won't have the revenue to go out and spend in a restaurant or to have a beer or go to a bar,” Egan said.
Vicki Hagberg, president of the Hibbing Area Chamber of Commerce, said the Iron Range is used to the cycle of mines idling — most recently, downturns in 2015 and 2009 — and said the companies that provide equipment and services directly to the mines could be forced to make layoffs as well. Meanwhile, businesses that benefit from customers working at the mine will see less traffic.
“We all know that because all of those jobs between mining and the direct-support jobs are lost, there's fewer people in our community that are spending money on retail, going out to eat and those discretionary purchases that really help drive our economy,” Hagberg said.
Babbitt Mayor Andrea Zupancich is also worried about what she called the “ripple effect” of mining layoffs.
“It’s not just laying off people at the mine,” Zupancich said. “You’re essentially laying off all the other people in town because there are people that are coming there to get gas and stop at the grocery store or pick up food on the way home.”
“‘Aside from everything else being shut down, it’s just one more kick in the stomach,” Zupancich said.
Zupancich, who is also a real estate agent, said home sales have been canceled already, or about to be canceled, because would-be buyers won’t be able to get financing until they are back at work.
“It’s amazing how the trickle-down, ripple effect happens,” Zupancich said. “You realize just how huge just one job is.”
Cities will see less revenue
Every ton of iron ore pellets produced on the Iron Range is taxed and the revenue given to local towns, school districts, counties and a state agency, but idling plants mean less production and less revenue from those taxes, even if its based on multi-year production averages.
Cities and townships received over $12.2 million from the production tax last year, according to the Minnesota Department of Revenue’s annual Mining Tax Guide .
And for the smaller towns, that taconite tax makes up a large portion of their annual budgets.
Keewatin Mayor William King said he expects the town of 1,000 to receive about $150,000-$200,000 in production taxes each year, about 12%-13% of the town’s budget.
“If (the mines) are down for any length of time, it really hurts,” King said.
On top of that, King said Keewatin is getting phone calls from residents unable to pay public utilities bills.
Without many commercial businesses in town, Taconite taxes make up a “majority” of the Babbitt’s budget, Zupancich said. The town of about 1,500 saw more than $600,000 in 2019, according to the Department of Revenue.
“We’re a struggling small town,” Zupancich said. “We’ve got small budgets. We also have big bills.”
That includes putting in a wastewater treatment center and campground, Zupancich said.
In Silver Bay, which received almost $500,000 in production taxes last year, Mayor Scott Johnson is less worried because the production taxes received by towns are based on five-year production averages.
“So towns that experience the shutdown still generally get a close amount to what they've already been receiving, so that’s stability overall,” Johnson said.
The Department of Iron Range Resources and Rehabilitation, a state agency funded by taconite taxes based on a three-year production average, provides area businesses and communities with loans and grants. Commissioner Mark Phillips said the budget being based on production averages “takes some bumps out of the road” when mines idle, but it will be a problem for the agency if the downturn lasts into 2021.
“We're going to be very careful going forward on managing our resources, but I still believe we can manage them and still provide a lot of benefits for businesses and communities at the same time,” Phillips said. “We don't plan on not operating; we're going to keep going."