2020 pandemic vs. Flood of 1997: In Grand Forks, city leaders say they are comparable
The 100-year flood destroyed property. The 100-year pandemic is eating away at jobs and city revenue.
City Council member Kein Vein remembers Grand Forks’ devastating Flood of 1997 as well as anyone. He was city engineer at the time – a ranking officer in the battle against rising waters creeping into the city’s basements, living rooms and business district.
Now, 23 years later, the city is faced with a crisis just as big. The coronavirus has driven Americans back into their homes and out of public life, fearing both for their own health and that of their eldest loved ones. The Federal Reserve Bank of St. Louis, predicting a potential 32.1% national unemployment rate, called the pandemic crisis a blow “unlike any other experienced by the U.S. economy in the last 100 years.” Across Grand Forks, businesses are shuttered and health care staff are pivoting toward fighting a new, invisible enemy.
"I've been back and forth on whether it's comparable or not,” Vein said of the '97 flood and the emerging pandemic. “But today, I think it is.”
Many local leaders offered similar thoughts. Mayor Mike Brown pointed out that local residents aren’t dragging furniture out of mud-swamped homes, but are still bracing for an economic shock all the same. And Al Grasser, the current city engineer, expressed frustration at having such limited ability to fight the virus.
“The river, you could see, you could touch, you could experience,” Grasser said. “You could see it coming. You could fight it. you could throw sandbags … you could physically do things. And with this thing, your action is to sit home. And I think psychologically that's a huge difference. Speaking for myself, I know it is."
Flattening the curve
Right now, City Administrator Todd Feland said, the most important thing to do is defeat the virus, or “flatten the curve,” in public health parlance – a reference to graphs showing declining new numbers of coronavirus cases. Across the country, the overwhelming majority of communities are seeing Americans staying in their homes and keeping their distance whenever they can.
“Even when we flatten this curve, that really just means that we’ve now allowed our hospital systems to be able to maintain people that are going to become COVID-positive over these next year to year-and-a-half,” Feland said, referring to how long many experts think it will take to develop a coronavirus vaccine. “Which is an incredibly long time.”
One of the major questions of the crisis, though, is how leaders will balance economic and public health concerns as cases begin to taper off. Those same strategies to combat the virus have led to a steep decline in demand in service and entertainment industries; as of Thursday, more than 10 million Americans had filed for unemployment benefits.
But economic experts warn that sending Americans back to work too soon could endanger public health once again, potentially prolonging the crisis and generating further economic damage as consumer confidence is shaken.
City leaders have been bracing for revenue shortfalls for weeks, freezing more than $550,000 in spending – on downtown lighting and five city vehicles – on March 18. At the most recent City Council meeting on April 6, council member Danny Weigel openly worried about expenses from the city’s public loan programs.
In an interview on Wednesday, Feland said the city expects to miss its 2020 revenue projection of nearly $189 million, though it’s still not clear by how much. City utilities, like water, are expected to see smaller losses with a slowdown in consumption by businesses. But right now, Feland said, leaders are most closely watching sales tax revenues – locally and statewide – which both help fund the city budget, as well as gas and hotel tax revenues. Already, he said, state officials are advising that a $12 million sum through the new state infrastructure “Prairie Dog” program cannot be counted upon.
“It is a hundred-year pandemic,” Feland said of the shifts. “So I think we're gong to see revenue impacts.”
And there are signs that, from a fiscal standpoint, those figures will be worse than in 1997. Herald archives show that, from April through June of that year, statewide taxable sales were up $57 million over 1996. In Grand Forks they were up $14,350, following growth in hardware, building materials, farm machinery and repair parts. There was a 48% increase in construction spending as residents began building, remodeling and repairing their way back from the depths of the crisis.
By contrast, 2020’s problems aren’t a natural disaster, but part of a steep, nationwide slowdown in demand, and it’s unclear how quickly consumer enthusiasm will recover. Brian Johnson, CEO of Choice Financial in Grand Forks, said he expects a slow return to normal spending levels, with many consumers likely to hesitate to leave the house even after the danger of the pandemic has passed.
"There's going to be a psychological impact of people in our community going out and being in groups," he said "I think there are going to be psychological ramifications (to) doing things we wanted to do pre-COVID."
How big is the ‘abyss’?
As a result, City Hall’s budget shortfalls, though still not quantified, are expected to stretch well into the millions of dollars, posing thorny questions for city leaders who could have to build a much leaner 2021 budget.
Despite the ugly financial forecast, Mayor Brown struck a note of optimism, referring back to the pro-business platforms he outlined in his state-of-the-city address in February.
“We were going great until this COVID-19 pandemic. We were looking at a billion-dollar construction boom. Sales taxes were up, tourism was up. We really did good, and now we're faced with this other crisis,” he said. “(But) I think we have proven leadership in this situation, and (are) working well with the council. We'll get through this."
The same problems are dogging state officials, too. State Sen. Ray Holmberg, R-Grand Forks, compared the coming budget shortfall – which, early last week, he said still had not been fully forecast – to the one legislators faced in 2015, when state budgets were steeply curtailed. He was hard-pressed to make firm predictions about the future, though, given that the damage to the economy is still developing.
"The flood, of course, came and went. It was a short duration. The physical tragedy of it, it took years to mend everything,” he said. “But our problem today – and I like the word 'abyss' – we just don't know how big it is.”
There’s emerging speculation that North Dakota’s financial woes might open the Legacy Fund – the state’s oil-funded piggy bank worth billions of dollars – though it’s not clear how. Vein, in raising the possibility, spoke of the pandemic as a kind of break-glass scenario that might warrant it.
“That's a question that I've asked, that others have asked. At what point would (using Legacy Fund dollars) make sense?” he said. “This is more than once-a-generation. This is just hugely impactful, and I think that's a question that has to be answered."
A spokesperson with Gov. Doug Burgum’s office did not fulfill the Herald’s request for comment on the Legacy Fund prior to press deadlines.
For now, much of the response has centered on the federal government’s attempts to prop up the economy, with beefed-up unemployment benefits, stimulus checks delivered directly to Americans and loans to businesses to help support payrolls. The latter are being organized by the U.S. Small Business Administration and delivered to Americans through banks like Choice Financial.
“To date, we’ve processed applications for approval and got SBA numbers for about 1,100 loans already. And we are estimating we could do another 300 to 400 just on the size of our bank,” he said on Wednesday. “So the volume of activity. I know the word ‘unprecedented’ gets thrown around in this time … but I’ve never seen anything come together like this.”
Barry Wilfahrt, CEO of the local Chamber of Commerce, said how effective the response is – and whether leaders will need to do more – rests entirely on how much longer the worst of the pandemic lasts.
“If this is 60 days, it's one thing,” Wilfahrt said on Thursday morning. “If it starts to get to 90, 100, those programs will be woefully inadequate."