Creative Tactics Cities Are Using to Address the Child Care Shortage

By Deborah Lynn Blumberg

In step with the rest of the United States, Minnesota is in the midst of a child care crisis that’s keeping parents out of work, companies forgoing key talent, and the economy missing out on billions in lost revenue, earnings, and productivity.

Driving this decline in child care providers is a mix of factors — low pay for child care workers, high start-up costs to open a center, and provider burn out. In Minnesota, total capacity for child care spots is rising statewide, according to a report by the Center for Rural Policy and Development. But data is driven by the most populated counties. Rural areas, in particular, are struggling to fill their community’s needs. The Center estimates that there is a shortage of over 40,000 child care spots outside the Twin Cities metro area.

It’s a major problem since, ultimately, the effects trickle down to local economies, says Marnie Werner, vice president of research and operations with the Center for Rural Policy and Development. Too few child care spots might mean a community’s core employer can’t attract enough employees. The company could be forced to scale back operations or relocate.

“This is an economic issue for the whole community,” Werner says. “It’s important for employers, businesses, employees. With a tight labor market, it’s really become very apparent child care is a big issue. You can’t hang on to workers if there’s no place to put their kids during the day. We’ve hit this critical point.”

Minnesota lawmakers have taken note and are discussing ways to help. Bill HF 1180, if enacted, would appropriate $20 million in fiscal year 2024 for the Greater Minnesota Child Care Facility Capital Grant program, providing grants to counties and cities to build new child care facilities. But cities are coming around to the notion, too, that they must play a key part in developing a comprehensive approach to alleviating the shortage.

Werner has seen cities employ a wide array of creative tactics — many focused on helping providers stay in business, including reducing start-up costs and setting up child care pods where multiple providers operate under the same roof, so providers can afford to operate outside their home.

“It’s going to be different with each community because each has its own unique needs,” she says. “But there are many valuable things cities can do.”

St. Peter helps with low-cost leases, loans

A decade ago in St. Peter, city administrator Todd Prafke and other officials started discussions with school administrators about the needs of young families. Child care came up repeatedly as a pressing need. Ultimately, the city’s first Child Care Task Force was born out of the talks.

The task force was comprised of providers, city officials, parents, and school district representatives. It was charged with providing the City Council with detailed information about the child care challenges St. Peter was facing and making recommendations.

“We said, we know we can do something, and we’re not afraid to do hard things,” Prafke says, “but we also knew we couldn’t do everything.”

Regular task force meetings generated a significant buzz, Prafke says. “It created specific gravity around, what does this mean for our community? And, not just for our families but also for our businesses and others. It created this wave of, ‘we can do something.’”

From the task force recommendations, the city developed programs to help current and potential new providers. One early effort included giving a group of parents a low-cost lease on a recently vacated city-owned building — a former nursing home — so they could afford to start a not-for-profit child care center, SPC3.

The building was ideal for child care with its sprinkler system in place, wide hallways, and multiple bathrooms. The city’s economic development authority loaned money under generous terms for cribs and baby buggies.

St. Peter also set up a program to loan money to residents wanting to start a home-based licensed child care business. The city dedicated $10,000 to cover potential providers’ cost of the county pre-inspection fee — a few hundred dollars for each. Of 12 people that signed up, over half started a home-based child care business.

“It’s about, how do you try to reduce the level of risk or number of hurdles to be able to explore the opportunity,” Prafke says.

The program lasted two years. Now, the city is evaluating whether to bring it back as part of its second Child Care Task Force, which it started this year. Prafke says today’s child care challenges are different from 10 years ago.

“It was about money and space,” he says. “Now, it’s about money and people.” Facilities are struggling to staff centers. Given that, the new task force is also mulling over how the city might help encourage more young people to enter the field.

Prafke hopes to see new ideas in the next few months, then develop programs to help for early next year. Fresh ideas are important as federal dollars to help with child care challenges during Covid have dried up, he says.

“There’s more than one way to work toward figuring out how to address these problems,” Prafke says, “and it does take a little while. There is a role for cities to play, and it’s OK to move at a methodical, thoughtful pace.”

Little Falls is using grant money to build a large, new center

Little Falls City Administrator Jon Radermacher struggled firsthand with the child care shortage when his family couldn’t find a spot for their child.

Over the years, he has fielded calls from others in the community who also have found themselves struggling to find their children care providers. Currently, Little Falls is lacking some 550 child care spots. The desperate phone calls sparked conversations at City Council meetings and with the economic development authority.

Radermacher helped form focus groups of providers, employers, families, and school district representatives. “We learned family providers were struggling and feeling underappreciated,” he says. Many were overwhelmed with changing rules and licensing requirements.

Through focus groups run in 2018, city officials learned most people operating a facility in town had income from other sources as well and weren’t relying completely on the child care center for their income. Others had kids and needed the care for their own family.

“You were left with very few people doing it because they loved it and thought they could make a quality living,” he says. “That was very important for us to understand, because it told us the future was unsustainable.”

The city started by building community awareness about who child care providers are and what they do. Little Falls has just one child care center. Officials started hearing from people who wanted to start another but couldn’t afford it.

Radermacher and other officials worked to reduce facility and operating costs. An early success came when the city helped a new provider set up shop in a church’s former child care space. It helped cover the cost of providers’ credentials with grant money acquired through the Network of State Initiative Foundations. Recently, the city gave a $10,000 grant to a nearby hospital to help convert an unused building into an area for child care, plus $5,000 each to two providers to start their child care businesses. It should have the capacity for 20 children.

But the city’s big-ticket item is a brand-new child care facility that will be run by Little Falls Community Schools. The center, to be located on school property, is expected to cover 200 spots. The city is using $1.5 million of federal money in the form of a Housing and Urban Development grant to help with costs, and partnering with the local school district, too. The district will match federal funding through an additional levy, which will have a minimal impact on taxpayers. The project is in the design phase, with construction slotted to start next year and opening day in 2025.

Along the way, Radermacher and city officials have worked with First Children’s Finance, which has helped with market analysis and planning. And while the city’s deficit of spots has yet to be fully solved, Radermacher is hopeful.

“After these intentional efforts to talk about the issues and come up with solutions, today we have providers ready to go,” he says. “It’s exciting. And now, I have tangible places I can point parents to.”

Montevideo focuses on provider appreciation, training

In Montevideo, a city of 5,300, community development coordinator Jack Gottfried is leading the city through the Rural Child Care Innovation Program, an initiative developed and run by First Children’s Finance. The program helps rural communities develop sustainable, innovative strategies to address child care needs.

Montevideo, which has a large and rising Hispanic population, applied for the program and was accepted. Then, First Children’s Finance staff helped Gottfried assemble a team to work on child care initiatives. It included the city’s mayor, a county commissioner, school representatives, child care providers, nonprofit leaders, and a representative from one of Montevideo’s biggest employers.

Next, program staff helped with training. “We wanted everybody to be educated on the basics of early childhood development, what it takes to run a facility, what the shortages are, what our community needs,” Gottfried says.

In 2022, the team sent a survey to parents, providers, and businesses to discover challenges. The perception of the availability of child care in town was poor, waitlists for spots long, and nearly half of those surveyed, 44%, said child care availability played heavily into their family planning. Montevideo posted full survey results on its website.

Like in Little Falls, efforts included in-person events to show appreciation for child care providers, like a dinner and group discussion. “The goal was to let them know our community appreciates all the things they do and get feedback to shape our goals,” Gottfried says.

Montevideo hosted a town hall on child care, too. Officials presented survey results and listened to feedback. With information gathered, they created a community solutions action plan.

“The definition of economic development is shifting,” Gottfried says. “It’s about, how can I get a big company to move to my community? The conversation we have to have is about housing, children, recreation activities, and events to get people to want to move here.”

The plan’s five areas include:

• Helping non-English speakers to find child care and become providers. This fall, two new bilingual providers are expected to open via the pod model, where providers work separately but in a shared building. The city is helping with licensing and finding financing.
• Developing new child care facilities. Two new facilities are on the way — the pod model by the bilingual providers (to open in a former gas station) and a second pod model with space for three providers. Together, they’ll create 60 spots.
• Creating a community-led child care organization. This specialized organization where providers can go for help is in the planning stages.
• Creating career exposure to increase the pool of providers. This could include a specialized educational program for teens interested in becoming a child care provider, and connecting students with providers to learn about the industry.
• Continuing to engage current providers. Events may include an annual dinner or training event, like CPR.

When it comes to liability concerns, Gottfried says that’s always something to consider. However, with pod models, those are privately owned, meaning the building owner and providers occupying the space take any liability, not the city, he says.

Cities should be aware the League of Minnesota Cities Insurance Trust (LMCIT) excludes coverage for damages “arising out of the city’s ownership, operation or maintenance of [a]…[l]icensed child care program.” Depending on the city’s involvement, separate liability coverage may be needed for the city’s role in operating a child care center. Cities may also be able to transfer liability by contract to a child care provider. Also note, LMCIT excludes coverage for a “licensed child care program.” Cities should contact their LMCIT underwriter for guidance.

First Children’s is a great resource, Gottfried adds. Creating community- government-employer partnerships can also help. His top tip is for communities to think creatively about unused spots they could use to house a center.

“This creates new options for child care,” he says, “but it’s also a great economic development tool because you’re filling up empty community spaces with a needed community resource.”

Deborah Lynn Blumberg is a freelance writer.