The operator of a downtown homeless shelter has decided not to renovate it, even after the Minneapolis City Council stepped in with a $1.5 million injection of public funds last year to try to help keep its doors open.

Erik Hansen, director of Community Planning & Economic Development for the city, released a statement Tuesday saying the city received confirmation that Agate Housing and Services won't be moving forward with renovations, so the city won't "complete the funding" approved by the council.

Agate's board of directors voted Monday night not to renovate the downtown building due to higher-than-expected construction costs, according to an email obtained by the Minnesota Star Tribune. The email from Agate Executive Director Kyle Hanson says it would need at least $7.7 million, and it's unable to raise that much.

An Agate spokesperson declined to comment Tuesday.

The council voted in September to make midyear budget cuts in order to allocate $1.5 million to help fund repairs to Agate's century-old building at 510 S. 8th St. It was slated to permanently close due to plumbing and other problems when the council stepped in with funding, which was contingent on Agate finding matching funds, which an anonymous donor agreed to put up. (Agate still planned to close temporarily for construction.)

The council decision caused a rift with Mayor Jacob Frey, who accused the council of making a rash decision based on fluid quarterly budget projections rather than working with city budget officials on a solution.

Frey said in a letter to the council at the time that its intent was commendable, and the city has invested millions of dollars into shelters, but the decision "lacked proper vetting" and the council should have worked with "subject matter experts" to create a competitive, fair process.

Frey released a statement Tuesday calling Agate an invaluable partner.

"This result, while unfortunate, is exactly what we communicated to the council months ago," he said. "It underscores the importance of ensuring any use of taxpayer dollars is carefully vetted and goes through a thorough and equitable city process, which the council refused to do."

The Frey administration said it would have to find the money by making cuts that included a controversial $350,000 cut to $3 million in funding for North Commons Park, which the Minneapolis Park Board plans to renovate and expand. Frey ultimately used remaining federal pandemic aid funds instead.

City Council Member Linea Palmisano said her colleagues voted to give Agate the money with no competitive bid process, vetting or capital needs assessment and against the advice of city budget officials.

"This is the danger of moving millions of dollars of taxpayer money without any due diligence," she said.

Council Member Jason Chavez said he's disappointed that Agate couldn't reopen, because the loss of the shelter's beds will significantly affect homelessness in Minneapolis.

"I still believe it's important to preserve these units and I'm ready to work with any and all partners to do so," he said. "This situation highlights the fiscal cliff facing shelters in Minneapolis who need our support right now."

Several other council members declined to comment Tuesday, saying they had not yet been notified of the development.

Agate lost another property in south Minneapolis in October when a fire destroyed 16 of its 38 low-income housing units at its Metro Inn affordable housing property at 5637 Lyndale Av. S.