(ABC 6 News) – Olmsted County’s push for a new homeless shelter in Rochester has hit a wall. The Minnesota Department of Human Services denied a $10 million grant request made by the county that would have helped turn Residences at Old Town Hall into a homeless shelter.

Back in September, Olmsted County entered a purchase option for the Old Town Hall as part of their work to address an uptick in Rochester’s homeless population.

The county hoped that this $10-million dollar grant from the state would help them turn the site into a new homeless shelter to replace the Warming Center, which the county and city have deemed outdated and too small for services.

“Our plan was to transform that into emergency shelter along with support services and then supportive housing,” said Dave Dunn, Olmsted County Housing and Planning Director. “So really, the ability to do all three in one.”

With the grant denied, it’s back to square one for the county. The county now says they have three months to decide if they’ll commit to purchasing the site and how exactly they’ll pay for it.

And this time around residents of Rochester’s Eastside Neighborhood, where the building sits, want to be part of the conversation.

“We needed to slow this down and the county needed to engage with us and talk to us,” said property owner Helen Roland. “The difficulty for us was that we didn’t know what they based the decision on and how can we complain about the decision that they made if they didn’t make it?”

The solutions for helping the city’s homeless crisis was never the problem for these neighborhood residents, some residents explained. They were instead frustrated with the county for not looping residents in on the plan.

“We don’t see a coordinated response and we think with that coordinated response, especially involving the Landing, it serves the homeless during the day. We could make some excellent progress for the city and really problem solve this,” Roland said.

“We need to reevaluate what is the next step as far as the facility itself. Is this something we want to continue evaluating or not and then once we know that. Having the conversation with the neighborhood and other stake holders to figure out what’s the best next path,” Dunn said.

But in the end, everyone hopes to come together to find a solution that works for all.

“As we move forward, knowing that this grant isn’t a reality. We’ll continue to work with the neighborhood, continue to work with stake holders and continue to work with people experiencing homelessness because one person sleeping outside is one too many,” said Dunn.

Olmsted County has the purchase option in place with current Old Town Hall owner Jeff Allman until March 2024. Dunn says the county expects to reach out to the Eastside Neighborhood for further feedback in the coming weeks.