Cities slow down with US bailout funds
When President Joe Biden enacted the American Rescue Plan Act (ARP) last March, it was a momentous opportunity for local governments across the country. Unlike previous federal tax relief efforts, most notably the CARES Act of 2020, the ARP has provided a large number of cities and counties with direct and flexible support from the federal government. And the sums on offer were substantial: $ 130 billion in fiscal stimulus funds (FRF) for cities, counties and tribes, often representing large portions of annual local government budgets.
The Treasury Department began disbursing these dollars in May, forcing large recipients to submit initial reports by this week on how they are allocating the dollars to deal with the impacts of the COVID-19 pandemic, and for “Rebuild better” for the future.
In turn, many large cities say to the Treasury: we will get back to you about this.
That’s a takeaway from our preliminary review of the plans 20 major cities across the country have made available. These cities are expected to receive between $ 142 million (Charlotte, NC) and $ 827 million (Detroit) in flexible ARP funds, for a combined total of $ 7.4 billion, of which only 18%, we have found, have been engaged so far.
Many cities say they are not spending FRF dollars yet
As part of the Treasury reporting requirements for the ARP, cities and counties with at least 250,000 inhabitants were required to report the FRF amounts they had spent up to July 31 in a series of eligible expenditure categories: public health, economic support to households and businesses, services to disproportionately affected communities, bonuses for essential workers, broadband / water / sewage infrastructure and income replacement.
Of the 20 city plans we looked at, eight reported no spending until July. A few others reported spending only a tiny fraction of their allocated funds. In total, cities said they committed $ 1.3 billion, or 18% of their combined allocation of $ 7.4 billion.
This is not necessarily surprising or worrying. Cities have only received half of their FRF dollars, with the second half due in May 2022. Additionally, the Treasury has advised cities not to pledge all of their dollars immediately, so they can respond to changes in health and economic circumstances over the coming months. .
The overall signal from many large cities seems to be that they don’t immediately feel pressured to commit and spend the first installment of flexible federal dollars. In some cities, plans are still being worked out in the legislative process. In others, as researchers of the Note from Nowak Metro Finance Lab, a bottom-up community engagement process to inform allocations is still ongoing. And many cities may be waiting for the publication of the FRF final regulation of the Treasury, so that they can be sure that their spending priorities meet the official eligibility criteria.
Among the cities with spending plans, some priorities emerge
In the two cities that reported the first spending to the treasury and the cities that announced detailed spending proposals, a few areas of emphasis (and non-emphasis) are emerging.
Many cities reserve a significant portion of their FRF allocation for income replacement. Treasury guidelines allow cities to use the funds to make up their estimated shortfall from the previous year due to the pandemic economic crisis. From there, cities have great latitude to use those dollars to support government services. Buffalo, New York, Houston, and Kansas City, Missouri report that they spend around a third of their FRF allowance on income replacement. Pittsburgh, meanwhile, reports that he will devote all of its funds for this purpose – although the city continues to list a number of specific needs, these funds will help meet. Differences in how cities prioritize income replacement may largely reflect variation in how the pandemic has affected their finances, due to different local tax structures. For those cities that have declared spending plans, revenue replacement represents 39% of the total funds committed.
A number of cities are planning to use or have already used significant funds to address the challenges facing low-income groups and others. disproportionately affected communities. The interim treasury rule gives local authorities quite a bit of leeway in this area. Saint Louis, for example, has committed nearly $ 72 million (about 16% of its total allocation) to help these communities, including shelters and services for the homeless, funds to prevent evictions and programs for youth . Boston, Minneapolis, and Seattle also plan to dedicate significant FRF funds to address affordable housing needs and address homelessness. In Buffalo, investing in city parks, especially in low-income neighborhoods and in amenities for children, is one of the largest planned spending. Services to disproportionately affected communities represent 21% of the $ 1.3 billion the 20 cities have committed to date. Some cities that have announced plans not yet reflected in official reports, such as Detroit, Pittsburgh, St. Paul, Minn., And Austin, Texas, are close to making significant commitments in this area as well.
Other areas of spending, including support to small businesses and affected industries, skills training, neighborhood / corridor revitalization, and direct cash / nutrition assistance to households, received varying levels of attention and focus. investment in published municipal plans. Some of these represent high priorities in cities that have announced plans but have yet to report spending money (p. Detroit, Syracuse, New York State, and Akron, Ohio). Meanwhile, infrastructure (broadband, water and sewage) has received significantly less emphasis in the initial plans, possibly because cities anticipate even greater resources soon to be offered by the infrastructure package that will pass through Congress. .
The bottom line: plenty of room for reflection and creativity
Perhaps the most important takeaway from this initial analysis of city stimulus packages is the flexibility left for city leaders to adopt thoughtful, evidence-based, equity-focused approaches to use. these substantial one-off funds. Cities that have come out of the gate with comprehensive plans linking high-level goals to project-level details, such as Boston, Buffalo, St. Louis, and Seattle, offer models for how other cities can approach this. historic opportunity.
At the end of October, cities must submit even more detailed reports to the Treasury, listing their FRF expenditure at the project level. As more plans hit the streets, Brookings Metro will highlight both high-profile emerging trends as well as the most innovative ways cities are designing their strategies and deploying their resources to recover from the pandemic. and make bold, long-term investments.