According to recent estimates from the House Oversight Committee, the City of Richmond will receive approximately $20,811,816 from the American Rescue Plan.
Recently, heated fiscal arguments in Richmond have been over what NOT to cut. In the next couple of years, those arguments will intensify as interest groups fight over how to allocate this new source of funding.
The US Conference of Mayors this morning provided the following about the American Rescue Plan and cities. For information on other funding, see USCM-American-Rescue-Plan-Overview.pdf (usmayors.org).
Although prescriptive, the restrictions on use of funds are pretty broad, potentially allowing almost anything except raises for City Council members.
President Signs American Rescue Plan In a huge victory for state and local governments, President Biden signed the $1.9 trillion American Rescue Plan (HR 1319) into law on March 11 following final action in the House the day before, where it was adopted by a vote of 220 to 211. The measure provides much needed fiscal relief for families, communities and small businesses fighting the COVID-19 pandemic. A total of $360 billion is provided for direct fiscal assistance to state and local governments that have health care workers, firefighters, police officers, bus drivers and other critical workers on the front line every day responding to the health and economic challenges caused by the pandemic.
DIRECT FISCAL ASSISTANCE TO STATE AND LOCAL GOVERNMENTS
This new law provides the largest amount of direct federal aid ever to local governments. A total of $130.2 billion will be provided to cities and counties to use through December 31, 2024. The program will be administered by the U.S. Treasury Department.
Key provisions include:
● Funding: Local governments will receive $130.2 billion (half cities/half counties). Cities will receive $65.1 billion, roughly 19 times the annual Community Development Block Grant (CDBG) allocation, although this money is NOT CDBG – it is a totally new program.
● Allocation Structure: CDBG entitlement municipalities will receive funding based on the CDBG formula. Non-entitlement municipalities will receive funding based on their relative population as compared to other non-entitlement communities in their state, which will be administered by the state as an automatic pass through.
● Two-Year Funding: Half of a city’s allocation will be distributed to the city in 2021, and the second half in 2022. However, cities will have until December 31, 2024 to use these funds.
● Timing of Receipt of Funds: Entitlement cities will receive their funds within 60 days of date of enactment. States will receive their funds to distribute to non-entitlement cities within 60 days of the date of enactment, which they then must distribute to non-entitlements cities within 30 days (although the state may apply for two additional 30 day extensions, but only under strict requirements).
● Eligible Uses: Eligible use of funds include the following. USCM will work with the Treasury Department to develop regulations to provide further guidance on these “use of funds”.
“USE OF FUNDS—Subject to paragraph (2), and except as provided in paragraphs (3) and (4), a metropolitan city, non-entitlement unit of local government, or county shall only use the funds provided under a payment made under this section to cover costs incurred by the metropolitan city, non-entitlement unit of local government, or county, by December 31, 2024. “
- to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;‘
- to respond to workers performing essential work during the COVID–19 public health emergency by providing premium pay to eligible workers of the metropolitan city, non entitlement unit of local government, or county that are performing such essential work, or by 22 providing grants to eligible employers that have 23 eligible workers who perform essential work; ‘‘
- for the provision of government services to the extent of the reduction in revenue of such metropolitan city, non-entitlement unit of 2 local government, or county due to the COVID– 3 public health emergency relative to revenues collected in the most recent full fiscal year of the metropolitan city, non-entitlement unit of local government, or county prior to the emergency;‘‘
- to make necessary investments in water, sewer, or broadband infrastructure.”
The first argument will be over whether these are “one-time” revenues or simply a backfill for revenues lost to COVID-19. The City Council has adopted policies in the past for the use of one-time revenues, including the policy that one-time revenues should not be used for normal operating expenses, meaning they should be used for capital investments, increasing reserves or paying down unfunded liabilities. The Management Associates presentation on March 2, 2021, included the following recommendation: “Unpredictable revenues, such as those derived from the sale of surplus land assets or inventory, will be treated as one-time revenue and will not be used to support ongoing expenses.”
Others will argue that the American Rescue Plan revenues represent what the City would have reaped absent COVID-19 and that they should be spent on employee raises, overtime, hiring to fill frozen positions, and maybe recently debated challenges such as homelessness and reimagining the police.
I don’t know what the outcome will be, but it will make for a lot of late meetings.