Cities Prepare to Spend Historic Sums of Federal Aid

Mayors across the U.S. are preparing to spend a huge influx of federal aid that will flow to their cities under the coronavirus relief package that President Biden signed into law last month.

They're looking at using the funds for both immediate priorities, like backfilling budget holes left by sharp declines in tax revenue and providing assistance to people and businesses struggling due to the Covid-19 outbreak, as well as longer-term initiatives focused on job training, housing and alleviating intergenerational poverty.

Equity concerns are front and center as the nation continues to grapple with issues around racial disparities and repeated incidents where Black Americans have been killed during police encounters—a scenario that again played out this week in Minnesota when an officer fatally shot 20-year-old Daunte Wright during a traffic stop.

For many smaller cities, their share of roughly $130 billion in local recovery funds provided under the American Rescue Plan Act is the first direct federal assistance that they'll receive since the pandemic began in early 2020. The law sets a target for the Treasury Department to deliver the first half of the local aid payments within 60 days of when the legislation was enacted—this would be May 10.

"I really see this as a once in a generation opportunity for us. This is an enormous investment in our cities," Madison, Wisconsin Mayor Satya Rhodes-Conway, said during an online event that the U.S. Conference of Mayors held Tuesday.

Rhodes-Conway said her city is developing a set of principles to guide how it spends not only direct local aid from the American Rescue Plan, but funding from other sources as well, such as an infrastructure package like the one that the Biden administration is pushing for.

The principles, the mayor said, account for factors like how certain spending might position Madison to transition into the post-covid era, address climate change, alleviate disparities between different groups of residents, and whether the expenditures are fiscally responsible and will help the city avoid layoffs, rebuild savings and balance its budget.

"We're running all of our thoughts, proposals, ideas, projects through this framework as we try and make decisions about where to spend," Rhodes-Conway said, adding that she's specifically focused on issues around providing residents access to healthy food, affordable housing, child care and high-speed broadband.

Dayton, Ohio Mayor Nan Whaley made a case beginning early on in the pandemic that small and mid-sized cities needed direct aid from the federal government to deal with the financial blow the virus outbreak dealt to their budgets. An earlier relief law, known as the CARES Act, sent aid only to states and larger localities.

Many states did see their revenues outperform forecasts from early last year that predicted cratering tax collections due to the pandemic. For cities and counties, however, the financial outlook before the latest aid package was often more gloomy and uncertain.

Dayton, with about 140,000 residents and a general fund of about $180 million, will receive around $147 million in direct federal aid, according to estimates compiled by the National League of Cities. 

Whaley described the possible uses for that money falling into three buckets: stabilizing city government finances in order to maintain essential services; providing assistance to residents reeling from the pandemic; and long-term recovery.

"Our first jobs are to help meet the needs of the people who are still struggling," Whaley said, noting also that many local small businesses are strained and some are on the verge of closing. 

She added that Dayton would use some of the money to restart police and fire academies that were canceled due to scarce resources.

A portion of the aid will also likely go to economic development efforts in lower-income communities, Whaley said. She raised the possibility of a program to clean up abandoned buildings that she described as an "albatross" for some neighborhoods, noting an initiative like this could be linked to job training to provide both near and long-term benefits.

In Detroit, Mayor Mike Duggan said that the city would look for ways to put the federal aid toward one-time initiatives that wouldn't turn into unsustainable expenses once the deadline to use the money passes at the end of 2024. The city is in line to get about $879 million.

Duggan said that about half of that money would probably go to fill gaps in the city budget, which had been hit by declines in downtown office activity as people worked remotely, and by a falloff in revenues tied to local casinos, which saw profits plummet amid public health restrictions on businesses and gatherings.

But Duggan also said that his city will look to fight poverty with spending on job training and assisting people who didn't complete high school in getting their degrees. Similar to Whaley, he mentioned putting people to work cleaning up street scapes and blighted property, paying them for part of the week and providing training in trades like carpentry or tree care the other days.

"What we're trying to hammer out right now is: Could we use this money for a one-time revitalization of the neighborhood and the community and at the end of it leave our residents with significantly better skills and earning power," he said.

Quinton Lucas, mayor of Kansas City, Missouri, said he hopes to direct some of the money toward housing programs, and getting people who are homeless into stable living arrangements, whether it's at motels or in spaces like "tiny home villages."  Lucas added that many cities, including his, have seen a "dramatic increase" in homelessness.

Whaley referenced discussions that she and other mayors had last week about the path forward with the local aid funds, where they spoke with Biden administration officials, including Gene Sperling, a lead White House advisor on the American Rescue Plan, and Jacob Leibenluft, a counselor to Treasury Secretary Janet Yellen.

The Dayton mayor said there is "every reason to believe" Treasury is trying to get payments distributed by May 10. She also said the Conference of Mayors is talking with federal officials about guidance Treasury is drafting for the aid program, which will provide local officials with specifics about how they can, and cannot, use the money.