Connecting state and local government leaders
Across the country, some local governments are using federal aid from the American Rescue Plan to launch "transformational" projects in areas like affordable housing, public safety and ridding homes of lead—things that will endure long after the money is spent.
When President Biden signed the American Rescue Plan Act into law on March 11, 2021, the fiscal future for states and localities looked bleak. Public officials on both sides of the aisle were predicting that the pandemic was putting their cities and counties in dire financial straits and they would not recover for the foreseeable future. As a result, many anticipated that the $350 million of ARPA money that was going to states and localities would be used to simply dig the country out of a covid-based hole.
Forecasters, as is often the case, turned out to be wrong, and state and local economies have recovered at a far speedier pace than could have been seen. As a result, many are using the flexibility in the Treasury Department guidelines for ARPA to make truly transformative investments, some putting money into projects that were long shots at best, had there never been a pandemic.
“There’s been a shift in the paradigm, as the economy has allowed entities to think of using ARPA funds for purposes outside their basic operational expenditures and instead using it for something that can help in the long term.” says Emily Brock, director of the Government Finance Officers Association’s Federal Liaison Center.
While the investments governments are making are nowhere near the magnitude of many proposed by President Biden in his Build Back Better initiative, states and localities are using some of their ARPA money to make up for the giant piece of legislation that ran into the rocky shoals of congressional infighting.
“There are some things that only the federal government can afford,” says Ed Lazere, senior fellow at the Center on Budget and Policy Priorities. “But the combination of the pandemic and the hopes for important new public investments that Joe Biden’s win brought, seems to have enhanced the desire for states and localities to pursue similarly groundbreaking new investments, of particular importance because many pieces of Build Back Better are unlikely to pass anytime soon.”
Cleveland’s new Mayor Justin Bibb came into office in January with that kind of goal in mind.
Brad Whitehead is senior advisor at the Fund for Our Economic Future, and a consultant to the Cleveland Center for Economic Recovery, which helps ascertain the best ways to spend ARPA and other federal funding. With the support of the Cleveland council, Whitehead says, “the mayor’s first step was to ask what we can achieve that would have transformational impact. These are big efforts that aren’t going to be finished in two or three years. They’re big topics that we need to be thinking about at least through 2027.”
Much of the first portion of Cleveland’s ARPA money was spent on items that the city couldn’t afford because of declining revenues in the early part of the pandemic. It’s now exclusively tackling long-term projects like ensuring that all rental homes built before 1978 are lead free. The city has used $17 million of its $511 million total ARPA funds to help accomplish that goal.
More examples abound in localities small and large. Take, for example, Vienna, Virginia, a community of about 16,000 located about 17 miles west of Washington D.C. It’s getting about $17.1 million from ARPA intended to replace revenues that were anticipated to come in short as a result of the pandemic. But, as it turned out, Vienna only had revenue shortfalls of about $4 million.
“This allowed us to catch up on prior year shortfalls in revenues for our parks,” says Marion Serfass, director of finance and treasurer there, “as well as to move forward in transformative ways in areas like public safety, where we’re using this money for in-car dashboard cameras for police vehicles, body cameras for officers and a better dispatch system.”
Local Priorities: Affordable Housing and Equity
One problem that preceded the pandemic was a painful shortage of affordable housing, and a number of communities are using their new federal dollars to address that issue.
Denver, for example, is making sizeable investments in affordable housing including “alternatives to traditional sheltering models,” according to Rory Regan, federal grants manager for the city and county of Denver. Uses for ARPA money in its Housing Stability and Homelessness Resolution Support programming range from $150,000 for building tiny homes that can inexpensively house the homeless to $28 million for Denver’s long-standing Affordable Housing Fund.
Then there's Madison, Wisconsin, where ARPA money was used to create an organization called Occupy Madison, which is working to create villages of tiny houses for the previously homeless.
But Madison has taken things one step further. According to Julia Bauer, a research specialist at the National League of Cities who helped develop a sophisticated tracking system to see where ARPA money is being spent, "One of the highest costs for people to remain in their homes is electricity. So, they're installing solar panels so the residents won't have to pay for electricity, and that's only costing the city $150,000.
While affordable housing has been on many entities’ to-do lists for years, some of the ARPA money is going to projects that weren’t even on the distant horizon prior to the pandemic. For instance, Chula Vista, California, with about 275,000 residents, is developing an intergenerational community center for the arts with a price tag of $1 million. It’s a very innovative project according to Bauer, who explains that “multilayers of the family, grandparents and grandchildren or parents and children will be working together on the artwork.”
One significant trend that fits squarely in the heart of transformational change has been the use of ARPA dollars to promote equity in cities and counties.
“For a lot of cities, the data around covid showed the stark racial divide to the access to health care between different racial groups,” says Joshua Pine, City Innovation and Data Program manager for the National League of Cities. “For many cities it was a wakeup call to see how that was a reflection on access to parks, transit and housing. This has led them to challenge the norm, as they became more open to intentionally engaging people in those communities in the decisions about how the ARPA money could be spent.”
Fortunately, the Treasury guidelines allow for a great deal of unrestricted spending on these communities. Explains Denver’s Regan, “If you can define a population has been disproportionately impacted by the pandemic, then the tools you’re allowed to use are a lot broader and have given us the opportunity to deal with the housing problems that have been a problem for the city, even preceding the pandemic.”
Projects like this are particularly feasible in localities that waited to spend their ARPA funds.
“When GFOA issued its guiding principles for the expenditure of ARPA money, we recommended that entities be thoughtful about what they would use the cash for, rather than rushing into committing the full amount that would come in both tranches,” says Brock. “Those places that followed that broad guidance are now suited well to think about transformational approaches to these expenditures.”
Katherine Barrett and Richard Greene of Barrett and Greene, Inc. are columnists and senior advisers to Route Fifty.