How will funds be spent here?
Local governments deliberate on what to do with federal aid
During a conference call with other county leaders two months ago, Phillips Armstrong learned what the proposed 2021 coronavirus relief package had in store for local governments. As soon as it was over, the Lehigh County executive and retired social studies teacher exclaimed to his wife, “This is the Marshall Plan for America.”
In 1948, the United States spent more than $13 billion to help rebuild Europe in the aftermath of World War II. Adjusted for inflation, that’s roughly equivalent to the $130.2 billion piece of the larger $1.9 trillion federal COVID-19 relief bill committed to U.S. cities, counties and other local governments.
Lehigh County is projected to receive $72 million, and Northampton County is in line for $61 million. More than $57 million is estimated to be coming
Allentown’s way, while Bethlehem is supposed to get nearly $34 million. And this only covers the direct stimulus dollars local governments will receive; the 628-page bill offers all sorts of more targeted relief measures to help local health departments, emergency management agencies and area schools, among other institutions.
Armstrong and other officials acknowledge that it’s quite the windfall. And while there are some strings attached, local governments appear to have considerable latitude in determining how to use the aid.
“This is a program to bring every aspect of our economy back,” the Democrat said. “There were a lot of critics of the Marshall Plan, and there are a lot of critics of this package. But I think their shared goal is a good one: to get workers back on their feet, kids back in school, and businesses in a position where
“This is the Marshall Plan for America.” — Phillips Armstrong, Lehigh County executive and retired social studies teacher
they can flourish.”
Unlike the $500 billion in state and local relief funds provided by the initial coronavirus relief legislation in 2020, the money isn’t burning a hole in their pockets. Cities and towns will receive the money in two installments, this summer and next, and they have until the end of 2024 to spend it.
Such provisions have provoked criticism from fiscal conservatives and Republicans like Sen. Pat Toomey of Pennsylvania, who this month called the bill a “spending monstrosity” that has little to do with emergency COVID-19 relief, and noted that many states and local governments collected record amounts of revenue last year.
The long runway to spend the money is a feature, not a bug, argues U.S. Rep. Susan Wild, a Democrat representing the Lehigh Valley. Municipal leaders need time to develop a strategy and think through longer-range initiatives, she said. Lottery winners, she noted, often go bankrupt because of a lack of financial planning.
Use of funds
The bill outlines a number of fairly broad parameters on how local governments can spend the money.
For example, municipalities may use funds to address the “negative economic impacts” of the pandemic. That includes assistance to households and individual businesses, as well as aid to “impacted industries such as tourism, travel and hospitality.”
The funds can cover overtime pay for government employees performing “essential work” during the ongoing pandemic. Or, governments can provide grants to businesses whose employees are performing essential work.
Governments can also use the money to supplement their general fund to the extent they experienced revenue shortfalls in 2020. And they can use as much as they want to invest in either water and sewer systems or public broadband internet.
Alternatively, municipalities are allowed to transfer money to nonprofits, public transit agencies or “special-purpose” agencies like parking and housing authorities.
The bill explicitly bars governments from padding municipal pension funds using the federal aid. But of course, covering a number of qualifying expenses with federal dollars frees up local dollars that could be spent on pensions, health care costs or other long-term liabilities.
“It’s pretty wide open,” Allentown Mayor Ray O’Connell said. “Christmas is coming early.”
O’Connell said his administration would meet with community groups and stakeholders throughout the city in the coming months to determine how to best allocate the city’s $57.5 million, which represents nearly half of the annual budget.
Leonard Lightner, the city’s director of community and economic development, said Tuesday he’s already received several calls and messages from community members with ideas on how and where to spend the money. He emphasized that the city will need to work with county officials and consider all the potential sources of federal assistance to ensure money isn’t spend redundantly.
Lightner is keen to invest a portion of the city’s bonanza in opportunities that can pay for themselves in the long run, such as initiatives identified in the city’s Vision 2030 comprehensive plan.
For example, community broadband would help families that can’t afford internet service while also attracting businesses and creating jobs, Lightner said. Published before the pandemic, the comprehensive plan notes that more employees are working remotely, and access to internet affects educational and economic opportunities.
Pennsylvania bars municipalities from providing broadband service to residents unless no such services are provided by private telecom companies, but a public-private partnership model may be able to circumvent those rules.
Allentown Councilman Joshua Siegel likes that idea — and has a slew of his own.
He supports a vocal contingent seeking city and county funding to develop a village of microshelters, or tiny homes, an incremental step toward permanent housing for individuals experiencing chronic homelessness.
During a council meeting last week, Siegel said the city should create an emergency reserve fund for overtime pay so the city won’t have to continue raiding cash reserves to cover account deficits. Allentown spent $4.7 million on premium pay in 2020, about 32% over budget.
Siegel also wants Allentown to consider launching a scholarship program in which city students receive enough money to cover two years of community college. Or, it could create a program similar to Feed Phoenix in Arizona that buys food from local farmers and pays restaurants and caterers to prepare meals and deliver them to food banks.
“We need to prioritize immediate COVID relief, but this is also a one-time opportunity to tackle larger problems the city has,” he said.
Local officials have the opportunity to achieve generational change if they’re smart with the money, echoed Geoff Brace, chairperson of the Lehigh County Board of Commissioners. With 2 ½ years to spend the money, “we have an opportunity to take a deep breath and say, ‘What do we want to build that will make the community stronger and more equitable?’ “he said.
Among other personal preferences, Brace wants the county to explore the feasibility of establishing a county health department. And while the county already plans to offer more than $20 million in rental assistance over the coming months, it can use this next round of federal assistance to develop emergency housing options, such as a yearround shelter, for those experiencing homelessness or housing insecurity, he said.
In Bethlehem, city officials are also adopting a long-term perspective on how to employ their estimated $34 million in aid, which represents about one-third of the budget.
“We are certainly very appreciative of that amount. We are at the point though where we need to be deliberative and do what the most responsible thing for the taxpayers of the city,” business administrator Eric Evans said.
Bethlehem plans to check with other cities to see how they are using the money before making any decision. They also will check with small business and nonprofits to see how much federal money they have received, he said.
Easton shortchanged?
Not everyone is thrilled with the initial aid estimates. Easton expected $18 million-$20 million, but initial congressional data projected the city would receive less than $3 million.
“For us to get $2.69 million in revenue, it doesn’t even cover half our revenue losses from coronavirus last year,” Mayor Sal Panto Jr. said.
Panto thinks the discrepancy could be because of the city’s decision to opt out as a direct entitlement community for federal aid. About three years ago, city officials entered into a consortium agreement with Northampton County for 42% of the county’s annual allotment of federal Community Development Block Grant and Home Investment Partnership funds. Allentown and Bethlehem receive these funds directly from the U.S. Department of Housing and Urban Development.
The intent of the consortium agreement was to obtain more CDBG money, but it may have had the unintended consequence of disqualifying Easton from the relief bill’s definition of a “metropolitan city.”
Easton’s allocation appears to be based on its population, leaving it with a smaller estimate than a wealthy suburban township like Lower Macungie Township ($3.23 million). While Easton will likely receive a share of Northampton County’s allocation, it’s unlikely to be 42%, County Executive Lamont McClure said.
“Remember, we have an entire county to consider,” McClure said. “Obviously, Easton being the county seat is very important to us and we will be looking at ways to help Easton as much as we can.”
Since the relief money was released, Panto has been in contact with Wild, the U.S. Department of Treasury, the White House Office of Intergovernmental Affairs and Sen. Bob Casey, a Pennsylvania Democrat.
Wild emphasized that the $2.69 million figure is an estimate, and that the treasury department makes the final call on how much each city and county receives. Wild has asked department officials to review Easton’s case and ensure it gets its fair share of funding.
On the other side of the Lehigh Valley, Lower Macungie Commissioner Ron W. Beitler wondered how the township could use its stimulus most responsibly.
“I’m still trying to get my head around it,” he said.
The closure of its community center and swimming pool last year resulted in the loss of programming revenue, he noted. The township collected about 20% of the $385,000 budgeted revenue for culture and recreational activities.
But overall, he acknowledged, the township government is doing just fine. Bigger picture, the Republican candidate for the Lehigh County Board of Commissioners worried about the long-term consequences of so much untargeted federal spending.
“At some point, we will have to pay for this,” he said.
Republican challenge
One potential snag: Republican attorneys general from 21 states this week questioned a provision of the relief bill that bars state governments from using the funds to offset tax cuts. That provision is in the broader section of the bill that details local spending.
In a letter to Treasury Secretary Janet Yellen, the coalition listed over a dozen instances of states currently considering new tax credits or cuts they believe could be jeopardized because of the relief funds, according to the Associated Press.
White House Press Secretary Jen Psaki said Monday that President Joe Biden expects the relief funds to not go toward decreasing taxes.
“The original purpose of the state and local funding was to keep cops, firefighters and other essential employees at work and employed and it wasn’t intended to cut taxes,” she said at a briefing Monday.
Morning Call reporter Andrew Wagaman can be reached at 484-553-7413 or awagaman@ mcall.com.