Bank says Cleveland’s stimulus could be ‘transformational’

How much of a difference could Cleveland’s $511 million, Cuyahoga County’s $239 million and Ohio’s $5.4 billion from the American Rescue Plan make in communities?

According to a recent report from the Federal Reserve Bank of Cleveland, we can find the answer by comparing a state or local government’s stimulus cash with its 2020 tax revenue. Cleveland’s windfall exceeds its 2020 tax revenue, while Cuyahoga County’s is about 30% of its tax collections and Ohio’s is about 17%.

“When we hear that a county is receiving $500 million and a state is receiving $5 billion, both figures sound very large, but what we don’t know is how much change those allocations can create,” the report reads. “Scaling our state or local government’s annual tax revenue enables us to consider whether our American Rescue Plan allocation could be transformational or merely helpful.”

Researchers found ratios of the stimulus money to 2020 tax revenue for almost all states are between 10 to 30%, with a median of 20%. Ohio is right in the middle of the pack, with a ratio of 16.8%.

For local governments, the ratios averaged 25% to 45%. They varied from less than 10%, which could help the municipalities recoup some of the revenue lost during the coronavirus pandemic, to well over 100%, “an amount that could create a once-in-a-generation opportunity to invest more than an entire year’s worth of tax revenue without taking on new debt,” the report states.

Cleveland’s ratio is 100.7%, according to the report.

East Cleveland has the highest ratio in the state with an eye-popping 258.5%. Only 17 cities in the country had ratios greater than 200%, according to the report.

Cleveland’s ratio is also behind a handful of other northeast Ohio cities, including Warren at 145.8%, Youngstown at 110.4%, Lorain at 110.3%, Lakewood at 107.7% and Barberton at 102.8%.

Cleveland has the highest ratio of Ohio’s big cities, with Dayton at 90%, Toledo at 80.7%, Cincinnati at 48.3% and Columbus at 18.6%.

Other northeast Ohio city ratios are: Cleveland Heights (92.9%), Canton (90.8%), Euclid (76.6%), Alliance (66.7%), Akron (63.5%), Elyria (45.6%), Green (41.9%), Parma (37.5%), Kent (35%), Cuyahoga Falls (32.4%) and Mentor (6.9%). Mentor has the lowest ratio in the state.

Counties across the country had a median ratio of 24%, but Ohio counties had a median of 52%. Cuyahoga County was among the lowest ratios in the state at 29.6%, similar to other large counties — Franklin at 29.4% and Hamilton at 30%. Geauga County had the seventh-lowest ratio at 34%.

Lorain County had the highest ratio in Greater Cleveland at 57.6%. Portage and Medina counties each had about 52.2%, Summit County’s ratio was 50.4% and Lake County’s was 42.4%.

Warren County in southwest Ohio had the highest ratio in the state at 268%, making it one of 72 counties in the country with ratios exceeding 100%.

The Cleveland Fed’s report only accounts for governments receiving stimulus money directly from the U.S. Treasury, which does not include small cities, townships or villages. Researches also noted that American Rescue Plan money was not evenly distributed across all communities. The amount a state received was based on its unemployment rate during the pandemic; county funds were distributed on a per capita basis unless the per capita amount was less than the amount the county would receive under the Community Development Block Grant formula; and city funds were allocated solely based on CDBG formulas, which weigh factors including population, poverty rates and housing conditions.

Governments must allocate their stimulus money by the end of 2024 and spend it by the end of 2026. Permissible expenditures include revenue recovery; grants to households, businesses and nonprofits impacted by the pandemic; increasing pay for essential workers; or investing in public health, water or broadband infrastructure. While the authorized uses are quite broad, the U.S. Treasury can force repayment if money is used improperly, such as paying for a project proposed before 2020 that has no connection to pandemic recovery.