Like pretty much every municipality in the country, the City of Grand Rapids got hit right smack in the general fund by the once-in-a-century pandemic.
Operations around the city were hurt by the loss of revenue and, while its fund balance helped keep the city afloat, officials were going to have to figure out how to keep the city running.
Parking revenue was down some 40% because pandemic-related stay-home orders had people holed up in their homes and no one was going anywhere. Revenue generated by city income tax was down because unemployment was up, which affected the city’s ability to fund its public safety programs.
“We’ve had the operations of our city decimated (by the pandemic),” said Molly Clarin, the chief financial officer for the City of Grand Rapids. “Luckily, the city had put in financial policies where we had a fund balance to rely on to get us through the past year, but …”
And when the city’s budget managers got together as the new fiscal year was about to dawn, they were at a bit of a loss as to how to replace lost revenue and still be able to keep essential services such as public safety and other departments running.
Help on the way
Then, Congress and President Joe Biden threw everyone a lifeline, passing the American Rescue Plan Act of 2021, which Biden signed into law March 19. The act, first proposed in January, is designed to speed up the U.S. recovery from the economic and health effects of the COVID-19 pandemic.
It builds on the CARES Act from March 2020 and the second stimulus bill passed in December.
Michigan’s state government is expected to receive some $6.5 billion, the state government is set to receive $6.5 billion that can be spent through 2024. Counties across the state are set to receive some $1.9 billion, while large cities are expecting some $1.8 billion and townships, villages and smaller cities are in line for some $644 million.
The windfall was welcome news to financial professionals like Clarin, the Grand Rapids CFO who was happy to hear it.
“When we were putting a budget together, we anticipated significant reductions (in services), but once we got wind of the ARP money, it changed our thought process,” Clarin said. “We would have probably seen reductions in staffing. We weren’t far enough down the road to see where we were going to take it, but we were analyzing services.”
Money received under the plan can be used in a variety of ways, allowing municipalities to address immediate needs – what Oakland County Executive David Coulter calls “acute” needs – but also long-term needs.
What to do with it
According to guidance issued by the U.S. Treasury Deparment, state and local governments can use the funding across four broad categories:
- Public health: To pay for COVID-19 mitigation efforts including vaccination programs, medical expenses, behavioral health and to pay some public health and safety staff
- Economic recovery: To address “negative economic impacts caused by the public health emergency,” including assistance programs for workers, households, small business and specific industries
- Lost revenue: To make up for revenues lost during the pandemic, including gas tax and registration fees used to pay for road construction and repair.
- Bonus pay: To provide extra pay to essential workers “who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors.” This can include nursing home staff, health care workers, child care workers, teachers, school staff, grocery store and restaurant workers, janitors and truck drivers.
- Infrastructure: To pay for water, sewer and broadband infrastructure construction or improvements.
Oakland County officials are still preparing a plan of action for the $244 million the county is set to receive. The first installment – a $122 million check — is due “any time,” according to Coulter; the second half will come in 2022. Municipalities have until 2024 to spend the money.
In Oakland County, any plans have to be approved by the county’s Board of Commissioners, and Coulter says the board will have his suggestions soon.
“We don’t have final details, and all ultimate funding decisions go through our board,” Coulter said. “We have a framework of principals we’re thinking about.”
But make no mistake: Coulter is ecstatic about the boost from the government. A 20-year politician, Coulter said he’s used to having to take funding decisions in the opposite direction, so the ability to actually think about an increase like this is exciting.
“Most of my career has been spent trying to figure out how to cut funds,” Coulter said. “It’s almost hard to overstate what a large and potentially transformative sum of money this is. I’ve been in politics for 20 years and there’s never been a situation where we’ve received financial assistance of that magnitude.
“The fact we’re able to have this once-in-a-generation investment in things we haven’t been able to invest in in awhile is significant.”
Coulter said he started thinking about it in terms of acute needs (short-term needs to get the county through the pandemic) and chronic needs.
For example, he said, the county still has “vaccinations to do,” there are health department expenses, lab services and the like. And, he pointed out, the county still has “businesses and residents struggling” because of COVID-19.
“We’re going to present some proposals this month for some business grants, nonprofit grants and address some of the lingering COVID-19 needs,” he said.
The county also still has workforce development needs, with a lack of talent in the workforce or lack of people lookin for jobs. The county will, he said, see “how we can leverage this money to connect people to jobs.”
The county has convened an economic recovery task force to be a “sounding board” and “idea generator” about how the county moves forward.
Leveraging the help
With three years to spend the money, Coulter said he would consult with the state and other municipalities to make sure efforts aren’t being duplicated.
“I want to make sure we’re not duplicating what other folks are doing and, more importantly, we’re leveraging what they’re doing,” he said.
The county is looking at the funds in terms of “buckets” to determine future needs. The buckets include:
- Mental health services, which Coulter points out was an issue “before the pandemic.”
- Child care, which Coulter called a “huge need.”
“The latest statistic I saw showed 40% of child care services being provided in Oakland County before the pandemic are not back on-line yet, for lots of different reasons,” he said. “It’s a big part of why a lot of folks aren’t back to work yet.”
- Quality, affordable health care, something Coulter said the county was looking at before the pandemic, but has been exacerbated by it.
- Infrastructure. The county has needs, like everyone else, but Coulter said these discussions have been delayed because Congress is debating a national infrastructure plan.
Infrastructure and other investments are where Tim Mroz thinks municipalities have a great opportunity.
Mroz, the senior vice president for Strategic Initiatives for Grand Rapids-based economic development giant The Right Place, said ARPA money can not only help local governments and businesses recover from the financial impact of the pandemic, but set them up for future business success.
Areas of need
“We understand every community was impacted negatively by COVID-19,” said Mroz, who has been with The Right Place 13 years. “Much of the funds that are allocated through ARP are intended to help fill those gaps in funding.
“However, we also think this is a once-in-a-generation opportunity to make some strategic investments that would move our communities forward,” he added. “The ARP funds allow for investments in infrastructure, in other amenities and assets that could really make an impact on a community’s ability to attract future business.”
Two areas Mroz thinks have great potential for improvement: Investments in broadband, and water and sewer expansion, an area where small communities spend as much as one-third or more of their general fund dollars.
“We know today that attracting business into a community that doesn’t have adequate broadband is a non-starter … If a community makes an investment in broad infrastructure, it will also benefit the community that lives and works there,” Mroz said. “In West Michigan many of the new greenfield undeveloped parcels we have are available, but many do not have access to water and sewer. (ARP funding) allows communities to extend water/sewer to make the development ready.”
There have been those who’ve compared this massive injection of federal money to FDR’s “New Deal,” the 1930s effort that helped bring the country out the Great Depression.
For its part, the White House has downplayed the comparison, saying instead the Biden administration used lessons from the “great recession of 2007-2009.”
But The Right Place’s Mroz is one who is comfortable making the “New Deal” comparison, or even with former President Obama’s American Recovery and Reinvesmtent Act of 2009.
“In today’s money, FDR’s New Deal would have clocked in at $745 billion,” Mroz said. “If you look at ARRA, that was $840 billion. This rescue plan is on scale more than twice that size.
“History books are still talking about the new deal,” Mroz said. “The challenge is what can communities do with ARP dollars coming down, and what can the state do to start making some significant improvements.”