Why some Alabama cities are seeing their stimulus funds cut by more than half
Fairhope may have a quaint downtown area, but there aren’t any skyscrapers or toll freeways that suggest Alabama’s fastest growing city is the typical “metropolitan”.
Muscle Shoals may be the largest town in Colbert County and has a famous music studio, but it is far from being confused with Birmingham or Huntsville.
But a recent classification of the two cities as “metropolitan” under US bailout law has left officials in both cities asking questions. The cities are among 21 in Alabama designated as “metropolitan” under federal relief law.
Alabama officials say that because the two cities are considered metropolises, they are expected to receive significantly less money in relief funds than initial estimates suggested in March. Fairhope, near the Gulf Coast of Alabama, is expected to get $ 1.9 million, down 55% from an estimated $ 4.2 million in March. Muscle Shoals in northwestern Alabama will receive $ 1.3 million, down 52% from the $ 2.7 million originally estimated.
“We haven’t really made any plans for the money, but we’re starting to look at it when we find out we’re only getting $ 1.9 million,” Fairhope Mayor Sherry Sullivan told About humanitarian aid.
She said part of her worry is that the nearby town of Daphne is getting $ 2 million more than Fairhope. The two towns are adjacent and are only separated by a difference of 4000 inhabitants.
While Fairhope and Muscle Shoals are growing cities, neither comes close to the threshold of 50,000 people that the US Treasury Department typically defines a metropolitan city. Daphne, for comparison, is also one of the cities classified as “metropolitan” in Alabama by the American Rescue Plan Act.
In the March estimates, the three cities were grouped with smaller towns in Alabama and were expected to get higher allowance amounts.
The federal government determines metropolitan status by assessing eligibility to participate in the Community Development Block Grant (CDBG) program, whether or not the city is currently participating. The CDBG program distributes grants annually to major cities for improved housing and neighborhoods and economic opportunities to low and moderate income people.
According to the latest census estimates, only 10 cities in Alabama have a population greater than 50,000. But under the American Rescue Plan Act, the smallest city that qualifies as a “metropolitan” is Gulf Shores with a 2019 population estimate of 12,267.
Gulf Shores is expected to get $ 1.26 million, down 46% from the March estimate of $ 2.36 million.
“We plan to include these funds in our budget process and be strategic in how these funds will be used once we fully understand the eligibility criteria,” said Grant Brown, city spokesperson. of Gulf Shores.
“Estimates that could change”
A drop in expected relief funds is not just a problem in Alabama. Nationally, small towns are struggling to find out why the initial allocations under the American Rescue Plan Act were much more generous than what they are receiving. Meanwhile, questions continue to swirl around how the money can be used.
The $ 1.9 trillion federal law, signed by President Joe Biden in March, provided $ 350 billion to governments to reimburse cities for pandemic-related expenses and to fill the shortfall that some cities have suffered. ‘last year.
The US Treasury Department is responsible for administering the program, and the agency last month released its “interim rules” on how the money is used for cities. A public comment period is underway, and Alabama officials expect final decisions and advice on the money later this summer.
But among the Treasury Department information released last month was revised allocations and classifications for metropolitan cities, which are posted on the National League of Cities website.
In the cases of Fairhope and Muscle Shoals, these final numbers are significantly different from the initial estimates released by the US House Oversight and Reform Committee in March.
Fairhope, in an email the city received from the US Treasury Department’s Coronavirus State and Local Fiscal Recovery Fund Center, was informed that these March figures were “unofficial allocation estimates” produced by ” other organizations “which” may have classified some local governments as lawless units of local government.
According to the email, the Treasury Department says that “based on statutory definitions, some of these local communities should have been classified as metropolitan cities.”
Fairhope is also a primary city within the Daphne-Fairhope-Foley Metropolitan Statistical Area, which would make it eligible to be classified as a “metropolitan” city for relief money.
Greg Cochran, executive director of the League of Municipalities of Alabama, said that officials from the town of Muscle Shoals recently sent a letter to the Treasury Department “noting that the CDBG funds they received were from years ago ”and that the city should be reassigned to a community without rights, similar to small towns of less than 50,000 inhabitants.
The Treasury Department email to Fairhope provided some responses. In it, a Treasury Department official states that a “city is eligible to be a metropolitan city” even if it falls below the threshold of 50,000 inhabitants under the American Rescue Plan Act and even if it does not. no longer participates in the CDBG program.
Cochran said: “We have always told our members that the March numbers are purely estimates that can change.”
That said, Cochran said cities were generally happy to claim the relief funds for water infrastructure projects. Water, sewer and broadband projects are eligible for funding under the Relief Act.
Other activities eligible for the money include:
-Respond to public health impacts related to the pandemic or negative economic impacts, including assistance to households, small businesses and non-profit organizations. The hotel industry – travel and tourism is also eligible for aid.
-Wage bonus for essential workers.
-To cover loss of income in the provision of services.
Money, however, cannot be used to replenish a city’s rainy day fund.
And it cannot be used to make up lost income from a tax cut, nor to cover pension deficits.
“Still waiting for answers”
Cochran said his agency was working with the Alabama Department of Finance to provide a portal for small towns not qualified as “metropolitan areas” under the American Rescue Plan Act to register their information in order to obtain a funding. He said virtual meetings will be held with the National League of Cities to provide more information, and details will also be posted on the League’s website.
“Many questions posed by our members are still awaiting answers from the US Treasury,” Cochran said.
The counties are also waiting for more information. Sonny Brasfield, executive director of the Alabama Association of County Commissions, said the US Treasury’s release last month was a “tentative final rule, rather than guidance” on how the money should be used. He said the current interim rule has a 90-day comment period that will end in early August, and changes are planned based on comments the federal government will get from local government units nationwide.
Brasfield and others say there is plenty of time: the current interim rule requires funding to be mandatory by Dec.31, 2024, and “allow an additional two years to complete all ongoing projects by the end of from 2024 ”.
Birmingham and Mobile, however, are moving forward as they begin to receive the first half of their allocations as major cities across the United States begin to receive initial Treasury Department deposits.
Birmingham receives $ 141.2 million in relief funds, compared to $ 148.8 million or just 5%. The mobile gets $ 58.2 million, compared to $ 60.2 million, or 3.3%.
Cities and counties receive half of their allocations now and the other half in about a year.
Birmingham City Council on Tuesday approved a proposal from Mayor Randall Woodfin to provide a one-time bonus of $ 5,000 to every employee in the city, at a cost of $ 16.8 million. The bonus money will come from the relief fund money.
In Mobile, Mayor Sandy Stimpson’s administration met on Tuesday to discuss how it plans to spend its allowances. A final plan is expected to be released to city council for review later this month, according to personnel director James Barber.
“We have a lot of capital improvement projects going on right now and there are a lot of labor shortages and material issues, so being able to make sure we can identify the projects that we can run in that amount of time is a bit of a challenge for us, ”said Barber.
Barber said part of Mobile’s allocation could be spent on capital projects that improve drainage in the city. He said the city’s legal staff would review every project considered for the money for fear of running into the US Treasury.
“If you’re spending money from the treasury on something that you’re not supposed to spend it on, then that money has to be returned to the treasury and we’ll have to figure out how to catch it,” Barber said. “We have to think about how we do this spending. “
Not all big cities move forward with plans. Huntsville city officials are waiting for the Treasury Department to finalize its final rules for the money later this summer.
“Once this process is complete, the Treasury will determine its final rules for the beneficiaries and the City of Huntsville can (make) a decision on the use of the funds,” said Kelly Schrimsher, spokesperson for the City of Huntsville.
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