Why some small towns are rejecting federal COVID relief funds

Bingham Township, Pennsylvania is a quiet, rural place with few local businesses. “I always tell people that the cows outnumber the people here,” said Cheryl Young, the township secretary. Most of the roads are dirt and gravel, she said, and many of the roughly 600 residents are Amish.

Congress in March authorized $ 19.5 billion in aid to towns and cities of less than 50,000 people, including very small jurisdictions such as Bingham. Lawmakers wanted to help every city meet the cost of battling a pandemic and recover from last year’s recession.

But in some small, rural or conservative towns, local leaders refuse the money. They say they don’t need it and in some cases don’t feel comfortable accepting it.

Bingham executives recently turned down about $ 69,000 in federal COVID-19 relief assistance because they couldn’t think of a way to spend it, Young said.

“This is the main reason we chose not to do it,” Young said. “It doesn’t make sense to have [the money] sit here for two years, then turn around and send it back because you can’t spend it.

Of course, such refusals are rare. In 14 states where data is available, only 171 out of 7,975 communities who have less than 50,000 residents have rejected the funds, according to the National League of Cities, a Washington, DC-based group that advocates for cities and towns.

The average community that rejected the money is 540 people, according to the group.

City advocates say cities that refuse funds are missing out on a great opportunity. “It is unfortunate that anyone who refuses this money, because I think any community could benefit from it,” said Mike Gleeson, legislative director of finance, administration and intergovernmental relations in the defense team. of the National League of Cities.

Small towns can team up with their neighbors or with county and state leaders to use the funds, these advocates say. This could mean a regional effort to expand broadband, modernize water infrastructure, or study a region’s housing needs.

“I don’t think there is a dearth of things to spend money on, especially when we are able to think beyond town hall and beyond town hall,” said Chris Hackbarth, director Michigan Municipal League state and federal affairs.

Fourteen Michigan towns and townships refused funding, out of 1,692 eligible jurisdictions with fewer than 50,000 residents, according to the latest statistics from the Michigan Treasury.

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Small towns that accept funds may need help from states, municipal associations, and local accountants to manage their grants. Places as small as Bingham typically don’t have staff familiar with following federal grant requirements.

Young said that she, three elected supervisors and two road maintenance officers, one of whom also sits on the board, represent roughly the breadth of local government. – That’s it, she said. “You are looking at us.

Money for all municipalities

Last year’s major federal aid program, known as the CARES Act, sent money directly to large cities and counties, but not small ones. States were supposed to transfer part of the federal dollars they received to jurisdictions of less than 500,000 inhabitants.

However, this system has left many localities behind. Nearly 30% of cities across the country have not received money from the CARES law, according to the National League of Cities.

Congress tried a new approach with this year’s federal relief program, the American Rescue Plan Act. The law sent money to most towns, villages, townships, boroughs and incorporated districts.

“They made sure to include all the little guys,” said Emily S. Brock, director of the Federal Liaison Center at the Government Finance Officers Association. The association represents those responsible for public finances.

However, the US Treasury Department and state officials had to figure out which governments could handle the money. Some local authorities exist in name only or have limited fiscal and expenditure functions.

Brock said his organization advised the US Treasury to avoid allocating funds to such bow governments. “There are no elected officials, there is no governing body, you cannot give them $ 100 million!” she said.

Eligible localities can use the latest round of federal COVID-19 relief for a wide range of things: to replace lost tax revenue; pay for pandemic response efforts; help households and businesses to recover economically; grant an increase to essential workers; and investing in water, sewers and broadband infrastructure. The money cannot be used to consolidate pension funds or pay tax cuts.

Cities that accept money get half this year and half next year. They have until 2026 to spend it and have to report their spending to the Treasury on a regular basis. Those who do not spend the money in accordance with the law and the rules of the Treasury must return those dollars to the federal government.

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States again played the role of intermediary. Local leaders must ask states to accept or reject their federal allocation. When cities refuse the money or simply fail to request it, states must reallocate the money among other eligible towns with fewer than 50,000 people.

Some unusual jurisdictions that made the cut have refused their federal grants, according to state records published online or provided to Stateline.

In Pennsylvania, for example, the SNPJ borough refused a grant of $ 1,988. SNPJ, or “Slovenska Narodna Podporna Jednota”, is a fraternal charity association founded by Slovenian immigrants in 1904. The group runs a recreation center which is set up in a district. The SNPJ has only 18 residents, according to the US Census Bureau.

“It was not advantageous for us”

More established cities have also refused funds. City leaders who turned down the latest federal grants say they lack the infrastructure, struggling businesses, essential workers or public health efforts to spend the money.

“The things they allowed us to use the money for in this plan were nothing we had in our city,” said Richard Ouellette, chairman of the board of Dummer, New Hampshire. “So really, it didn’t give us any advantage. “

Dummer is a rural town of about 300 people and it was eligible for about $ 29,000. “We really didn’t have any expenses for COVID,” Ouellette said. “We ended up buying maybe a case of masks for the municipal office, and that was about it.”

There aren’t many businesses in town, Ouellette said, and residents get water from their wells rather than a municipal water system.

Iowa Park, Texas, received the CARES Act money last year, said city manager Jerry Flemming. That money – $ 350,020, according to records published online by the Federal Pandemic Accountability Committee – covered all of the city’s needs related to the pandemic, he said.

The latest wave of aid hasn’t been as helpful, Flemming said. “We just didn’t have any projects that met the criteria, so we didn’t apply. Iowa Park is located near the Oklahoma border and has approximately 6,500 residents.

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Some local leaders refused the funds in part for ideological reasons. “The main reason we said ‘no’ as a board of directors is that our country is in debt at $ 29 trillion, and we wanted to do our part to say, hey, that’s enough,” said Kevin Green, Algoma Township Supervisor in West Michigan. . “We didn’t want to be a part of this.

Greene said the board had two other reasons for rejecting his allocation of $ 1.3 million: Members couldn’t think of a way to use the funds to benefit the 12,055 residents, and they felt in a hurry.

The US Treasury has yet to release its final rules for spending the money, Green noted. But the Michigan Treasury wanted cities to accept or reject the funds by the end of July. “I think if they had given us a few more months and we could have thought about it, we might have been able to accept some of it,” he said.

Algoma received funds from the CARES Act last year, he said. The township used the funds to pay overtime for public security workers. He said local leaders would have liked to use the remaining relief funds to upgrade township roads and parks, but such general infrastructure projects are not permitted by law.

Follow federal rules

Many small towns will not be able to track their expenses and report them to the US Treasury without help.

Many leaders in these cities are unaware of federal reporting and auditing requirements, said Brock of the Government Finance Officers Association.

“In some cases, they may have to hire an auditor or consultant to make sure they’re doing things right – an additional expense on top of the money they just got,” he said. she declared.

About half of the counties and more than 100 municipalities in Pennsylvania have hired Zelenkofske Axelrod LLC, an accounting firm, to help them manage the money, said Cory Johnson, a partner at the firm who works with public sector clients.

“There are small municipalities that have part-time people at best, and they are not accountants,” he said. Some local leaders do not have strong computer skills, he added. “It’s a big hesitation, in some parts of the state. “

Help is available, however. City leaders can use their American Rescue Plan Act grants to hire outside help. And they can turn to municipal leagues, professional associations, and even public university extension officers, who have answered questions about compliance.

City advocates say that once small towns get used to handling federal money, they will be well placed for future grant opportunities. “If they can do it this time around, it could potentially open up future federal grants,” said Gleeson of the National League of Cities.

Not all local leaders may see it that way. Green of Algoma said meeting the demands of the CARES Act was not easy and township leaders were not eager to start the process again this year. “From an accounting standpoint, it was a bit difficult,” he said.


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