From CDBG to ARP: An Overview of The COVID-19 Stimulus Package

Zencity

Zencity

Community-Development-Block-Grant-Stimulus-fund-covid19

At Zencity we’re constantly striving to support the local government professionals championing their communities everyday and even more so during these unprecedented times. In response to the recent signing of the American Rescue Plan Act, we consulted with leading policy professionals in Washington D.C. to put together an overview of the ARP for the inspiring local government leaders who have been on the frontlines of this crisis.

We hope that this overview will prove useful as you shift your focus to adjusting to new changes and deploying federal funding for the short and long-term betterment of your community.

Ensure you make the biggest impact with your stimulus spending.  Learn more in our Guide to Strategic Stimulus Funding Allocation ⇒

Part I: The Basics

Just over $130 billion of the federal relief funding is specifically for local governments

The ARP offers $360 billion in direct aid to state, territorial, tribal, county, and municipal governments. Of this, $219.8 billion will go to the District of Columbia and state governments and $130.2 billion is for local governments. An additional $10 billion will be divided among state and local governments for capital programs

Local Government Break Down 

Counties $65.1B

Metropolitan cities (50K) $45.57B

Smaller jurisdictions $19.53B

The U.S. Treasury Department under Secretary Janet Yellen will oversee the distribution of this funding.

An additional $10 billion is for capital projects related to the COVID-19 response

Of this $10 billion, a certain portion is already allocated to the District of Columbia and to tribal governments and indigenous Hawaiians. The remainder will be distributed according to a number of factors which include population size and poverty data. Capital projects entail a number of different types of projects from enabling remote work, to education, to health monitoring, to broadband infrastructure.

Metropolitan cities and most counties will receive their first batch of funding by May 10, 2021 but smaller cities and towns will have to wait longer 

While your qualifying residents may have already begun receiving their stimulus checks and online deposits, there are still a few months ahead of us before the funding makes it to local government. That’s because the massive aid bill is currently making its way through the federal regulatory and rule making process. These processes will determine how the funds will flow; any restrictions or requirements in how local governments and states may use the funds; and record-keeping requirements.

Metropolitan cities (50k+ residents) & most counties will receive their funds directly from the Treasury in two equal tranches, the first by May 10, 2021, and the second by March 11, 2022. 

Smaller cities and towns, and counties that are not their own political entities will be transferred funds from their states – who will be receiving the funds May 10, 2021. Once the states receive the funds, they have 30 days to redistribute them to local governments (but they can always ask for extensions).

Fund Allocation will be based on the existing Community Development Block Grant (CDBG) formulae

As of now, it seems that to get the funding, local governments won’t have to do much because allocations are currently based on existing formulae used to distribute federal funds- Community Development Block Grant or CDBG. But, we should be aware that this could change via the rulemaking process currently underway. But once they have the funding, all ARP funds must be spent on costs incurred no later than December 31, 2024.

What are Community Development Block Grants (CDBG) and how are they connected to the stimulus package?

The U.S. Department of Housing and Urban Development’s (HUD’s) Community Development Block Grant program (CDBG) improves the economic, social and physical environment of eligible cities and counties, and now in response to the COVID-19 pandemic, it can be employed by states and local units of government to support economic and community development effort. As mentioned above, relief funds will be distributed through the Treasury according to a modified community development block grant formula but CDBG rules will not be taken into account. 

While waiting for final federal guidance and for funds to come in, this is an excellent time to begin the process of fund allocations. In analyzing the ARP, the Economic Policy Institute said it best – you and your communities are best positioned to know how to rebuild better:

“…the reality is that no one has a clearer sense of the needs of local communities than the people in those communities and the public servants who work to serve them.” 

Part II: How Local Governments Can (and Cannot) Use the $130 Billion in Funding

The American Rescue Plan Act provides discretion in terms of what local governments may use the federal funding for. The congressional intent behind the act is broad and the Plan lists examples (such as those below) and not requirements. 

Local governments (and states) MAY use Rescue Plan funds for helping those affected by the pandemic in terms of both the negative health ramifications and the negative economic consequences. This includes:

  • Aid to households, small businesses, or nonprofits; aid to “Impacted” industries such as travel, tourism, and hospitality  
  •  To restore government services to the extent they were cut or reduced due to tax revenue lost due to the pandemic
  • Making “necessary investments” in water, sewer, or broadband infrastructure. Anytime there is a qualifying term like “necessary” in the Plan we can expect some debate as one politician’s necessity is another’s frivolity.
  • State and local governments can transfer the funds to a private nonprofit organization, a public benefit corporation involved in the transportation of passengers or cargo or a special-purpose unit of State or local government.
  • Respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the county that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work.
  •  Premium pay is an amount up to an additional $13/h to an eligible worker up to $25,000/year per workers.

Local governments (and states) MAY NOT use Rescue Plan funds for:

  • New fiscal policies 
  • Old debts 
  • Public pensions funds
  • To directly or indirectly pay for tax cuts enacted since March 3rd and until December 31, 2024 

Local governments can also expect to feel the impact of the remainder of the $1.9 trillion ARP 

In addition to the $360 billion in aid to state and local governments, the $1.9 trillion ARP covers nearly all aspects of civic life. Billions of dollars of funding are dedicated to policy-specific programs including education, energy and environment, agriculture, transportation, and infrastructure. While most of the funding will flow through existing federal agencies and programs, like Community Development Block Grants, it is certain that your residents will feel the benefit of the additional funding and that, as a local government professional, will be invaluable to these programs in helping to make them as effective and efficient as possible for your community. 

In our overview, we’ve focused on a few policy areas that we think can directly impact your residents and where you can help shape spending for the better.

Download our guide for local governments to learn how you can use your federal stimulus funding to provide effective & equitable relief with a robust community engagement strategy.