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World & Nation

Cities and counties fear losing out on coronavirus rescue funding

President Trump and Jovita Carranza, administrator of the Small Business Administration, listen as Treasury Secretary Steven Mnuchin speaks about the coronavirus April 2.
President Trump and Jovita Carranza, administrator of the Small Business Administration, listen as Treasury Secretary Steven T. Mnuchin speaks about the coronavirus response April 2.
(Alex Brandon / Associated Press)

The $2.2-trillion U.S. federal rescue package could fail to deliver badly needed financial aid to thousands of smaller cities and counties where a majority of Americans live, according to documents and interviews with local officials.

The coronavirus outbreak has blown holes in the budgets of communities as the costs of battling the outbreak skyrocket and critical sources of revenue such as sales and income taxes plummet.

Congress’ Coronavirus Relief Fund uses a formula based on population to parcel out tens of billions of dollars to the states while allowing local governments with more than 500,000 residents to apply directly to the Treasury Department for cash infusions. But localities below the half-million population threshold are in limbo.

Among those affected: New Rochelle, N.Y., one of the cities hardest hit by the outbreak.

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“I cannot understand the logic,” said Noam Bramson, the Democratic mayor of the city, which has a population of about 80,000. “Cities with fewer than 500,000 people have been just as heavily impacted as those with more than 500,000 people. It strikes me as a completely arbitrary cutoff.”

The National League of Cities and the U.S. Conference of Mayors on Tuesday released a survey of more than 2,400 local officials that found 88% of them “anticipate the pandemic will lead to painful reductions in revenue this year” that are likely to result in cuts to services, worker furloughs and layoffs. The groups said the outlook is “particularly acute” for cities, towns and villages under the threshold.

Congress’ coronavirus relief package excludes millions of immigrants who do not have legal status in the U.S. but who work here and pay taxes.

Amid the uncertainty, lawmakers and advocacy groups, including the National League of Cities and the U.S. Conference of Mayors, have been urging Treasury Secretary Steven T. Mnuchin to ensure that the relief funds are fairly distributed. Guidelines for how the fund will operate are slated to be issued by the Treasury Department this week. The department announced Monday that it had launched a web portal through which eligible parties could register to receive the money.

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“Because of the lack of specificity in the legislation itself, it really is up for interpretation,” said Irma Esparza Diggs, director of federal advocacy for the National League of Cities. “Everybody’s just kind of holding their breath until Treasury comes out with their guidance.”

Of the nearly 3,100 counties in the U.S., 130 have populations of more than 500,000, according to the National Assn. of Counties. There are 36 cities which exceed that threshold, the National League of Cities told President Trump in a letter last week. More than half the country’s population lives in cities, towns and villages of fewer than 50,000 people, the letter noted.

Cities including Miami and Kansas City are under the 500,000 cutoff, according to the most recent Census Bureau figures available.

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“Depending on who you believe, we’re either at 470,000 or 510,000,” said Miami’s Republican mayor, Francis Suarez. “We’re projected to lose about $20 million a month while our economy has ground to a halt. The state of Florida is slated to get $8.3 billion, but we’re not sure if we’re going to get any of it.”

Every state will receive at least $1.25 billion in relief fund money. The state government gets the biggest share of the total — New York, for example, is projected to receive $7.5 billion, according to estimates prepared by the nonprofit Tax Foundation. The state gets $5.2 billion of that amount, and municipalities with more than 500,000 residents are eligible for the rest in direct payments.

The Treasury guidelines may permit below-the-threshold counties and cities to appeal directly to the governor for a portion of the state’s allotment, according to Matt Chase, executive director of the National Assn. of Counties. But that may heighten the potential for political alliances to be formed in the quest for money or behind-the-scenes lobbying campaigns for a piece of the state’s share.

“Each local government would have to go hat in hand to the governor and say, ’Can we have part of your allocation?’” said Chase, who added: “We don’t need a lot of politics right now.”

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The population threshold was included as a trade-off as lawmakers scrambled to put the relief package together, according to a letter sent by 16 Republican senators to Mnuchin last week. Getting the relief dollars delivered quickly was essential, they said, and “requiring Treasury to process applications and calculate payment calculations for every local government in the United States would have created a bureaucratic morass that would have held up the distribution of these critical funds.”

The senators expressed concern over comments Mnuchin made during a recent briefing for lawmakers on the status of the rescue package. The Treasury secretary suggested that the department would interpret the law narrowly and “issue guidance that unintentionally creates obstacles to states supporting their front line,” the senators said.

That’s at odds with Trump’s own promises that the federal government would be there to backstop local and state officials, said Bryan K. Barnett, the Republican mayor of Rochester Hills, Mich., and the president of the U.S. Conference of Mayors.

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“The word from their lips to our ears is that this whole effort would be locally executed and federally supported,” Barnett said.

There are 16 states that have no counties, cities or other municipalities with populations above 500,000, including Wyoming, Alaska and Montana. Without a mechanism that allows or requires states to share coronavirus relief money, there’s no clear way to prevent state governments from keeping the entire pot to help make up their own budget shortfalls.

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New York state has a deficit of more than $10 billion from fighting the coronavirus, and the $5.2 billion it’s to receive from the relief fund could help close that gap.

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Stephen Acquario, executive director of the New York State Assn. of Counties, said those budgetary pressures made it unlikely local governments under the population threshold will get any of the state’s money.

“The states will exert jurisdiction over that money and the thousands of local governments who will have needs, it will be very difficult to get that money,” Acquario said.

Cameron Diehl, executive director of the Utah League of Cities and Towns, said the state legislature is expected to meet in a special virtual session this week, and on its agenda is the creation of a legal framework to accept $1.25 billion from the relief fund. “There are a lot of questions about the logistics, and it’s hard to plan around this much uncertainty,” Diehl said.

In Ohio, income tax is one of the primary ways that government is financed.

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“If nobody is working, we’re not going to have any money,” said Nan Whaley, the Democratic mayor of Dayton, Ohio. “I just can’t explain to you the level of frustration of mayors who are working so hard for their communities and see that it could all go away because there’s no help coming. It’s just so painful for all of us.”


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