Could $360B federal aid allow localities to do more than just recover from 2020 losses?

Jeff Smith
Binghamton Press & Sun-Bulletin

Binghamton Mayor Richard C. David calls $360 billion in federal funding for state and local governments a "once-in-a-lifetime" opportunity for municipalities to make key long-term investments for their future. 

The $1.9 trillion American Rescue Plan, passed by party-line votes in Congress, is the biggest direct federal infusion of funds to state and local governments in decades, putting municipal leaders in a situation most haven't experienced before, he said.

David said the City of Binghamton is slated to receive $48.3 million through the program, with the language in the bill focusing mostly on replacing lost revenue.

“So if (a municipality) lost money as a result of loss of state aid, sales tax reduction, parking revenue, water and sewer bills, the cost of collecting garbage — the stimulus money can be used to offset your revenue losses and make your budget whole,” David said. “We are looking at anywhere from $4-5 million in regards to losses in 2020."

He knows that's a long way from the $48 million that's coming in.

“It's true that many municipalities will receive more funds than their COVID pandemic losses,” David said. “I think many mayors and officials would argue this is the federal government’s way of catching up for decades worth of lack of investment or neglect in American cities, both large and small.”

He sees particular opportunity in one area where the language of the American Rescue Plan is much broader.

"For capital (uses), the bill (allows for) water projects, sewer projects, broadband projects," David said. "We are looking for clarification from the U.S. Treasury Department.”

Can money be used to reduce tax burden?

Casino workers rallied outside Tioga Downs in Nichols in August, urging the state to let them reopen. The economic shutdown caused by the COVID-19 pandemic led to a sharp decline in tax revenue for municipalities across New York.

Elmira Mayor Dan Mandell said the city is expecting to receive $30.8 million in federal funding under the program.

“Obviously, I’m very happy about that,” Mandell said. “We just have to find out what the exact parameters are, and if I am understanding correctly, the U.S Treasury Office (will be) giving its guidance (on) exactly how we can use that money.”

Mandell said the City of Elmira is currently putting together a team including himself, Elmira City Manager Mike Collins, staff members and the deputy mayor to determine how to allocate the stimulus funds.

“One thing we would like to do, and I’m not sure if we can yet, is a possible property tax decrease to give back to the people of Elmira,” Mandell said. “We don’t know for sure if we can do that, but that would be a great way to give some relief to our citizens who were hit hard by this pandemic.”

David, who also serves as president of the New York State Conference of Mayors, said he doesn't believe stimulus funds can be used to directly lower taxes.

Attorneys general from several states are threatening to take action against the federal government over a provision in the bill preventing the funds from being used that way.

Corning City Manager Mark Ryckman said the city will receive about $1.2 million in federal funds through the program. 

“This is important funding to help us offset our revenue losses due to the downturn in the economy,” Ryckman said. “Although we were hoping state and local funding would be included in earlier stimulus plans, we appreciate Congress recognizing our financial needs.”

In Binghamton, the city will receive half of the expected $48.3 million, about $24.15 million, in 60 days or less from when the bill was signed, David said. The second portion of the funds would be received in early-to-mid 2022.

Will the state withhold any of the money?

David said one key variable that will determine municipalities' ultimate financial situation is the potential of cuts to the Aid and Incentives for Municipalities (AIM) program, which provides state aid to all of New York's cities, other than New York City, and towns and villages. AIM is funded at $656 million in the current 2020-21 state budget. 

“This is a little bit of a moving target, if you have been following what the state has been doing with regards to state aid,” David said.

He said over the past decade or more, state officials have held back varying percentages of funds intended for the AIM program, keeping the money in state coffers.

David said his presumption, because the state budget has been also been bolstered through the federal assistance, is that the state should give back 100% of all of the withholdings to the municipalities. 

“Many mayors and managers are concerned that the state will say, 'OK, you received all this federal funding, so we are going to just keep your state aid,' ” Davis said.

Hornell Mayor John Buckley, whose city will receive about $910,000, is one of those concerned.

“There are a lot of mayors and executives that are very happy right now, but we have to be very cautious about the uncertainty if the governor is going to cut the AIM funding,” Buckley said. “We have to keep in mind this federal aid is a one-shot deal, where AIM funding is a dedicated source of unrestricted aid that comes from the state annually, (and) that (municipalities) rely on.

“We haven’t seen an AIM funding increase in about 12 years now, while the school districts generally enjoy an increase in foundation aid,” Buckley said. “The cities, towns and villages have been left behind.”

Mandell said he is also hoping that AIM finding is not cut. 

“It’s a worry, and we don’t know what the governor is going to do,” Mandell said. “I would hope that the state government would see that the cities in this upstate area are struggling. They need to maintain the level of AIM funding. We just can't take any more hits on revenue.”

'Strategic' plans to boost municipal finances

Assemblyman Phil Palmesano, R-Corning, called the American Rescue Plan “good news” for both municipalities and the state government. 

“The package of the assistance coming from the federal government provided direct aid to municipalities,” Palmesano said. “But also part of that package from the stimulus plan includes over $12 billion in unrestricted aid to the state government.

"So the governor and the state Legislature shouldn’t be withholding or cutting AIM funding at all.”

In Binghamton, David said on top of the sewer, water and broadband projects, the federal money could be used to repay city unions who gave concessions due to the pandemic, and for a one-time capital project.

“This may be an opportunity to make very smart, strategic investments in the City of Binghamton,” David said. “We are very interested in the use of broadband, expanding that in our community for residents, and to make sites in the city more strategic from an economical development standpoint.”

David said the city wants to put a major portion of the funding in reserve for use in future years. 

“I know there will be some capital projects,” David said. “I’ve outlined water and sewer specifically, fixing city streets and the water and sewer lines underneath. We also have a water plant that’s in need of an overhaul that we would certainly take a look at.”

Buckley said Hornell is in a similar position as many other municipalities in the Southern Tier, where sales taxes have been greatly reduced by state-mandated shutdowns during the pandemic. 

‘There is definitely a revenue loss in sales tax and other (areas),” Buckley said.

David said his situation is unique, in that his strategic plans come with a ticking clock: His term limit as mayor will end Dec. 31, after eight years in office.

"So I want to make sure that a future administration just doesn’t come in and squander the (federal) money," he said. "I want to work with the City Council to put some safeguards in to make sure that doesn’t happen. I want to protect this money for future use.”