How much and how to spend? Delaware's small cities and towns have COVID relief questions
The $1.9 trillion American Rescue Plan Act signed last month by President Joe Biden sends millions in the pandemic recovery funding to Delaware.
The state 3 counties along with Wilmington and Dover get their own pools of money directly from the feds. But there’s also $85.6 million that will be split among Delaware’s 55 other cities and towns.
Contributor Larry Nagengast delves into the many nuances to divvying this money up – many still unresolved – and how some of these small towns may spend what the ultimately receive.
The American Rescue Plan Act, the $1.9 trillion pandemic recovery legislation signed last month by President Joe Biden, will provide up to $85.6 million that state Treasurer Colleen Davis distributes to 55 Delaware cities and towns.
In some towns, officials and residents are starting to think about how they will spend their grants. Others are facing a more basic question: how much are we going to get?
The uncertainty stems from a key provision in the legislation: while the maximum grant is based on a municipality’s population, the actual grant cannot exceed 75 percent of its annual budget.
That sounds simple enough but, in starting to examine the towns’ budgets, there are enough inconsistencies to indicate that the amounts to be distributed are “completely up the air,” according to Deputy State Treasurer Liza Davis, who is not related to her boss.
In checking the list of population-based distributions released by the state treasurer against budget data posted online by the towns, Delaware Public Media identified several incongruities and asked Liza Davis about them.
“As of right now, because there is no guidance” from the U.S. Treasury, she replied, “we don’t have a working assumption” on distributions.
SOME OBVIOUS QUIRKS
Consider, for example, two New Castle County towns of similar size, Newport and Bellefonte.
Newport, population 1,055, is in line to receive about $530,000, based on its population. Its annual budget of about $1.5 million, which pays for a couple of town employees as well as a small police force, seems to ensure that it will receive the maximum grant.
On the other hand, Bellefonte, with 1,193 residents, won’t get anywhere near its population-based allocation of about $590,000. It will likely receive about $206,000, three quarters of its $274,900 annual budget. Bellefonte has no fulltime employees; it pays local officers like commissioners and the tax collector a total of about $14,000. Nearly half the budget is spent on a private trash-collection service.
Then there’s Arden, population 439, whose numbers present a different sort of problem. Based on population, it would appear to be in line for a grant of about $220,000. But it depends on what counts, or doesn’t count, in calculating its budget. On Oct. 30, 2018, Arden residents voted on their “budget referendum” for the 2019-2020 fiscal year, the one that matters for determining ARPA grants. The budget referendum tally sheet shows “total expenses” of $800,017, which is broken down into “budget expenses” of $98,200 and “non-budget expenses” of $701,817.
Using “total expenses” as the determinant for the ARPA grant, Arden would easily qualify for its hoped-for $220,000. But those “total expenses” include, among other things, more than $500,000 in property taxes paid by the town on behalf of its residents to New Castle County and the Brandywine and county vocational-technical school districts. Among Delaware municipalities, Arden is unique in classifying property taxes paid to other government jurisdictions as an expense. (Also unique about Arden is that its primary source of revenue is the “land rent” it collects annually from its residents.)
However, if only the items labeled “budget expenses” are used in calculating Arden’s eligibility for the grant, it would qualify for slightly less than $75,000 – roughly one-third of what it is hoping to receive.
"Admittedly we didn't earn this money, and some might not agree with it coming out of the federal treasury, but it's here, and we want to get our fair share." - Little Creek Mayor Glenn Gauvry
In reviewing budget information from those 55 cities and towns, “Arden is one that we’ve flagged,” Liza Davis says. “This is going to be complicated.”
Confusing as that issue might be, it might not be the least of the problems confronting the treasurer’s office.
Though they’re not naming names, some Delaware towns don’t even have budgets, Davis and Davis say.
“Without a formalized budget, it’s hard to do a certification” that a town qualifies for funds, Colleen Davis says. And, for those that do have budgets, there’s the question of which number should be used for certification – revenue or expenses, which are not always the same.
It’s more appropriate to use expenditures than revenues to make the determination, Liza Davis says.
As for those towns that don’t have budgets, she says a budget is “something that can be retroactively backed into” by establishing a fiscal year, logging all expenses for that period and placing them in the appropriate categories.
Learn more about the patchwork of budget processes here.
As of now, the treasurer’s office is reviewing the information it has received from those 55 towns and cities (the three counties and the cities of Wilmington and Dover will be getting their funds, totaling more than $250 million, directly from the federal government) and is waiting for more guidance from Washington.
WHAT'S CLEAR – AND WHAT ISN'T
Meanwhile, the treasurer’s office says that there are three things about the law that seem pretty clear.
First, the funds will be distributed in two chunks, one this year and one next year. Second, local governments will have until the end of 2024 to spend it. Third, they can’t use the money to cut their local tax rates.
And there are a few more uncertainties. To the extent that the 75 percent budget cap rule is applied, grants to towns will be below the amount determined by population, but it isn’t clear whether funds that aren’t distributed to towns will revert to the federal government. Also unclear is how the money may be used and what sort of reporting the towns will have to provide to show that the money is spent only for what is permitted under the law.
One more question: can neighboring towns or towns and counties combine their grants to take on more expensive projects than they could afford on their own?
“We’re open to pooling funds,” says Brian Cunningham, New Castle County’s director of strategic communications, but he acknowledges it could be a challenge to do so countywide if it requires securing agreement with every local government in the county.
SOME THOUGHTS ON SPENDING
While waiting for more information on how much they will receive and how they might spend it, some towns are giving that some thought.
Jeff Politis, chairman of Arden’s town assembly, says residents will start considering their options at the town’s next quarterly meeting, scheduled for June. Among the possibilities, which he characterized as being in the “brainstorming” stage: financing a stormwater management system that is now in the planning phase, improving broadband capabilities, and broadening community resources to meet the needs of aging residents.
Politis says he is also interested in the answer to the grant-sharing question because Arden likes to partner with neighboring Ardentown and Ardencroft on projects of mutual interest.
Delaware City, which is expecting to receive more than $900,000, has “a lot of things in mind” and the town council will likely hold one or more special meetings to discuss the ideas, Mayor Paul Johnson says. Paving streets is always a concern and dredging accumulated silt and sediment from the branch canal must be considered, he says. Residents are also talking about a dog park as well as an amphitheater or stage for entertainment events at the community center.
In Newport, “it’s a matter of needs vs. wants. Should we save it for a rainy day or get the new Xbox5,” Town Manager Wendy King jests. COVID 19 caused a drop in some town revenue categories last year, she says. Business licenses were down $25,000 and court revenues dropped because violators slowed payment of traffic fines after the state Division of Motor Vehicles relaxed suspensions of drivers’ licenses, she said.
“We can use the money for operations, pave a road or two, or get some curbs replaced. The town council will direct me,” she says.
Millville, which expects to receive about $320,000, might use some of its grant to cover ongoing expenses related to COVID-19, like more frequent cleaning of the town hall as well as the town park, which reopened in March, Finance Director Lisa Wynn says. Since the start of the pandemic, the town has purchased laptop computers for the town manager and members of the town council so they could work remotely. Before resuming in-person council meetings, the town upgraded the sound system in the hall so residents can listen to the meetings without leaving home.
"Some towns have greater needs than others. We've had some towns say they don't want the money." - State Treasurer Colleen Davis
Other towns have made similar choices, state Treasurer Colleen Davis says. Some are buying audiovisual systems, screens and related equipment so their council meetings are more accessible to residents, and a few are talking about enlarging their meeting spaces to cope with pandemic-related capacity limits, she says.
Little Creek, among the smallest of Delaware towns with only 224 residents, doesn’t know what, if anything, it might do with the money, Mayor Glenn Gauvry says. Based on population, the town would qualify for about $119,000, but its budget of just over $30,000 means it will qualify for a little more than $24,000 – just over $12,000 in each payment. “The same probably goes for Hartly, and Leipsic, and a number of other small towns,” Gauvry says.
In relation to the town’s budget, $12,000 sounds nice, but “It’s really not enough to use as a matching grant for anything,” he says. “We could use it if something [unexpected] comes up. We can set it aside. That’s probably what we’ll do.”
“Some towns have greater needs than others,” Treasurer Davis says, and some don’t think they need much at all. “We’ve had some towns say they don’t want the money.”
Asked to name them, she demurs, saying “I don’t want to throw anyone under the bus.”
Dealing with the federal government’s unexpected largesse can put small towns in a quandary, Little Creek’s Gauvry admits.
“Admittedly we didn’t earn this money, and some might not agree with it coming out of the federal treasury, but it’s here, and we want to get our fair share,” he says.
And then a disappointing reality sets in. “When you hear about millions coming from the federal government, everybody gets excited and it sounds real good,” he adds, “but we’re a small community and we’re not getting much.”