State and local leaders breathed a sigh of relief on passage of the American Rescue Plan, with its $350 billion in relatively unrestricted funding for governmental functions. Certainly, many cities and counties — battered by COVID-19 as sales taxes, income taxes and other revenues dropped — need help. Property taxes, which lag the economy, will fall as property is reassessed. And the hospitality industry and the tax revenue it generates, which support so many medium and large cities, were decimated.

The new $1.9 trillion stimulus package allows state and local governments to use the funds to assist public employees, households, nonprofits, small businesses and workers harmed by COVID-19, especially in heavily impacted industries such as tourism, travel and hospitality. It permits expenditures to provide government services to the extent that revenues fell below the most recent full fiscal year, as well as allowing investments in water, sewer and broadband infrastructure.

The best approach would be to invest in these permitted uses but to do so in a manner that modernizes the way government performs its work. We saw a similar situation with respect to the American Recovery and Reinvestment Act of 2009, which helped local governments avoid significant public-employee layoffs coming out of the Great Recession. But the ARRA funding ended without many places using it as an opportunity to make material changes in how government operates.

One example to the contrary highlights the opportunity now. As ARRA funding was ending, New York City invested in digital water meters. With the new technology, the city could more quickly detect leaks, identify pipes in need of repair and alert residents to service issues. Rather than simply filling a financial hole, the city invested in a transformational change that improved responsiveness and sustainability. So what would it look like to use the new funding to move beyond simply plugging operational deficits to driving operational excellence?

With federal regulators’ approval, city officials deciding how to use the federal relief funds should deploy the money in a way that modernizes public work while improving services for the long term. Put another way, in conjunction with backfilling revenue shortfalls, policymakers should strive to leverage the funding to create meaningful value for residents over time. These investments might include the following:

Enhancing data analytics capabilities: Cities too frequently send their workers out on routine service calls rather than utilizing predictive analytics to identify unusual trends. Using data analytics to anticipate problems earlier allows cities to invest resources at the point where they can make the most difference.

Increasing community responsiveness: Public employees need to find better ways to capture community input. Chicago’s 311 system combines modern software with a GIS capability that allows community groups to not only understand localized trends but to respond. These GIS layers allow the connection of different events so that communities can identify what causes specific issues.

Deploying cross-agency platforms: As cities contemplate how to return their cores and neighborhoods to their pre-pandemic vibrancy, they should look for ways to best use the lessons from the pandemic to support mobility, urban space planning and hospitality. For example, rather than thinking about the legacy (and competing) silos of bikes, on-street parking, scooters and cafes as separate uses, they should use technology tools to better manage curbs and sidewalks — just one item of city-owned infrastructure that can be redeployed as an asset.

Modernizing infrastructure equipment: The federal legislation’s specific reference to water and sewer infrastructure investments creates compelling opportunities. Faced with the twin challenges of hundreds of billions of dollars in unfunded infrastructure needs and an emerging affordability crisis, water and sewer systems need to rapidly innovate and automate. While some utilities may choose to spend money on core infrastructure (which might be the optimal investment in a system dealing with water safety issues or lead pipes), the available funding can’t possibly solve infrastructure’s long-term funding gap and service affordability issues. The investment options are numerous, including green infrastructure, energy management, remote monitoring tools, and predictive maintenance tools such as vibration and oil analysis for large equipment.

Expanding broadband access: While the pandemic laid bare the digital divide in K-12 education, the end of the pandemic will not eliminate that challenge. Working collaboratively, local government and schools (which also received pandemic-related funding) have a unique opportunity to ensure that all students have adequate digital access, even as we return to in-person learning. The most effective solutions are likely to involve multi-party collaboratives and public-private partnerships that seek to leverage the needs and expertise of various stakeholders. Broadband solutions that serve multiple users, potentially including commercial partners, are likely to be the most sustainable and cost-effective.

Accelerating digital solutions: While the transition was painful, public entities have shown incredible adaptability during the last year. Service and cost-saving innovations that might have previously been seen as impossible or requiring years to implement — enhanced online resident services as well as the efficiencies and worker benefits of government employees working from home — were suddenly achievable because there was no other option. Local governments should build on those solutions for the future.

Federal funding can be thought of as filling a leaky bucket. Or it can be used to create a newer, more modern bucket and then filling it in ways that enhance public services and governmental efficiency for the post-pandemic future. We advocate the latter.


Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.