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Michigan, Detroit Have Spent Hardly Any of Their COVID Millions

Detroit has spent less than $80,000 of the more than $826 million in COVID-19 relief funds it received; the state had spent none of its $6.5 billion by the end of July. Many blame politics for the slow spending.

(TNS) — Detroit, Mich. was awarded more than $826 million in federal dollars through the American Rescue Plan Act, the COVID-19 stimulus plan for local governments.

It has spent almost none of that money.

The city has spent $78,225 as of Wednesday, said Jay Rising, Detroit's newly appointed chief financial officer. That amount is about 0.009 percent of the city's total allocated funds.

The city has many other plans in place on how to spend the money, Rising said, and has incurred expenses that have not yet been invoiced. But like Detroit, local and state governments around the country are having the same problem: They got millions, sometimes billions of dollars, and they've spent almost nothing.

"We have roughly 30 projects in development, and each has its own timeline for funds to be expended over the next three years to meet the ARPA deadline," Rising said.

The money is earmarked to support COVID-19 relief efforts, replace revenues lost because of the pandemic and "address systemic public health and economic challenges that have contributed to the inequal impact of the pandemic," according to the U.S. Treasury Department.

It provides "substantial flexibility" so each government can meet the most important needs for its residents, be it spending on sewer infrastructure, upping pay for essential workers or supporting small businesses. Seattle, for example, reports it plans to put part of its money toward affordable housing programs. Buffalo, New York, plans to dedicate part of its money to help improve city parks and playgrounds.

Yet nearly two-thirds of cities with more than 250,000 residents hadn't spent any of their money yet as of July 31, according to reports submitted by local and state governments to the U.S. Treasury Department and collected by the Associated Press.

An AP analysis found that across the country, cities reported spending less than $1.2 billion, which is about 8.5 percent of their initial allotment. The bulk of that was spent in New York and San Francisco. Most cities used it to provide government services and make up for revenue lost because of the pandemic. In Detroit, the money went to what its report described as "administrative expenses."

The AP also found that states, including the District of Columbia, spent about $3.9 billion, or about 2.5 percent of their initial allotment. Much of that money went to states' unemployment insurance trust funds, which took major hits during the pandemic.

But more than half of states — 28 in total — reported spending nothing by July 31. Michigan was one of them.

Why Spending's Delayed

There are a few reasons that most government entities didn't report huge spending, experts say. The interim reports only cover about three months between when the money became available in May to when the reported cutoff deadline hit at the end of July. Guidelines also didn't come out until May, so many officials opted to wait to allocate the money.

Many governments are getting the money in two even batches, doled out in May of this year and May 2022. Governments also have until the end of 2024 to obligate the money and until the end of 2026 to spend it, so many aren't in a rush.

But one of the biggest reasons? Politics.

Rising said in an interview that while the city of Detroit was moving fast to spend its allocated money, officials wanted to make sure they were meeting with residents to see where their priorities for the money were.

Detroit had several community meetings to hear from people and polled residents online. What they learned is that at the city level, residents want leaders to focus on rebuilding neighborhoods, fighting poverty and improving public safety. After that, the spending needed to go through the City Council for approval.

Rising said Detroiters will start seeing the projects the city was able to start because of the ARP money soon. They include "Skills for Life," a paid work training program where people split their time between career training and helping to remove blight from the city, and "Renew Detroit," which will begin by helping homeowners to replace their roofs.

The program right now is set to help about 1,000 households, but around 5,000 people had already applied, city officials told The News. While researchers and advocates say the money is a good start, many agree it will only make a small dent in the major repair needs of the city's housing stock.

But other programs will follow suit to support other areas as well. Rising said he expects that by the time all the money has been distributed, it will be "transformative" for Detroit.

"If we're successful with how the design of the program and implementation take place, in three to four years, people are really going to notice a change," Rising said. "They're going to notice more jobs in the city, more opportunities. They're going to notice a different-looking city."

The city is developing a dashboard to track spending set to be rolled out later this fall, Rising said.

The next set of reports is due to the Treasury Department by Jan. 31, 2022.

Michigan's Spending Delay

Spending the roughly $6.5 billion the state of Michigan received will likely be even more complicated.

Even though none of the money had been spent as of July 31, about $774 million had been appropriated through various budgeting bills, said Kurt Weiss, spokesman for the state budget office.

Gov. Gretchen Whitmer has said she wants to use the money to do everything from improving the state's health care infrastructure to eliminating the funding gaps in public schools to modernizing the state's parks and trails. But she is not the only one involved in deciding how the money is allocated.

Any spending would have to go through the Republican-controlled Legislature as well. Everyone involved in the process has their own ideas on how the money might best be used.

"Right now, it's a matter of getting it to the table and getting it negotiated," Weiss said.

The goal now is to begin to schedule meetings for supplemental budget bills, which would allow the government to amend the budget and spend the money by the end of the month.

Weiss said Bethany Wicksall, the state's deputy budget director, recently returned from the fall meeting of the National Association of State Budget Officers and felt better after talking with leaders from other states.

"She came back and said, 'We're in the same boat as all the other 49 states. It feels like there's too much money on the table, but everyone is in the same boat,'" Weiss said.

While the state's top officials work to figure out how to begin spending the money as well as unexpected budget surpluses, local leaders have shared how they would like to see the money used.

A group of more than 40 Michigan businesses, government groups and local officials known as the Coalition for a Strong and Prosperous Michigan unveiled a plan Thursday to spend the state's remaining $6 billion in American Rescue Plan dollars.

Their plan includes about $2.5 billion for water infrastructure, $910 million for business and economic development, $800 million in revenue sharing and deposits into the unemployment trust fund, $805 million for housing and community development grants, $500 million to expand high-speed broadband access and another $500 million for mental health improvements and restaurant licensing help.

Among the groups making up the Coalition for a Strong and Prosperous Michigan are several associations, elected officials, and private companies such as Ford Motor Co. and Rock Financial.

The plan was delivered to leaders of the Legislature last Wednesday, but it's not clear whether they'll be receptive to the initiative.

" The Legislature certainly has ideas of their own; the governor's administration has ideas of their own," said Dawn Crandall of the Home Builders Association of Michigan. "We do feel like this dovetails nicely in certain areas that we've incorporated."

The Senate last Wednesday started discussions in committee about a $2.5 billion water infrastructure supplemental spending plan that has many similarities with the coalition's plan for water investments.

Separately, Whitmer has proposed about $2.1 billion in federal money go toward stimulating the economy through investments in small businesses, community housing and skilled trades and continuing education programs.

But budget negotiations between the GOP-led Legislature and the Democratic governor have been anything but smooth since Whitmer took office in 2019. And the upcoming debate overspending of the federal COVID dollars appears to be starting off on the wrong foot.

Earlier this month, after Whitmer decided to pursue an administrative contracting policy to get around a 2018 repeal of the prevailing wage, House Appropriations Chairman Rep. Thomas Albert, R- Lowell, indicated her decision would have ramifications on the budgeting process.

"Every time the governor pulls a partisan stunt like this, she makes it harder to find bipartisan consensus on state budget issues," Albert said in a statement.

Steve Currie, executive director for the Michigan Association of Counties, said the comments were "concerning" but noted there is a three-year time frame to allocate the money and five years to spend it. He urged state leaders not to run the clock on distributing the money.

"I think timeliness is of the utmost importance," Currie said. "We don't want to have this money necessarily in bank accounts not being used."

(c)2021 The Detroit News. Distributed by Tribune Content Agency, LLC.

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