Curry: Where Did Iowa’s Local COVID Relief Funds Go?
The COVID-19 pandemic began in March 2020, but the federal government has taken more than a year to direct financial assistance to municipalities across the country through the American Rescue Plan Act (ARPA). The pandemic has hit local communities in Iowa hard, but our governments have weathered the pandemic with little lasting fiscal damage. Now, cities and counties in Iowa are faced with the task of spending ARPA funds while complying with complicated guidelines from the US Treasury.
The state’s eleven largest metropolitan cities received nearly $335 million, while counties received $612 million and smaller governments received $216 million in payments. To find out how local governments used these funds, Iowans for Tax Relief Foundation (ITRF) conducted a survey of select communities. Our intention was not only to report on what public servants did, but also to discern the long-term effects for taxpayers.
Elected officials were given countless ideas about how to spend ARPA funds, but putting the interests of the taxpayer first should have been at the forefront of their minds. Fortunately, most communities in the state did not commit to future obligations while spending these funds, but instead spent them on one-time expenses and capital projects.
The largest ARPA funds spending category was revenue replacement (41%), with Polk County showing the largest revenue loss, followed by Council Bluffs and Cedar Rapids. Items that local governments in Iowa have listed in this category range from large capital or infrastructure projects, such as building a stable on the fairgrounds, renovating fire stations, and building from a justice center, to everyday items such as office chairs, software upgrades, playgrounds, new signage and alarm system upgrades. Of the communities surveyed, all reported a loss of revenue except for Sioux City, Scott County and Muscatine County.
The second largest spending category was infrastructure (30%). Cedar Falls has spent millions on sewer and storm water repairs and sewage treatment. Sioux City has committed 94% of its $40 million to stormwater, drinking water and sewer projects. In some cases, local governments have worked together: Linn County and Cedar Rapids have committed more than $5 million each to flood control and water/sewer projects, while Cerro County Gordo invested in the sewage well in the town of Meservey. Another major area of infrastructure investment was broadband or fiber internet, which was listed for Waterloo, Muscatine County and Pottawattamie County.
The broad category of negative economic impacts (13%) was the third largest. Affordable housing and housing need in general are particularly important in this category. Public health accounted for just 12% of total spending and included things like COVID-19 signage and equipping vaccination clinics, as well as upgrades to emergency management operations.
While many of these expenses are worthwhile, many Iowans hoped the aid would result in property tax reductions, and although the federal government authorized it, none of the communities directly engaged ARPA funds toward tax relief. Council Bluffs and Polk County went so far as to erroneously report that the funds could not be used for this purpose. That said, 10 of the 19 responding communities reduced their property tax levies between fiscal years 2022 and 2023, while two left their levy rates unchanged. Blackhawk County saw the biggest property tax savings with a levy reduction of 54 cents, while Sioux City saw the biggest increase at 97 cents.
There is no doubt that many local governments have suffered the negative financial effects of the pandemic; however, the assistance provided almost 18 months after the start was arguably too late to do much good. Sixty-eight Iowa communities have turned down ARPA dollars while 85% of local government bailout funds we surveyed remain unused.
Data from our Iowa-specific survey implies that the pandemic has not destroyed local governments as badly as news reports had portrayed. In fact, even now, when our lives are pretty much back to normal, the federal government is expected to send more money to local governments this fall, which will only further contribute to rising inflation in the country.
You can read more details about this survey here.