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The County of Orange and cities across OC have received millions of dollars in federal pandemic bailouts, but questions linger over how exactly that money can be spent.
Yet the county government and some cities are already planning how they’ll spend millions in federal relief money from the pandemic in the coming months,
The American Rescue Plan Act is set to send over $1.3 billion to Orange County in the next two years, with 35 different public agencies to figure out how they’ll spend their slice of the pie while the final rules on what they can do with their cash haven’t come out yet.
So far, cities have all received the first half of the promised relief money, with the second chunk set to come at least a year from now after they can show when and how they used the first installment.
Some spending plans are already drawing concerns from tax money watch dogs.
Carolyn Cavecche, president of the OC Taxpayers Association, said her organization plans to review every city’s spending plan, but the expenditures that stood out so far were some cities’ infrastructure spending.
“Their finance director would really have to make a case to me on how that falls under the ARPA rules as they stand right now,” Cavecche said, specifically referencing the San Clemente City Council’s plan to build new council chambers. “The infrastructure improvements are very strict, it’s for water, sewer and broadband infrastructure.”
What Have They Spent It On?
A Voice of OC review found at least three cities and the county government have already chosen how to allocate some of their relief dollars while waiting on the final spending rules.
The county government has allocated $308.4 million of its $616.8 million share, nearly half the county’s total relief funds, with roughly 95% of the funds going toward backpaying lost revenue during the pandemic.
According to a summary released by the county on Wednesday, while they’ve decided that 95% of those funds will be spent in the revenue loss section, they still haven’t decided how to spend $188.5 million of it.
The apportioned chunk was spent on staffing costs, emergency housing vouchers, technology support for seniors and $20 million to study a potential veterans cemetery in Anaheim.
The remaining 5% is going to a food insecurity program and economic support for the arts.
To review the rest of the county’s published spending, click here.
Cavecche raised concerns over using the money to backfill lost tax revenue, comparing the situation to the Great Recession and when former Governor Jerry Brown dissolved redevelopment agencies in 2012, stripping millions in funding from cities who were using the program to help float their budgets.
“The danger with cities using this money as a backfill, the feds are not going to be coming and doing this every year. Taxpayers need to understand … in two years this revenue is not going to be there anymore,” Cavecche said. “This is great news for them to backfill their budgets, but it’ll be gone in a couple years and (taxpayers) need to understand.”
The largest city to approve a spending plan so far is Santa Ana, which has allocated $79.5 million of their funds toward a plan called Revive Santa Ana.
That plan incorporates funding from multiple sources, but the lionshare is from the city’s $128 million in COVID relief, along with another $32 million for housing and emergency rental assistance.
Over $35 million is going toward new city programming, including the addition of new Santa Ana parks, improvements to the city’s Central Library and the creation of a new library branch.
An additional $16 million will be spent on addressing “negative economic impacts,” for residents, and the city will hang onto nearly $9 million in revenue replacement.
To review more specifics of Santa Ana’s plan, click here.
Meanwhile, several smaller south Orange County cities created their own spending plans, with Lake Forest choosing to focus mostly on local business support and San Clemente investing heavily in local infrastructure projects, including $2 million toward new city council chambers.
What Can They Spend It On?
Everyone is still waiting for the U.S. Treasury Department to release the final guidelines on how the county and cities are allowed to spend that money, but some cities have already started making the decision based on the interim final guidelines.
Those federal rules set up guidelines on where cities can spend the money, but the plan creates several umbrellas of where agencies can spend the money.
The first umbrella is an overall response to the public health losses caused by COVID-19 and its negative economic impacts, outlining rules for how agencies can spend the money on public health programs and staff, along with assisting local communities and businesses.
The money can also be spent offering premium pay to frontline workers, including janitors, grocery stores, nursing homes and other industries, a step some cities already took earlier in the pandemic.
One section some cities have focused on is back-paying lost tax revenue, allowing some leeway to recover lost sales and hotel tax that brutally impacted some city’s projected revenues — like Anaheim, which lost nearly $52 million from its hotel closures alone, according to a report from the state auditor last month.
The rules also limit any new infrastructure spending to water, sewer and broadband upgrades according to the Treasury Department’s summary, preventing agencies from spending on a wider variety of programs unless the project can be paid for immediately with cash on hand.
The money cannot be used to pay off existing debt, outstanding legal fees, or prop up financial reserves. The guidelines also expressly prohibited any spending on pension funds.
To read the rules, click here.
The final spending rules are expected to come out within the next couple weeks, Cavecche said, opening up the door for more cities to launch their recovery spending plans.