Cities back Democrats’ virus aid formula amid small-business stalemate

More generous provisions for smaller cites in relief proposal come at the expense of county governments, which want changes

New York City's Bill DeBlasio, a Democrat, and other mayors want more relief from Congress for coronavirus-related budget shortfalls. (Tom Williams/CQ Roll Call file photo) (CQ Roll Call)
New York City's Bill DeBlasio, a Democrat, and other mayors want more relief from Congress for coronavirus-related budget shortfalls. (Tom Williams/CQ Roll Call file photo) (CQ Roll Call)
Posted April 14, 2020 at 3:45pm

Mayors of small and midsize cities, arguing they were shortchanged in last month’s coronavirus relief package, are pushing tweaks to that program as well as a huge new cash infusion.

That $2.3 trillion measure included $150 billion for state and local governments. But the package offered no direct funding to cities with under 500,000 residents.

With city budgets now facing cuts from the economic shutdown, the National League of Cities and the U.S. Conference of Mayors called for $250 billion in fresh federal aid for municipal governments of all sizes.

“Congress has offered no direct support for cities like ours,” said Bryan Barnett, the Republican mayor of Rochester Hills, Michigan, a city of about 75,000 in the Detroit metro area. “This is not a big-city problem. It is an every-city problem.”

Mayors and other city officials back a proposal from House Speaker Nancy Pelosi and Senate Minority Leader Charles E. Schumer that would provide $150 billion more for state and local governments, although they say more is needed just for municipalities.

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The Democratic measure would distribute $53.55 billion of the money directly to localities using the Department of Housing and Urban Development’s Community Development Block Grants formula.

Under that construct, 70 percent of the money goes to cities with at least 50,000 residents, or urban counties with at least 200,000. The remaining funds would go to less populous localities.

The U.S. Conference of Mayors sent a letter Monday to Schumer and Pelosi lining up behind their proposed funding formula as well as loosening restrictions on the earlier round so that aid can be used to backfill general budget shortfalls.

Barnett, the group’s president, led the letter. Other signatories included Conference of Mayors Vice President Greg Fischer, the mayor of Louisville, Kentucky — home of Senate Majority Leader Mitch McConnell.

Louisville is part of the greater Louisville-Jefferson County metro government, with more than 620,000 residents as of 2018, which makes it eligible for aid under existing law.

But there’s not much love lost between McConnell, who's facing a challenge in November from former Marine Corps fighter pilot Amy McGrath, and Fischer, the Democratic mayor who recently tussled with the Senate GOP leader over allowing drive-in church services back home.

High bar for cities

The Treasury Department announced Monday that it was making $71 billion of the earlier funding round available, with applications due Friday. Treasury said 171 cities and counties met the population threshold based on 2019 Census Bureau data.

The 500,000-resident threshold is a fairly high bar; even a relatively large city like Atlanta barely made the cut under the law’s criteria. The city had 498,000 people as of 2018, according to census data, though Treasury said Atlanta was eligible based on unpublished 2019 data provided by the Census Bureau in advance of its official release.

Barnett told reporters on a conference call Monday that water, sewer and road projects planned for his city this summer are now on hold. “We are truly a global hot spot” for the COVID-19 pandemic, he said. “Our economy has been brought to a screeching halt.”

The city of Dayton, Ohio, which relies on municipal income taxes for the bulk of its revenue, is suffering even more. The city of about 140,000 had to furlough about 28 percent of its employees, said Mayor Nan Whaley, the second vice president of the Conference of Mayors.

“No city is immune to the problem of dwindling revenue,” Whaley said. “We will not have the revenues to keep people working.”

While last month’s law restricted aid to cities with a population of at least 500,000, money provided to states could still trickle down to smaller cities and towns. But city officials said Monday that they are unlikely to see much if any of that funding.

“Usually, when you bring in a middle man, you don’t get what you need,” said Mayor Vince Williams of Union City, Georgia, who is second vice president of the National League of Cities.

NLC President Joe Buscaino, who serves on the Los Angeles City Council, said it was “reprehensible and inexcusable” for Congress to reject direct funding for smaller cities. “We are on the front lines,” he said. “Cities of all sizes need direct funding yesterday, not tomorrow.”

The cities’ favored formula has run afoul of county governments, however, who say they would be underfunded. They cited examples like Los Angeles, which under the Democratic proposal would receive $490 million more than greater Los Angeles County, despite the city representing less than 40 percent of the county’s overall population.

The National Association of Counties made clear that current law is insufficient as well. In a Tuesday letter to President Donald Trump, the group said the initial $150 billion aid round cuts out smaller counties with fewer than 500,000 residents.

Additionally, Treasury's implementation of the law cuts the allocation to major urban counties by $5.1 billion, the letter said. That's because while city populations count towards a county's eligibility, the share that goes to the county government is reduced by aid that goes directly to the city, provided the city population is above the 500,000 threshold.

Ongoing impasse

No matter how it’s sliced, state and local aid remains tied up in the ongoing impasse over small-business relief that’s running out this week.

McConnell and Senate Small Business and Entrepreneurship Chairman Marco Rubio, R-Fla., said Tuesday that about 70 percent of the $349 billion in “Paycheck Protection Program” funds appropriated in the $2.3 trillion package last month are already spent. The remainder of the money could be exhausted in days, they said.

Republicans and the White House want to inject another $251 billion into the program, which forgives eight weeks’ worth of loan money if the funds are used to meet mostly payroll as well as other fixed costs like rent and utilities.

Democrats want about half that sum for the existing program, with the remainder set aside for minority-owned and underserved businesses as well as a disaster loan program account that’s also tapped out. In addition, they want more money for hospitals, personal protective gear for health care workers and food stamps on top of the state and local aid.

“We cannot accept Leader McConnell’s proposals that would only perpetuate the flaws that are threatening the survival of the most vulnerable small businesses and would do nothing to aid desperate hospitals and state and local governments,” Pelosi wrote to other House Democrats on Tuesday.

McConnell in turn accused top Democrats of playing politics with small-business funds, which face an immediate cash crunch while other pots of money are just beginning to be released.

“Clean funding for worker pay in a crisis should not be controversial,” McConnell said in a statement Tuesday. “American workers deserve paychecks, not pink slips caused by political games.”

Jennifer Shutt contributed to this report.