As the COVID-19 pandemic ravaged the nation, many cities and towns took a financial hit as tax revenue dried up and public health expenditures increased. But now the federal government is doling out funds to help communities recover.
San Jose and Santa Clara County are receiving approximately $212 and $374 million, respectively, from the American Rescue Plan, but smaller governments are also getting a share, including Saratoga ($5.6 million) Campbell ($7.8 million) and Los Gatos ($5.6 million).
Saratoga Mayor Yan Zhao said the city appreciated the federal support. Saratoga lost about $1.25 million from declining revenue, she explained, and spent money moving services online and providing employees with resources needed to work from home.
“It was very much needed, otherwise we would be in the hole,” Zhao told San José Spotlight. “It’s going to take a long time to recover.”
The American Rescue Plan, a sweeping $1.9 trillion relief package signed into law in March, provides $350 billion overall to state, local, territorial and tribal governments.
According to the U.S. Department of the Treasury, the money can be used to support public health efforts, replace lost public sector revenue, provide premium pay for essential workers or to address negative economic effects on households, small businesses and impacted industries. It can also be used to support some types of infrastructure systems such as sewer, water and broadband.
Zhao said the Saratoga City Council held several public study sessions to discuss how their money will be used. About $550,000 will be used to fund current year internal service support reductions, $850,000 will go into a reserve to support city services in future downturns and $600,000 will be held over for next year’s capital improvement budget.
The remaining funds will be applied in upcoming years.
In Campbell, Mayor Liz Gibbons said the coronavirus delivered a major budgetary blow.
“We are a community of small businesses, and a lot of it is restaurants and retail,” she said.
Declining hotel and sales taxes, as well as reductions in building permits and business licensing fees, caused the city to lose about $11 million, Gibbons said. Faced with tough decisions, the Campbell City Council laid off all temporary and part-time employees last year.
Before the federal funding for local governments was approved, the mayor said the city anticipated further cuts, with upwards of 20 city employees at risk of losing their jobs.
“We were already in negotiations with the unions,” Gibbons said. “If we hadn’t gotten that money, it would have been tragic for employees and for the city services that would have been lost.”
Gibbons said the council is using all of its American Rescue Plan funding this year and next to prevent large layoffs and continue offering community services.
Los Gatos, meanwhile, fared better than some of its neighbors, according to Assistant Town Manager Arn Andrews. But he said the town still lost about $4 million from declining revenue.
“Unlike other communities, we did not have to furlough or start cutting,” he said. “But even we needed some support.”
Of the $5.6 million allocated to Los Gatos, Andrews said the town will spend about $3.2 million on revenue replacement, $360,000 on rent forgiveness for the town’s lessees and $300,000 on a parklet program, which helps businesses create outdoor spaces to serve customers safely. Another $60,000 will go toward local nonprofits, such as West Valley Community Services.
The remaining funds will be used in the coming years. Towns and cities have until Dec. 31, 2024 to determine how to spend the funding.
“It’s going to be a fluid, continuous process for the next couple of years,” said Andrews.
Phil Koen, a Los Gatos resident, believes town leaders should have made more of an effort to engage the public. He said there was never a community-wide meeting held specifically to explain the American Rescue Plan and solicit feedback from residents.
“If you just ask an ordinary person on the street, I think they would be clueless (about the federal funding),” he said.
Koen worries local leaders may not fully understand the money’s intended uses or how it could best be spent.
“I think this has been a rush to spend as opposed to a thoughtful process,” he said. “The treasury department will be looking at how this money is spent. This is not a free gift.”
Los Gatos Mayor Marico Sayoc told San José Spotlight the town provided opportunities for the public to weigh-in.
The issue was discussed at several Town Council meetings, she said, which were all open to the public. The Finance Commission, which serves as a financial advisory board to the Town Council, also discussed the matter.
Community members could speak at any of those meetings, Sayoc added.
Sayoc and Andrews said the federal government provided clear restrictions and guidelines about how the money could be spent.
The National League of Cities was also a great asset, according to Andrews. He said town officials virtually attended the organization’s weekly webinars about the American Rescue Plan.
“We have been engaged with the process robustly from the beginning,” said Andrews.
Contact Katie King at [email protected] or follow @KatieKingCST on Twitter.