Some metro cities surprised to see American Rescue Plan funds slashed

Allocations for at least 6 cities drop by more than 40%
Alpharetta is among the metro Atlanta cities that will receive significantly less money from the American Rescue Plan Act of 2021 than initially expected. (Courtesy City of Alpharetta).

Alpharetta is among the metro Atlanta cities that will receive significantly less money from the American Rescue Plan Act of 2021 than initially expected. (Courtesy City of Alpharetta).

When President Joe Biden’s $1.9-trillion stimulus package, the American Rescue Plan, passed Congress, many local cities were encouraged by the large amount of pandemic relief funds they’d be allocated. Most Georgia cities were poised to receive nearly triple what they did last year as part of the CARES Act.

But over the past few weeks, a few metro Atlanta cities have learned they won’t be getting nearly as much as they expected.

At least six metro cities will receive drastically lower amounts — up to 73% less — than the initial estimates released when the American Rescue Plan Act was pitched to Congress. Alpharetta will only receive about $6.6 million instead of the original estimate of $21.2 million. Johns Creek will receive $7.1 million, down 73% from the initial estimate of $26.6 million.

The unexpected loss of funding could cause headaches for city leaders, some of whom were already making budget plans based on more generous numbers. Ultimately, the shrinking windfall could change the number of city and community programs that will benefit.

“We certainly are disappointed with the negative impact caused by the Treasury’s interpretations and final allocation methodology especially in light of the initial projected allocation,” said Tom Harris, finance director of Alpharetta.

Other metro Atlanta cities that also expect to receive significantly reduced pandemic relief: Brookhaven, Smyrna, South Fulton and Stonecrest.

In Atlanta, funding from the American Rescue Plan relief package will help the city offset the pandemic’s hit to the city’s current budget.

The city is expecting $170.9 million from the American Rescue Plan. Atlanta’s Finance and Executive Committee learned on Wednesday that $64 million in relief funds will be sent to the city “in the next few weeks” that could be used to balance an expected $38 million revenue shortfall in their current fiscal year 2021 budget.

The legislation provided $350 billion for governments across the country to reimburse pandemic-related budget losses, pay essential workers and help hard-hit communities. The U.S. House Oversight and Reform Committee released estimates in March showing how much each state, county and city could receive under what was then proposed legislation. But adjustments were made by the U.S. Department of the Treasury, which has the final say on how much is sent to each government.

The Treasury’s formula for funding differs from the one used by the House committee, leading to slight changes for nearly every local government.

‘A great discrepancy’

Brookhaven, which was expecting to get $17.5 million, found out three weeks ago that it was getting roughly half that amount, City Manager Christian Sigman said. The north DeKalb County city was among the wave of cities that found out their funding had been slashed under complicated financial formulas buried deep within the 242-page piece of legislation passed by Congress.

“It was probably a good 30 days or 60 days after the legislation was signed before people started realizing their allocation was going to be using another method,” Sigman said, “and it wasn’t exactly going to be the number that was bantered around in the House committees.”

Brookhaven and several other cities contacted the Georgia Municipal Association (GMA), an organization that represents the state’s 537 cities, to try to figure out why they relief payment was slashed. Larry Hanson, executive director of the Municipal Association, emailed the Treasury on May 11 to try to get clarity on what changed.

“While we all understand that those estimated amounts were intended as just that — estimates — there appears to be a great discrepancy between many of those estimates and final allocation amounts,” the email said. “... Cities and their residents and businesses started planning how the use the expected funds to meet community needs. Obviously these large discrepancies will require these local leaders to reconsider where funds may be used and this will be difficult to explain to citizens and business owners who were aware of the published estimates.”

Hanson said Wednesday that the GMA is still working to determine the specific formula that led to the changes.

“Without having the methodology or formula used to calculate the amounts, it’s difficult to have an informed discussion and therefore impossible to determine if the funding amounts are appropriate,” he said in an email to The Atlanta Journal-Constitution. “We are hopeful we will receive the requested information from Treasury and that will allow us the opportunity for further analysis and discussion.”

Wealth, poverty, income and population

Harris believes the drastic change in funding for Alpharetta and others comes down to a change in how they are classified by the Treasury.

In the original March 8 estimations, Alpharetta and other large cities were grouped with smaller Georgia cities, who compete with one another for funding, with calculations based on population.

Harris said the U.S. Department of Treasury now considers Alpharetta, Brookhaven, Johns Creek and others to be “metropolitan cities,” a category with funding calculations based on community needs such as poverty.

In general, cities with more than 50,000 residents are considered metropolitan by the Treasury’s standards. Some cities receive this classification because they directly or indirectly receive U.S. Housing and Urban Development funding, Harris said.

In total, metropolitan cities are allotted $45.6 billion in the American Rescue Plan Act of 2021. These funds are split between 142 U.S. cities.

With the former classification, Alpharetta only had to compete for funding with small Georgia cities. With its population of more than 65,000 people, it was more advantageous for Alpharetta not to be considered a metropolitan city.

Alpharetta has already received its first payment of about $3.32 million. City leaders will likely use the funds for maintenance projects, Harris said. They held off on deciding how to spend the money until now, he said, waiting to hear the final allocation amount that Alpharetta would receive.

Johns Creek expects to receive its first payment in the next 30 to 60 days, said Bob Mullen, communications director for Johns Creek.

Brookhaven also received its first payment last Friday, and Sigman said city leaders plan to use it to reimburse lost revenue and public safety expenditures accrued during the pandemic. He said other parts of the stimulus package address rent relief, struggling restaurants and other groups in need.

“It’s a huge piece of legislation,” Sigman said. “I think the intent of the legislation for local government support in that section of the legislation is specific to helping governments with their finances due to COVID — not helping governments go provide social services like they did with the CARES Act.”