Sacramento region to get a tsunami of stimulus money. Here’s how it will be spent
Tens of millions of new federal economic relief dollars are headed to the Sacramento area, largely free of any strings — and city officials are eyeing potential uses that include helping law enforcement, the arts, the homeless and seniors.
In Sacramento, Mary Lynne Vellinga, a communications director for the mayor, listed general areas where the $121 million the city anticipates could help: Youth and workforce, housing and homelessness, cultural organizations and tourism, and small business.
The funds are part of a $65 billion pot of federal money authorized in Washington’s $1.9 trillion stimulus plan, aimed at helping local governments overcome revenue shortfalls triggered by the year-old COVID pandemic.
Critics — mostly Republicans — have said that the money is now largely unnecessary, since the economy has been growing since the summer and many jurisdictions, including California’s state government, see revenues are exceeding estimates.
But Sacramento area officials say their governments need the money.
“That’s always the big concern that we have--if we go into a prolonged recession will there be impacts to home and other property values,” said Aaron Laurel, West Sacramento city manager.
The cities will have leeway as they make plans to spend the money. Federal guidance so far has been deliberately open-ended, since different cities have different needs.
Money can be used to help residents, small businesses, nonprofits and industries such as tourism. It can go for government services affected by a revenue reduction as well as investments in water, sewer and broadband infrastructure.
Sacramento spends on services
The last round of federal economic relief funding in spring 2020 sorted cities into groups of haves and have nots. Only those with a population greater than a half million people were rewarded with millions.
The city of Sacramento, with a population around 513,000, barely made the cut.
The city gave large sums of its $89 million allocation to community groups, small businesses and other city services.
Some of the largest payments were to major community nonprofits like the Sacramento Convention and Visitors Bureau, the Greater Sacramento Urban League and WellSpace Health
Federal data shows at least 190 grantees benefited from payments larger than $1,000, although some organizations appear more than once and the city puts it at 361 grants.
Some have questioned this approach to spending. Craig Powell, president of Eye on Sacramento, a nonprofit that monitors city issues, said not enough has been done to ensure the money is being put to good use. He said many of these efforts cannot be sustained over time.
“The list of recipients was as long as your arm and then some,” Powell said. “As far as we can tell there have been no metrics set to tell whether this money was doing any good.”
A city website offers a broad description in five general categories of how about $80 million of last year’s money was spent. It also lists in cursory detail the volume of services provided:including more than a half million meals delivered to seniors, more than $5 million in rental assistance and 1.5 million masks distributed.
The city’s spending stood in stark contrast to Sacramento County, which directed most of its funds to cover salaries for the county Sheriff’s Office. The county is due to get $301 million in federal stimulus money this time.
In the last year, the city of Sacramento’s revenues have been better than expected but still short of its pre-pandemic strength. At a mid-year budget review last month, Dawn Holm, the city’s finance director, said the city’s revenues were about $26 million short of that figure.
The largest gaps were in parking revenue the city collects from garages and meters, which was down by more than 50%, and general sales and use taxes were down by 10%, according to Holm’s budget presentation.
“The city has experienced revenue losses over the past year while the cost of certain programs and services have continued to grow,” Tim Swanson, a spokesman for the city manager’s office, said in a prepared statement.
Hotel and sales tax declines
Smaller cities in the region dipped into their reserves to cover costs as restrictions from the public health order put a pinch on programming revenue from events and city services. Hotel and sales taxes also declined. Property taxes remained strong but some city managers said they were still wary until the economy fully recovers.
The city of West Sacramento is due to get $11.65 million from the new pool of stimulus money, or about 18% of last year’s budget.
Laurel, the city manager, said the city lost between $7 million and $8 million in revenue out of its $64 million budget last year due to lagging sales tax revenue and increased expenses related to the coronavirus pandemic, he said
Among the projects that could benefit from the new funding is Project Roomkey, the statewide effort to shelter homeless people in hotels. The city allocated $2 million in matching funds for the project, and Laurel hopes to recoup that money, replenish the city’s reserves and revisit some city projects that were delayed or reduced in scope.
The current year is still an open question, Laurel said.
“We’re in March, and in the middle of a fiscal year and we have been tracking revenues, trying to do our best to project what likely impacts there will be,” Laurel said. “But there is still so much that’s unknown and we are expecting some impacts with closures in place.”
Folsom expects $15.3 million from the 2021 economic stimulus, probably not enough to cover shortfalls.
Compared to fiscal year 2019, the last pre-pandemic year, sales tax revenue is down by 10%, programming revenue has fallen 76% and transient occupancy taxes levied on hotel guests are down by 47%, city officials said.
To cope with the revenue declines, Folsom city manager Elaine Andersen said the city pulled $3.6 million from its rainy day fund and leaned on another $4.3 million from a so-called risk fund to prop up the $89 million general fund budget last year.
“We did receive about $1 million in CARES Act funding that was spread out over several allocations in 2020,” Andersen said, “but honestly that was already more than spent by the time the dollars arrived.” The federal CARES Act allocated funds in 2020 to state and local governments.
The financial struggle is not yet over as state restrictions remain in place. During this budget year Folsom has had to freeze vacant positions, pull back on operations and maintenance, and halt or postpone major building or equipment purchases, she said.
“(The) $15.3 million is a lot of money by any standard and we are very grateful but we do need to keep in mind, that even that sum does not make us whole financially,” Andersen said. She predicted a “spartan” budget for the fiscal year that starts July 1, one where “We are having to make very hard choices.”
This story was originally published March 25, 2021 at 5:00 AM.
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