As municipalities across the country continue to claw out of the pandemic-induced economic downturn, the City of Denver could get over $300 million from the American Rescue Plan Act, the economic stimulus bill passed by Congress and signed into law by President Joe Biden on March 11.
"We want to make sure that we spend [the funds] in a fashion that is sustainable for the city’s finances after the funds are no longer available," says Brendan Hanlon, Denver's chief financial officer.
Denver's "Local Aid" cash windfall could range from $141 million to $311 million, according to the best available estimates; where the amount lands in that vast range depends on how the federal government classifies Denver, which is a consolidated city and county.
"In the American Rescue Plan, under the relief aid, there’s a section that talks about the amount of money that a county would receive. And then there’s an amount of money that a city would receive. And then, unlike the Coronavirus Relief Fund, there’s a provision for consolidated governments," explains Hanlon. "It would be eligible for both funds. We are arguing that we are a city and a county. It’s our name, the City and County of Denver, and the allocation should be both because we perform both functions."
Denver would receive an estimated $141 million if it's classified solely as a county, $170 million if it's classified just as a city, and $311 million if it's designated as both.
Denver officials have reached out to members of Colorado's congressional delegation, asking them to ensure that the federal government grants the full amount possible for the City and County of Denver. While most cities across the country are part of a county, Denver is not the only exception: When Broomfield incorporated over two decades ago, it was as a consolidated city and county; Honolulu and New Orleans are set up the same way.
Whatever amount Denver finally receives, it will get half within the next two months and half next year. All of the money must be spent by the end of 2024, and city officials are already considering what to do with it.
The Denver Department of Finance's first focus will be on reducing the number of furlough days for city employees and filling vacancies that remained empty after hiring freezes were enacted as a cost-saving mechanism.
"Vacant positions impact all the employees who remain on staff. Those employees who remain on staff are taking furlough days, and they don’t have as many peers to administer the work," says Hanlon, who notes that filling the jobs will also increase the purchasing power of the new hires, thus increasing the overall economic impact for the city.
Denver's 2020 general-fund budget had a pandemic-induced shortfall of around $200 million, according to the city's latest analysis, which represents around 13.5 percent of the $1.485 billion general-fund budget for that year. This year, the city anticipates a shortfall of around $190 million, which is part of why it enacted a $1.33 billion general-fund budget for 2021. (While the city generally made cuts across the board, Denver actually increased its spending on homelessness and housing services for 2021.)
To close budget gaps, the city has had to both dip into reserves and enact furloughs and hiring freezes. The 2021 budget created $39 million in savings through reduced hiring and holding more than 400 career service positions vacant. The city is also saving $11.5 million through vacancies in the police, fire and sheriff departments.
The biggest indicator for how well Denver's economy is doing in the short term will be the city revenue numbers for March, April and May.
"Those three months [last year] were the most impacted as we were dealing with the pandemic. That is when we had very aggressive and necessary public-health orders that were in place that required people to stay at home, and businesses were closed at that time," says Hanlon. "With our economic posture and the number of businesses that are open now, I think naturally we’re going to perform better. I think the question is how much better."
If the economic performance numbers during these months are closer to those from spring 2019 than 2020, then Denver is on a solid financial track, Hanlon says. "We have made it clear that we cannot restore everything," he notes, adding that the city wants to maintain a "balance between restoring services and economic recovery."
After focusing on that initial restoration of services by bringing back the employees who provide them, Hanlon expects the city to spend its federal dollars on shortening service backlogs, emergency response and economic recovery.
"I don’t imagine we’re going to use this category much in the beginning," Hanlon said of the new federal funds during a March 25 Denver City Council committee meeting, pointing out that Denver still has Coronavirus Relief Fund money created by the CARES Act. The city received $126.8 million in Coronavirus Relief Fund money, a figure that would've been much higher had it gotten money as both a city and a county.
In addition to the American Rescue Plan Act "Local Aid" funding, Denver could also receive more targeted federal funds for housing and homelessness, public health, economic recovery and community support.
During the March 25 meeting, councilmembers Kendra Black and Chris Hinds suggested that the city explore buying a building to house homeless people, while Councilwoman Robin Kniech broached the idea of purchasing land for homelessness resolution projects.
"I think my answer is 'Maybe,'" responded Hanlon. "Until we get guidance from the Treasury Department on this local aid as to what eligible expenditures are, I'm kind of taking all of the ideas in, as the finance department is just hearing everyone out."
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