Cleveland’s Use of Stimulus Fund for Revenue Clawback Outpaces Other Northeastern Ohio Cities: Stimulus Watch
CLEVELAND, Ohio – About 70% of Cleveland’s first installment of US bailout stimulus money goes to government services to make up for lost revenue during the pandemic, which sets it apart from other major cities in Northeastern L ‘Ohio who have spent much less, if any, of their funds toward revenue collection.
Cleveland receives a total of $ 511 million over two years. Of the first $ 255 million, $ 108 million has been set aside to offset revenue losses due to income tax cuts.
But some cities aren’t planning on spending some of their initial stimulus dollars on revenue clawback, and many are still deciding if that’s the best use of one-time money.
Compensating for lost income is one of the top priorities of the American Rescue Plan funds for local governments, many of which raised less money in 2020 in taxes – including income tax – and from other sources, such as building permits and parking infractions, due to closures, closures and other impacts of the pandemic.
Given that Cleveland is the heart of most industries in Northeast Ohio, it makes sense for the city to lose more revenue streams that don’t exist or are much smaller in other communities, including admission taxes, hotel taxes and casino revenues.
âI think people tend to downplay the huge impact this has had,â Sharon Dumas, chief of staff and chief financial officer for Cleveland Mayor Frank Jackson, told cleveland.com. “All the momentum has stopped.”
The US Treasury has provided cities with a calculator to determine how much they can recover using stimulus money, based on the difference between what was collected in 2019 – corrected for inflation – and what was collected in 2020.
The money then has to be spent on government services, which could include spending to maintain or build new infrastructure, including roads; modernize cybersecurity; health services; environmental sanitation; school or educational services; and public safety. Cleveland intends to spend its reclaimed money to hire unfilled jobs, restore fire and emergency medical services that were cut in 2020, and close funding gaps in areas where spending was cut.
But suburban officials have been less decisive about how to fill these gaps.
Parma will use $ 5.3 million of its $ 23.7 million for revenue collection, or about 22% of its total windfall revenue, or 44% of its first installment.
âThe main factor behind the city’s loss of income was the loss of income tax,â Parma auditor Brian Day said. âAs to how the revenue replacement dollars will be used, this is currently the subject of discussions between the mayor and city council. “
Cuyahoga Falls CFO Bryan Hoffman estimates his city will allocate about half of its $ 16.5 million to revenue clawback – but that could change depending on what the city collects over the next four years. , did he declare.
Lakewood calculated its loss at around $ 3.4 million, but CFO Peter Rancatore said the city has yet to determine whether it will seek to recoup that money using its $ 47 million in plan funds. American rescue.
Barberton has yet to allocate his $ 16.4 million towards revenue recovery, with CFO Jeremy Flaker saying the city “is looking at various other uses before allocating them to lost revenue.”
Cleveland Heights chief financial officer Amy Himmelein said her city will not seek to recoup lost revenue as other sources of funding have already supplemented qualifying deficits.
Most notably, Himmelein said, the city received approximately $ 3.3 million from the Bureau of Workers’ Compensation in 2020. Coupled with above-normal permit revenues due to some larger construction projects, the city has received so much one-time income that she is currently not allowed by Treasury guidelines to use her $ 38.8 million in stimulus funds for revenue clawback.
Akron Mayor Dan Horrigan’s press secretary Ellen Lander Nischt said the city will use some of its stimulus money to replace lost revenue – up to $ 16.7 million of its total of 145 million, or 11% – but wait to see how the “work from home” trend continues and potentially affects tax revenue in the years to come.
Other cities, including Euclid and Kent, have yet to decide whether they will seek to recoup revenue lost due to the pandemic.
If governments choose not to use the stimulus dollars for revenue recovery, it could leave more money on the table for innovative projects. Some of the broad categories of eligible treasury expenditures include investments in public health, addressing negative economic impacts, providing services to disproportionately affected communities, and improving infrastructure.
Cities may also need to reassess their revenue needs in the spring, when the second half of stimulus funds arrive, and financial administrators may be grappling with additional revenue losses in 2021.
In Cleveland, for example, hotel revenues in 2021 still lag behind projections as theaters and other venues struggle to open and fill seats. The city had hoped to collect around $ 31 million from those taxes this year, but that number is now expected to be closer to $ 21 million.
Governments must allocate their US bailout money by the end of 2024 and spend it by the end of 2026.
Stimulus Watch is a public service journalism project of cleveland.com and The Plain Dealer to track federal stimulus funds entering Northeast Ohio through the US bailout. Read more oncleveland.com/stimulus-watch.