By Sarah Curry, DBA
The COVID-19 pandemic began in March 2020, yet the federal government took over a year to direct financial relief to local municipalities across the country through the American Rescue Plan Act (ARPA). The pandemic hit local communities across Iowa hard, but through hard work and fortitude, governments survived the pandemic with little lasting fiscal damage. Now Iowa’s cities and counties face the task of spending ARPA funds while also complying with the U.S. Treasury’s complicated guidelines.
To discover how local governments were using these funds in Iowa, Iowans for Tax Relief Foundation (ITRF) conducted a survey of select communities across the state. Our intent was not only to report on what local government officials have done, but also to discern the long-term effects for taxpayers.
While elected officials have been presented with countless ideas about how to spend ARPA funds, prioritizing the interests of the taxpayer should have been at the top of their minds. In addition to direct property tax relief, investments in permanent infrastructure projects and fulfillment of deferred maintenance obligations would be prudent uses of these funds. Putting the taxpayer on the hook for future spending by hiring new employees, in contrast, is an example of windfall spending that should be avoided.
Mason City and Cerro Gordo County received a combined $12.3 million, with $8.2 million going to the county. Mason City has spent or obligated all its ARPA funds to date, while Cerro Gordo County has only used 5% of its total.
The city opted to classify all its ARPA funds in the revenue replacement category, allowing more flexibility to use the funds as officials see fit. Some of the projects they have identified include fire station renovations, city hall lobby renovations, tourism promotion payments to the North Iowa Events Center and Visit Mason City, housing development, and support for the city’s arena. The little Cerro Gordo County has spent has gone toward infrastructure needs, such as a wastewater well in Meservey, a generator for emergency management, and building a horse barn at the fairgrounds.
Taxpayers across the state have questioned why ARPA funds were not used to reduce property taxes. While no local government in our survey chose to directly reduce its property taxes, both Mason City and Cerro Gordo County stand out for having made cuts to their property tax rates amidst the ARPA funding.
No doubt, many local governments experienced negative financial effects from the pandemic; however, assistance given nearly 18 months after the onset was arguably too late to do much good. In fact, more than 85% of the rescue funds allocated to local governments we surveyed remains unspent. Even now, when our lives are practically back to normal, the federal government is scheduled to send more money, which will only further contribute to the country’s rising inflation.
To read more details about this survey, visit itrfoundation.org/where-did-iowas-local-covid-relief-funds-go/.