Stimulus Program and the City of Phoenix
- The American Recovery & Reinvestment Act (Stimulus Program) provides no direct funding to cities to fund ongoing city services nor pay city operating costs nor finance city deficits nor replace cut city services.
- The Stimulus Program provides several types of funding to states that are not provided to cities. There also are stimulus dollars that go to the states and then the state can pass a portion of these funds through to cities. Almost all of these funds are then passed through the cities to private sector or nonprofit contractors or to residents.
- The vast majority of funding the cities will receive is for capital projects in the community. The cities will award contracts to private sector firms to build public works, the cities will pay the contractors and then the cities will be reimbursed by the federal government.
- Examples of this capital funding are many. Cities can get money to fund new bus shelters and build new park and ride lots, but not one cent to pay for bus operations or even keep bus shelters or park and ride lots clean. Cities can get funding for new fire stations, but no funding to pay for fire operating costs like firefighters or diesel fuel or electricity for fire houses.
- City budgets will not be improved directly by these capital projects. Cities are aggressively pursuing these funds to put people to work in the community in private sector jobs - generally in the construction industry. These jobs will reduce hardship and improve the economy in the community. These workers will spend their salaries in other businesses, which will help those other businesses and hopefully improve the economy. In the long run, the improved economy will bring in added taxes to the economy. The state will benefit more because the state sales tax rate is higher than the cities’.
- Cities do receive a few stimulus programs that pay for community services. Generally, these funds are passed directly on to private sector contractors (i.e. a program to weatherize resident homes with insulation or clean up deteriorated repossessed homes) or programs to extend new services (i.e. prevention of foreclosures) in which funding is passed on to residents. These are new programs specifically directed by Congress and do not provide funding for existing operations.
- There are limited exceptions. Cities may use up to 15 percent of Community Development Block Grant (CDBG) funds for federally authorized community development program staff. In Phoenix’s case, this is up to $600,000. This may allow a very few cut services to be reestablished. Secondly, we understand that Community Oriented Policing Services (COPS) funding will allow the hiring of new police officers. These funds could not be used to pay costs of current police officers. We have not received the federal regulations and no funds have yet been made available. The cities would have to assume all funding of these positions after three years, and the cities would need cash today to pay for cars, radios and other equipment used by officers.
- The stimulus program will have a significant impact on city budgets only by improving the local economy which would cause current tax rates to produce increasing rather than decreasing revenue.