We wanted share a testimony which was presented to the Fiscal Stability and Intergovernmental Cooperation Committee of the Philadelphia City Council on April 13, 2021. The testimony draws on two iconic research products published by the Nowak Metro Finance Lab and our partners – one Federal investment guide the American Rescue Plan (ARP), which shows how ARP funds will go to 84 programs from 19 federal agencies through seven distribution channels, and the Small Business Equity Toolkit, which shows where the top 100 metropolitan areas were before the pandemic in terms of the number, size and sectoral concentration of women and minority-owned businesses.
We want to highlight four takeaways that you need to keep in mind as you go through our testimony. We see this as a framework that local leaders can use to bypass ARP. (You can see the full presentation of the testimonial here.)
- City governance does not stop at Town Hall
In many cities, local media, advocates and activists have reduced the ARP to their $ 130 billion subset of flexible funding that will go directly to general purpose local governments at the city and county level. This is understandable given the historic scale and flexibility of local government aid the federal government is allocating starting next month and the fact that in most cities mayors are the personification and agent of all. local governments. But this reductionist approach drastically underestimates the amount of funding that cities (i.e. governments, networks, residents, businesses, etc.) should receive.
The ARP provides a useful civics lesson: Cities are governed by a plethora of authorities and agencies and amplified by networks of commercial and nonprofit intermediaries. To this end, the Plan will directly fund school districts, public housing authorities, public health centers and transportation companies through a series of block grants, as well as support individuals, businesses and non-profit organizations. profit through a range of financial products, grants, tax incentives and competitive grants. Focusing exclusively on what the town hall receives undermines the full potential of ARP to stabilize local economies and put them on the path to a more inclusive and sustainable trajectory.
In reality, the town hall will play various roles in deploying the full ARP. It would be wise for mayors and their senior officials to develop a plan that encompasses 2-3 key local priorities and weave together their roles as a leader, facilitator and communicator. Flexible relief funds are just one of the tools in the ARP toolkit for reaching local priorities.
- City council decisions should be made in the context of multiple funding sources
City governments are now under pressure from multiple constituencies to fund a disparate set of needs that have emerged from the pandemic. The larger picture of ARP funding and distribution channels described above explains how municipal governments make decisions about the funding they receive directly.
The allocation of flexible local aid dollars, for example, must take into account funding for specific purposes (eg, housing, food insecurity, childcare) that pass through other channels. At the same time, local federal aid dollars could have the potential to mobilize substantial public, private and civic resources if properly structured. We wrote several months ago about The Philadelphia Efforts to link as many MWBEs as possible to Federal Paycheck Protection Program loans, linking these companies to accountants and other financial navigators on the one hand and to capital providers (e.g. banks, CDFIs) of somewhere else.
Municipal governments would be well served to deploy their direct funding in a way that builds the capacity of existing organizations and intermediaries so that other public, private and civic sources can be fully tapped. We are past the point where municipal governments would have to provide grants of $ 10,000 to small businesses, which was necessary at the very onset of the pandemic.
Rather, small amounts of funding to bridge the dots between small businesses, financial browsers, and federally backed grants and loans (including Paycheck Protection Program loans, economic disaster loans , Closed Site Grants, Restaurant Revitalization Fund Grants, and Small Business Credit Initiative Stabilization Fund and SBA Community Navigator Pilot Program) is what we need now.
Ultimately, winning the game requires not only technocratic skills, clear communication and strategic choice, but a firm belief in local priorities and smart investment in building the capacity of organizations capable of delivering those priorities effectively, efficient and fair.
Capacity building outside of town hall should also focus on efforts that help people access relief intended for them. As we point out in the Federal Investment Guide, direct individual relief accounts for almost half of ARP. In addition to the $ 1,400 stimulus checks, much of this relief is provided through the tax code (for example, the EITC and the Child Tax Credit) and by state and local agencies (for example , unemployment insurance and emergency housing assistance), both of which have suffered from deployment issues in the past 12 months.
Making sure relief gets into the pockets of those who need it will take work: communicating eligibility, gathering the appropriate documents, and completing the paperwork. As with the Philadelphia PPP Prep initiative, there are models like the EITC campaign which can be scaled up locally but requires an immediate communication effort.
- Use safety net financing to simultaneously stimulate business growth and development
We recently wrote that “it is better not to judge a [federal] program only by its label or by the responsible body. Indeed, the ARP includes a diverse set of tools to support small businesses affected by the pandemic and resources to help small business ecosystems grow, which is not necessarily obvious.
This is particularly the case for the financing of the social safety net. The core elements of the social safety net (e.g. food, child care and housing) are ultimately provided by private companies that grow and transport food, care for children, build and manage housing, etc. Public spending on social protection is directed to these companies and therefore increases access by providing better quality services at lower costs for the user.
In other words, the financing of the social safety net is in fact a process of public procurement or grant (and often both) aimed at companies (small and large) to provide services to eligible beneficiaries. It can therefore be spent in a way that supports the growth of business ecosystems owned by Blacks and Maroons.
Child care is emblematic of the potential impact of this approach. It’s an industry dominated by razor-thin margins, informality, and small business size – and one in which small businesses have been hit hard by the pandemic. It is also a sector where 13% of black-owned businesses (largely run by black women) are concentrated and where black businesses have incomes 60% lower than their white-owned counterparts.
The ARP provides $ 175 billion in funding for child care through a range of block grants, tax credits and existing programs. These funding streams are a potential win-win for cities looking to help struggling families and close the racial wealth gap. But to achieve this potential, ARP funding must be deployed with a clear focus and strategic sequence.
To that end, our testimony to Philadelphia City Council focused on the ARP’s unprecedented support for child care, both on the demand side (helping families afford child care services). quality care) and on the supply side (helping small businesses adapt to demand).
- The American Rescue Plan funds will not all arrive at the same time. This is a good thing.
Despite the speed at which some ARP funds will arrive, cities do not need to invent new priorities overnight. Flexible funds will be better spent on initiatives that help cities build towards the local economy they want ten to fifteen years into the future. ARP funds may eventually come along with additional investments provided through President Biden’s U.S. Jobs Plan and other federal infrastructure, innovation, and human capital laws. Knowing this, cities need to plan ahead and ensure that ARP funds are linked to the larger metro goals.
ARP is an important bill that funds a combination of existing and new programs. Each program has unique limits on when funds must be spent (which we highlight in the Federal Investment Guide). The result is that not all funding will come at the same time. In fact, funding will come in waves as direct transfers are processed, new programs are established, and new requests are processed.
Cities need to plan accordingly. They should order the funding plans according to local priority uses over three time periods: the next 100 days, the next 6 months, and the next 12 months. More immediate uses should focus on time-limited or amount programs that already exist (EITC, PPP, etc.), six-month uses should focus on capacity building investments, and 12-month uses should focus on the long term. city ââpriorities that will work alongside the US jobs plan. This approach will help make the deployment of funds more manageable for overburdened and understaffed town halls.
As you read our Philadelphia Testimonial and related documents, keep these four points to remember. Rolling out the American Rescue Plan and existing streams of federal funds feels like a game of chess on many levels. Ultimately, winning the game requires not only technocratic skills, clear communication and strategic choice, but a firm belief in local priorities and smart investment in building the capacity of organizations capable of delivering those priorities effectively, efficient and fair.
Bruce Katz is the founding director of the Nowak Metro Finance Lab at Drexel University. Colin Higgins, Karyn Bruggeman, and Victoria Orozco are principal investigators at the Nowak Metro Finance Lab.
Photo courtesy of Visit Philly