By Alfredo Santana
LOS ANGELES — Cities in Southeast Los Angeles County are poised to claim a slice of funds from the $7.05 billion allocated to municipalities in California in the relief package signed by President Joe Biden earlier this month to cushion the fiscal blow endured following the shutdown brought on by the COVID-19 pandemic.
However, cities with less than 50,000 residents may not be able to recover large sums lost to the pandemic, because allocations are capped at 75% of the budget from the fiscal year prior to the crisis, and distributions are tied to population.
The relief package excludes losses in sales taxes and bans its use to revamp retirement funds of public employees.
Instead, the money is designed to repair budget gaps caused by business closures, job losses and infrastructure works put on hold as municipalities moved to stop the spread of the coronavirus.
A webinar conducted March 17 by the League of California Cities was held to explain the American Rescue Plan’s potential impact on municipalities underscored the funds are not handouts, and they must be sought by getting certification from the U.S Department of Treasury, and from the state if the applicants are non-entitlement cities.
Non-entitlement cities have populations below 50,000 residents.
Cities can use the funds to cover financial voids caused by businesses being shut down in the tourism and hospitality industries. They also can be used to address tenant’s overdue rents, and prop up battered small businesses and nonprofits, said Irma Esparza Diggs, a representative from the National League of Cities.
“Cities would have to meet with their city managers, personnel and representatives of essential services departments to count the money needs” and define the areas that suffered cutbacks blamed on the coronavirus, Esparza Diggs said.
The plan calls for cities to submit petitions on documented tallies of revenue losses reflected in budgets, said Mike Wallace, the legislative director of Housing, Community and Economic Development with the National League of Cities.
Municipalities should certify to get their funds with the U.S Department of Treasury, while smaller cities would be required to certify with a state agency to obtain the funds.
The guidelines indicate that funds for diminished municipal services, layoffs and furloughs can be recovered.
Those funds can be claimed to upgrade digital and urban infrastructure, and could bring aid for households unable to pay rent and to clean blight caused by permanent business closures.
In the city of Commerce, Finance Director Josh Brooks said his department tallied an initial revenue loss of $11.7 million in 2020, with total cumulative losses of up to $36.5 million that include 2021 figures. The economic loss was felt in the city with the shutdown of the Commerce Casino and the Citadel shopping center.
Brooks said that because allocations are based on population, Commerce stands to receive only $2.3 million, nearly the same amount the card club generated in revenue a month prior to the pandemic. Data from the U.S. Census Bureau indicates Commerce had 12,661 residents in 2019.
Commerce slashed $8.5 million from its budget, affecting employment and services, and projects a $3.15 million shortfall in the current year.
“We are not getting anywhere near enough to cover the losses,” Brooks said.
Assistant City Manager Vilko Domic said about 115 full-time employees were furloughed, nine or 10 were laid off and only 40 have returned. Before the pandemic was declared by Gov. Gavin Newsom, Commerce employed 155 part-time workers, positions that were permanently eliminated.
Domic said the city would withdraw up to $6 million from emergency accounts to help stabilize a projected $57.8 million budget for fiscal year 2020-21.
Another heavily burdened city is Bell Gardens, with reported revenue losses of $3.3 million in 2019-20, and $3.64 million in 2020-21 attributed to the coronavirus.
City documents indicate the city suffered revenue losses from the Bicycle Casino of $5.93 million this year, and $9 million since the pandemic was declared, Councilwoman Alejandra Cortez said.
Bell Gardens estimated an overall budget of $48.6 million this fiscal year. The U.S Census estimated the city had a population of 42,012 in 2019.
A year ago, area cities canceled parking street enforcement, offered free rides in local buses and created programs to help poor tenants pay the rent as initial responses to cushion the blow of immediate business closures.
Paramount reported economic casualties of $2.14 million in fiscal year 2019-20, and projected to draw from rainy day funds up to $6 million to balance its $64.3 million budget for 2020-21. The city faced uncertainty collecting revenue as the pandemic unfolded in the second half of last year.
In response to the crisis, Lynwood and South Gate operated programs that offered free meals to vulnerable residents and created grants for businesses to stay afloat during the pandemic.
South Gate reported the pandemic created a $2.4 million hole in revenue from a mix of fewer licenses, permits and property taxes.
Among the measures to fight the effects of COVID-19, South Gate’s City Council approved $1.07 million to increase psychological and legal services, provide job training to residents, offer coronavirus free tests, prevent and treat family violence, support tenants unable to pay monthly rent and fight the causes that lead people into homelessness.
The city also launched a transportation pilot program for the elderly to drive them to vaccination sites and back home for free.
Pico Rivera reported a $1.27 million deficit due to shelter in place mandates, and plugged it with funds from its economic stabilization account.
Bell came up short $600,000 in a $12.7 million budget, with City Manager Paul Phillips blaming the pandemic for reduced economic activity in local shops and protocols that kept customers at home.
Downey fared much better because of a wider sales tax base
Downey dodged serious shortfalls, while its overall budget called for revenues of $106.8 million and expenses of $98.2 million in fiscal 2020-21.
The city planned for a reduction in services to compensate likely revenue drops from businesses that took advantage of an extension to file income taxes until July of last year. It was unclear what services had been trimmed.
Downey Councilman Sean Ashton said the expected deficit is “not too large at this time.”
“What I know is that city staff are looking into how the money can be best used,” Ashton said. “As of now, we have not been impacted financially. I don’t have the timeline as to when we will be able to submit this. However, it should come before council before we do submit.”
The city approved special funds to acquire facemasks and personal protective equipment for micro outlets, first responders, essential workers and residents, and directed $950,000 to provide relief to renters suffering job layoffs or furloughs.
Unless the Treasury Department issues additional guidelines, metropolitan cities should get two disbursements within a year following certification, with a requirement to spend the money not later than Dec. 31, 2024. Also, they should submit periodical updates on how the money is spent.
State disbursements should arrive within 30 days of active application, but it can request a waiver to avoid penalties.
Also, the plan calls for potential salary increases for essential public employees of up to $13 an hour, with a maximum of $25,000 a year if they work in places with high potential of contagion.
Norwalk, Whittier and Maywood did not project reduced budgets linked to the pandemic this fiscal year, but could follow Downey’s steps if the delayed tax season disrupts expected revenue.