Burlington to get COVID windfall of $11.8 million; councilman suggests cutting taxes for city residents
Local government leaders have faced quite a conundrum since President Joe Biden signed the so-called American Rescue Plan into law on March 11 and effectively lifted the flood gates on nearly $2 trillion in federal pandemic relief.
With the first installment of these funds scheduled to pour into city and county coffers next month, local officials have only received the vaguest instructions on how they can spend this financial infusion, which is the latest in a series of federal allocations spurred by the ongoing coronavirus pandemic.
But the question of what to do with this revenue seems to have already resolved itself for one member of Burlington’s city council, who has openly declared his desire to pass these particular bucks to the city’s taxpayers.
During a regularly-scheduled work session on Monday, councilman Jim Butler seized on the idea of a municipal tax cut as a way to disburse some of the nearly $11.8 million that the city expects to receive from this aid package.
Butler endorsed this idea after Louisa Sholar, a fellow with UNC’s School of Government, informed the council that there’s nothing to prevent cities from using this revenue to fund “tax cuts” or “local stimulus payments.”
Sholar added that municipalities may also be able to distribute this money to nonprofit organizations, private companies that provide transit services, and “special-purpose” units of government. But it
was the prospect of sharing the wealth with Burlington’s taxpayers that really seemed to leave a lasting impression on Butler.
“There are no restrictions for tax cuts,” he told the rest of the council, “and I’m sure everybody would vote for that.”
Butler’s suggestion drew a skeptical response from Burlington’s mayor Ian Baltutis, who warned that the U.S. Treasury Department might forbid local governments from using pandemic relief funds to “reduce” their existing budgets.
Butler argued, however, that if there are genuinely no restrictions on tax cuts, the council may be able to use the federal dollars to supplant the city’s tax revenue without actually reducing its budget.
In either case, he called on his colleagues to keep this option in mind after May 10, when the city expects to get the first installment of the promised federal aid.
Sholar told the council that the Treasury Department has, so far, provided only the most basic guidance on what local governments can do with the funds they receive under the American Rescue Plan.
She added that the National League of Cities and its state-level equivalent, the N.C. League of Municipalities, have identified
several broad categories of allowable outlays based on initial indications from the Treasury Department.
These permitted uses include direct responses to the pandemic, “premium pay” for public and nonpublic employees who do “essential work,” and allocations to supplement revenues that have fallen off during the pandemic.
Sholar told the council that these first three categories are all intertwined with the ongoing pandemic, while the case is a bit different for the fourth allowable area of spending, which concerns investments in water, sewer, and broadband infrastructure.
“This is the only one that does not spell out a specific requirement tied to the public health emergency,” she went on to elaborate.
Sholar said that, according to the N.C. League of Municipalities, Burlington can expect to receive $11,760,000 from the latest federal financial stimulus. She noted that these funds are slated to be disbursed in two “tranches;” the first to come 60 days after the stimulus bill was signed into law, and the second to arrive a year
Sholar told the council that the city will have until December of 2024 to decide how best to distribute these funds. She added that the league of municipalities advises its members to consider both government and community needs in making these outlays, prioritize uses that ensure fiscal stability or put people back to work, and keep careful records of its allocations.
She said that the league also encourages municipalities to thank their Congress representatives for the financial stimulus by inviting them to ribbon cuttings and ceremonial reopenings.
“Earmarks” to return in Washington spending bills
Another item that Sholar addressed with the council is the return of federal “earmarks,” or specific line items that members of Congress had traditionally slipped into the national budget on behalf of constituents.
Known pejoratively as “pork,” the practice of earmarks was discontinued some years ago only to make a sudden comeback earlier this year.
The U.S. House of Representatives, which is the point of origin for all federal spending bills, has reportedly given its members until April 15 to submit up to 10 prospective earmarks for the next federal budget.
According to Burlington’s city manager Hardin Watkins, Rep. Ted Budd, a Republican who represents the portion of Burlington that lies in Alamance County, has opted not to submit any earmarks this year.
Watkins added, however, that the city may be able to get some budgetary consideration from Rep. Kathy Manning, a Democrat whose district includes the portion of Burlington that spills over into eastern Guilford County. The city manager noted that he and his fellow administrators have already identified three projects in this part of the city that may be ripe for an earmark from Manning.