Where did Iowa’s local COVID-19 relief funds go?

The COVID-19 pandemic began in March 2020, yet the federal government took over a year to direct financial relief to municipalities through the American Rescue Plan Act (ARPA).

The pandemic hit local communities across Iowa hard, but our governments survived the pandemic with little lasting fiscal damage. Now cities and counties face the task of spending ARPA funds while complying with the U.S. Treasury’s complicated guidelines.

To discover how local governments were using these funds, Iowans for Tax Relief Foundation (ITRF) surveyed select communities. Our intent was to report on what government officials have done, and to discern the long-term effects for taxpayers.

While elected officials have been presented with countless ideas for spending ARPA funds, prioritizing the interests of taxpayers 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 expenditures. 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.

Linn County and the cities of Cedar Rapids and Marion received a combined $78.1 million, with $44 million going to the county. Among them, Linn County has obligated 70% of its funds, while Cedar Rapids has obligated 37%, in contrast to Marion, which had yet to make any decisions at the time of our survey.

Most governments have chosen to use their funds independently of each other, but Linn County and Cedar Rapids chose to work together on some projects. Each obligated over $5 million for flood control and water/sewer projects, in addition to spending millions on a partnered affordable housing project. Individually, Linn County chose to obligate $10 million toward capital projects that would not normally have been funded and to support other programs, such as the local community gardens, mental health services, youth advocacy programs, an expansion of its small business incubator and affordable housing initiatives.

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 with ARPA funds, Linn County stands out for having made a significant cut to its property tax rate in this year’s budget. The Linn County Board of Supervisors reduced the countywide levy rate by over 39 cents. In contrast, the Cedar Rapids’ councilors increased the levy rate by 15 cents, while Marion increased its by less than a cent.

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 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 this survey, visit itrfoundation.org/where-did-iowas-local-covid-relief-funds-go/.

Sarah Curry is research director of Iowans for Tax Relief Foundation (ITR Foundation).