Kentucky League of Cities Executive Director/CEO J.D. Chaney testified on Tuesday before the Interim Joint Committee on Local Government to update legislators on city allocations from the American Rescue Plan Act (ARPA). The U.S. Department of Treasury delivered $931 million to 376 Kentucky cities. Nine entitlement cities – Ashland, Bowling Green, Covington, Elizabethtown, Henderson, Hopkinsville, Lexington, Louisville, and Owensboro ‒ received a combined $607 million. Other non-entitlement cities split $324 million with payment through the Department for Local Government (DLG).
Chaney explained that many cities delayed allocating funds because federal guidance has continuously evolved. Treasury released interim rules in May 2021 but offered seven updates through November. It issued a final rule in January 2022 which incorporated almost all of KLC’s recommendations to loosen restrictions and broaden eligible users. The final rule took effect April 1, 2022.
Most cities have not reported yet how they have used or plan to use the money because of the delayed final rule. Chaney said that KLC encouraged most cities to wait until Treasury released the final guidance to allocate funds to avoid potentially ineligible expenditures.
Non-entitlement cities plus Elizabethtown, Henderson, and Hopkinsville had to submit their final report by April 30, 2022. They will not report again until April 30, 2023.
Ashland, Bowling Green, Covington, Lexington, Louisville, and Owensboro must report quarterly. Chaney said that, at this time, Ashland, Covington, Lexington, and Louisville have budgeted $155 million, obligated $95 million, and expended $52 million.
Ashland, Covington, Lexington, and Louisville reported their four highest budgeted expenditure categories were:
- Public health
- Premium pay
- Response to negative economic impacts
- Services to disproportionately impacted communities
Those cities spent the most money on COVID-19 response and vaccinations, premium pay for essential workers, housing assistance, parks and recreation improvements, drinking water investments, and provisions of government services. Premium pay must go to eligible workers who have performed essential work during the pandemic.
Cities have used the funds for other essential community programs and needs.
- Bowling Green plans to use $16 million to establish fiber optic cable to homes and businesses.
- Lexington budgeted $10 million for affordable housing programs.
- Louisville set aside $10 million for a court eviction diversion program for low-income residents.
- Covington allocated more than $3 million for various affordable housing programs to assist income-eligible households.
- Owensboro will use $5 million to improve stormwater drainage systems, $2.5 million to replace an aging water tower, and $750,000 for public pool upgrades in a low-income area.
Treasury has not publicly released data from cities that submitted reports on April 30. Based on discussions with officials in smaller cities, the most common projects pursued include premium pay for essential work, incentive pay for retention of current employees, water and sewer projects, police and fire equipment and vehicles, parks and recreation improvements, and general government administration.
Chaney explained the difficulty many cities face when discussing how to offer premium pay, especially to retain public safety employees. “Under Section 3 of the Kentucky Constitution, cities cannot give bonuses,” Chaney said. “So, it has to be in consideration of work done in the past or work performed in the future.”
Cities such as Eminence, Prestonsburg, Versailles, and Wurtland reported providing premium pay in the range of 70 cents to $13 per hour on a going-forward basis. The average pay increase totals $5 per hour.
The cities of Glasgow, Owingsville, Richmond, and Williamsburg approved premium pay on a looking-backward model based on essential work performed earlier in the pandemic. Those totals typically do not exceed $2,000 per employee, although ARPA guidance allows up to $25,000 per employee.
Chaney stressed that city officials are carefully reviewing all options. “Our cities are being very diligent. The League is diligent in our counsel, and I think the Department for Local Government is the same. We are talking about the fact that this is probably one-time money that we will never see again in our lifetime.”
Kentucky Infrastructure Authority (KIA) Executive Director Sandy Williams testified at Tuesday’s hearing about a second round of drinking and wastewater grants. The General Assembly allocated $250 million from ARPA in 2021 and 2022. While Williams said that the portal is open for applicants, a formal call for projects will take place in the coming weeks. KIA encourages local governments to coordinate efforts since a county’s population determines the maximum grant allowed.
Williams told the committee that KIA awarded all $200 million set aside for grants in round one. The remaining $50 million will benefit some projects that experience bids impacted by the rising cost of construction supplies. She encouraged applicants in round two to consider applying for over-budgeted costs from round one projects.