Stimulus Cash Hunt Baffles

April 21, 2009

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Chris Lloyd of McGuireWoods Consulting’s Business Expansion team was recently quoted in the Greensboro News & Record describing the hurdles that local governments in North Carolina have encountered when trying to access stimulus funds.


News & Record   April 19, 2009

Local government officials had hoped the massive economic stimulus bill Congress passed in February would be manna from heaven, or at least easy cash from the federal government.

Rather, tapping money coming to North Carolina from the American Investment and Recovery Act has turned into a strange Easter egg hunt, one in which nobody knows all the rules or exactly what the eggs look like.

“We are extremely frustrated about what’s going on,” said Reidsville City Manager Kelly Almond. “We don’t know who to ask or who to fault.”

The stimulus bill divided funding between tax breaks, infusions into entitlement programs such as Medicaid and unemployment benefits and capital projects such as building roads or schools.

It is that third chunk – at least $6.1 billion – that cities and counties hope to tap.

Bigger cities like Greensboro have already seen money flowing their way. For example, about $600,000 was sent to the Gate City last week to help complete the Bicentennial Greenway, a trail linking north High Point and Guilford Courthouse in Greensboro.

Smaller towns like Reidsville, Almond said, seem to have fallen off the radar of those managing the money.

“City managers in smaller cities are being questioned, rightfully questioned, by our city councils about where’s ours,” Almond said. “It’s a matter of not being clear how to tap into it. … And a big part of the problem, too, was the incredible expectations we all got.”

The stimulus bill was poorly understood by local leaders and residents alike – many in Congress even acknowledged they didn’t have a chance to read it thoroughly before voting – and it was often erroneously described as an imminent infusion of cash.

“Folks, I think, wanted to think there would be a certain amount of dollars going to each community,” said Dempsey Benton, who was tapped by Gov. Bev Perdue to oversee North Carolina’s stimulus spending. “Really, it’s a purpose-driven kind of funding rather than place-driven.”

The money has to be channeled through dozens of federal programs, each with its own rules and procedures. Some programs are so new that state and federal regulations aren’t fully developed.

Broadly, there are some things common to all stimulus spending.

Federal rules require spending to be reported through state and federal Web sites so that everyone can evaluate how the money was used. And Benton said, North Carolina will require businesses and nonprofits that hire new workers with stimulus money to post their jobs at the Employment Security Commission so that everyone has an equal chance to apply.

Some stimulus money is already being put to work. Fastest out of the gate has been transportation spending on roads, airports and the like. That will be closely followed by water and sewer projects.

But state and local officials are still trying to learn more about several programs, including funding to promote energy efficiency, homelessness prevention and economic development.

“What I spend the most time on is making sure I’m not missing something,” said Denise Turner, an assistant city manager in Greensboro who has been picked to head up the city’s stimulus tracking efforts.

Although the stimulus bill apportioned the money for various programs, it did not come with a handy checklist or a user’s manual. Turner said she has spent enough time sorting through the program to know how much money is available for certain categories or programs.

“Our issue is knowing when the money is actually going to be available and what the criteria is for getting it,” she said.

The hurdles and questions in Greensboro and Reidsville are not uncommon, said Christopher Lloyd, a Richmond-based consultant with McGuire Woods, a legal and consulting firm that has offices in Charlotte and Raleigh.

“While the stimulus package has some great aspects to it, it’s not just funding everybody’s wish list,” Lloyd said.

Businesses, nonprofits and governments hoping to tap into the funds need to be sure they’re ready to play by a complex set of regulatory rules.

“We’re warning (our clients) that transparency and accountability are absolutely paramount in this process,” Lloyd said. “There’s an unprecedented amount of scrutiny in how it will be spent.”

Charles Archer, associate director of the N.C. League of Municipalities, echoed that advice, adding that governments need to be ready to follow through on the commitments that come with stimulus funds.

For example, getting Justice Department money for hiring new police officers could mean promising to keep that officer on the street for years after the stimulus money runs out.

Some cities have been leaning on state and federal legislators to help them get stimulus grants. Greensboro, for example, scrambled last month to create a list of projects that could be paid for with stimulus money to give to a Senate oversight committee.

The chairman of the committee called the idea “a false start” and said that it’s unlikely members of the General Assembly would be involved in setting aside money for specific projects.

“It’s not a political process,” Archer said. “It’s a merit-based process. They’d be better off hiring someone to write and administer grants than a lobbyist.”

That’s not to say legislators don’t want to have a say in how the money’s handled. Both the House and Senate have appointed committees to track stimulus spending.

Last week, a briefing on the distribution of money to help low-income homeowners weatherize caused consternation among Senate committee members. Human Service officials said that the money would have to be piped through an existing program with a set number of contractors.

“We’ve got to determine what is allowed,” said Sen. Martin Nesbitt, a Buncombe County Democrat who chairs the committee. “We’re being told that the federal rules basically control everything including who gets to spend the money and who they get to spend it with. I don’t believe that. … Surely the federal government wouldn’t send it to us if they didn’t expect us to have input and oversight.”

Nesbitt said his preference would be to see grants go directly to homeowners rather than be given to nonprofit agencies.

Sen. Don Vaughan, a Greensboro Democrat, said he is also uncomfortable having too much money flow to nonprofit agencies.

“I just remember what happened with Project Homestead with federal money coming directly down to a nonprofit,” Vaughan said, referring to a housing nonprofit accused of mishandling federal grants.

More broadly, the legislature and the governor’s office are trying to figure out who has control of which pots of money.

One basic question is whether the state needs to appropriate stimulus funds, that is write a law designating money for particular purposes, or whether Gov. Bev Perdue can control them without legislative authority.

“Clearly,” said Benton, the state stimulus czar, “our primary mission is investing the funds for job creation with full accountability to the federal government.”