Sep 15, 2022 - News

How Philly is spending federal COVID money remains unclear

Illustration of a U.S. quarter coin with duct tape covering George Washington's mouth
Illustration: Annelise Capossela/Axios

The federal American Rescue Plan Act (ARPA) is bringing more than a billion dollars to Philadelphia but how the city will use the funds remains murky.

Context: President Joe Biden signed ARPA into law last year to deliver $350 billion to cities and counties to recover from COVID-19. It's the largest injection of federal funding in local governments in nearly four decades, economists tell the Marshall Project.

  • Few limitations were put on how local governments could spend ARPA funds.

By the numbers: The majority of all planned ARPA spending through the first quarter of this year — $52.6 billion — was categorized as "revenue replacement," a vague, catch-all category that local governments could claim by calculating how much tax revenue they lost due to the pandemic.

  • Nearly half of the $52.6 billion went to projects that mentioned police, law enforcement, courts, jails and prisons, the Marshall Project found.
  • Less than 10% went to "public health."

Zoom in: Philadelphia, pegged to receive $1.4 billion through the ARPA, has earmarked $250 million of the funding so far under "revenue replacement," according to data compiled by the Marshall Project and shared with Axios.

What they're saying: Kenney administration spokesperson Kevin Lessard said the entirety of Philly's ARPA funding will be used for "revenue replacement" so that the city can "continue to provide the existing level of services." He did not provide further details about where that money will go.

  • An August report from the city noted that ARPA dollars helped the city avoid painful budget cuts and potential tax increases while making investments in public safety, education and more.

Lessard blamed Philly's "unique tax structure," particularly the state's uniformity clause that prohibits local governments from taxing people and businesses at different rates, and its large, pandemic-driven budget shortfall as reasons for the administration categorizing its ARPA funds under the catch-all category.

  • The pandemic is expected to cost the city $1.5 billion in lost revenue over five years, making Philly's budget among the hardest hit nationwide.
  • Yes, but: Other counties and municipalities in the state bound by the clause and affected by the pandemic reported more details about spending their ARPA funding.

For example: Allegheny County, which includes Pittsburgh, listed expenditures that include a new armored rescue vehicle for its SWAT team, funding for Allegheny County Community College, and projects to boost economic development and tourism.

The other side: City Controller Rebecca Rhynhart, the city's independent financial watchdog, recommended earlier this year that the city create a targeted spending plan for ARPA funding, outlining investments focused on the city's top challenges.

  • Rhynhart told Axios the Kenney administration's lack of transparency around the spending of ARPA dollars is "hindering the trust between the people and government."
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