The town has already lost millions of dollars in revenue due to COVID-19, with more losses to come as New Canaan emerges from the pandemic, so municipal officials should look to use $6 million in new federal funding to restore the town’s General Fund, Selectman Nick Williams said.
The $3 million that New Canaan should get this week through the America Rescue Plan Act just about covers losses already incurred in areas such as parking, recreation programs and property rentals, Williams noted during the June 15 Board of Selectmen meeting.
And New Canaan has “other continuing negative trends on revenue” that should be addressed in a second $3 million payment from the federal government that’s expected to come within the next 12 months, Williams said during the meeting, held both in person at Town Hall and via videoconference.
“Do we need to proactively say, ‘Oh we are going to get $3 million next year, Christmas has come early, what do we do with that money?’ ” he said. “It seems to me that prudence would augur that we just maybe just see how things go. Is there a rush? I suspect not, right? You mentioned 2024 would be the date you’ve got to figure out what to do with all this cash.”
He addressed town CFO Lunda Asmani, who had provided an update to the selectmen on the federal funds. During the update, Asmani noted that the town gets the funds upfront though it has until 2024 to spend it.
Williams said, “We don’t have to do anything with that money. That money is basically supplanting money that we lost because of lost revenue because of COVID, right?”
The $6 million that New Canaan is receiving is its share of the $1.9 trillion America Rescue Plan Act that Congress passed in March, Asmani said. In Connecticut, town allocations are based on population size, he said. The money is being transferred in a way that’s similar to Community Development Block Grants, where “you have a certain timeframe to spend it,” as per criteria set out in the federal Act, “and then you report back on what you spent it on,” Asmani said.
The main criteria “are obviously they want to encourage support for public health expenditures—and these are new expenses—not reimbursement,” he said.
“This is looking forward, not expenses you have incurred. So you could spend these funds on enhancing COVID responses, mitigating efforts, medical expenses. Just getting yourself ready—beefing up, basically, a public health response. The other area that you could use these funds for is to address some negative economic impacts that were due to COVID, so these would be things with businesses that were impacted and what not. Communities can set programs locally and use these funds to address some of those impacts, including public health emergencies. You can also use these funds—and this is the only area where it looks back—you can use these funds to replace lost revenue that were lost, if you can make the relationship, due to COVID. As you know locally, we have been talking about the parking revenues and how those were impacted.”
According to Asmani, New Canaan since the onset of the pandemic has lost about $3.2 million in town revenue already in the areas of parking ($2 million), Recreation Department programs ($560,000) and funds such as property rentals ($670,000).
The overall figure doesn’t include lost interest, which also will qualify for reimbursement and “is significant,” Asmani said, as interest income has declined this year from about $1.3 million to just $200,000.
Under the federal Act, communities that “wish to provide some premium pay to essential workers, that is also something that you can qualify—just in recognition of their efforts and what not.”
“You could do that,” Asmani said. “And then they have also included in this any new investments in water, sewer, broadband type of infrastructure moving forward.”
Yet “the advantage of applying these funds to lost revenue is it goes back into your General Fund,” he added.
“And therefore, at that point you have the discretion of using—it’s your General Fund. Use that for whatever … You are no longer tied to the specific projects because you are not really funding those projects with this money. You are paying yourself for lost revenue, and then you are just using the General Fund balance to fund for projects. If you are using the fund for new projects, then these projects have to meet criteria that is designated. For example if we said we lost $6 million in revenue, all of that goes to the General Fund. Then you have satisfied the requirement that you use these funds for lost revenue. Now you have $6 million that the town can spend on whatever projects they want without any federal restrictions because you’ve already met the restrictions of replenishing your revenue.”
Williams said, “To cut to the chase, my sense is that a year from now, we’ve got a pretty good case that we’ve had lost revenue in excess of $6 million and that all of that $6 million should go to the General Fund.”
Yet First Selectman Kevin Moynihan said that in figuring out how to allocate the public funds he planned to meet June 17 with private nonprofit groups including the New Canaan Community Foundation and Chamber of Commerce, that have insight to “discuss what the needs of the community are.” Moynihan said that a staffer in his office, Tucker Murphy, also would be there.
“There is a sense that some of this money should run to losses or needs in the community and we’re going to start to investigate that,” he said.
Moynihan said that “we are investigating processes” regarding “how we should go about addressing this.” He added that the Board of Finance and Town Council “probably” also have a role.
Williams responded that it’s “really important that we make a reasonable determination as to what we expect the long-term reduction in revenue to the town is going to be.”
“I think the parking situation—we could face material reductions in revenue from parking for years,” Williams said. “For years. It could be something that will never change. We could see half of our parking lots filled for the next 10, 20 years. I don’t know. I may be wrong. But I just think it’s really important—I am supportive of new programs to the extent that we can that they are right place, right time, but I do want to make sure that we recognize the fact that this pandemic has caused reductions across-the-board in revenue in the town of New Canaan and I think we should apply these funds to those losses first, before we support new programs.”
It wasn’t immediately clear, should some in Town Hall seek to divert funds to local businesses and organizations, just how they would identify needs—for example, through a survey, applications or direct communication—which local businesses or organizations would be considered, and what criteria will be used to determine which businesses or organizations would benefit. Most pandemic-related restrictions, including those that affected businesses, only began lifting one month ago. One local business owner said last week that his revenues declined nearly 60% at times during the past year-plus.
The selectmen asked Asmani how the Board of Ed factors into the funding (they get their funds separately), whether Board of Ed funds come out of the $6 million for the town (no, theirs is a separate pot), whether the Board of Ed money would be subject to a single audit for federal funding just as the town’s is (yes), what the Board of Ed’s total is (not sure) and why the lost revenue would exceed $6 million (because COVID-related revenue losses will continue to mount to 2024).
Moynihan asked for clarification that the funds cannot be used to reduce taxes.
Asmani said yes.
“They want you to spend the money,” he said. “They don’t want you to lower taxes. That’s the goal.”
100%. Thanks, Nick for this fiscal sanity.
Thanks, Nick, for protecting our general fund. Excellent points.
Perhaps the federal funds could be used as a down payment on building the long-discussed Locust Avenue parking structure. That would be a big help to all the merchants in the commercial district, many of whom have been badly hurt by the pandemic.