With City of DeKalb eligible for $10M in COVID-19 financial relief, council mulls options

DeKALB – With the City of DeKalb eligible for more than $10 million in federal funding meant to aid COVID-19 pandemic economic recovery, city staff on Monday presented the DeKalb City Council with spending options.

DeKalb City Manager Bill Nicklas said during the Monday City Council meeting the City of DeKalb is potentially eligible for $10,422,954 from the American Rescue Plan, which was signed into federal law March 11. He said the City has already received $5,211,477 on May 19.

“Which has been sitting in an escrow fund,” Nicklas told aldermen, referring to the $5.2 million the City already received. “Not a dollar has been spent pending further discussion with the council and approval by the council.”

At the tail end of 2020, as the pandemic’s virus cases surged and the city council looked to pass a Fiscal Year 2021 budget amid economic uncertainty, DeKalb city staff presented a budget which was balanced. The budget was passed in December, despite an estimated $4.5 million financial loss, primarily attributed to the loss of tax revenue from the restaurant and hospitality industry, crippled by pandemic mitigations.

To mitigate budget shortfalls at the time, city staff used $1.8 million received from the Coronavirus Aid, Relief, and Economic Security (CARES) Act in mid-November, along with another $1.8 million from the city’s General Fund to pay down four bonds which offset the expected losses. Throughout 2020, the City of DeKalb also instituted a hiring freeze, among other financial mitigations.

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Nicklas said the difference between the 2021 federal plan and the 2020 CARES Act is that the 2020 federal money primarily was designed to “fill the boot,” or city finance gaps that occurred because of falls in revenue, budget constraints on spending and unusual spending such as overtime spending and providing extraordinary services due to the COVID-19 pandemic. He said most of the thrust of the American Rescue Plan is “forward-looking.”

[ One year later: City officials talk pandemic’s financial impact, $891K in overtime, and balancing a budget despite ]

“There is a portion of it that takes into account that, when the CARES Act was passed in the third quarter of 2020, there was still more damage that was experienced in fiscal terms by communities such as ours – so there is some consideration for revenue loss,” Nicklas said. “But then ... there’s also a focus on how we can be proactive in helping underserved populations in dealing with some infrastructure issues that have been much in the news in the last couple of years, not the least of which is the area of water services and lead services.”

According to city documents, other potential uses for the American Rescue Plan funds include un-freezing city fire, police and public works positions that were frozen in May 2020 and remained frozen in the fiscal year 2021 general fund budget. Another possible use of the funds is to provide relocation assistance for residents and businesses currently located in Hunter Hillcrest, which the City recently expressed the intent to purchase, as a part of the property’s redevelopment, according to city documents.

Nicklas said the City has to send an initial report to the U.S. Treasury Bill for any American Rescue Plan fund spending activity up through July 31. He said that report is due at the end of August and the City will have to provide similar quarterly spending reports thereafter.

“And this will go on through 2024, maybe longer – it depends when our last dollars are spent,” Nicklas told aldermen. “So you’ll have lots of opportunities to guide us and guide the community on how this money will be spent.”

Nicklas said the funds also can be transferred to non-entitlement units such as the Kishwaukee Water Reclamation District, which does not get a direct allocation from the U.S. Treasury but is involved in local infrastructure. He said the agency suffered its own losses “associated with services that they were not able to provide” at Northern Illinois University because of drops in student population over the COVID-19 pandemic.

There was no additional discussion among city officials on the subject during the Monday meeting.

“I intend to come back to you in no later than the second meeting in July with the first round of what I think are important expenditures to make,” Nicklas told the City Council. “And we can talk more about the details then.”