In a Nutshell

• Detroit has a once in a lifetime opportunity to invest in programs and projects that would improve Detroiters’ quality of life through the $826 million of COVID-19 relief funding provided by the American Rescue Plan Act.
• Detroit city council voted to approve Mayor Mike Duggan’s plan, informed by the public, to spend the federal dollars. The city must consider long-term solutions that can address many of the changes to the economy that resulted out of the pandemic.
• The proposed revised city charter (Proposal P on the August ballot) includes many provisions and ideas addressed through the ARPA funding: however, there is controversy among different coalitions in the city pertaining to how the plan to spend the money was developed.

Detroit is receiving $826 million in federal funds through the American Rescue Plan Act (ARPA), making it the fifth largest amount appropriated among American cities. This is a once-in-a-lifetime opportunity for the city receiving funding that could contribute to transformational programs and policies. The city has already received the first half of its funding and will receive the second half in May 2022. It is obligated to fully earmark the funds by December 31, 2024. If any money is left unspent, they go back to the federal government.

The distribution of the COVID-19 relief funding came with federal restrictions that influenced much of the city’s planning when deciding how to spend the dollars. Funding could not be spent to make pension contributions, pay off debt incurred prior to the pandemic, or pay past legal obligations. In light of these stipulations, the Mayor submitted a budget amendment proposal to City Council consisting of six spending categories within the four authorized uses for ARPA funding:

• Responding to public health needs and economic damage from the pandemic
• Providing premium pay (i.e., hazard pay) to essential workers
• Replacing lost revenue to the city
• Investing in necessary broadband and water infrastructure

How will Detroit Spend its Money?

On June 29, the Detroit City Council voted to approve the $826 million American Rescue Plan Act Fiscal Recovery Funds Budget Amendment by a 6-2 vote. In that resolution, Mayor Mike Duggan outlined uses of a $400 million allocation earmarking the relief funding to restore the city’s budget and address fiscal shortfalls. The remaining $426 million will be used toward a Detroit Future Fund to make community investments, including allocations toward jobs, small businesses, housing support, home repair, neighborhood initiatives, and addressing the digital divide. A significant amount of funding for neighborhood investments will be allocated toward the Community Health Corps, targeted employment/wraparound services, and new or expanded recreation centers. Additional funding for neighborhood investments will be used for grants that block clubs and neighborhood associations can access. Investments that aim to address intergenerational poverty include funding for home repairs in marginalized communities; the creation of a city locator to find affordable housing; and housing assistance programs that would address foreclosure prevention, credit repair and restoration, and down payment services. The chart below provides a breakdown of the city’s ARPA funding plan approved by city council.

While the funds have been allocated, the individual projects and programs that have been earmarked still have to be developed by the city and contracts approved by City Council. During that process, the Mayor promises to continue engaging Detroiters in development of programs and projects pursuant to the requirements laid out through the Community Outreach Ordinance. This ordinance sets out requirements for the Office of the Chief Financial Officer to conduct outreach, notify, provide information, collect comments, and provide reports on community comments, concerns, and solutions prior to any contracts being approved by City Council.

Potential Implications for Spending

The resolution approved by City Council and proposed by the Mayor allocates $400 million to restore the city’s budget and address fiscal shortfalls. It is an attempt to backfill lost revenue from the COVID-19 pandemic. The question one must ask is whether the $400 million is enough to address the city’s fiscal shortfalls? The negative economic impact of the COVID-19 pandemic on city finances can still be felt as revenue losses have adversely impacted the city’s budget and its ability to implement the Restructuring and Reinvestment Initiatives (RRI) that are required by the bankruptcy Plan of Adjustment (POA). Implementation of the RRIs includes maintaining city services, returning 1,000 employees to full-time employment status, investing in information technology infrastructure, and fully funding the blight program. Is the $400 million appropriation enough to backfill not only what was lost in 2020, but also in 2021, 2022, and 2023?

One of the biggest changes that came out of the COVID-19 pandemic was the restructuring of the workforce and the work environment. Many businesses and companies had their employees work remotely during the pandemic and this shift in the work environment may become more of a permanent fixture across the country as employers and employees alike see the benefits of this new model. Many companies and organizations are opting into a hybrid model or sticking with full-time remote work. Michigan is no exception; we see the same trend happening all across the state. If workers do not return to city offices, will income tax continue to lag and how will this impact the money going towards restoring the city’s budget? While $400 million is a significant amount of money to address the city’s fiscal shortfalls, the city needs to think about more long-term solutions that can address many of the changes that have resulted out of the pandemic. 

It is important to remember that the money being funded by the federal government is finite. The $826 million that the city is receiving is a one-time payment from the federal government. This must be considered as the city develops the proposed projects and programs provided in the approved resolution. New programs that provide new services may create new costs or expectations of future spending that the city must account for after the money has been exhausted. The city needs to think about how it can generate revenue that will maintain these programs in a manner that will benefit Detroiters in the long term. There is an opportunity for the city to create transformational change with this one-time allocation of funding. Earmarking dollars towards infrastructure spending, blight remediation, and addressing issues affecting intergenerational poverty can all be transformational. But is spending for employment and job creation, neighborhood beautification and small business transformational?

Different Ideas for Change

The vote to approve the resolution did not come without controversy. Even though the city made attempts to engage the community in the process of creating a plan for the ARPA funds, many Detroiters felt the process was rushed and their voices were not fully heard. Many seemed to think the federal dollars will be misappropriated in a way that will prevent transformative programs and projects to come about. Detroiters would have liked to see the process slowed down with an education campaign created to teach residents about the options for this money. From that, a plan would be devised that would have been more representative of the community’s priorities. Coalitions opposing the Mayor’s plan claim that the appropriations are not true investments designed to make the kind of equitable and transformational economic recovery from the pandemic as the funding was intended to do.

Other ideas for investments included funding that would go towards “in-fill housing” in struggling neighborhoods, right to counseling for residents facing evictions, and funding mental health services through the Detroit Police Department. The Chair of the Human Rights Commission, Shannon Smith, and City Councilmember, Raquel Castañeda-López, proposed a Universal Basic Income pilot program that would provide payments to residents below the federal poverty level.

President Pro Tempore Mary Sheffield’s office conducted a poll of residents within her district; the results showed general support for the proposal passed by city council. Most District 5 residents want city council to take more time before making decisions on ARPA funding appropriations. Most residents are not comfortable with the amount of information they received regarding ARPA funding and guidelines. The chart below provides a visual breakdown of the residents’ responses to the poll. While this is only representative of one council district, it provides insight to what many Detroiters may be feeling.

Proposal P

The passage of this resolution comes at the same time City Council unanimously approved a reparations resolution opening up possibilities for addressing many important issues Detroiters have wanted to for years. It also comes at a time when the fate of Proposal P hangs in the balance pending a decision from the Michigan Supreme Court. The proposed revised Detroit city charter includes many provisions and ideas addressed through the ARPA funding plan. The proposed charter endeavors to improve quality-of-life issues by ensuring increased representation and equity for Detroit residents; increasing access to city services and programs; and including strategies to increase citizen involvement and government transparency through an equitable development framework.