Stimulus Funding Update

(from Maine Townsman, July 2009)
By Lee Burnett, Freelance Writer

The City of Albuquerque, New Mexico, population 518,000, has created 10 teams to exploit funding opportunities in the federal stimulus package, or more formally called the American Recovery & Reinvestment Act (ARRA). In contrast, the City of Hallowell, Maine, population 2,467, relies on overworked interim City Manager Todd Shea to keep abreast of opportunities. Expectations are low.

“Working 50-60 hours a week running the town doesn’t leave much time to surf the web looking for grant opportunities,” acknowledges Phil
Lindley, a Hallowell city councilor who is also executive director of ConnectME Authority, where he keeps abreast of stimulus funding opportunities for expanding broadband into rural Maine. Lindley voices a gripe commonly heard among small town officials: that stimulus funds are bypassing them.”We complain about that on a regular basis,” said Lindley.

The complaints may be premature since the vast majority of stimulus funding is still in Washington, unspent, unallocated. As of June 5, just 18 percent of the $780 billion stimulus package had been awarded and six percent spent, according to the Recovery.org website. Ryan Low, Maine Commissioner of Administrative & Financial Services and state ARRA coordinator, said some money was spent quickly to create jobs, while longer-term investments are still to come. “So far, just a fraction has been spent,” he said.

Still, the anxiety about being bypassed is real and there are some things communities can do to position themselves. First, there are some new opportunities since the Maine Townsman last went to press:

Recovery Zone Bonds

Communities looking to finance infrastructure projects in the next 17 months should look to new kinds of public purpose bonds created by the stimulus package. Both Build America Bonds and Recovery Zone Bonds are potentially more advantageous than tax-exempt borrowing, although their applicability varies, according to
Robert O. Lenna, executive director of the Maine Municipal Bond Bank. What’s makes these bonds different is that they are sold on the commercial bond market – a much larger pool of investors than the tax-exempt bond market – but they carry give-back options that make them comparable in cost to tax-exempt borrowing, he said.

The Build America Bonds allow either a tax break to the investor or a direct payment to the bond seller of 35 percent. Those incentives work best for bonds in the several hundred million dollar range and for many decades in duration, which will probably make them unattractive to Maine bond sellers, Lenna said.

The Recovery Zone Bonds allow a tax break or direct payment of 45 percent, although with an additional restriction that the bonds must be used to finance a project in an economically distressed area. Those incentives make Recovery Zone Bonds potentially more attractive than tax-exempt borrowing, even for small projects of short duration, Lenna said.

Lenna is still researching how “Recovery Zones” will be defined, although generally they are areas of high unemployment, poverty, foreclosures, or general distress, or an area suffering from a military base closure. “As we find out more, if it is what we think it is, we will be saying, ‘you should be looking at this.’ If it is the best deal around, we will be saying that,” Lenna said. The Recovery Zone Bonds opportunity expires January 2011.

Community Facilities

Communities smaller than 20,000 residents looking to build or repair libraries, replace fire trucks, or build fire stations and other community facilities should reconsider the rural development program of the U.S. Department of Agriculture (USDA Rural Development). The stimulus package could make up to $20 million available in Maine for such purposes, which is double and triple the usual allocation, said Valarie Flanders, acting director of the Rural Development program for Maine. In the past, the program has attracted only modest interest because funding was so limited. Word apparently hasn’t gotten out about the infusion of money because Flanders’ office is receiving few inquiries about the community facilities program compared to the surge in interest in its housing and business development programs, she said. The time-consuming process of obtaining local approval for capital expenditures may also be a factor, she adds.

Energy Programs

Communities in northern and eastern Maine looking to replace an old furnace might consider taking advantage of a new wood heat initiative. The U.S. Department of Agriculture recently awarded Maine $11.4 million in stimulus funding to finance the conversion of up to 15 public buildings from fossil fuel to wood heat. Only communities in Aroostook, Franklin, Hancock, Penobscot, Piscataquis, Somerset, and Washington counties are eligible. The program is being administered by the Maine Office of Energy Independence, according to Congressman Mike
Michaud, D-Maine.

By August, EfficiencyMaine could announce energy grants for smaller and mid-sized communities. Some $5.8 million is available to municipalities from the $36.8 million in stimulus funds awarded to Efficiency Maine, said Executive Director John Brautigam. “It’s astonishing, it’s exhilarating, it’s scary,” Brautigam told an audience of about 70 municipal folks attending the recent annual meeting of Southern Maine Regional Planning Commission in Sanford.

Efficiency Maine plans to award grants up to $85,000 on a competitive basis for a variety of energy conservation, efficiency and development projects. (The 10 largest communities in Maine are not eligible because they received allotments directly from the federal government.)

Brautigam said the state’s program will be closely aligned with the federal program, which funds 14 different categories of activities: energy audits and energy conservation strategies, building retrofits, public education, overhauling zoning and building codes to emphasize less energy intensive development, sequencing streetlights and converting them to more efficient bulbs, bike lanes, flex-time work policies, engine idling reduction programs, solar and other renewable energy installations, and regional approaches.

Brautigam is trying to encourage creativity. “We’re trying to keep it wide open,” he said. “What works in your town? ... Try some things, don’t be afraid to fail. People are beginning to make the mental transition.”

Potentially, there’s more energy block grant money coming to Maine, although that depends on the outcome of discussions between the Department of Energy and county officials. It turns out that county governments in Maine – and elsewhere in New England – are receiving no energy efficiency and conservation block grant funds. The omission stands out because the U.S. Department of Energy announced that the 10 largest counties in each state (and counties with populations exceeding 200,000) would all be receiving direct formula awards under the $3.2 billion Energy Efficiency and Conservation Block Grant (EECB) program.

But when the allocations were listed in March, counties in Maine, New Hampshire, Vermont and Massachusetts were omitted from the allocation list. DOE’s explanation is that county government in northern New England is so limited that it can be disregarded.

“As defined by the Census of Governments, county governments in Maine, Massachusetts, New Hampshire and Vermont perform only limited functions, and thus all counties in these states were determined to be ineligible for Program funds,” according to an item published in the Federal Register on April 15.

Cumberland County and the Maine County Commissioners Association are both exploring an appeal. But first, county officials are trying to determine what happened to the missing county allocations – were they added to boost Maine’s overall share or were they withheld? If they were awarded to Maine, an appeal is not likely, but if they were withheld, an appeal is more likely, said Elisabeth Trice, grants coordinator for Cumberland County. A letter has been drafted to the DOE and to Maine’s congressional delegation.

“We don’t know if we’re being treated fairly or not,” explained Trice.

As it now stands, Cumberland County, with a population of 280,000, received zero funding, while Lincoln County, Montana with a population of 18,000, received $80,000, she notes.

Trice takes exception to characterization of Cumberland County government as limited and notes that it runs a rural police force, county jail, a deeds office, a probate office and a civic center, and is the only county in New England to win designation as a CDBG “entitlement” community.

The DOE is already looking into the matter, according to a spokeswoman. “Secretary [Steven] Chu has discussed this issue with a number of senators in the region and is aware of the concern,” spokeswoman Jennifer Stutsman wrote in an email. “We are working to develop a solution that will support energy efficiency efforts in local communities across New England.”

Thinking Outside the Box

Looking to the stimulus package for help with core projects like road paving may be a low-percentage game. A good example is the money recently made available for the Fire Station Construction Grant (SCG) program to build or renovate fire stations. By the time the July 10 deadline rolled around, the Department of Homeland Security expected between 5,000 and 10,000 applications and requests totaling $30 billion. But only 100 projects will get funded because just $210 million is available.

There may be more payoff in thinking beyond town hall, beyond town borders, even beyond state borders.

Last January, Waterville joined with three neighboring communities for a three-day visioning exercise in reducing energy use and their carbon footprints. The Mid-Maine Sustainability Coalition has more than a 100 volunteers implementing a multi-part strategy that promotes recycling, local foods, weatherization, more efficient transportation, renewable energy sources and education. Positioning for grant money was not a motivating factor in the creation of the coalition, although it’s an obvious byproduct, said Waterville City Manager Michael Roy.

“I think it’s certainly a huge help,” said Roy. “We have much more focus in what our priorities are … to have a core group of people committed to the objectives ... and to implement them.” He said the initiative came from people outside city hall, some affiliated with Colby College. “We had a fledging sustainability initiative – biodiesel – but they approached us. The picture has to be bigger than just what can you do [in energy efficiency] of government buildings.” The group hasn’t exploited grant opportunities yet, but as a former community development director, Roy said he knows the value of “having planning and strategy in place beforehand.”

Portland initially took an outside-the-box approach to using its $683,000 Energy Efficiency and Conservation Block Grant (EECBG) money, but wasn’t convinced it could put together a successful program in the allotted time and reverted to a more traditional approach. An initial plan was to use $400,000 of its funds to weatherize privately-owned apartment buildings and to also create a city-appointed position to work with landlords to apply for other grants and tax credits.

Why would a city choose to use tax dollars on privately-owned buildings when it could use the same money to weatherize its own buildings? Because a big-picture approach would be wiser in the long run, explains City Councilor David Marshall. The impact of another oil price shock will be huge in Portland, where old, drafty apartment buildings account for a large percentage of Portland’s housing stock, he pointed out. “We need to be cognizant of the fact that if we do have another (oil) shock and we get landlords not paying utility bills and tenants not paying utility bills and the water department comes in and shuts off water, the city ends up dealing with all these scenarios,” Marshall said.

This approach was applauded by Opportunity Maine, an organization pushing investments in energy conservation.

“There is nothing ... specifically geared toward those [apartment] buildings. It is uniquely difficult to get energy efficiencies there because the people paying the bills [tenants] don’t get to make the decisions,” said Clifford Ginn, president of Opportunity Maine. Ginn says municipalities should spend their federal stimulus funds on projects other than public buildings because municipalities – with access to tax-exempt financing and performance contracting – are more than capable of making their buildings energy efficient without help.

“Block grant money should not be used for public buildings,” Ginn said point blank.

In the end, Portland decided to use its money to hire a sustainability coordinator and to get efficiencies in city-owned buildings, said Assistant City Manager Pat Finnigan. She said a motivating factor was concern they couldn’t get a brand new program up and running quickly.

Also thinking big is Kittery, which is trying to get the Maine Department of Transportation to join with New Hampshire on a joint application for $125 million to repair two of the three bridges between Kittery and Portsmouth, New Hampshire. A joint application might give the small states of Maine and New Hampshire a leg up on the bigger states and cities in the competition for $1.5 billion in discretionary transportation money

There are three bridges between Kittery and Portsmouth and only the I-95 bridge is in decent condition. Memorial Bridge, which carries local traffic, may have to close within two years without repairs and Sarah M. Long Bridge, which carries the rail line to the Portsmouth Naval Shipyard, has a six to seven year life expectancy without repairs. New Hampshire has put both bridges at the top of its “red list” of priority bridge projects. Maine is not discounting the priority but also lists 278 other bridges in critical condition.

“I have to respect the difficult situation Maine is in. But it doesn’t change the real need we have to get these bridge repairs, especially Memorial Bridge, funded as quickly as we can,” said Ben Porter of the group Save Our Bridges. The two bridges are critical to the entire seacoast region, he said.

“If you knock out Memorial Bridge, businesses in Kittery die and some businesses in Portsmouth die. If you knock out Sarah Long Bridge then you lose the rail link to the Shipyard. Part of the Shipyard’s productivity is predicated on rail and all of a sudden its base closure time and it’s not a viable entity and you lose 5,000 jobs,” said Porter.

Porter said he spoke to Maine Transportation Commissioner David Cole who told him the Kittery bridge repairs are competing with an east-west highway connector and a rail link to Eastport. DOT spokesman Herb Thompson said Maine may still join New Hampshire, but needs to complete its analysis.

“That possibility is still in the mix; it is part of our consideration,” said Thompson. “We’re still doing our homework.”

Kittery Town Manager Jonathan Carter doubts the state would be as slow to commit to the repairs if it involved bridges between other communities in Maine.

“It’s no different than if the state took away a bridge between Bangor and Brewer. What do you think the outcry would be? Or between Lewiston and Auburn?” said Carter.

Reporting Requirements

Stimulus funding comes with new reporting requirements – chiefly documenting the jobs impact of projects and accounting for how the money is spent in more transparent ways. “It is absolutely not going to be anything like what you are used to,” predicts Ryan Low, Maine’s ARRA coordinator. For example, how does a school district document job impact if a planned layoff was scaled back as a result of receipt of stimulus funds, but still implemented, asks Low. “What would you have done if you hadn’t received the funds, would you have laid off or would you have raised taxes? It’s totally speculative. You have no idea what you would have done ... so much of this is Monday morning quarterbacking. So far the jobs thing concerns me most, but ask me next week and I might say something different.”

Low said he’s not impressed with the early track record of the federal government’s attempt to cut the red tape. He said state stimulus coordinators were told at an orientation meeting that they would not be compelled to “fill out lengthy forms,” but that promise was followed by a series of guidance documents exceeding 50 pages. “It’s guidance of the guidance,” said Low.

It’s not yet known how burdensome those reporting requirements will be. Portland’s only experience with stimulus reporting requirements to date was an audit visit by the Environmental Protection Agency (EPA) to check out a stormwater separation project, said Assistant City Manager Pat Finnigan. She said they haven’t had to report anything yet because they haven’t received any money. She said their grant awards have been posted on the city’s website. “[website posting] is not a requirement, but you feel duty bound because transparency is what it’s all about,” she said.

Already, transparency is proving to be a challenge for some, observes Phil Nadeau, Lewiston’s deputy city manager. Nadeau surveyed the websites of members of the Maine Service Center Coalition and found no postings of stimulus funding awards. Some communities have yet to receive any stimulus funds, he said, but he believes others are not fulfilling the spirit of the stimulus law.

“It’s very unfortunate,” said Nadeau. “If they have websites and they’re not using them, then I think it’s regrettable.”

Low echoes Nadeau’s concern. He said transparency goes beyond providing an accounting to the feds through standard reporting channels. “If you live in Manchester, Maine and you want to know what’s going on in your town, do you want to go to a giant federal data base? It should be available locally.”

 

Lee Burnett is a freelance writer from Sanford