City Hall/Municipal Building

A photo of the Frankfort city government municipal building. (Austin Horn | The State Journal)

The American Rescue Plan Act (ARPA), passed and signed into law earlier this month, will pump around $1.9 trillion into the U.S. economy.

For most people, that means a $1,400 check to spend however they choose.

But Frankfort and Franklin County governments are also likely getting a significant boost — to the tune of $17 million combined.

According to the National Association of Counties, Franklin County is projected to get $9.9 million from the federal government.

The City of Frankfort could receive $7.7 million, per projections from the U.S. House Committee on Oversight and Reform.

Unlike citizens who are receiving stimulus checks, local governments are limited in the ways they can spend these funds.

Kentucky Center for Economic Policy Research Director Dr. Ashley Spalding said that ARPA spending breaks down into four main areas:

  • Responding to the COVID-19 pandemic and its economic impact, which could include assistance to “households, small businesses and nonprofits or aid to impacted industries such as tourism, travel and hospitality.”

  • Providing “premium pay” to essential public workers up to a maximum of $13 per hour and $25,000 per worker. 

  • Investing in water, sewer or broadband infrastructure.

  • Providing government services to the extent of the reduction in tax revenue that has occurred due to COVID-19.

The Kentucky Center for Economic Policy non-partisan research organization.

Spalding said that the funds will come in two installments, the first arriving within 60 days of the president's signing ARPA into law on March 11. The second half of the funds will arrive about a year from now, Spalding said.

Governments have until 2024 to spend the funds, she said.

Of note to the City of Frankfort, Spalding is confident that a shortfall from the city’s occupational tax roll due to state government workers not commuting into the county will qualify for ARPA funding.

Frankfort Mayor Layne Wilkerson estimated that the city has recently lost occupational tax revenue at a rate of $2 million to $3 million annually.

The city's occupational tax supplies the lion's share of its revenue — pre-COVID, the total hovered just above $24 million. In the Fiscal Year 2021 budget, it was slated for $21 million.

County tax rolls, on the other hand, have not been as directly affected by the COVID-19 pandemic. Its largest source of revenue, real estate/property tax, has not been harmed by the pandemic.

When asked whether there might be workarounds for governments to use these funds how they please without regard to the published requirements, Spalding said that while the requirements are clear there might be some wiggle room.

“I think it will be the case that there may be some overlap between what is identified as allowable uses for these funds and needs that local governments had already identified before the pandemic,” Spalding said. “… There may be some overlap, but still there are these specific guidelines.”

Regarding the “premium pay” for essential public workers, Spalding was unsure who exactly would be eligible for those funds; whether that includes only those who work for public agencies is uncertain.

The state is set to receive $2.4 billion, though debates over how those funds can be used are ongoing in the legislature.

Spalding said she understands that ARPA funds allocated to local governments like Franklin County and the City of Frankfort will go directly from the U.S. Treasury to the localities — not through the state. 

“Since these ARPA funds go directly to the local government, it is our understanding that the General Assembly does not have the ability to control, hold up or appropriate those funds. That would be the case only if the ARPA provided that the funds come to the state first to distribute, which it doesn’t look like they do.”

She also said that she believes reporting on how the funds are used would be the responsibility of local governments.

“The state doesn’t report on behalf of the local governments about the use of funds,” Spalding said. “Local governments have to provide ‘periodic reports’ providing a detailed accounting of the use of funds.”

Spalding pointed out that the largest chunk of money from ARPA would be given to individuals, with $424 million being disbursed nationwide.

“This is a really positive law,” Spalding said. “This is extremely important legislation that comes with a really significant amount of resources for everyone, including local governments.”

County thoughts

The State Journal reached out to all Frankfort and Franklin County elected officials this week to get their thoughts on the incoming federal funds. Several did not respond, and most expressed uncertainty about how they might be able to spend the funds as they have yet to hit county or city coffers.

Franklin County Judge-Executive Huston Wells said that while much was still unclear about the amount of funds or how the county would spend them, he’s got a few areas in mind.

Wells first mentioned infrastructure, pointing to the Farmdale Sanitation District, potential projects with water districts in the county and broadband internet service as areas for potential county investment. He said he would keep an open mind as more is learned, and that the county will likely hear an update about ARPA at its April 1 meeting.

When asked about using the funds for a potential project at Lakeview Park — a master plan/feasibility study for which is underway — Wells said he wasn’t sure.

“It doesn’t look like that’s the case,” Wells said. “We kind of figured that would be the ask, but according to (grants writer) Ann (Northcutt), who has been studying this, she doesn’t see that at this time as a piece of it. But there’s a possibility of it. Tourism was mentioned, so tourism could be related to that.”

Magistrate Marti Booth said she hopes that some of the infrastructure funds could be used for county road repairs. She added that if requirements were more flexible, she’d favor spending money on local solar energy.

Sherry Sebastian, magistrate for the First District, stressed that the $9.9 million figure was only a projection. She said she looks forward to working with the rest of the fiscal court to figure out the best use for the funds.

“Positioning Franklin County to rebound and, more importantly, to thrive is paramount,” Sebastian said. “A majority of the Franklin County Fiscal Court will make these determinations, as it does with all important decisions, after responsible discussions ... . Hearing from my constituents on issues that are important to them and working alongside my fellow magistrates to reach consensus on how to maximize the funds will be the guiding principles I use to prioritize how any ARPA funds will be expended to benefit and strengthen Franklin County.”

Magistrate J.W. Blackburn said that he wasn't comfortable commenting on how the county might use the funds because the parameters for their use weren't yet clear.

Magistrates Michael Mueller, Lambert Moore and Scotty Tracy did not respond to a request for comment by press time.

City thoughts

Frankfort Mayor Layne Wilkerson also expressed some caution about planning for use of the funds too early, but was overall excited about the prospect of the city likely making up for revenue losses from its drop in collected occupational tax.

“We have not talked about it as a commission or with staff yet, but I imagine the first thing would be to fill any fiscal hole we have due to COVID-19, which would be our drop in revenue due to occupational taxes,” Wilkerson said. “I think that will be our first priority.”

Wilkerson said that he hopes to look at spending what’s left of the funds on potentially catalytic projects.

“I think we’d want to look at making some investments that could be transformational projects that would have a lasting, positive impact on Frankfort and help us diversify our economy,” Wilkerson said. “Which projects? I don’t know yet … hopefully some things that will set us up for long-lasting prosperity.”

Commissioner Kyle Thompson agreed with Wilkerson about the significance of the hit that city coffers have taken a hit due to trends in state government.

He also pointed to the toll the pandemic has taken on the business and nonprofit community as a concern of his that might factor into his preference for spending the ARPA funds.

“We have also lost a number of small- to medium-sized businesses around town,” Thompson said. “We will continue to lose more businesses due to COVID-related issues … . If we can use the money for small business and nonprofit subsidies and awards, I think we could go a long way to helping save some of our hometown businesses and nonprofit agencies that are in desperate need of funds after struggling the last 12 months.”

Of interest to Thompson is “restructuring (the city’s) revenue base” away from reliance on state government.

Commissioners Leesa Unger, Katrisha Waldridge and Kelly May did not respond to a request for comment by press time.

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