New York Is Getting $22 Billion in Federal Aid. How Should It Be Spent?

Business leaders warn the mayor that an influx of aid could be squandered on short-term programs that won’t help the unemployed.

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Mayor Bill de Blasio has many ideas about how to spend an unparalleled influx of $22 billion in federal aid heading to New York City.

At least $234 million would be used to pay crews to clean up parks and scrub off graffiti. Some lower-income homeowners would receive up to $300 in one-time tax credits, a program costing a total of about $90 million. Another $121 million would help temporarily expand the city’s mental health crisis teams.

It is part of the mayor’s sweeping efforts to address inequities and revive an urban economy that the coronavirus pandemic pummeled harder than any other American city.

But just weeks before New York City is poised to adopt those initiatives as part of a $100 billion budget — its biggest ever — a powerful alliance of business leaders and nonprofit organizations is asserting that Mr. de Blasio is squandering a once-in-a-generation opportunity on ill-conceived projects and haphazard initiatives that will eventually run out of funds.

While the group says that many of the mayor’s priorities, especially around mental health, are important, it argues that not enough money and attention are being focused on the city’s hardest-hit institutions, from businesses owned by people of color to cultural organizations to hotels.

Nor is the city creating the kind of expansive jobs and training program needed to help the roughly 440,000 residents, many of them low-income workers, who remain unemployed and lack the education and skills required in an economy where rapid change has been accelerated by the pandemic.

“A lot of these programs on their face sound decent and they may help people,” said Andrew Rein, a member of the group and the president of the Citizens Budget Commission, a nonpartisan fiscal watchdog. “But that’s not the same as it being a strategic use of the whole pot of money.”

On Wednesday, Mr. Rein joined nearly two dozen industry and business leaders, from chamber of commerce executives to the representatives of the construction, technology, hospitality and nonprofit sectors, in sending a letter to city leaders seeking to intervene in the distribution of federal aid in the 2022 fiscal year budget.

The letter was sent to to Mr. de Blasio; Corey Johnson, the City Council speaker who is running for city comptroller; and other City Council members. The budget must be approved by July 1.

Mr. de Blasio said his priority was stimulating an economic recovery.

“This includes vital investments in small business grants, the largest tourism campaign in city history, directly hiring 10,000 New Yorkers in the City Cleanup Corps, providing universal 3-K early education and more,” said Laura Feyer, a spokeswoman for Mr. de Blasio. “Paring down those investments means slowing down economic recovery. That can’t be tolerated.”

The city, however, was reviewing whether to use federal aid for the homeowner tax credit, Ms. Feyer said.

To some extent, the disagreement appears rooted in an ideological divide. Mr. de Blasio has long harbored a distrust for corporate America and a belief that boosting government employment can help revive the economy.

Some of those pushing Mr. de Blasio to refocus the use of federal aid have suggested a lack of faith in his managerial acumen and are advancing an agenda that would lean heavily on a partnership between the public and private sectors.

New York City is set to receive more than $22 billion in federal assistance over several years, including $7 billion for the city’s schools, according to the Citizens Budget Commission. Some funds can only be used in specific ways, while other funding streams, such as $5.9 billion from the American Rescue Plan Act approved under President Biden, have fewer strings attached.

The group questioning the city’s spending plan largely focuses on the work force and calls for something akin to a “post-World War II demobilization effort” to connect unemployed New Yorkers with more than 300,000 existing job openings, most of which require more than a high school degree.

The program would cost at least $300 million, which the group’s members say could be drawn from what they believe are less-pressing needs, including the mayor’s cleanup corps and the homeowner tax credit.

The group is also calling on the city to facilitate arbitration between landlords and tenants over lease disputes, invest in cultural organizations and extend a waiver through 2021 on hotel room taxes, which the city has stopped collecting through the end of summer.

The city’s unemployment rate, 11.4 percent in April, has dropped sharply from last May, when it hit 20 percent. But, excluding other months during the pandemic, the April figure is the highest for the city since December 1992, according to New York State’s Department of Labor.

“The scale and suddenness of the needed reallocation of hundreds of thousands of workers is unprecedented,” the group said in a brief accompanying its letter.

A spokeswoman for Mr. Johnson said he was reviewing the group’s proposal.

“I’ve been adamant that this budget must be focused on the city’s long-term recovery, as well as our fiscal stability and the elimination of wasteful spending,” Mr. Johnson said in a statement. “This Council has already secured investments in education, housing, and enhanced sanitation services for the upcoming fiscal year, and we will continue fighting for more.”

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Corey Johnson, the City Council speaker, said the city’s budget “must be focused on the city’s long-term recovery, as well as our fiscal stability and the elimination of wasteful spending.”Credit…Dave Sanders for The New York Times

The group challenging City Hall includes frequent critics of the de Blasio administration, including the Partnership for New York City, a Wall Street-backed business group, and the Real Estate Board of New York, which represents large landlords.

But the alliance also includes others who tend to have better working relationships with the administration, like Jennifer Jones Austin, the chief executive of the Federation of Protestant Welfare Agencies and the de Blasio-appointed chair of the Board of Correction, and Jose Ortiz Jr., chief executive of the New York City Employment and Training Coalition.

“The city does not have a comprehensive work force or job training strategy that is going to address this challenge,” Mr. Ortiz said. “We need to get the city back and running, and we can’t do so if hundreds of thousands of New York remain unemployable.”

As cities and states reopen widely because of lower transmission rates and widespread vaccinations and rebound more strongly because of better-than-expected tax collections and the largest federal stimulus packages in history, they are confronting major challenges and opportunities.

The federal aid has been a lifesaver for some cities and states, helping rescue places like Hawaii, which saw a sharp decline in tourism, and New York City, which as an epicenter of the outbreak purchased $4.7 billion in pandemic-related goods and services and saw its revenue plummet during strict lockdowns.

But in the rush to use that money, some budget experts worry that elected officials are creating programs that will run out of money once the funding disappears or believe that the aid should be diverted to other needs like a federal infrastructure plan.

The vast trove of federal aid flowing to states and cities creates tremendous opportunity, but elected officials are under intense pressure to spend it in a transparent manner that also ensures an equitable recovery, said Tracy Gordon, acting director of the Urban-Brookings Tax Policy Center.

“They have to be careful how they choose to spend it,” Ms. Gordon said, adding that expanding programs and services with temporary money could backfire. “It’s a well-worn lesson from budgeting that you don’t use one-time funds for ongoing spending.”

In Chicago, the hotel industry has lobbied for $75 million in federal assistance. The mayor, Lori Lightfoot, wants to use about half of its $1.9 billion in federal aid to improve the city’s finances by paying down its debt and avoid having to borrow $500 million.

The City of Los Angeles plans to spend $1.3 billion in federal aid over two years, including to pay for more than $600 million worth of pandemic-related losses incurred as Covid-19 drove up the city’s expenses and hammered its economy.

A spokesman for Mayor Eric Garcetti said a portion of the aid also will be directed to offer rental assistance and could be used to support progressive pilot programs, including one that would give low-income residents a $1,000 guaranteed basic income for a year.

The huge amount of federal aid could not only shore up enormous expenses incurred during the pandemic but also propel cities and states to better economic positions than they had before the outbreak, Ms. Gordon said.

“It’s an opportunity to create a better platform for growth in the future,” she said.

In New York the Citizens Budget Commission has identified up to $4 billion in potentially recurring expenses paid by the federal relief — mental health teams, housing vouchers, early childhood education for 3-year-olds and more — that would be unfunded by 2026 when the assistance phases out, Mr. Rein said.

Those programs would be likely to enjoy broad support, he said, raising the chances that the city might be forced to cut elsewhere to continue financing them.

“As we came together as a group, we said we have this opportunity but the money is sprinkled,” he said, “and we are setting ourselves up for fiscal challenges with recurring programs.”

Shawn Hubler contributed reporting from California.

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