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Philly has spent less than half of its federal coronavirus relief money, but pandemic costs are growing

Federal reimbursements won't cover the hundreds of millions of dollars that Philadelphia is losing in tax revenue because of the COVID-19 shutdown. City officials hope that will change.

Philadelphia Mayor Jim Kenney at City Hall on Aug. 10.
Philadelphia Mayor Jim Kenney at City Hall on Aug. 10.Read moreTOM GRALISH / Staff Photographer

Philadelphia is seeking more than $100 million in reimbursements from the federal government for just four months of spending related to the coronavirus pandemic.

The request for $115.8 million, submitted to the U.S. Treasury last month, includes $21 million for public health expenses, $7.5 million for economic support such as grants for businesses, and almost $5 million to improve remote working capacity for city employees. All the costs were incurred from March through June.

But even that represents just a small portion of the impact the pandemic has had on Philadelphia’s budget.

The city is eligible for up to $276 million in federal reimbursements from the first coronavirus economic relief package, known as the CARES Act, which can be used for eligible expenses between March and December. In their report to the Treasury, city officials detailed the $115.8 million they believe is eligible for reimbursement for the first four months of the pandemic. The remaining amount, officials said, will be spent before the end of the year.

Philadelphia officials hope additional aid is still coming. But negotiations remain stalled in Washington over a second relief plan.

Mayor Jim Kenney said Tuesday that he is hopeful Congress will pass legislation with additional help for the city.

“If we can get some flexibility on whatever money comes from the federal government in the future, that will hopefully help us get back to where we were,” Kenney said.

» READ MORE: Gov. Wolf wants the feds to offer disaster loans to arson victims from Philly’s George Floyd protests

A significant portion of the hit to the city budget is from lost tax revenue — which totals hundreds of millions of dollars and is not reimbursable under the CARES Act.

The budget City Council approved in June included layoffs and cuts to city services to account for a $750 million budget hole, mostly due to the shortfall in taxes. The Kenney administration estimated that just $30 million of that gap would be from added expenses due to the coronavirus pandemic.

“While we are grateful for the assistance the federal government has provided, the funds cannot be used to help the city address the significant loss of tax revenue caused by the pandemic,” city spokesperson Mike Dunn said.

Sen. Pat Toomey (R., Pa.), in response to calls for more federal aid for local governments, said Tuesday that interim reports submitted to the Treasury showed just 26.7% of CARES Act funds have been spent thus far by Pennsylvania and local governments. In Southeastern Pennsylvania, Chester County reported spending one-third of its grant amount, Delaware County reported spending 25%, Montgomery County spent just $4 million, or 3.3%, of its allotment, and Bucks County reported spending only one-tenth of 1% of its share.

“Before Congress spends even more money it doesn’t actually have, states and counties should allocate their existing allotments so we can thoughtfully determine what needs remain,” Toomey said in a statement.

In addition to the $276 million the city expects to spend and be reimbursed for before December, the current budget includes $25 million “for a recession reserve and reopening costs that are not covered by grant funds,” Dunn said.

But the precise expense of battling the coronavirus in the months to come — and the impact on tax revenue — remains uncertain.

» READ MORE: Coronavirus could leave Philly’s budget in the red next year, state board warns

The city’s revenue losses in the next year could be about $90 million worse than anticipated, according to the Pennsylvania Intergovernmental Cooperation Authority (PICA), the state board that oversees city finances. PICA approved Philadelphia’s five-year spending plan last month on the condition that it gets monthly reports on expenses and revenues to ensure that the city avoids a deficit.

“The bottom line is that we went from having one of the best fund balances we’ve ever had as a city ... and in two months or so we went into a $750 million hole,” Kenney said.

What’s been spent so far

The $115 million the city has deemed as eligible for reimbursement under the CARES Act includes some new expenditures, but more than half of it — totaling $65 million — is payroll for public health and safety employees.

City Council approved transferring $85.4 million in March to spend on the coronavirus response. As of July 10, the Kenney administration reported that two-thirds of that amount was already spent or owed under contracts for purchases.

“The $85 million figure was never intended to represent a cost estimate for pandemic response or represent the full cost of the city’s response,” Dunn said. “That ordinance was transmitted to Council very early in the pandemic to ensure that enough additional appropriations were available to pay for unforeseen and previously unbudgeted expenses so the city could appropriately respond as the pandemic unfolded.”

Itemized expenses in the administration’s reports to City Council on the use of that money include:

  1. $16.8 million for incentive pay. The city paid overtime rates to thousands of workers during the first two weeks of the shutdown through an agreement reached with labor unions.

  2. $7.8 million for the purchase of N95 masks, protective gowns, and disposable respirators.

  3. $1.95 million for the emergency food distribution program.

  4. More than $1 million for COVID-19 testing.

  5. $730,000 for health care for inmates in the city’s prisons.

The city has also placed many orders for masks and other personal protective equipment that have fallen through or have been slow to arrive. Dunn said most supply-chain issues have been resolved, but disinfectant wipes remain “very challenging to locate and procure.”