The state is working through a couple of challenges in its plan to distribute tens of millions of dollars of federal relief funds to municipalities and businesses. Applications for grants to local governments far exceeded the available funds, while grant applications from eligible tourism-related businesses and others fell far short.
The Department of Commerce, Community and Economic Development is looking for answers to both questions: How to decide which cities and boroughs will receive how much of the limited money to replace their lost tax revenues, and how to make changes in the business program before offering a second round of grants.
The state received applications from 41 cities and boroughs totaling $131 million in revenue losses due to the COVID-19 pandemic, Micaela Fowler, the department’s administrative services director, told a state House subcommittee Jan. 27. The Legislature last year appropriated $50 million for the program from the state’s share of the American Rescue Plan Act.
Meanwhile, a separate program of aid to businesses has approved grants totaling only half of its available funds.
The department is “actively working” on a second round of business aid to give away the $44 million remaining in the $90 million legislative appropriation, Fowler said.
More than 1,000 businesses applied for the grant program last fall, with 363 applications approved, totaling $45.9 million. The state contracted with the Juneau Economic Development Council to manage the program under the department’s rules.
The requirements were strict: Businesses had to show at least a 50% drop in net income from 2019 to 2020 to qualify.
The department is looking to see what changes it could make in the eligibility requirements, such as using a different threshold than net income, Fowler told the department’s budget subcommittee of the House Finance Committee.
“The intent of the department is for all of that funding ($90 million) to be expended,” she said.
The question will be whether the department can make changes to the eligibility requirements, or whether it will need legislative approval. She said the department hopes it can make changes without needing new legislation.
“We need to get this money into the hands of small businesses,” Juneau Rep. Sara Hannan, a member of the subcommittee, told Fowler.
“This is one of the areas we have heard frustrations from local businesses,” Fowler responded.
The $90 million program is the most recent of several pandemic relief aid operations managed or allocated by the state with federal funds over the past two years.
As the department makes plans for a second round of grants, Hannan suggested it could start by reconsidering unsuccessful applicants from the first round who “didn’t lose enough money” to qualify under the tight standards.
North Pole Rep. Mike Prax, also a subcommittee member, suggested that the application process required too much work, putting small businesses at a disadvantage.
It’s the opposite problem with the grants program for cities and boroughs that lost revenue due to the pandemic-induced economic slowdown: Too many eligible requests.
The application period closed in early December, and the department hopes to start sending out grant award notices in early February, Fowler said. But first, officials need to figure out how to share $50 million among $131 million in requests.
The challenge will be how to squeeze the requests into the available funds, and to do it fairly, Fowler said the day after the subcommittee meeting. That will involve prorating the grants, though perhaps by different percentages depending on need, she said. Meanwhile, the department doesn’t know if every applicant will get something, or if some of the least-hurt cities and boroughs might get nothing out of the program.
The department “is in the process of ranking and prioritizing funding” for communities hit hardest by revenue losses, Fowler told House members.
The 41 cities and boroughs reported revenue losses of between 10% and 70%, varying by the municipalities’ dependence on sales tax receipts, dock fees and other economic activities knocked down by pandemic closures.
Wrangell estimates its revenue loss due to the pandemic could total a couple million dollars by the end of the current fiscal year on June 30, close to 10% of overall borough revenues for two years. That includes lost revenue from lower sales tax receipts, fewer ships tying up at the port and harbors, lower revenues at the Marine Service Center and municipal utilities, and fewer paying visitors at the Nolan Center.
Separate from its application to the latest state program, the Wrangell borough received about $4.3 million in direct funding under federal pandemic relief legislation in 2020 and 2021. In addition, the school district has received about $1 million under state and federal funding formulas.