Localities warn of risks in federal cuts

As the appropriations tug of war goes back and forth in Congress, municipalities are concerned about a wide range of federally-supported infrastructure projects which might end up on the chopping block.

The National Association of Counties is already ringing a warning bell via a letter addressed to both chambers of Congress imploring the need  to "prioritize federal investments in crucial local government activities through the appropriations process."  

NACo is especially concerned about the Federal Emergency Management Agency Disaster Relief Fund running dry after a season marked with wildfires and hurricanes. Per their letter, "Without the DRF being adequately funded, recovery projects will halt as FEMA implements punitive measures stifling response efforts." 

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The National League of Cities is ringing the same bell and sent their own letter to Congress about the gap in FEMA funding in August. Per their letter. "If current trends persist, these funds are projected to be completely exhausted by the end of August, leaving a staggering $10 billion deficit by the close of September."  

The counties refer to a litany of funding recipients of interest to the muni community including the impact of the Department of Housing and Urban Development's Community Development Block Grant Program. CDBG's are often a key element in the capital stack, along with munis, that help develop and upgrade local housing, water, and infrastructure projects. 

In addition to appropriation worries NACo notes that "The CDBG program has faced drastic cuts in recent years, falling by over half a billion dollars since fiscal year 2010. Funding for CDBG should, at a minimum, be funded at fiscal 2023 levels or increased to $4.2 billion in fiscal year 2024." 

The counties also emphasize the need to keep $100 billion in federally funded infrastructure projects on track. According to the letter, "These programs provide key opportunities  for county governments who do not receive direct funding for most local infrastructure, including 45% of public road miles and 38% of the nation's bridges owned and operated solely by counties." 

The NLC recently unveiled a dashboard tracking infrastructure spending in cities, towns and villages. Progress is shown on over 1,600 projects totaling $13 billion in investment. Most of the money is funding roads, bridges, and major projects located in the Midwest. Any interruption in funding could also put those projects at risk.  

Expanding broadband coverage is a key concern for the counties and an area of emphasis for the federal government. The counties maintain that the Affordable Connectivity Program is an essential tool for reaching the unconnected  and it is set to expire in 2024. The Biden Administration has directed billions of dollars towards the same goal, another probable spark plug for bond issuance.

Federally-owned lands in counties are non-taxable but the fed compensates the counties through the Payment in Lieu of Taxes Program, another item currently on the appropriations chopping block 

The ongoing and rancorous discussion over State Revolving Funds that support water infrastructure projects across the country is also of concern to NACo.

SRFs are often used to prime the pump for bond issuance. Congress is eyeballing reducing SRF's in view of infrastructure money flowing in. Per the letter, "We urge that any funding appropriated for water infrastructure through congressionally directed spending should be in addition  to the base annual appropriations amount."