COVID-19: Getting the money on the street

With 35 years of experience in economic development—and a focus on disaster recovery—Sue Southon has helped many communities regain their footing after natural disasters. She’s led local governments through the economic recovery process following some of the most devastating natural disasters the U.S. has ever seen. At the state level, as an independent contractor, and now with ICF.

The COVID-19 era presents many unchartered challenges for those in the economic development and disaster recovery fields. But Sue’s expertise has given her an edge, helping her pave a path for state and local governments as they gain access to newly created Community Development Block Grant COVID-19 (CDBG-CV) funds.

The presentation slides below walk state and local governments through a 45-day plan to operationalize a CDBG-CV program. Sue delivered this presentation at a recent International Economic Development Council (IEDC) conference and was kind enough to put the information in context for us in a quick interview. Transcript below:

Q: How is this moment different from others you’ve experienced in your career? And how is it similar?

A: Well, not thinking of this pandemic as a disaster is a mistake, because it really is. On so many levels. Personally, for individuals and families, for local and state governments, and certainly for the business community. The huge difference here is that it’s prolonged. It’s not a singular event—like a hurricane or a tornado, where you get an initial substantial impact, and then a status quo you can recover and rebuild from. In this instance, I don’t know if we’ll have a “status quo” anytime soon. So, it’s a matter of continuing to learn and adapt and to change.

And it’s everywhere. It didn’t just hit a state or a group of states. Everybody is impacted, all at the same time. Which means that there are all kinds of economic disruptions in supply chains as well as at the state and local level.

Q: How would you advise state and local governments through a smooth, successful 45-day program launch?

A: First and foremost—because this is a presidentially declared disaster—FEMA is the go-to first resource for local and state governments. Anything that a state or local unit of government is doing in response to COVID-19 is potentially reimbursable by FEMA. If you’re not sending in those reimbursement requests, FEMA may get the sense that there’s not a need—and that money might go away. In which case, you’ve lost your opportunity for a 75% reimbursement.

But before you even get to that point, you need to identify and convene your key stakeholders. In my presentation, I outline the steps state and local governments must take to operationalize a CDBG-CV program, and that’s the first one. You want to bring everyone together—local, state, and regional representatives of federal agencies (FEMA, HUD, SBA, EDA, HHS)—and make sure they have the knowledge and ability to act on day one.

Q. In your presentation, you emphasize the importance of comprehensive documentation. Can you tell us more about that?

A. Yes, it’s critical that you track everything you’re doing related to COVID-19. If you’re deploying your EMS people, police department, or fire department personnel to assist with testing sites, or even overtime work—that’s all potentially reimbursable. So is any testing that you’re setting up, and food banks, and deliveries for seniors. But you’ll need documentation to get requests for reimbursement. And in some instances, FEMA will advance money—but you have to make the ask. FEMA has set up a portal to make it easier for local governments to submit those reimbursement requests and get a “project worksheet” going—that will form the basis for the FEMA 75% cost reimbursement. You can obtain a link to the portal through your state agency once you’re deemed eligible.

Also, HHS will reimburse some things because this is a public health emergency. HHS reimbursements are primarily tied to hospital-related costs. But the costs that local governments are incurring—those are all potentially reimbursable, and you need to be tracking those expenses now.

Q: So document everything from the very start. Even if you’re not sure if it will be covered, you need to keep track.

A: Absolutely. Because even if it’s not all covered, a portion of it may be—and that’s another expense you won’t have use your general funds to cover. A lot of local governments are in a tough spot because, in addition to putting out these dollars for COVID-19 response, they’re seeing a significant reduction in sales tax revenue, in property tax revenue, in permitting and other fees they’d normally be collecting. And that’s going to create an enormous financial hardship for them. So, there are things like Community Disaster Loans they should look into—and those require thorough documentation as well.

Q: How different is CDBG-CV from other CDBG funds? What should state and local governments be aware of, in terms of duplication of benefits?

A: Duplication of benefits will be a factor because of the Stafford Act declaration. You need to be sure that you’re not using two sources of funding for the same thing. That’s why it’s so important to start with FEMA—you don’t want to use CDBG money to reimburse for things that FEMA could pay for.

CDBG is a lot more flexible. Think about how to use that money in ways that FEMA isn’t going to reimburse, for example. Or as the local match—the 25% match for the FEMA funds—in lieu of general fund dollars. That’s a perfectly acceptable use of the money.

The cap on public services has been removed, so you could conceivably spend all your CDBG-CV allocations on public services if you chose to. But, again, I would caution against using it on things that FEMA would reimburse—like food banks.

We’re hoping for some waivers that look like the disaster recovery waivers HUD has granted in the past. I talk about this in my presentation. One would streamline the public benefit requirements for economic activity. Another would allow states to run programs directly, as opposed to sending their money down to the local units of government. Again, we’re waiting on those waivers. But if you’re a grantee—go ahead and request it. Because it is a waiver that HUD has granted in the past, so there is precedent, should it be something useful in your communities.

Q: How can grantees use CDBG-CV funds to help the small businesses in their communities?

A: Well, something came to light recently on this topic. We’ve discovered that the federal resources may not be as well-coordinated as they originally hoped for, in terms of assistance to small businesses. So, for example, the Paycheck Protection Program—which everybody is hearing about—provides direct payroll assistance and other working capital funding to businesses for a set period of time. But if there’s a shelter-in-place in their communities, they may not be able to reopen within that timeframe. And while it was intended for payroll, many of their workers may already be receiving unemployment benefits. So, it’s worth thinking about direct assistance to those businesses. Especially—again, in the retail and restaurant business—those who’ll have to modify their facilities to meet the new social distancing requirements. They’re not going to have the funding to do that initially. And many of them won’t be in a position to take out loans to make those physical modifications. That may be another kind of a program grantees might want to think about.

Q: True. A lot of us weren’t really thinking about the longevity of this problem when it first started.

A: There are going to be businesses that will need permanent technology upgrades in order to operate with what we call “the new normal.” A lot of them have already started doing that, but I think—again—financial support to help them do things they didn’t need to do before, but now need to do, is something else to consider.

There’s a lot that grantees need to navigate, which is why I developed my presentation for the IEDC. My hope is that the information I share here will help state and local governments maximize benefits and forge a clear 45-day path forward.