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How Baltimore is planning to spend $670 million in latest federal COVID relief aid

When Baltimore received its first federal aid to help deal with the effects of the coronavirus, the city was in the grip of the worst of the pandemic-fueled crisis. The funds were quickly doled out in dozens of directions, paying for protective gear, aid for businesses and COVID-19 testing efforts.

Now, nearly two months after it was announced the city would receive $670 million from the American Rescue Plan, Democratic President Joe Biden’s economic relief effort, city officials have yet to announce a plan to distribute it.

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Instead, Baltimore leaders are favoring a more deliberative approach to spending the most recent infusion of cash into the city — one that will involve community input and big ideas.

Mayor Brandon Scott, a Democrat who took office in December, recently told The Baltimore Sun’s editorial board that he was working with community groups on an “equitable, transparent and expeditious” distribution plan for the funds.

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“My goals are very clear,” Scott said. “We’re going to prioritize them to get Baltimore working again or working for the first time, to help our businesses recover and invest in our people and the places that have been left out due to inequitable policies of the past.”

“We do believe we can have a life-changing impact on neighborhoods, communities, and individuals through the [American Rescue Plan],” Scott added.

Some of the city’s other leaders are pushing the mayor to explore “transformative” ways to spend the money. City Council President Nick Mosby, also a Democrat, called the funding a “once-in-a-generation opportunity.”

With the peak of the pandemic behind the city, Mosby said there’s an opportunity to identify “systemic issues” to tackle with the funding.

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“This could be Baltimore’s almost New Deal approach,” Mosby said. “Be it mental illness, digital divide, equity issues — something that will have a tremendous impact. If we take the traditional approach where we take this money and do 100 things with it, how do we feel good about the things we’re able to do?”

The first relief payment to the city is due to arrive this spring, Scott told The Sun. The money must be spent by December 2024.

Thus far, funding from the American Rescue Plan has not been included in the city’s proposed budget for the 2022 fiscal year, which begins in July.

The funding cannot be used to pay down debt or reduce taxes, although city officials otherwise have greater flexibility with the money than previous federal relief programs.

Lights in the Hilton Baltimore Inner Harbor's rooms show a heart on Saturday, April 4, 2020, as few commuters head downtown.
Lights in the Hilton Baltimore Inner Harbor's rooms show a heart on Saturday, April 4, 2020, as few commuters head downtown. (Karl Merton Ferron/The Baltimore Sun)

Comptroller Bill Henry also said the money presents a unique opportunity for the city. Baltimore needs to “take advantage of that. Act bold, be thoughtful,” he said.

Henry, a Democrat, has compiled a list of ideas for the funding, some of which he said he has discussed with Scott.

The comptroller’s priority involves the city’s tax sale, which is scheduled for May 17.

Baltimore typically holds a tax lien certificate sale in May each year to collect on past-due property taxes or other delinquent charges. Investors purchase the liens from the city during an auction, giving them authority to collect the debts from property owners — with interest.

Several members of City Council have pushed for the sale to be canceled or postponed, calling the practice predatory, but city finance officials have stressed that Baltimore relies on the revenue from the sale. The city is expected to make $14 million to $15 million this year.

Henry said rules associated with the American Rescue Plan prevent Baltimore from replacing tax sale revenue with funds from the relief effort, if the sale was canceled. But Baltimore could offer grants or forgivable loans to homeowners involved in the sale to pay down their liens or redeem their tax certificates, he said.

Henry also proposed using a portion of the funds to assist the Hilton Baltimore Inner Harbor hotel. The hotel was financed in 2006 with more than $300 million in city bonds that are repaid each year with revenue from the hotel, hotel taxes and property taxes. Due to the pandemic, the hotel suspended operations in late March 2020 and stayed closed into the new year, causing a shortfall in those revenues.

Bond agreements require the city to pay up to $7 million toward the bonds when other revenues fall short. The city is expected to pay that full amount in 2021 and the proposed 2022 budget calls for another $7 million to be spent.

Henry noted that the Hilton has not been eligible for other relief programs for the hotel industry because it is owned by the city.

“It’s in a particularly rough position, even compared to other hotels here in Baltimore,” he said.

Henry also proposed several revolving loan funds including a small business loan fund with “an equity frame” and an affordable rent-to-own fund that would buy homes and rent them to tenants with federal Section 8 housing vouchers or other rental assistance. As the fund is replenished, Henry envisions selling the homes to tenants for a “nominal fee.”

Additionally, Henry suggested a portion of the federal funding could be used to cover startup costs for the city to create its own internet service provider to offer low-cost or free internet in Baltimore. Henry estimated it would cost $10 million to $20 million to lay the fiber optic cable for such a network. If the entire project cost $50 million, that would only be a tenth of the federal aid, Henry said.

“At that point, we’re not just talking about helping to close the digital divide. We’re not just talking about something morally good,” he said. “We’re talking about a serious amenity when it comes to attracting residents, tourists, new businesses. Who doesn’t want to go to a city where they can have free internet wherever they go?”

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