Using ARPA for GBI

Got a project that the U.S. Treasury would deem eligible under the American Rescue Plan Act?

If so, the City of Alameda may have a deal for you – but you’d better act fast.

Of the $28.6 million in ARPA funds awarded to the City by the federal government, staff has laid claim to up to $10 million for transfer to the General Fund to “replace” revenue “lost” as a result of the pandemic.  (If it strikes you as strange that the City of Alameda is entitled to use ARPA funds for this purpose when General Fund revenue actually increased by $16.2 million from fiscal year 2019‑20 to FY 2020‑21, rest assured it’s perfectly legal.)

In addition, in a series of votes taken over the last year, Council already has approved spending a total of $11 million of the ARPA funds on a variety of projects.

That leaves $7.6 million in the pot – but not for long.  This Tuesday, staff will recommend that Council appropriate $4.6 million in ARPA funds to establish a “Guaranteed Basic Income” pilot program in Alameda.  In all likelihood, Council will accept that recommendation – or some modified version thereof – and the unallocated balance will drop to $3 million.

Today, we will devote most of our attention to the proposed GBI program.  But first, a bit of background on the use of ARPA funds approved so far.

To date, Council has voted to spend nearly a third of the City’s ARPA money on two projects for the homeless:

  • Developing “interim homeless supportive housing” on the 0.82‑acre “bottle parcel” located at 2350 Fifth Street.  Council originally allocated $4.6 million in ARPA funds to pay the annual operational expenses for the project from its beginning through December 2026, and then added another $1 million to cover higher‑than‑estimated infrastructure costs.
  • Converting three of the vacant homes owned by the City at Alameda Point to provide “emergency homeless housing” for two families and up to six individuals. (The possible venues include three Big Whites.)  Council originally allocated $2.8 million in ARPA funds for the project, including a $2.5 million contract with a non‑profit organization to manage it.  That organization backed out, but the contract with a successor is expected to cost at least as much.

In addition to these homeless housing projects, Council has voted to spend $2.6 million in ARPA funds on five other items.  The Midway Shelter and the Alameda Food Bank will get $1.8 million and $42,000, respectively, for building repairs.  The Alameda Library will get $50,000 to buy 30 wireless hotspots to be lent to borrowers (plus $19,000 for service charges).  And Council allocated ARPA funds to continue two projects begun during the pandemic:  the “Feed Alameda” program, which paid local restaurants to prepare hot meals for homeless and “food insecure” people; and the “Commercial Streets” program, which revamped the Park and Webster Street business districts.  The former will get $26,500, the latter $630,500.

And now for the latest big‑ticket item.

As we reported last April, Guaranteed Basic Income programs – which used to be called “Universal Basic Income” or “UBI” – have become all the rage these days.  A December 2021 survey by the Business Insider identified 33 such programs across the country, with more having been announced since then.  According to the staff report for this Tuesday’s Council meeting, the number of “pilot” GBI programs now approaches 100 nationwide, including seven cities or counties in “relative proximity” to Alameda.

Our local “progressives,” of course, never want to be left behind, so last March, in the midst of a Council discussion about police reform, Councilman John Knox White told his colleagues that he wanted staff to “look at” the “possibility” of setting up a GBI program in Alameda.  (What’s the connection between GBI and police reform?  Well, according to Mr. Knox White, “we know” that “the cause of violence” is “income inequality.”)  Mayor Marilyn Ezzy Ashcraft enthusiastically endorsed the idea – “I did a little internal high five when you mentioned universal basic income because that’s one of the things I would like to see, too,” she said – and, as usual, Councilwoman Malia Vella chimed in her concurrence.

Council ended up directing staff to prepare a report on GBI in addition to implementing the police reforms recommended by the steering committee.  (GBI was not one of them.)

The progress updates submitted in July 2021 and January 2022 on the police reform “action items”  didn’t include a GBI report, but Mayor Ashcraft and Councilman Knox White didn’t forget about the idea.  Both of them brought up GBI again during the September 2021 discussion about potential uses for the ARPA funds.  And when staff made another set of recommendations for spending the ARPA money in December 2021, Ms. Ashcraft once again reiterated that she wanted to see GBI on the list, either as a standalone program or as an adjunct to a newly announced State‑run program for pregnant women and children transitioning out of foster care.

This Tuesday, Ms. Ashcraft will get her wish.  Staff has submitted a comprehensive report recommending that Council establish a “pilot program” under which the City would pay $1,000 per month for 24 months to 150 “low‑income” households – apparently, those earning 30‑to‑50 percent of Area Median Income.  And it is asking Council to appropriate $4.6 million in ARPA funds for the program.

Those of our readers with a mathematical bent may have noticed a disconnect:  The cash payments total $3.6 million ($1,000 times 24 times 150) – but staff is asking for $4.6 million.  This isn’t a mistake.  The “administrative and research” costs of creating and operating a GBI program, the staff report states, “can be significant.”  No kidding:  By staff’s estimate, Alameda will need to spend $720,000 in “administrative costs” and $300,000 in “research costs” to get the recommended pilot program up and running.

And who gets the money?  If you said, “consultants” and “non‑profits,” you wouldn’t be far off.

According to the staff report, the City will need to hire a “research partner” to design a GBI program that will enable recipients to obtain waivers so that they don’t risk losing benefits from other State‑run programs like CalWORKS and CalFresh.  It will need to hire an “implementing partner” to collect applications, select and enroll recipients, and “collaborate” with “other partners” on “outreach and communication efforts.”  And it will need to hire a “funding partner” to “administer the financial components” of the program.

The staff report is accompanied by an exhibit summarizing “social science research” vouching for the efficacy of GBI.  (We haven’t read all of the papers listed in the footnotes, but we were disappointed to find that the summary doesn’t refer to any study finding that a GBI program reduces violence.  Of course, Mr. Knox White may have his own undisclosed sources.)  The research likewise purports to rebut the counter‑arguments that a GBI program “decreases the motivation to work” or “lead[s] to spending on nonessential goods such as alcohol and tobacco products. . . .”

We don’t think explication of these points will be necessary to get the three votes necessary to authorize a pilot GBI program for Alameda:  Mr. Knox White and Ms. Ashcraft, of course, have been touting such a program for some time, and, if someone assures Councilwoman Vella that GBI is identified with “progressives” (rather than with, say, Richard Nixon, who proposed back in 1969 that the federal government give every American family a guaranteed annual income), she’ll vote for it, too.

Which is not to say that Council will accept the staff recommendation as is.  For sure, Mr. Knox White will want to tweak the program to put his own imprint on it.  And there are a host of variables to play around with:  How many individuals/households should the program benefit?  Are “low‑income households” the right universe from which to select recipients?  Is $1,000 a month too much (or too little)?  Is 24 months too long (or too short)?

According to the staff report, “program development and finalization may be a lengthy process,” so there will be time to massage these parameters.  But the mechanics aren’t the only issue a careful Council member would want to consider before green‑lighting the proposed GBI program.

For one thing, the program is designed to reach 150 households.  Are there any other uses for the same amount of ARPA funds that would benefit a greater number of people in need?  For example, suppose Council used the $4.6 million (or a hefty chunk thereof) to give subsidies to Alamedans who were behind on their rent.  Or suppose it used the cash to create coupons for residents to use to buy food or school supplies.  We’d bet that there would be more beneficiaries under either alternative than under the proposed GBI program.

In addition, the program is structured to last 24 months.  What will happen when that period is over?  If Council wanted to keep it going, the cost would be $1.2 million per year, which would come from the General Fund.  According to the forecast presented at Council’s May 10 meeting, the City will begin running an operating deficit – i.e., expenses will exceed revenue – in FY 2022‑23, and the deficits will continue in each of the following three years.  True, the City might be able to fund a continued GBI program out of the General Fund “excess reserve” balance – but if Council continues to tap the “reserves” to pay for operating expenses, one day it might wake up and find the well has dried up.

This is why one ought to be wary of calling the GBI program a “pilot” program.  Such programs tend to take on a life of their own and their costs seldom go away.  The Alameda fire department knows this very well.  The SAFER grants were supposed to enable the department to hire six firefighters for a limited period, at the end of which they would no longer have a job.  But we (among others) suspected that when the defined period ended, the department would want to add the six firefighters to the regular payroll.  And so it did.  (A similar phenomenon now is happening with the CARES mental‑health‑response program, which is being cited to justify a six‑firefighter increase in AFD headcount.)

It would be instructive for a careful Council member – a hypothetical concept, we admit – to consider whether any of the potential uses for the ARPA funds previously proposed by staff (but not endorsed by Council) might deliver more widespread and more long‑lasting benefits than a GBI program does.  Here’s the list of alternatives we put together from prior staff reports:

  • Vouchers to be used by tenants at properties owned by the Alameda Housing Authority (estimated expense: $500,000);
  • Citywide Broadband service ($6 million);
  • Financial assistance to residents for utility bills ($1.2 million);
  • Financial assistance to small businesses ($2 million);
  • Alameda Point water, wastewater, and sewer infrastructure ($8 million).

(This list doesn’t include the purchase and conversion of a hotel into housing for the homeless, an idea that Council initially was quite enamored of but appears to have put aside, at least for now.)

Moreover, also worthy of consideration would be the ideas suggested by the AHA for using ARPA funds: establishing an eviction‑protection and rapid re‑housing fund; “jump‑starting” construction of 90 units of permanent supportive housing at the North Housing site; buying or leasing existing multi‑family buildings and renting units to seniors or low‑income tenants at below‑market rates; or “expediting” the development of affordable housing.  (None of these suggestions made it onto a staff-recommended list.)

We should emphasize that we are not necessarily saying that any of these alternatives, whether suggested by staff or the AHA, is a better use of ARPA funds than GBI is.  We just think it behooves Council at least to evaluate their relative merits compared to a GBI program before committing $4.6 million to the latter.  In no event should Council, as a body, succumb to the temptation to start a program simply because other cities are doing it and the Council majority doesn’t want to diminish its bragging rights.

Eric Fonstein of the Community Development Department told us that before the August Council recess staff will be submitting an updated report with a new set of recommendations for spending the ARPA funds.  So our readers ought to act now if they have a project of their own they want to see on the list.  One word of gratuitous advice:  make your project sound as “progressive” as possible.  (An Alameda women’s reproductive health clinic?)  That’s one sure way to garner the three votes you’ll need to get your hands on the cash.

Sources:

Staff report: 2022-05-17 staff report re GBI; 2022-05-17 Ex. 2 to staff report – Summary of Research Findings and Sources

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
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8 Responses to Using ARPA for GBI

  1. Bob Shannon says:

    If we’re truly looking for a project that will effect thousands of citizens into the future for our city, how about matching the School District and put in a state of the art pool at Alameda High School.

    We need to stop being the “Me Too” city in the Bay Area. Original ideas help all citizens not just the constituents of our 3 progressives in City Council.

  2. IAFF 689 says:

    Silly amateurs think they can get their hands on OUR money…..

    • IDGAF 689 says:

      Puppets pretending to be the fire union, JKW, developers, etc never gets old. It does require less mental bandwidth than trying to understand and form an opinion about the blog.

  3. Mary Go-round says:

    Still nothing to help alleviate the dire needs of the Main St encampments. in addition to basic needs such as sanitation services and food, Alameda needs Safe Overnight Parking (which could easily be located at the wide expanse of vacant parking lots adjacent to Village of Love) and for long-term assistance—true navigation center that would assess and enroll programs. So why is this not happening? Cronyism?

    • Subpar Swimmer says:

      I love how “cronyism” and “corrupt non-profit execs getting rich” are the go-to around here when things can be better explained by lack of awareness. There already is a safe overnight parking space, operated by – wait for it – Village of Love. The Village of Love also operates a sort of navigation center that connects participants with housing. I think the new wellness center that’s opening up soon will also have a drop-in resource center to connect troubled Alameda residents with housing.

      I think the problem we have is these existing resources are not sufficient enough to cover the Main St encampments. We apparently have good programs that are not scaling up enough to meet a growing problem.

  4. Imi says:

    Council should just give the money to Oakland if they insist Alameda residents should aside any expectations that they do their job and govern our city. Homelessness is a crisis in Oakland. They will use the money more effectively. We don’t have any homeless and those who have been transferred here are sheltered.

  5. Imi says:

    Any idea- spend the money to ways to reduce the city’s pension liability of over $200 million.

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