Some pandemic assistance programs may not qualify for federal reimbursement, leaving cities in the lurch

This article appeared in the Feb. 12 issue of the Progress Times.

Cities in Hidalgo County spent thousands on small business grant programs during the coronavirus pandemic.

Many business grant programs, however, may not qualify for federal reimbursement, forcing cash-strapped cities to cover the costs themselves.

Guidelines published by the U.S. Treasury Department require documentation that a business suffered financial losses during the pandemic. Programs that took business owners at their word may run afoul of the regulations.

“The problem or challenge with the Treasury guidelines is they came out four or five times with different versions,” said Palmview City Manager Michael Leo.

Hidalgo County received nearly $152 million after Congress passed the Coronavirus Aid, Relief, and Economic Security Act — the CARES Act — last year.

The county allocated nearly $115 million to cities based on population. Hidalgo County, though, didn’t simply write them checks.

The county provided cities with 20% up front and later provided a second 20% advance. To receive the remaining money, the cities needed to submit expenses for reimbursement.

Some created grant programs to help small businesses, which had been devastated by the pandemic.

Palmview asked businesses for tax returns or bank statements, Leo said, and submitted the documentation to Hidalgo County.

“We’ve been going back and forth with the county, providing the additional documentation that they requested,” Leo said. “But we haven’t gotten a yes or no.”

The Hidalgo County Auditor’s Office reviews the requests for reimbursement before they’re approved.

While the process is lengthy, Palmview appears likely to meet the requirements and be reimbursed with federal CARES Act funding.

Other cities may not be so lucky.

“Generally, what the U.S. Treasury required was that there be some type of verification of economic loss,” said First Assistant Hidalgo County Auditor Linda Fong.

Grant programs needed to collect documentation on financial hardship and verify the information to comply with U.S. Treasury guidelines.

“Very few actually established a program that we could reimburse,” Fong said.

Peñitas created a program that handed out $2,000 grants to businesses that met city requirements.

City Manager Omar Romero said Peñitas approved business grants in August and September.

“We went by the original rules because we had already set up the program and advertised the program,” Romero said, adding that the U.S. Treasury changed the guidelines in October.

It also seemed like common sense: Businesses in the community shut down when the pandemic started, so they had obviously suffered an economic loss. Allowing them to self-certify that loss wasn’t controversial.

The city requirements didn’t match the U.S. Treasury requirements, Fong said, and the Auditor’s Office rejected the city’s request for reimbursement.

On Feb. 5, when Fong spoke with the Progress Times, requests for reimbursement from Palmview and Sullivan City that included business grants hadn’t reached the Auditor’s Office yet.

La Joya, which also handed out business grants, apparently didn’t submit them for reimbursement. Fong said that La Joya hadn’t submitted any Category 5 expenses, which cover “expenses for economic support in connection with the COVID-19 public health emergency.”

Cities that provided residents with utility assistance may encounter similar problems with reimbursement.

Palmview, Peñitas, La Joya and Sullivan City purchased gift cards that residents could use to pay their utility bills.

To qualify for reimbursement, they would need to show the people who received gift cards suffered financial losses during the pandemic.

“Just being a resident of a city, that would not be sufficient,” Fong said.

Faced with a thicket of federal regulations, some cities didn’t submit business grants for reimbursement. Others submitted their entire police and fire department payrolls for reimbursement, which freed up local funds for public assistance programs.

Complying with the U.S. Treasury guidelines caused headaches for small cities, which desperately needed the money.

“The CARES Act, while we’re very thankful that it is there, that’s all we can say — that it’s there,” said Edcouch City Manager Victor Hugo De La Cruz. “It’s not in our bank account. And it not being in our bank account is not helping the city at all.”

On Feb. 9, the city of Edcouch still hadn’t received any CARES Act funding beyond the 20% up-front payment and the second 20% advance, De La Cruz said. He estimated that Edcouch is waiting for reimbursements worth more than $200,000.

“I don’t even get mad anymore,” De La Cruz said, adding that the process left him tired and frustrated. “It’s whenever it gets here, it gets here.”

Hidalgo County and the Auditor’s Office are doing their best, said Donna Mayor Rick Morales. While it may seem like they’re creating red tape for cities, Hidalgo County is just trying to comply with U.S. Treasury guidelines.

“It’s not the county’s fault,” Morales said. “They have somebody that they need to answer to.”