Johnson County’s three largest cities — Overland Park, Olathe and Shawnee — have received hundreds of thousands of dollars in coronavirus relief funding directly from the federal government.
This money comes from the Department of Housing and Urban Development and is aimed at helping small businesses and community organizations weather the economic downturn caused by the pandemic.
If they wanted to, these cities could keep up to one-fifth of this money for their own administrative costs. So far, though, none of the three cities that have received this direct federal aid have come close to claiming that much.
Still, the issue of administrative fees tied to pandemic relief money has become politically fraught at a time when individuals and small business owners are stretched to the limit by the pandemic downturn.
Funds from HUD
Most of the county’s cities don’t qualify for this funding from HUD because they’re not big enough. The exceptions are Overland Park, Olathe and Shawnee.
The funds distributed through HUD to these cities have been given out to variety of local business, ranging from a craft beer store in downtown Overland Park to the Salvation Army in Shawnee.
HUD allows a maximum of up to 20% to be taken off for administrative costs, but so far, these three cities haven’t come close to that.
Here’s how much each city has received in HUD funding for pandemic relief:
- Overland Park, $1.25 million (in two separate rounds)
- Olathe, $604,000
- Shawnee, $414,000
Debate in Overland Park over admin costs
In Overland Park, city councilmembers recently debated whether it was right to take about 6% of that city’s HUD allocation to pay city staff for handling a second round of relief money.
A third-party administrator was already getting 10% in a separate agreement for the first round.
The program in question was the Small Business Economic Recovery Assistance Program – and it was a new idea for Overland Park. It was intended to help people with 2 to 25 employees keep paying the rent, and it amounted to a grant of up to $5,000 for those who qualified.
The city contracted with the nonprofit Community Capital Fund, headquartered in Kansas City, Mo., to distribute $347,508 to local businesses in the first round of HUD grants. The non-profit would get $38,612 to do marketing, outreach, distribution, data and reporting.
Overland Park officials then found they would be getting another $781,000 in the second round of relief.
“We could have requested administrative money from the first round of money but we did not,” Erin Ollig, strategic planning manager for the city, explained in an email. “We wanted to get as much money out the door as fast as we could to meet the intent of the program – to help people impacted by coronavirus.”
But the burden of administering the second, larger round was enough that councilmembers approved $44,500, or roughly 6%, to pay those expenses.
That amount was too much for Councilmember Faris Farassati. He said he didn’t object to the Community Capital charge, but he pushed back against the amount the city was taking for its in-house work.
Farassati pointed out that the money use for administrative fees could help four other businesses in the second round, where grants were increased to $10,000.
“This is desperate money for people who need it. The bureaucracy of Overland Park does not need to be charging,” he said.
Councilmember Curt Skoog countered that handling the new round of money will take a big chunk of time for the existing staff that needs to be paid for.
“Every service we provide as a city, there’s a cost involved in providing the service,” he said. “We balance everything we do with what it costs to provide. The question I would ask is what did (critics) want us to stop doing to fund that?”
What Olathe and Shawnee are doing
Like Overland Park, Olathe has opted to set aside some of its HUD grant money for administration costs.
That city received $256,422 in coronavirus relief money through HUD and distributed it to the Salvation Army, Catholic Charities and Olathe Housing Authority.
Overall, $23,311 of that total went for administration.
On the other hand, Shawnee reported using a staffer paid from the city’s general fund for block grants. But that city encountered a different problem.
For a time, the city found that more than $400,000 in federal relief funds were going completely untapped by local businesses and community organizations because they didn’t meet the qualification criteria laid out by HUD.
Johnson County also paid admin costs
Larger cities are more often “direct recipients” of such federal grants, meaning the money doesn’t flow through the state or county on its way to a local government.
That adds a certain element of fear for city officials. Federal grants come with a raft of paperwork, and rules, Overland Park city councilmember Curt Skoog said.
There are thousands of ways to go wrong. Direct recipients are responsible if a government auditor decides later that the money was spent incorrectly. The outcome could be a huge surprise bill to pay back the grant.
That was incentive enough for Johnson County, another direct recipient of pandemic aid, to hire a consultant last summer to vet the plan for $116 million it got in federal relief money.
Getting the spending perfectly aligned with federal rules became an obsession over the following weeks, as county officials and stakeholders raced to come up with a plan in time to get the money spent by the Dec. 31 deadline. That deadline was later extended by Congress.
Overland Park councilmembers had similar reasons for using a third-party. Community Capital Fund had experience working with “under-resourced” neighborhoods and would be able to find qualified recipients, they were told.
Farassati suggested the city “bite the bullet” and forego its own costs on the second round of HUD funding, though, but he was ultimately out-voted by a majority who saw the expense as a reasonable use of funds allowed by the government.
“We don’t have people just sitting around,” Skoog said. “To administer the program it takes staff time.”