Santa Cruz Good Times

Two years later, a look at how the stimulus bill has impacted Santa Cruz
It’s been almost two years since President Barack Obama signed the American Recovery and Reinvestment Act (ARRA) on Feb. 17, 2009, pumping $787 billion of federal funds into the economy. But where has that money gone and what was the impact?

In Santa Cruz County—where there were 198 grants and seven contracts awarded for a total of $120 million—the consensus seems to be that the stimulus was a double-edged sword. On one hand, jobs were saved, programs were created, and start-up businesses had better chances of securing loans. But, at the same time, new levels of bureaucracy, limited funds and a distorted public image of ARRA had a crippling effect on some local agencies.

“It was meant to stimulate growth, not to sustain it,” says Rep. Sam Farr (D-17th District). “But public financing is very difficult and with cuts coming down [from the government] people don’t necessarily know where the money is coming from.”

That’s likely why the near 370 jobs retained in Santa Cruz County thanks to stimulus money went unrecognized. “If you kept your job, you probably didn’t notice,” he says.

Among those constituents who received money, but did not express the thanks Farr anticipated, were special education and Salud Para la Gente medical clinic in Watsonville, which received more than $1 million. It was the construction workers hired to work on the medical clinic who thanked Farr for their paychecks.

Among the most vocally thankful were the owners of Penny Ice Creamery on Cedar Street, Kendra Baker and Zach Davis, who went as far as creating a YouTube video to express their thanks.

In the video—tweeted by the White House and featured by The Huffington Post—the owners demonstrate their gratitude toward President Obama, Sens. Barbara Boxer and Dianne Feinstein, Rep. Farr and others responsible for passing the ARRA, which allowed them to secure a small business loan. With the loan, they hired employees, purchased equipment, obtained ingredients and witnessed their dream business become a reality.

But not everyone felt the stimulus impact so close to home.

For Joe Hall, project manager with the Economic Development and Redevelopment Agency (RDA), the government’s method for calculating stimulus success—a numbers game based on job creation—and the invisibility of the ARRA symbol on project sites set it up for failure.

“The program was oversold on what it could achieve,” says Hall. “Lots of people benefited, but the government’s job- counting system hid that fact.”

Hall uses the example of a parking lot improvement project at the Tannery Arts Center, which was funded by stimulus dollars. According to Hall, through the federal formula, the project created only 2.5 jobs, but in reality 20 people received paychecks.

He says that that project and others appear wasteful without those facts being publicized,.

“The true impact was never filtered to the people,” says Hall. “They couldn’t see it—there were no signs with a visible recovery symbol.”

Unlike in the Great Depression, when people had Works Progress Administration (WPA) symbols in their windows, few today can identify the ARRA logo or know there is one. Consequently, few know where the funds went.

A partial list of how The City of Santa Cruz’s $11.5 million in stimulus dollars was spent reveals that: Parks and Recreation employed eight youth for the summer; segments of Market Street, Morrissey Boulevard and West Cliff Drive were repaved; an Energy Block Grant was created, bringing more solar panels to the community; street lights for lower Pacific Avenue are in the works; jobs were saved at the Familia Center, Homeless Services Center and River Street Shelter; a gang unit was established at the Santa Cruz Police Department and five officers’ jobs were spared from the chopping block; clean water projects are underway at San Lorenzo River, Branciforte Creek and Main Beach; and a digital media center is in progress at the Tannery Arts Center.

Though many ARRA projects are now complete, there are some that have yet to get off the ground. While any project started before the deadline can be finished, the ARRA series is expiring soon, causing some agencies to dread the future.

One concern is whether in-home care workers will experience a wage reduction from $11.50 to $8.50 an hour when ARRA grants expire. In-Home Support Services (IHSS) is a state program that pays care providers to perform in-home services for disabled people, such as cooking and cleaning.

According to Supervisor Ellen Pirie’s recent column in Good Times, “although they are not county employees, [care providers’] wages are paid by a combination of state, federal and county funds.” While she maintains that the county is not considering reducing their contribution to the wages, “the county has used federal stimulus funds to supplement the care provider wages for the last two years.”

As funds expire, the state portion of the wages will be reduced and the county will have to make up for the loss—“a total new expenditure of $2.2 million per year,” says Pirie. While the county is working with SEIU, the union representing care providers, they cannot make up the difference.

Also in a pinch is Central Coast Energy Services (CCES), a nonprofit that provides conservation and weatherization services.

Though Executive Director Dennis Osmer is grateful that CCES’ $2 million grant increased his number of employees from 27 to 65, purchased new vehicles and materials, he says that the ARRA added layers of bureaucracy and pressure to his job.

“They’ve increased accountability, but they’ve increased liability for the lowest common denominator,” says Osmer. “Each layer of bureaucracy is more motivated to not take any risks. We’re at the bottom, drowning in all this.”

Though the Department of Community Services and Development (DCSD) Bureau of State Audits regularly audits CCES, the Inspector General and the Department of Energy now monitor them too.

“We’re in a tough position because the government has placed this burden on us, while our neighbors want a cost-effective program,” says Osmer.

The inability to please everyone is an underlying truth of ARRA, but has been particularly prevalent in local banks, where executives like Bob Dennis, vice president of the Small Business Administration (SBA) Department at Lighthouse Bank, have the unfortunate task of turning away start-ups that don’t qualify for loans.

“The Penny Ice Creamery was the poster child for the stimulus’ SBA 7A loans, in which the bank loans money to a business and the government provides a 90 percent guarantee,” says Dennis. “It makes more businesses eligible and more attractive to banks, but you still have to qualify. If your business is losing money or hasn’t turned a profit, you won’t.”

Though Dennis is thrilled that the Creamery got a SBA 7A loan, he believes their publicized success may have exaggerated the positives of the program, which works on a loan-by-loan basis.

The SBA 7A program has lowered the risk for banks and temporarily eliminated fees that the borrower has to pay in exchange, but Lighthouse Bank is one of the few local lenders participating. With so many loans in default, there is little appetite to do more. “You would think it would generate business, but it doesn’t overcome the other obstacles,” says Dennis.

One company that not only qualified but also flourished with the help of a loan is Cruzio Internet.

Since the stimulus bill was used to back bonds, it made borrowing easier for the Santa Cruz business, which was lent $2.7 million. “The money helped us create a fiber-optic connection at 10 gigabytes per second throughout downtown that would allow businesses to keep their servers local, rather than over the hill,” says Cruzio President Peggy Dolgenos. The loan also allowed Cruzio to take up residence in the old Sentinel building, at 877 Cedar St.

Only time will tell whether ARRA has made a lasting impact on the aforementioned businesses and projects or simply served as a Band-Aid to bridge a couple rough years, but Hall, from the RDA, says one thing’s for sure: “It didn’t do miracles, but it did something.”

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