City of Austin faces tough cuts when ARPA dollars run out, including homelessness services

AUSTIN (KXAN) -- Alfredo Reyes Jr. is one of the many people the City of Austin has helped off the streets and into rapid rehousing over the past couple of years. But the American Rescue Plan Act (ARPA) dollars that helped put him there, will eventually run out.

"We're trying to get on our feet. We're actually trying to get work, we're trying to do something to better ourselves. We're doing that and the money runs out, we're back on the street. We have no other options," Reyes said.

According to the City of Austin's latest annual report to the Department of Treasury, Austin has dedicated roughly $100 million in ARPA funding to homelessness services. Roughly $40 million of that is for rapid rehousing, similar to what got Reyes out of homelessness -- for now.

Another $25.2 million was allocated to crisis services and emergency shelters -- for example the Marshalling Yard shelter, which has a one-year contract. And $11.1 million was set aside for permanent supportive housing.

When KXAN asked for a breakdown of what money has actually been spent so far, both the City's Homeless Strategy Office and the Financial Services Department referred us to a June 2023 presentation from then-Homeless Strategy Officer Dianna Grey.

The presentation showed only roughly $11.2 million had been spent so far, as of June of last year. But more than $83 million had been committed. The City of Austin did not provide updated numbers Wednesday.

"What the reality is is that there will come an end to it. So we have to ask ourselves, what is the best and highest use of our limited public dollars?" Council Member Vanessa Fuentes said. She is the chair of the public health committee, which got a briefing on rapid rehousing Wednesday.

ARPA funds have to be fully allocated by the end of the year and fully spent by the end of 2026. It's something Ed Van Eenoo, Austin's chief financial officer, told council could create a "fiscal cliff."

The City of Austin received $188 million in federal ARPA funding, according to Van Eenoo. Austin City Council approved a spending framework of more than $250 million though, which included additional grants and some general fund reserves.

“A $266 million influx of funding into our budget, that allowed us to elevate services in a number of areas and over the next three years that funding is going to start dropping off,” Van Eenoo said.

It's unclear right now how much of that funding was used for one-time purchases versus reoccurring costs that will need to be backfilled by the City.

The Financial Services Department will be back before council in April to cover midyear budget adjustments, according to Fuentes. The conversation will also play center stage during next year's budget deliberations.

"This is gonna be top of mind during the budget deliberations later this summer and the conversations with providers are ongoing," Fuentes said.