Thursday, March 12, 2009

Stimulus funds as gift cards on the secondary market

In Los Angeles County, cities are buying federal stimulus funds from each other at deep discounts, turning what was supposed to be a targeted infusion of cash into a huge auction.

It all started when the county's Metropolitan Transportation Agency decided to hand out $44 million from the federal stimulus package in the form of $500,000 transportation grants to each of the county's 88 cities. But some cities didn't have any shovel-ready transportation projects. So with MTA's blessing, they're selling the grants to the highest bidder:
La Habra Heights, a city of 6,000, has sold its $500,000 in federal funds to the city of Westlake Village for $310,000 cash. Irwindale, population 1,500, also sold its $500,000 to Westlake Village, for $325,000 cash.

The city of Rolling Hills, population 1,900, sold its $500,000 share to the city of Rancho Palos Verdes for $305,000 cash. The city of Avalon has reached an agreement to swap its $500,000 with L.A. County.
--Josh Harkinson, Mother Jones, on the low marginal value of stimulus funds. HT: Marginal Revolution

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