Dunkirk Common Council approved a new rescue boat for more than $340,000 in November 2022 with American Rescue Plan Act funding.

How much more collateral damage will there be from the generous COVID funds that were handed out by the federal government that came with little oversight? If the city of Dunkirk is any indication, we may just be at the tip of the iceberg.

Two north-county municipalities have been in the spotlight for all the wrong reasons in the last month. Fredonia is looking at a possible double-digit tax increase while Dunkirk is swimming in debt.

City residents and businesses will be on the hook come 2025 when the next spending proposal comes before the Common Council. Property taxes and fees will have to go up so the entity can begin to pay off its debt.

That is not to say the legislative group will act responsibly.

For the last three years — starting in 2022 — the council may have tweaked budget plans proposed by former Mayor Wilfred Rosas, but it did nothing to stop a spending train that needed to be derailed once the former NRG generating station quit operating in 2016. In that year, the city’s budget totaled $22 million. Today, it’s more than $26 million — an 18% increase over nine years.

That’s more than acceptable in this age of inflation. But without consistent revenue from NRG that totaled nearly $3 million annually in 2016 and was whittled down to nothing last year, a deficit emerged. State assistance helped alleviate some of the pain from the shuttered plant, but federal American Rescue Plan Act funding allowed for too much optimism during 2021 to 2023. In fact, council members believed the city coffers were so oversaturated they approved spending $300,000 on bonuses for the workers and themselves.

How generous — and foolish.

But the Coronavirus Aid, Relief and Economic Security Act funding in 2020 and ARPA monies a year later gave all government entities and school districts a false sense of security. Those funds that have gone away are leading to huge gaps, especially in a number of school districts in Erie County and across the state, as well as some municipalities that were able to get by for a couple of years.

Dunkirk may have been bamboozled the worst.

When city officials found out about the serious cash-flow problem at a special meeting in March that led to an $18.5 million loan from New York state, the sentiment was not that of an apology to residents but of praise for a new beginning. “This is in the best interest of the city moving forward,” said Councilmember Nancy Nichols that evening about the loan.

Actually it’s not. Dunkirk does nothing structurally in this loan to change its overspending ways. It’s still stuck with unrealistically oversized contracts and staffing in the city of 12,600.

That likely leaves taxpayers on the hook — just like those in neighboring Fredonia where the water problems have overshadowed the overspending in the village. A contentious public hearing focused this week on a summer recreation program that was being targeted for reduction.

Parents and community members made enough noise that Village Board members will bring the program back, but it could be an issue again next year.

To our north, the Hamburg and West Seneca Central School districts recently announced budget plans that include staff cuts and tax increases. West Seneca planned to eliminate a total of 47.5 positions with 19 of those being teachers while Hamburg was looking at layoffs of 20 teachers and staff, The Buffalo News reported.

That 2024 no-show of funding granted during the COVID years left regret for one elected official. “Frankly, I wish I would have done a better job last year as a board member,” West Seneca school board member Vincent Vanderlip said in the News. “I believe that had we done a little bit better job last year in tapering back, we wouldn’t be in this spot today.”

Once COVID hit in March 2020 and the economy began shutting down, there was a belief that the spending reins by public entities would have to be drastically tightened. Instead, lawmakers in Washington showered states, schools and municipalities with magic money that was guaranteed to disappear at the start of this year. It was a knee-jerk short-term solution that has long-term effects, including inflation.

Chautauqua County government entities received $83.1 million to be spent on equipment, personnel and salaries. Future costs of those purchases and additions have become a reality with no new funding streams following.

With the COVID money spent, the pain that should have been felt during the pandemic has taken hold. Current economic indicators and a volatile presidential election may only make things worse.

There’s an unfortunate moral to this story — one that governments and school districts are reluctantly learning. Everything comes with a consequence. Especially if it was too good to be true.

John D’Agostino is the editor of The Post-Journal, OBSERVER and Times Observer in Warren, Pa. Send comments to jdagostino@observertoday.com or call 716-487-1111, ext. 253.