Editor's note: This story's headline originally said the proposal was halted by the U.S. Treasury. The headline was changed based on new information received. In addition, the story has also been updated to include more comments from county officials and other sources.

On June 1, Montgomery County commissioners unanimously approved a plan to provide $500 stimulus checks to Montgomery County homesteaders for COVID-19 relief, and commissioners said it needed final approval by the U.S. Department of Treasury.

The plan, which was proposed by Precinct 3 Commissioner James Noack, would have used about $65 million of the nearly $105 million the county received in funding from the federal Coronavirus Aid, Relief and Economic Security Act.

On Aug. 24, the office of Precinct 3 released a statement which said that the Treasury showed a "lack of commitment" to provide written approval, and the Commissioners Court opted to not move forward with the plan. County officials said they were concerned the proposed $65 million in stimulus checks would be subject to the federal coronavirus relief package's clawback provision. The clawback provision states that if dollars are spent outside the scope of the intended use of the funds, local governments are responsible for repaying them.

"The county would be on the hook for millions of dollars, so we would have to raise taxes or figure out another way to pay back potentially $65 million," Precinct 3 Chief of Staff Evan Besong said.

However, some legal experts said Montgomery County officials should never have expected approval from the U.S. Treasury, and residents said the county was not transparent throughout the process.

"That's not the way it works," said Tenley Carp, a governmental contracts attorney for Arnall Golden Gregory, a law firm. "There's absolutely no process—there's no concept even—of Montgomery County requesting approval from the Department of Treasury."

County seeks clarification

Although commissioners approved the proposal June 1, county officials sought clarification from the Treasury after its approval for assurance the county would not be subject to a clawback.

On June 15 and 18, County Attorney B.D. Griffin penned three letters to Kevin Brady, R-The Woodlands, U.S. Sen. John Cornyn and U.S. Sen. Ted Cruz seeking to obtain a preliminary opinion that the newly approved program would be eligible for CARES funds. The U.S. Treasury specifies that CARES funds can only be used for expenditures specifically incurred due to the coronavirus pandemic and that they must be used by Dec. 31.

Griffin said in an email that he did not send a letter directly to the Treasury because he was informed the Treasury was working through U.S. representatives and senators.

In his letter, Griffin said the proposal is intended to address the "second order effects" of COVID-19 to aid those suffering from financial loss as well as to prevent foreclosures and evictions. But Griffin said he was worried about potential recoupment.

"It would be of great benefit if Treasury identifies any deficiencies that create ineligibility and/or suggests modifications," he wrote. "The potential risk and exposure of county for recoupment makes the county hesitant to expend such a significant amount of funds in relation the County's future budgets absent some preliminary determination for the U.S. Department of the Treasury."

County officials said it was not clear if the proposal qualified for the use of CARES funds and that they did not wish to proceed with the proposal before receiving confirmation in writing from the U.S. Department of Treasury, which never happened.

Noack said he was frustrated with the Treasury's lack of written confirmation and felt the process was bureaucratic.

"Everybody thought we would be able to get the Treasury to sign off on this. It's really unfortunate," he said, adding that he simply wanted to give money back to the people.

Noack reportedly had one phone call with the Treasury and was told to "go back and read our guidelines," he said. Treasury officials also reportedly said residents would need to show proof that they were affected by COVID-19, he added.

When asked if his proposal was presented to the public prematurely and if in hindsight he would have waited for further guidance, Noack said he was being transparent by publicly sharing what the county intended to do with its CARES funding.

"I needed to put this on the agenda and have a public meeting ... before we could even vet it to the U.S. Treasury," he added, referring to the Texas Open Meetings Act. "There was no way we could have sought their approval for a program that wasn't approved by the court."

Treasury officials did not provide a comment for publication.

Understanding the rules

Carp, who is based in Washington D.C., has experience negotiating governmental contracts and has been working daily with issues related to CARES funding. Carp said following up with the Treasury for approval of a proposal is not the correct process, and state and local governments are responsible for making their own determinations as to how to spend their money consistent with the guidelines.

"When the county decides what they want to do with the money, it is not necessary or even part of the process to submit their proposed expenditures to the Treasury," she said. "The Treasury would be overwhelmed trying to answer yes or no to proposals from state and local governments."

Carp said CARES funding is clearly allocated for expenditures incurred due to the public health emergency, and the only way a stimulus payment might qualify is if individuals who applied were to show direct impact from COVID-19, such as an eviction or foreclosure due to closing their business because of the pandemic.

"The stimulus payment is not at all what these funds are to be used for. It's very clear," she said. "Montgomery County has to understand the guidance for what they can and cannot do with that CARES Act money."

David Reischer, attorney and CEO of LegalAdvice.com, echoed Carp's response.

"The CARES Act specifically requires that there is a verification of income eligibility or income loss for each participant before the distribution of funds," he said.

Delayed communication

Email records and conversations with county residents indicate the county may have decided to backtrack on its proposal at least a few weeks prior to the Aug. 24 announcement.

In a July 30 email forwarded to Community Impact Newspaper, Cody Grimes, a representative of Noack's office, informed resident Maxine Shields that "the U.S. Treasury has no plans to approve the proposed $500 stimulus in writing. Therefore, we are being forced to look at other options."

Nearly 70 residents responded to a Nextdoor post in mid-August voicing their experiences and concerns with the county's plan. Some said they were told by the county that the Treasury had denied the proposal. Others said they were checking the website weekly, waiting for applications to open.

"I called [Noack's office]. I was informed by his office that there would not be any checks since approval has not been received because it was not listed correctly; however, they are trying to see if there are any other avenues where we would receive something," county resident Bertha Murphy said in an Aug. 17 email.

Sara Clayton, a Spring resident, said she was repeatedly emailing the Precinct 3 office asking for updates but received several different answers.

Many others said they felt frustrated by the county's lack of transparency and communication as they struggled to understand when applications would open, what the status of the proposal was and when they may receive their checks.

"I have been praying this would be approved," Montgomery County resident Dorothy Peterson said in an email. "I realize to some, it's a very small amount, but to the elderly, it means survival. I have been plagued with high water
bills, high electricity bills, auto expenses. ... The $500, I was counting on to recoup, but I guess it's not going to happen."