The US congresswoman Ilhan Omar is set to introduce a bill that would make federal immigration agencies “pay the price” for terrorising vulnerable communities, blocking nearly $140bn in funding and redirecting it to local recovery efforts, the Guardian has learned.

The Make ICE Pay Act, due to be introduced on Thursday, targets funding previously designated for Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP) under Donald Trump’s “One Big Beautiful Bill”.

It would send the money instead to states, local government authorities, nonprofit organisations and small businesses left reeling by Trump’s immigration enforcement crackdowns.

“For over a year, ICE has been tearing through our nation, leading racist terror campaigns that have caused devastating damage to our cities, to our businesses, and to the lives of our constituents,” said Omar, who represents Minnesota’s fifth congressional district, covering the city of Minneapolis and surrounding suburbs.

Beginning last December, thousands of federal immigration agents descended on Minneapolis and surrounding areas, resulting in nearly 4,000 total arrests and the fatal shooting of two US citizens, Renée Good and Alex Pretti. The mood of fear and isolation also had a profound effect on commerce.

Omar added: “In Minneapolis, Operation Metro Surge cost our community nearly $700m. We have a moral responsibility to end this abuse of power. Our bill will force ICE to pay the price for the damage they’ve left in their wake and ensure that these devastating operations can never be repeated.”

Enforcement actions covered by the bill include Operation Midway Blitz in Illinois, Operations Swamp Sweet and Catahoula Crunch in Louisiana, Operation Catch of the Day in Maine, Operation Charlotte’s Web in North Carolina and Operation Black Rose in Oregon.

Grants under the scheme could be used to provide economic relief, reimburse operational expenses, assist educational institutions and deliver psychosocial support to impacted individuals. The measure also authorises funding for official investigations, commissions of inquiry, record-keeping, truth-telling and memorialisation projects.

The scheme would be administered through the office of inspector general of the Department of Housing and Urban Development over three years.

ICE arrests surged to 49,571 in July, marking the highest monthly total of Trump’s second term. The total represented a 15% increase on the 43,021 arrests recorded in June, and a 70% rise compared with the 29,241 arrests made in February.

The sharp rise in detentions comes despite assurances during confirmation hearings by homeland security secretary Markwayne Mullin that the department would pursue a more moderate approach to enforcement.

Public opinion has turned against federal immigration agencies after a series of flashpoints, with 47% of Americans viewing ICE unfavourably and 39% viewing it favourably, according to a Harvard CAPS/ Harris survey of 2,100 registered voters last month.

Omar, who was born in Somalia, arrived in the US as a refugee aged 12 and became a citizen at 17. She has been a particular target of Trump’s racist rhetoric, which has helped spur death threats against her. “We ought to get her the hell out!” the president told a rally last December as a crowd chanted: “Send her back!”