For City Council Meeting [September 14, 2021]
TO: Honorable City Council
APPROVAL: Marcus Fuller, City Manager
FROM: Stephen Erlandson, Director of Finance
Title
Request City Council to Provide Direction to Staff on the Use and Allocation of the American Rescue Plan Act (ARPA) Funding.
(ACTION)
Body
BACKGROUND
On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA), which appropriates nearly $1.9 trillion nationwide for COVID-19 pandemic relief funding including $350 billion for every eligible state, city, town, territorial and Tribal governments in the country. ARPA establishes the Coronavirus State and Local Fiscal Recovery (SLFR) Fund to provide an infusion of resources to help State, local and Tribal governments address their economic struggles in responding to the impact of COVID-19 and to assist with recovery on their communities, residents and businesses.
The City of Rialto was awarded $29,373,105 in SLFR funds through the ARPA. The U.S. Department of Treasury used the standard Community Development Block Grant (CDBG) formula for determining the allocation of funds to metropolitan cities. The distribution of ARPA funds will be separated into two tranches, with 50% provided in May 2021 and the balance delivered approximately 12 months later. On June 18, 2021, the City of Rialto received the first distribution of funding, in the amount of 14,868,552.50.
Given the City’s receipt of the first tranche of SLFR funds which have not been appropriated for any use, Staff prepared this staff report to allow the City Council to consider the range of options and available use of the SLFR funds as may be restricted by the administrative regulations implemented through the ARPA.
ANALYSIS/DISCUSSION
SLFR Funds provide eligible state, local, territorial, and Tribal governments with a substantial infusion of resources to meet pandemic response needs and rebuild a stronger, more equitable economy as the country recovers. Within the categories of eligible uses, recipients have broad flexibility to decide how best to use this funding to meet the needs of their communities. Recipients my use SLFR Funds to:
• Support public health expenditures, by funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and Fire/EMS staff;
• Address negative economic impacts caused by the public health emergency, including economic harms to workers, households, small businesses, impacted industries, and the public sector;
• Replace lost public sector revenue, using this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic. This revenue per ARPA guidelines is based on four years historical revenue trends excluding: intergovernmental fund, transfers, and utility funds;
• Provide premium pay for essential workers, offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and,
• Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet.
Some suggestions that meet the requirements of ARPA include the following:
Assistance to Businesses, Workers and Families, Tourism Sectors and Public Sectors
• Providing aid to unemployed workers and job training, as well as aid to households facing food, housing, or other financial security, such as funds for survivor’s benefits for family members of COVID-19 victims.
• Providing grants, loans in-kind assistance or counseling programs to address financial challenges caused by the pandemic and to make investments in prevention and mitigation tactics.
• Rehiring public sector staff and replenishing of unemployment insurance (UI) trust funds, in each case up to pre-pandemic levels.
• Providing technical assistance, grants, loans, and other financial assistance to establish, stabilize, and expand microenterprises that provide medical, food delivery, cleaning, and other services to support home health and quarantine. •
Support the Public Health Response and Provide Public Services and Programs
• Providing services to address behavioral healthcare needs exacerbated by the pandemic, such as, mental health treatment, crisis intervention, substance misuse treatment, outreach to promote access to health and social services and support or development of hotlines.
• Providing testing, diagnosis or other services at a fixed or mobile location. •
• Increasing the capacity and availability of targeted health services for infectious disease response within existing health facilities.
• Providing equipment, supplies, and materials necessary to carry-out a public service.
• Delivering meals on wheels to quarantined individuals or individuals that need to maintain social distancing due to medical vulnerabilities. •
• Emergency housing assistance for rental and homeowners to help pay utilities, rent, and mortgages.
Building, Improvement and Investment, Including Public Facilities and Affordable Housing
• Constructing a facility for testing, diagnosis, or treatment of COVID-19. •
• Rehabilitating a community facility to establish an infectious disease treatment clinic.
• Investing in water and sewer infrastructure.
• Investing in broadband infrastructure to provide universal, high-speed, reliable, and affordable broadband coverage within public facilities.
• Services and programs to address homelessness, affordable housing development, housing vouchers and counseling assistance.
The aforementioned uses of the SLFR funds are not exhaustive but are examples of uses as provided by the Interim ARPA guidelines. (See Exhibits A & B).
A key factor here is that unless the City can demonstrate it suffered a loss of revenue and/or had direct COVID related eligible expenses that exceeds the amount of the SLFR funds appropriated to Rialto, the City would be required to limit its use of the SLFR funds solely to the uses outlined above. However, to the extent the City suffered a loss of revenue and had direct COVID related eligible expenses, the sum of those amounts may be used by the City Council at its discretion with a few limited exceptions.
The Finance Department reviewed the administrative regulations for determining the City’s loss of revenue and its direct COVID related eligible expenses, and has concluded the following:
• $2,495,000 in COVID related expenses in FY19 and FY20;
• $37,388,000 in first responder related expenses in FY19 and FY20
• $38,359,000 in loss of revenue
$78,242,000
As shown, the City’s financial impact ($78,242,000) as determined by the ARPA administrative regulations far exceeds the amount of SLFR funds appropriated to Rialto ($29,373,105). Therefore, the City Council can choose to program the use of its SLFR funds following the ARPA allowance for:
Replace lost public sector revenue, using this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic.
On this basis, the City Council can direct the use of its nearly $30 million in SLFR funds for a great many programs or projects. The following is a sampling of major capital projects or systems investments that have been identified in the past:
• A new Civic Center/City Hall/Police Station ($50M to $100M);
• A new Emergency Operations Center ($5M);
• New Financial ERP software ($4M);
• Information Technology Upgrades ($3M);
• Citywide security camera system ($3M);
• Lake Rialto ($5M);
• Reconstruction of City Streets in accordance with the Pavement Management Program ($35M);
• Programs to assist Rialto Residents and Small Business as provided by the ARPA guidelines
The are a variety of capital uses for these funds, but also social service-related uses in support of continued mitigation of the effects of the COVID pandemic on the Rialto community. Many cities have considered allocating a portion of its SLFR funds towards income protection programs and other continued assistance programs (rental/mortgage/utilities) along the lines of CDBG-CV funds previously programmed for those purposes. The City Council may consider setting aside a portion of its SLFR funds for this purpose. Examples of income protection programs provided by other cities to low and very-low income residents include:
• City of Stockton: $500 / mo for 24 months
• City of Los Angeles; $1,000 / mo for 12 months
• City of Long Beach; $500 / mo for 12 months
• City of Compton; $300 - $600 / mo for 24 months
• City of Oakland; $500 / mo for 18 months
An income protection program would require development of administrative regulations, and to comply with ARPA guidelines for use and reporting.
Per the ARPA guidelines there are five items that are expressly restricted from the use of SLFR funds:
• Paying pension deposits;
• May not be used as non-Federal Match for other Federal Programs;
• Principal or interest of debt services;
• Settlements or Judgments
• Reserves or rainy-day funds.
All SLFR funds must be obligated by December 31, 2024 and expended by December 31, 2026.
ENVIRONMENTAL IMPACT
The request is not a Project as defined by Section 15378 of the California Environmental Quality Act (CEQA).
GENERAL PLAN CONSISTENCY
Complies with the following Rialto General Plan Guiding Principle:
Our government will lead by example, and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.
LEGAL REVIEW
The City Attorney has reviewed and supports this staff report.
FINANCIAL IMPACT
The City of Rialto has already received $14,868,552.50 in ARPA funds and will receive the remaining appropriation of $14,868,552.50 in June of 2022 for a total of $29,373,105. These funds will be appropriated based on the direction of City Council through an amendment to the Fiscal Year 2021/2022 budget. At this time, the first tranche of funds have not been appropriated and remain in Fund Balance waiting the City Council’s direction on their use.
Per the Interim ARPA guidelines, the City Staff had approximately $2,495,000 in COVID related expenses in FY19 and FY20.
Additional per the Interim ARPA guidelines Fire Personnel costs are an allowable expense, for FY19 and FY20 this was approximately $37,388,000
Per the Interim ARPA guidelines the City can also claim Revenue Loss estimated at approximately $38,359,000.
The current assessments are based on the Interim ARPA’s guidelines, however the Final ARPA guidelines are not scheduled to be released until September 16, 2021. Staff will update the City’s assessment at that time.
Capital Improvement Budget Impact
Depending upon the direction of City Council, a portion or all of the $29,373,105 in SLFR funds may be appropriated for capital projects to be identified by the City Council.
Licensing
A Business License is not required as part of this action.
RECOMMENDATION
Provide direction to staff on the use and allocation of the American Rescue Plan Act (ARPA) SLFR funding of $29,373,105.