EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: September 20, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Patrick Heisinger, Interim City Manager
BY: Tomohito Oku, Finance Director
SUBJECT: Use of American Rescue Plan Act (ARPA) Funds
Recommendation
It is recommended that the City Council take the following actions:
1. Accept the staff report on the City’s use of American Rescue Plan Act (ARPA) funding;
2. Provide direction for how the City should allocate the remaining portion of ARPA funding; and
3. Direct staff to return to the City Council in October 2022 with specific allocation recommendations for the remaining portion of the City’s ARPA funding.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 3: Increase Organizational Effectiveness and Efficiency
Background
On March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA) into law. This action established the Coronavirus Local Fiscal Recovery Fund (ARPA Funds). ARPA Funds are intended to provide support to State, local, and Tribal governments in responding to the economic impacts of COVID-19 pandemic. The Treasury allocated Fiscal Recovery Funds based on a jurisdiction’s population and identified State Finance Departments to oversee the use of the funding.
The City’s total allocation of ARPA Funds was $7,012,516. In July 2021, the City received its first allocation of ARPA Funds in the amount of $3,506,250. The City Council approved a budget amendment of FY21-22 for ARPA funding on September 7, 2021, appropriating the first tranche of ARPA Funds in the amount of approximately $3.5 million for personnel costs. As a result, the City was able to address a budget deficit caused by the COVID-19 Pandemic, while meeting all its obligations with regard to spending its first allocation of ARPA Funds.
On June 7, 2022, the City Council adopted FY2022-23 budget including ARPA funding. The City’s 2022-2023 Budget assumed the City would receive the second ARPA payment shortly after the Budget became effective on July 1, 2022. In July 2022, the City received its second payment ($3,506,266) of ARPA Funds; these funds must be obligated by the City Council by December 31, 2024, and expended by December 31, 2026.
The table below describes the allocation of the second distribution of ARPA Funds under the FY 2022-2023 Adopted Budget.
USE OF ARPA FUNDS
Description FY22-23 Adopted
Budget
ARPA Grant Allocation $3,506,250
Interest Income $25,000
TOTAL REVENUES $3,531,250
Pandemic Workers and Diversion Backfill $(95,440)
PD Personnel Costs Allocation $(700,000)
Additional Pandemic Supports - extended to Dec 2022 $(35,000) Transfer out to General Fund to support additional
expenditures during the budget deliberations process
$(821,140)
TOTAL EXPENDITURES $(1,651,580)
Unspent ARPA Funds (Ending Fund Balance) $1,879, 670
The purpose of this staff report is to seek City Council direction for the allocation of the remaining ARPA Funds (approximately $1.9 M).
Analysis
Staff recommends that the City Council refer to the FY 2022-2023 priorities to establish guiding principals for the potential expenditure of the remaining ARPA funds. For reference, the key areas of the City Council priorities are listed below.
Effectively Respond to the COVID-19 Pandemic
Enhance Community Services and Parks for Residents
Advance Housing and Workforce Development
Develop/Implement a Comprehensive Facilities Master Plan Ensure Health and Public Safety
Develop Comprehensive Strategy to Address the City’s Structural Deficit
Establish/Implement a Transportation Mobility Plan
Improve the City’s Water Infrastructure
To assist the City Council with providing initial direction, staff identified a number of activities that were featured in the City Council FY 2022-2023 Priorities and Workplan. Based on the needs identified in the Council’s priorities, City staff recommends that the City Council allocate the remaining ARPA funding to the areas described in the table below. Note, staff landed on these initial recommendations because there are many initiatives within each of the given areas that may benefit from “one time” funding as opposed to creating long-term financial obligations.
PROPOSED OPTIONS FOR UTILIZATION OF ARPA FUNDS
Potential Area to Fund Rationale
Improve the City’s Infrastructure The City has several infrastructure projects that could benefit from design and/or capital funding.
Strategies to Address the City’s
Structural Deficit
The City must embark on several analyses/initiatives
to ensure fiscal resiliency moving forward.
Direct Assistance to the
Community
Staff recommends that a portion of remaining ARPA
funds be distributed to the community via a
competitive process. At this time, staff is not prepared to make specific recommendations on how much and
how the funds would be disbursed to the community.
These recommendations will be presented to the
Council in October 2022.
If the City Council concurs with the staff recommendation, staff would return in October 2022 with specific recommended initiatives to fund within each given area.
At this time, staff does not recommend specific funding thresholds for the given areas. The first step is to establish the guiding principals and then staff will take that information to craft specific recommendations.
As noted previously in this report, staff will take the City Council’s input on the proposed guiding principals, and will return to the City Council in October with specific recommendations for the allocation of the remaining ARPA Funds.
Fiscal Impact
There is no fiscal impact at this time. Staff will return to the Council in October 2022 to present detailed information by itemizing recommending expenditures.
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo Co. Library located at 2415 University Avenue in East Palo Alto, CA.
Environmental
The action being considered by the City Council is exempt from the California Environmental Quality Act (CEQA) because it is not a “project” pursuant to 15378(b)(4) because it is a fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant impact on the environment.