STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of January 11, 2022
TO: Members of the City Council
SUBMITTED BY: Dante Hall, City Manager
SUBJECT: ARPA – Results of the Business and Community Surveys and Funding Principals Recommendation
Accept the proposed set of principles to assist in developing the plan for use of the ARPA funds.
Fiscal Impact
None. Everything to be funded through the ARPA funds.
Executive Summary
The United States Department of Treasury released American Rescue Plan Act (ARPA) regulations and updated local government allocations on May 10, 2021. As part of the $1.9 trillion relief package, the City’s allocation is set at $6,285,778. Staff and our consultant will provide an ARPA update and the results of our business and community survey.
Over the past few months, the City Council has provided several ideas for ways to best utilize ARPA funds (Attachment 3). At the Special Council Meeting scheduled for February 22, 2022, regarding the annual budget, the City Council will be presented with a preliminary plan for the use of the ARPA funds including recommendations from staff and suggestions from Councilmembers. To assist in developing that plan, tonight staff seeks Council’s acceptance of a set of principles to be considered when making a final decision about projects to be funded with ARPA money.
Background
At the September 28th City Council meeting, HdL Companies’ Senior Advisor, Sandra Meyer, gave an overview of the agenda staff report, providing an introduction to the American Rescue Plan Act (ARPA) and presented a draft business needs survey, which is used to better understand the impact of the COVID-19 Pandemic on Hercules businesses. Staff also prepared a Community Needs Survey to assess the impact on community members. Both were launched on October 20, 2020 and concluded on November 26, 2020. The Business Needs Survey was distributed in 3 ways, including:
Social Media Outlets
City Website
Emails to active business license holders
The Community Needs Survey was posted on Social Media Outlets and the City’s Website.
Business Needs Survey Results
The Business Needs Survey garnered 39 responses from businesses located in Hercules. Details of the survey responses are attached (Attachment 1). Below is a summary of the results. 29 of the 37 responding businesses were either self-employed or had just 1 to 4 employees.
Restaurants/eating and drinking establishments had the highest number of respondents at 15% Medical Offices (Dental, Physicians, Pharmacies) and Professional and Technical Services were the next highest respondents each at 13% 77 % of the businesses that responded reported that their business operation has been negatively impacted by the COVID-19 Pandemic, with the biggest impacts being: 1) loss of revenue, 2) reduced customer demand and 3) temporary closure 37% of the respondents did not receive any financial assistance 40% of the respondents received financial assistance from the Paycheck Protection Program 24% received financial assistance from the Economic Injury Disaster Loan/Advance (EIDL) 24% received financial assistance from the California Small Business COVID-19 Relief Grant Ranking of the greatest challenges for the business/organization's recovery included: 1) paying rent (including back rent accumulated), 2) re-establishing customer base, 3) two-way tie between cash flow & payroll and marketing their business 4) hiring or rehiring employees 5) two-way tie between obtaining inventory and supplies and securing future financing 6) debt management The ranking of desired assistance by the City of the 39 business that responded included: 1) assistance with applying for available COVID-19 relief grants 2) rent assistance grants, 3) shop local campaign, including a community gift card program partially subsidized by the City and assistance with applying for small business relief grants, 4) two-way tie between financial training and resources - access to capital, debt management, etc and small business resources & one-on-one counseling assistance 5) online business support – website assistance 6) employee training and hiring assistance 7) a two way tie between improvements/enhancements to commercial areas and continued outdoor dining operations with enhancements Of those that responded to suggesting improvements or enhancements to the City’s commercial areas, the three top suggestions were additional arts, culture and entertainment venues, increased police presence and additional lighting, such as decorative strings of lights Community Survey Responses
136 responses were received from the Community Survey. Details of the survey responses are attached (Attachment 2).
In summary:
A majority of the respondents live in Hercules (130)
136 survey responders ranked importance of 9 different community aspects. Each aspect is not necessarily eligible for ARPA funding. The results are listed in descending order of weighted average:
improve public infrastructure (roads, sidewalks, storm drains, etc.) police and fire services
city having the resources to continue to provide high quality services recreation, parks, trails, creeks and open spaces
support and recovery of local businesses
assist residents that need housing, food, healthcare, childcare, rent or utility help traffic/bike/pedestrian safety
affordable housing options
support the work of non-profit organizations in the community 72% of the respondents would participate in a Community E‐Gift Card Program designed to promote Hercules businesses and encourage shopping, dining, and services in Hercules. Lafayette. 38% would not. 101 respondents have eaten at the temporary outdoor dining spaces in Hercules. 72% of respondents would you like to see the outdoor dining spaces enhanced or enlarged with more permanent and aesthetic structures. 29% said to keep the outdoor dining spaces as they are.
Use of Fiscal Recovery Funds for General Fund Revenue Loss Incurred by the City The City of Hercules received an ARPA funding allocation of $6,285,778. The first payment equal to one half of the City of Hercules’ allocation in the amount of $3,142,889 was received by the City in mid-July 2021. The second half will be distributed in July 2022. ARPA recipients may use payments from the Fiscal Recovery Funds for the provision of government services to the extent of the reduction in revenue experienced due to the COVID‐19 public health emergency. Section 603(c)(1)(C) of the ARPA allows recipients facing budget shortfalls to use payments from the Fiscal Recovery Funds to avoid cuts to government services. This is envisioned to enable local governments to continue to provide valuable services and ensure that budget deficits, tax increases and reductions in public expenditures do not continue to delay a city’s broader economic recovery.
Based on the Department of the Treasury’s revenue loss formula which includes all sources of revenue, the City of Hercules experienced a $2,918,338 shortfall in general revenues for the period ending December 31, 2020 due to the COVID–19 public health emergency. This total amount, or any portion thereof, is an eligible expense under ARPA funding rules.
Use of ARPA Funds for other than General Fund Revenue Loss The American Rescue Plan Act provides that Fiscal Recovery Funds may also be used for the following:
To respond to the public health emergency or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality; To respond to workers performing essential work during the COVID‐19 public health emergency by providing premium pay to eligible workers; To make necessary investments in water, sewer, or broadband infrastructure.
The Interim Final Rule implements the provisions of ARPA and identifies a non‐exclusive list of programs or services that may be funded as responding to COVID‐19 or the negative economic impacts of the COVID‐19 public health emergency, along with considerations for evaluating other potential uses of the Fiscal Recovery Funds not explicitly listed. In determining whether a program or service responds to the negative economic impacts of the COVID‐19 public health emergency, the Interim Final Rule provides that payments from the Fiscal Recovery Funds should be designed to address an economic harm resulting from or exacerbated by the public health emergency.
Cities are encouraged to use payments from the Fiscal Recovery Funds to respond to the direct and immediate needs of the pandemic and its negative economic impacts and, in particular, the needs of households and businesses that were disproportionately and negatively impacted by the public health emergency. Please note that the use of ARPA funds is subject to compliance and reporting requirements to the US Treasury along with possible audits.
Next Steps
Feedback from the Community and Business Recovery Surveys are one important factor for the City Council to consider when developing the ARPA funding plan. The City Council also provided ideas for use of the funds at their September 28th meeting as listed in Attachment 3. At the public meeting scheduled for February 22, 2022, the City Council will be presented with a preliminary plan for use of the ARPA funds. Staff has developed a draft set of principals for the City Council to consider and approve to assist in developing the plan for use of the funds as follows:
The ARPA funds do not need to be allocated until December 31, 2024 and the funds do not need to be spent until December 31, 2026.
The ARPA funds are a one‐time source of monies so ongoing costs need to be considered before allocating funds for any projects or programs.
The City should use other dedicated grants and funding programs first, whenever possible, and save ARPA funds for priorities not eligible for other federal and state assistance programs (such as federal infrastructure bills) With the first three bullet points in mind, ARPA funds will be allocated in the following order of priority:
To ensure that the City will have the resources to continue to provide high quality services by replacing the City’s general revenue losses To support the economic recovery of households and small businesses To solve immediate specific problems raised by the pandemic for the City To make investments that will strengthen and hasten the economic recovery of the City and its businesses It is important to note that the U.S. Senate just recently passed the “State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act” – SB 3011, which has now moved on to the U.S. House of Representatives. HdL staff are reviewing and monitoring this new bill, which may allow more flexibility and less reporting requirements for allocating the funds. There is uncertainty if and when this might be approved by the House and the President and what exactly the passage of this bill would change. However, this new legislation might broaden the types of infrastructure programs for which ARPA will allow funding (proposed to include roads, sidewalks, bridges and more traditional infrastructure projects) and possibly provide a new way to measure revenue loss. Consequently, it might be prudent to not allocate all of the first tranche of ARPA funding until the 3011 bill passes.
Attachments
Business Needs Survey
Community Survey
City Council ARPA Funding Suggestions
Date Page 1