CITY COUNCIL STAFF REPORT
Meeting Date: April 18, 2022
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
SUBJECT: ADOPT RESOLUTION NO. ___ - 22 APPROVING AMENDMENTS TO THE ANNUAL BUDGET FOR FISCAL YEAR 2021/22 TO
APPROPRIATE AMERICAN RESCUE PLAN ACT (ARPA) FUNDS AND
ELECT THE STANDARD ALLOWANCE ALLOWED BY THE U.S.
TREASURY FOR THE REVENUE LOSS CATEGORY
SYNOPSIS
The City of Pleasant Hill received an allocation of $8.3 million through the American Rescue Plan Act (ARPA). ARPA is administered by the United States Department of Treasury (U.S.
Treasury) and has recently updated guidance on allowable expenditures and required reporting that the City needs to complete by April 30, 2022. The Budget Committee recommended the City Council be provided an update on ARPA and provide direction to staff.
DISCUSSION
Background
On March 11, 2021, the American Rescue Plan Act (ARPA) was passed by Congress and signed into law a $1.9 trillion stimulus bill to assist with the impacts of COVID-19. Among other things, ARPA established a State and Local Fiscal Recovery Fund which provides $130 billion for local governments to enable them to continue to support the public health response and assist with economic recovery. The City of Pleasant Hill’s received an ARPA allocation for $8.3 million, which is paid in two tranches. The City received the first tranche last July for $4.17 million and the second funding tranche is expected in July 2022. Eligible costs must be expended between March 3, 2021 and December 31, 2026, and obligated by December 31, 2024.
On May 17, 2021, the U.S. Treasury initially released the Interim Final Rule (IFR) which provided preliminary guidance on expenditures to assist with the following needs by public and government agencies:
1. Support urgent COVID-19 response to decrease the spread of the virus and bring the pandemic under control
2. Replace lost public sector revenue
3. Support immediate economic stabilization for households and businesses
4. Address systemic public health and economic challenges The U.S. Treasury initially planned to receive feedback from agencies and stakeholders from across the county and amend the plan a few months later with the “Final Rule.” The Final Rule was delayed after receipt of over 1,500 questions/comments, hundreds of stakeholder meetings, and correspondence from various government agencies.
On January 6, 2022, the U.S. Treasury issued the Final Rule containing the major provisions for use and reporting of Coronavirus State & Local Fiscal Recovery Funds (aka ARPA funds). The Final Rule addresses many of the concerns communities raised with the Interim Final Rule and increased the flexibility for local governments while simplifying the program. The Final Rule took effect on April 1, 2022 and allows funds to be used consistent with the Final Rule prior to that date. A summary of the major provisions follow:
• Replacing Lost Revenue - The final rule offers a one-time standard allowance election for revenue loss of up to $10 million, enabling the City to select to use the full allocation for government services (defined as services traditionally provided by the recipient government agency) with streamlined reporting requirements. • Public Health and Economic Impacts - The final rule clarifies that recipients can use funds for capital expenditures that support an eligible COVID-19 public health or economic response. The set of households and communities that are presumed to be impacted by the pandemic as well as the set of uses was also expanded. The final rule also allows for a broader set of uses to restore and support government employment. • Premium Pay - The final rule delivers more streamlined options to provide premium pay, by broadening the share of eligible workers who can receive premium pay without a written justification while maintaining a focus on lower-income and frontline workers performing essential work.
• Water, Sewer & Broadband Infrastructure - The final rule significantly broadens eligible broadband infrastructure investments and adds additional eligible water and sewer infrastructure investments.
On February 28, 2022, the U.S. Treasury released “Compliance and Reporting Guidance” to local agencies. They informed municipalities that additional information would be coming for agencies that are considered “Non-Entitlement Units” (NEU). NEUs are defined as municipalities with a population less than 50,000 people. The ARPA funding for NEUs were sent to the respective states to allocate based on population compared to non-NEUs which received the funding directly from the U.S. Treasury.
On March 21, 2022, the U.S. Treasury provided an update for NEUs and outlined what would be required to be reported on or before the first reporting deadline of April 30, 2022.
ARPA Past Activities
The City submitted the required documentation to the State of California last summer to receive the initial first tranche of ARPA funds. The funds were deposited into a new fund in the financial system to easily track revenues and expenditures. Staff has held eight public meetings with the Budget Committee to keep them appraised of all the updates from the U.S. Treasury since May 2021. City Council has proceeded with the following recommendations from the Budget Committee:
1. $0.2 million on 6/21/21 – Audio Visual & Broadcast System in Council Chambers
2. $1.5 million on 10/4/2021 – Gregory Garden Storm Drain Project
3. $0.5 million on 11/1/2021 – Business Grants and Assistance (i.e. Gift Card Program) ARPA Analysis
The U.S. Treasury has now released the Final Rule and the reporting compliance requirements that the City will need to complete by April 30, 2022. The Budget Committee and staff wanted to provide the City Council an update on the ARPA activities and request approval of the following items:
1. Elect the $10 million Standard Allowance Revenue Loss Category since the City is receiving less than the standard allowance. This selection will simplify the reporting and administrative requirements by the City.
2. Approve an appropriation and transfer of up to $0.25 million for expenses incurred for safety. The majority of the expenses are for additional cleaning required of City facilities and police vehicles and supplies from masks to COVID-19 tests.
One other item has been reviewed and recommended by the Budget Committee and will be coming to City Council in the near future. Allocation of $0.35 million for costs related to Digital Documentation Accessibility Project. This project will allow easier access to staff and the public to search and find files electronically.
FISCAL IMPACT
Appropriate and transfer up to $250,000 of ARPA funds to reimburse the City for safety expenditures otherwise these funds would need to be covered by the City’s General Fund.
PUBLIC CONTACT
Public contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the Pleasant Hill Senior Center, and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
Adopt the proposed resolution as recommended by the Budget Committee at their meeting of April 6th.
ALTERNATIVES TO RECOMMENDED ACTION
The Council could choose not to adopt the proposed resolution that would add additional costs and administration to track ARPA funds. Also, the project and safety costs would need to be funded by the General Fund.
Prepared by: Erick Cheung, Finance Manager
Approved by: June Catalano, City Manager