CITY OF POMONA
COUNCIL REPORT
December 5, 2022
To: Honorable Mayor and Members of the City Council
From: James Makshanoff, City Manager
Submitted By: James Makshanoff, City Manager
SUBJECT: POMONA JOBS PROGRAM (PJP) – USE OF CITY AMERICAN RESCUE PLAN (ARP) FUNDS RECOMMENDATION:
It is recommended that the City Council discuss and provide staff direction regarding the proposal (Attachment No.1) presented by Latino-Latina Roundtable of the San Gabriel and Pomona Valley (LRT), in partnership with the Institute for Ecological Civilization (EcoCiv) and the Wellbeing Economy Alliance California Hub (WEAll), which is seeking funding from the City of Pomona’s American Rescue Plan Act (ARP) funds to help launch the Pomona Jobs Program (the “PJP”).
EXECUTIVE SUMMARY:
The Latino-Latina Roundtable of the San Gabriel and Pomona Valley (LRT), in partnership with the Institute for Ecological Civilization (EcoCiv) and the Wellbeing Economy Alliance California Hub (WEAll), seek funding from the City of Pomona’s American Rescue Plan Act funds to help launch the Pomona Jobs Program (the “PJP”), a public jobs program that will establish an Anchor Institution Collaborative and industry-led High Road Training Partnerships to create at least 30 to 50 new, high-quality jobs for which program beneficiaries will be prepared and into which they will be hired by the end of the American Rescue Plan (ARP) Act grant funding deadline in December 2026. The complete proposal can be found in Attachment No. 1.
The U.S. Treasury issued the Final Rule with guidance on the funding allocation methodology, distribution process, and reporting requirements in January 2022. ARP funds must be obligated by December 31, 2024 and expended no later than December 31, 2026. The City has discretion to use the funds in ways to meet the needs of the community if the use fits into one of the following categories:
Public Health and Economic Impacts
Provide premium pay for essential workers
Replace public sector lost revenue
Invest in water, sewer, or broadband infrastructure
The ARP expenditure spending plan was last discussed with minor changes made at the November 21, 2022 City Council meeting.
City Staff and Best Best and Krieger (BBK) legal counsel have raised concerns whether this proposal is an eligible use of ARP funds.
FISCAL IMPACT:
The estimated cost per the budget proposed by the Latino-Latina Roundtable of the San Gabriel and Pomona Valley (LRT) is $630k which includes $338k for salaries and $292k for operating expenses that are defined as services and supplies as detailed in Table 1 (Page 21 in Attachment No.1). These salaries (positions costs) are estimated based on a 12-month cycle for the PJP. All costs for these expenses would be on a reimbursement basis, per the system set up via the ARPA Policies and Procedures approved by the Mayor and City Council on June 6, 2022. In addition, LRT has stated that they believe that the PJP will obtain additional, non-city funding to assist this program during the term of this grant, which will allow us to extend and expand the program beyond this grant’s timeframe. LRT and EcoCiv have together identified five major foundations that could support the project with program costs over the next four years, including one foundation from which LRT has received funding in the past. Moreover, EcoCiv already helped to secure a $50,000 grant from the John Templeton Foundation to LRT to support this work. LRT plans to use the $50,000 to increase their own organizational infrastructure to accommodate the increase in staff and the reporting requirements that the ARPA grant would bring. Each Councilmember was allocated $750k as part of the $45M ARP funds allocated to the City of Pomona. Councilmember Nolte is proposing to use a portion of his $750k ARP allocation funds for this project. Direction would be needed from the Mayor and City Council if the proposal was pursued to identify the exact ARP allocations from the most recently approved ARP expenditure spending plan to fund this proposal.
Table 1 – Pomona Jobs Program Estimated Annual Budget (Page 21 in Attachment No.1) PREVIOUS RELATED ACTION:
On June 7, 2021 as part of the FY 2021-22 adopted budget, $6.8M was budgeted in the General Fund for potential revenue loss and accepted the $45.37M of the ARP funds allocated to the City of Pomona by the US Treasury.
On August 9, 2021 an ARP study session was held, and discussion occurred regarding uses that will be eligible. The Mayor and City council provided direction and suggested a specific plan to allocate the $45.37M of the ARP funds.
On September 20, 2021 the Mayor and City Council approved the $45.37M City of Pomona ARP Expenditure Plan.
On November 15, 2021 as part of the FY 2021-22 1st Quarter, update to the Expenditure Plan was approved and $2.07M of ARP funds were appropriated for one-time payments included in the respective bargaining unit agreements.
On December 6, 2021the City Council approved appropriation of $6.9M of ARP funds for capital improvement projects – Park Restroom Construction Replacement, Mission Blvd Rehabilitation (White Ave to Towne Ave), and Garey Ave Rehabilitation (Aliso Street to Monterey Ave).
On December 20, 2021 an ARP Sub-committee consisting of the Mayor, and two (2) council members to assist with the process to appropriate the ARP funds for the specific programs and projects as set forth in the City Council approved ARP spending plan was formed.
On February 28, 2022 an update to the ARP Spending Plan was approved to transfer $544,901 for City support related to the pandemic.
On April 18, 2022 the City Council approved ARP appropriations of $370k for Buena Vista Avenue Rehabilitation – Mission Blvd to 9th Street and $500k Philadelphia Street Rehabilitation – San Antonio Avenue to East City Limit.
On May 16, 2002 an update to the ARP Spending Plan was approved to transfer $106k District 2 Microgrants and a status update of ARP FY 2021-22 Appropriations and FY 2022-23 Proposed Budget Appropriations was provided.
On June 6, 2022, the City Council approved the Proposed ARPA Policies and Procedures and the Adopted FY 2022-23 budget that included appropriations increase of $500k to be used from ARP funds for Library youth services. An update to the ARP Spending Plan was approved to allow a reduction of $250k from the Health and Wellness Activities category, as well as a reduction of $250k from the Participatory Budget category to fund this increase to the Library.
On August 15, 2022, an update to the ARP Spending Plan was approved to allocate $1M for Citywide Rental Stabilization start up costs for consultant services, legal aid, and future work by City staff, $1.15M for Health and Wellness for possible uses including but not limited to concerts and community events as coordinated by the Mayor and councilmembers with City staff, mainly Neighborhood Services Department, $1.06M for Small Business Grants to fully appropriate funds allocated for this program, $600k for Real Time Crime Center (RTCC) which includes live-feed cameras on Holt Avenue ($300k) and build out of RTCC ($300k, and $200k for ARP Administration – Best, Best & Krieger support services, consultant services for subrecipient monitoring and ARP staffing services in Finance and Neighborhood Services.
On November 21, 2022, an update to the ARP Spending Plan was approved to allocate $211k for the Police Departments COPS Technology and Equipment Grant. This amount was offset from the General Fund Budget Shortfall category.
DISCUSSION:
City Staff has met with Councilmember Nolte regarding this proposed use of ARP funds. As mentioned, each Councilmember was allocated $750k as part of the original ARP expenditure spending plan approved in September 2021. To ensure the City of Pomona ARP funds are eligible for all intended uses, staff has relied on assistance from the Washington DC division of Best, Best & Krieger (BBK) to confirm that any use of the ARP funds are consistent with the US Treasury guidelines established in March 2021 and followed by the Final Rule that was issued in January 2022 (Attachment No 2). In reviewing the PJP proposal (Attachment No.1) which has been revised based on feedback, staff has identified several concerns from a Federal compliance standpoint based on the interpretations of the guidelines as well as the City of Pomona’s prior experiences of using Federal HUD grants mainly in the Neighborhood Services Department, Housing Services Division. Since the original discussion, the proposers have made significant updates in an effort to comply with the ARP guidelines. However, staff still has many concerns and are summarized herein:
The project application does not provide all of the information necessary for the City to move forward with the proposed project. Federal regulations at 2 C.F.R. 200.332 require the City to manage its subrecipients, and to ensure that the City’s subrecipients comply with all applicable federal laws and regulations. Section 200.332 further requires the City to consider the subrecipient’s ability to comply with federal requirements, and past experience doing the same. To date, the project applicants have not been entirely clear who will be managing the project and how they intend to comply with federal procurement requirements. Specifically, it is still unclear which entity the City is going to contract with – Latino-Latina Roundtable, Eco-Civ or some new jointly formed non-profit? The application/proposal has not identified other “partners” of the proposal subcontractors of the Latino-Latina Roundtable. There are additional details about the proposal that need to be worked out before the City can move forward. It is not impossible to cure these defects, but it will take time and resources from the City. The City’s investment of those resources for this project could create the appearance of a conflict of interest because the City is not making such efforts for other proposed projects funded with ARP funds.
The proposed project appears to be very administrative cost heavy in a way that has not been clarified and that Treasury could view as violating federal cost principles. Federal regulations at 2 C.F.R. 200.401 and 200.404 require the City to ensure that subrecipient project costs are reasonable, and have the appropriate allocations for administrative and direct costs. Specifically, 2 C.F.R. 200.404 requires the City to ensure that the subaward costs are “of a type generally recognized as ordinary and necessary” for the proposed project; whether the proposed project would “employ sound business practices; arm's-length bargaining; . . . and other terms and conditions” of ARPA; and whether the project would be paying “market prices for comparable goods or services for the geographic area.” Additionally, federal regulations at 2 C.F.R. 200.332 require the City to limit indirect costs in subrecipient awards. Generally, indirect costs are limited to 10% of the total award. (2 C.F.R. 200.332(a)(4)(ii); 200.414(f).) Costs in excess of that amount are prohibited. (2 C.F.R. 408.) Federal regulations define indirect costs to include salaries and other costs related to basic operations of a non-profit. (2 C.F.R. 200 Appendix IV). The exact numbers are calculated on the type of project and the role of each salaried employee.
The following facts complicate these determinations for the City:
The project proposal includes a proposed budget that is mostly for salaries for consultants to develop the job placement program. The budget is heavy with subcontractors that are not actually working on the core eligible activity of “Assistance to individuals who want and are available to work.” It is difficult for the City to determine, based on the information provided in the project proposal, whether the number of consultants and their salaries is reasonable.
The project proposal would create between 30 and 50 jobs for low income residents of Pomona. The cost per job would range from $12,500 per job to $21,000 per job. Based on the information provided in the proposal, it is difficult to determine whether this is a reasonable expenditure.
The project proposal states that it will create between 30 and 50 jobs, but it includes limited information about how the project will actually place employees and lacks measurable deliverables to demonstrate success.
The project proposal does not allocate salaries and other costs between indirect and direct classifications. This can be a complicated determination that will take time to work out with the project applicant should the City move forward with the proposal.
The proposed project includes limited information about how it will create jobs for beneficiaries. ARPA regulations allow funds to be spent in specific categories and further provide that projects aimed at economic development must benefit certain classes of people. ARPA regulations state that:
Under this approach, eligible uses to respond to the negative economic impacts of the public health emergency are organized based on the type of beneficiary: (1) Assistance to households, (2) assistance to small businesses, and (3) assistance to nonprofits, alongside a fourth standalone eligibility category for aid to travel, tourism, hospitality, and other impacted industries. The first three categories, assistance to households, small businesses, and nonprofits, include enumerated eligible uses for impacted and disproportionately impacted beneficiaries. (87 Fed Reg 4343) Job placement programs are an allowed, enumerated use under Treasury’s ARPA guidelines:
public jobs programs, subsidized employment, combined education and on-the-job training programs, or job training to accelerate rehiring or address negative economic or public health impacts experienced due to a worker’s occupation or level of training’’ are all enumerated eligible uses as assistance to unemployed or underemployed workers. (87 Fed Reg 4369) The project proposal includes a description of the goal of creating 30 to 50 jobs and matching employees with employers. However, the description of how this will occur is limited and lacks measurable benchmarks that the City could use to ensure the ARPA funds are being directed to the intended beneficiaries rather than the non-profit organization. The proposal as written is arguably compliant with the requirements of ARPA, but the lack of measurable benchmarks makes it difficult for the City to comply with the other federal procurement regulations that accompany ARPA.
The City’s involvement in the project has created an appearance of favorable treatment that the Treasury Department could view as violating federal regulations and grant conditions. Federal Regulations at 2 C.F.R. 200.318(c)(1) state:
No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract.
The preamble to Treasury’s final ARPA rule includes a similar requirement:
Decisions concerning SLFRF must be free of undisclosed personal or organizational conflicts of interest, both in fact and in appearance. Recipients may avoid conflicts of interest in awarding aid to impacted industries by, inter alia, making aid available to businesses in the industry on generally applicable terms or utilizing a competitive grant process. A recipient may not use control over SLFRF for their own private gain. Furthermore, no employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest. (87 Fed Reg 4383, fn 240) As part of accepting the Award Terms and Conditions for SLFRF, each recipient agreed to maintain a conflict-of-interest policy consistent with 2 CFR 200.318(c) that is applicable to all activities funded with the SLFRF award. This award term requires recipients and subrecipients to report to Treasury or the pass-through agency, as appropriate, any potential conflict of interest related to the award funds per 2 CFR 200.112. Pursuant to this policy, decisions concerning SLFRF funds must be free of undisclosed personal or organizational conflicts of interest, both in fact and in appearance. Consistent with this policy, elected officials are prohibited from using their official position and control over SLFRF funds for their own private gain. (87 Fed Reg 4400) The following facts could create an appearance of favoritism or conflict of interest that could be viewed as violating these requirements:
This proposal was unsolicited and did not go through any procurement process like the other ARPA funded programs that we have funded. Federal regulations do not require subawards like the one being proposed to be publicly or competitively bid. However, as noted above, the Treasury’s ARPA regulations encourage this kind of public input and the City has used a public application process for its other ARPA projects.
No members of the City of Pomona staff or Councilmembers have a current, official position with either the Latino-Latina Roundtable or EcoCiv, the other non-profit organization that would be involved in the proposed project. Nor would anyone from the City receive any financial gain from this project. However, at least one member of the Council has been a board member of the Latino-Latina Roundtable as recently as December 2021 and has received awards from them as well that could be seen as a potential conflict of interest, both in fact and appearance. When coupled with the non-bid award, and the Councilmember’s other efforts to promote this project, this kind of intangible benefit could be viewed as violating section 318(c)(1) and ARPA’s grant conditions and guidance.
Staff has no objection to the PJP program as written, but as stated within this report, the ARP US Treasury guidelines are not clear that the ARP funds can be used in this matter. If the Mayor and City Council would like to pursue this project using ARP funds, it is possible that Treasury may in the future determine that the expenditure did not comply with applicable federal regulations and the City may be required to repay the funds from the General Fund. In that instance, the City may also have difficulty obtaining federal grants under other programs in the future.
ALTERNATIVE(S):
The City Council has the following alternatives:
Do not pursue proposal
Instruct staff to attempt to pursue other non-federal funding alternatives if available.
ATTACHMENT(S):
Attachment No. 1 – Proposal Pomona Jobs Program
Attachment No. 2 – Final Rule
Pomona Jobs Program (PJP) – Use of American Rescue Plan (ARP) Funds