MEMO
To: The City of Richmond
From: Witt O’Brien’s
Date: August 13, 2026; revised August 24, 2026; revised August 25, 2026 Re: ARPA Reallocation Guidance
____________________________________________________________________________________________ Background
Treasury required that all American Rescue Plan State and Local Fiscal Recovery (ARPA SLFRF) funds be obligated by December 31, 2024. In November 2023, Treasury published guidance that outlined the following limited and specific ways that ARPA SLFRF funds could be reallocated after the obligation deadline.
1. To replace contracts necessary to complete work that was originally obligated by the deadline but now needs a new contractor due to a contractor going out of business, nonperformance, or similar a similar circumstance.1
2. To cover cost increases as outlined in FAQ 17.16.2
3. To reclassify funds that were obligated by the deadline but ultimately not expended on an eligible activity. Reclassification must be from the original activity to another project that would be eligible under the SLFRF program rules, including the requirement that the recipient incurred an obligation by December 31, 2024, to expend funds on the activity.3 This includes use of funds to pay for “any permissible upward cost adjustments in other contracts or subawards”.
4 4. To cover the cost of amendments to contracts if the amended contract is within substantially the same scope and for substantially the same purpose as the contract that was incurred by December 31, 20245
Those funds that are reclassified after the obligation deadline will still need to adhere to the expenditure deadline of December 31, 2026.6
City of Richmond Reallocation Proposal
The North Richmond Pump Station project was completed under budget and has a remaining balance of $199,776.15. The City of Richmond wishes to reallocate the available funds to another ARPA project, Street Paving Management, which has incurred costs greater than its ARPA allocation. 1 State and Local Fiscal Recovery Funds Frequently Asked Questions, FAQ 17.17, p. 103. 2 State and Local Fiscal Recovery Funds Frequently Asked Questions, FAQ 17.19, p. 104. 3 State and Local Fiscal Recovery Funds Frequently Asked Questions, FAQ 17.19, p. 104. 4 State and Local Fiscal Recovery Funds Frequently Asked Questions, FAQ 17.19, p. 104. 5 State and Local Fiscal Recovery Funds Frequently Asked Questions, FAQ 17.16, p.101 6 State and Local Fiscal Recovery Funds: Obligation IFR Quick Reference Guide:
https://home.treasury.gov/system/files/136/Obligation_Interim_Final_Rule_Quick_Reference_Guide_2023.p df
The current ARPA allocation for Street Paving Management is $2,144,834; however, the project has eligible costs that exceed its current ARPA allocation. Moreover, Martin Marietta Materials, Inc., the contractor associated with the Street Paving Management project, has a total budget of ten million dollars. The contract was finalized, and the funds were obligated by July 2023, well before the obligation deadline. The City’s strategy is to move ARPA funding from the North Richmond Pump Station and move it to the ARPA PO tied to the Martin Marietta contract associated with Street Paving Management.
The following table outlines the adopted budgets and amount to be reallocated from AR240-North Richmond Pump Station to 01A05-Street Paving Management.
Project Name Adopted Budget Reallocation Amount Final Budget AR40-North Richmond
Pump Station $1,068,152.15 ($199,776.15) $868,376.00
01A05-Street Paving Management $2,144,834.00 $199,776.15 $2,344,610.15 The City of Richmond intends to seek the approval of City Council to proceed with the reallocation, which changes the original adopted ARPA budget.
Eligibility Considerations
Any Reallocation action taken by the County must account for Treasury requirements, including the following:
• The obligation deadline of December 31, 2024, has passed. Funds must be expended to a previously obligated project that is active and has not been closed out. • The active, obligated project must have eligible costs. o For example, expenditures that were paid with another funding source (i.e., General Fund, ESD Enterprise Fund) while keeping Federal/ARPA eligibility intact. • Following Treasury’s guidance, an obligation means “an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment.”7
o In addition to the executed contract, leverage purchase orders, and encumbrance details from MUNIS to demonstrate costs incurred.
• There will be no general closeout period, and all funds must be liquidated by the expenditure deadline of December 31, 2026, except for administrative funds. • Ideally, projects must be completed by the end of the period of performance (December 31, 2026). If projects continue beyond that period, Treasury will require additional reporting on the status of those projects until completion.
7 State and Local Fiscal Recovery Funds Frequently Asked Questions, FAQ 17.1, p.93. • The City of Richmond must ensure the funding being re-obligated to the Martin Marietta contract will not substantially change the scope of work.8 • The City of Richmond takes responsibility for all final decisions related to the eligibility of the reallocation of funds.
8 State and Local Fiscal Recovery Funds Frequently Asked Questions, FAQ 17.16, p.101 Conclusion
The reallocation of ARPA funding from the North Richmond Pump Station projects to Street Pacing Management is likely an eligible activity. Street Paving Management is an ARPA eligible project with costs exceeding the current ARPA allocation. The Martin Marietta Materials, Inc. contract for the project was executed on July 1, 2023, before the final obligation deadline of December 21, 2024. The City of Richmond should document the obligation and costs incurred for Street Paving Management with the contract, corresponding purchase orders/encumbrance details, and when possible, associated project budgets.