Agenda Item Wording:
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American Rescue Plan Act -Appropriate funding for the remaining American Rescue Plan Act (ARPA) projects and close out the grant.
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Deadline for Action: 12/16/2024
Submitting Department: Finance and Technology Services
Contact Name and Phone Number: Renee Nagel, renee.nagel@visalia.city, 713-4375
Department Recommendation:
Staff recommends that Council appropriates the remaining ARPA projects (up to $7.7 million) in the General Fund and complete the close out process with the US Department of Treasury.
Background Discussion:
The American Rescue Plan Act of 2021 (ARPA) is the $1.9 trillion economic stimulus bill signed in March 2021. The City of Visalia received $29,364,455 million in one-time funding. The US Department of Treasury (Treasury) designated these funds to be spent by local governments to provide healthier and safer indoor and outdoor environments for residents, visitors, and employees; assist with investments in outdoor spaces and programs that promote responsible public gatherings; help pay for essential services, more secure broadband, and other critical public infrastructure; and compensate cities for relevant first responder expenses. Expenditures or obligations from these funds must be between March 3, 3021, through December 31, 2024. Funds obligated by December 31, 2024, must be expended by December 31, 2026. Any funds not obligated or expended for eligible uses by this timeline must be returned to the US Treasury Department.
In December 2021, Council approved using the ARPA funds for 34 projects that complied with the Treasury's Eligibility Categories, the GFOA Guiding Principles, and the Council's Budget Goals.
Since December 2021, City staff has been working on these projects which includes purchasing equipment, initiating new City programs, and establishing contracts to design and construct City improvements. These projects must follow federal requirements which typically takes longer than projects using local funds. To date $21.6 million has been spent and $5 million has been obligated as shown in Table 1 - ARPA Projects by Category. Obligated are amounts still owned per the contract which will be paid once services are completed and invoiced. There is $2.7 million in projects that were unable to begin for various reasons or have began and are not obligated (under contract). The SWEEP program is an example of not being obligated due to being performed in house.
Table 1 - ARPA Projects by Category
In January 2025, the City is required to submit another quarterly report which will be through December 31, 2024. The $2.7 million will need to be returned as part of the close-out process which has not been established yet.
The current guidelines from Treasury are clear about obligated expenditures being allowed until December 31, 2026. However, it is unclear if the new administration in Washington, DC, will continue this policy. The Teasury Department has the authority to change guidelines (requirements) and has issued 6 versions to date with several changes to already established requirements. Staff is concerned that the $5 million, currently obligated, could be at risk and may be required to payback.
In an effort to maximize the ARPA funds and fully spend the funds, staff is recommending to close out the grant completely by changing the use categories. This means all obligated and unobligated funds will be charged to the 6.1 Revenue Replacement for Public Safety category. These expenses are considered "Provisions of Government Services" and would expend the remaining amount. These funds would then be appropriated in the General Fund to complete the remaining ARPA projects as approved by Council.
This process would allow the City to complete all listed projects without time constraints and federal requirements. ARPA reporting would show every project as 100% complete which is allowed under the ARPA guidelines and leaves no funding open to being returned to the Federal Treasury. In addition, staff met with a consultant who specializes in ARPA funding, and he agreed that this methodology is the most effective way to utilize all APRA funds. Staff will continue to submit all required ARPA reports through the official close out period.
Fiscal Impact:
In order to utilize all ARPA funds and complete the approved projects, staff recommends switching the obligated and remaining project funds (Approxmately $7.7 million) to the 6.1 Revenue Replacement category. This allows the General Fund to be reimbursed for salaries and benefits with ARPA funds and then re-appropriate these projects in the General Fund causing a net zero cost to the General Fund. This would allow the City to close out the ARPA Grant and eliminate the risk of having unused ARPA funds that would have to be returned to US Treasury at some point.
The final amount is anticipated to be less and will be calculated after all invoices are processed. Table 2 - ARPA Project Summary, shows the total estimated project cost.
Table 2 - ARPA Project Summary
Prior Council Action: On December 20, 2021, the Council approved the projects presented and appropriated the funding from the ARPA Fund (642).
Other: N/A
Alternatives: Keep the remaining projects in the ARPA fund and potential return $7.7 million to US Treasury through the Close Out process as unspent.
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to appropriate up to $7.7 million in the General Fund for the ARPA projects not completed.
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Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments: .