Workshop Item - Joe Huss, Finance Director/Asst. City Manager
Title
Title
American Rescue Plan (ARP) Funding Discussion
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Background
On March 11, the American Rescue Plan Act (“ARPA” or “ARP”) of 2021, also called the COVID-19 Stimulus Package or American Rescue Plan, was signed into law. The act is a $1.9 trillion economic stimulus bill that builds upon previously enacted aid measures in 2020. Blaine’s total allocation is $6,793,793, and the first payment of $3,396,896.50, equaling one-half of the total of Blaine’s allocation, was received in June 2021. The balance of the allocation is expected by mid-2022.
In July 2021, a staff committee comprising the Finance Director, Public Works Director, Director of Administration, and Economic Development Specialist was formed. The committee reviewed the Act in greater detail and drafted a listing of potential uses of ARP funds in accordance with the act.
Eligible uses of ARP funds, and efforts thus far regarding these eligible uses, include:
• Assistance to households, small businesses, and non-profits to aid in the public health emergency response and address negative economic impacts caused by the emergency. Economic Development Specialist Ruth Tucker has researched this section of the Act and began reaching out to Blaine small businesses and non-profits. Attached to this summary is a list compiled by Ruth of potential uses of ARP funds for Community Development programs for businesses and non-profits. Staff is also researching the use of ARP to provide additional business assistance to both Fogerty Arena and the National Sports Center.
• To aid hard-hit industries such as tourism; travel; and hospitality. This is also included in the summary prepared by the Economic Development Specialist.
• Replace lost public sector revenue. Finance staff made an initial calculation using the calculator tool on the Treasury’s website. This staff calculation indicated Blaine did not have revenue loss that could be covered with ARP funds. Staff is considering performing a recalculation as the opportunity to claim ARP funds under revenue loss is still available. The benefit would be that any ARP funds used to cover revenue losses would be available to spend on programs outside of the narrow categories of: Assistance to households; businesses; non-profits; hard-hit industries; premium pay; and investment in infrastructure as defined in the Act.
• Provide premium pay for essential workers. Research indicates the City does not employ the types of positions that Treasury guidelines specifically refer to regarding premium pay.
• Invest in water, sewer, or broadband infrastructure. Treasury guidelines are strict in defining the infrastructure eligible for ARP funds - water, sanitary sewer, storm sewer, and broadband systems. Even under these narrowly defined uses, staff has identified a number of projects that are potentially eligible for ARP funding. A list of projects (and estimated cost of the project) that fall within this category, submitted by Public Works Director Jon Haukaas, are attached. The estimates are very high-level at this point with the understanding that the current supply chain volatility and inflationary market for infrastructure-related materials and labor could affect prices. Staff is also monitoring additional federal legislation that would provide funding for infrastructure projects outside of, or in addition to, ARP. Information regarding these programs is attached.
• Ineligible uses of ARP. ARP funds cannot be used to directly or indirectly offset tax reductions or delay a tax or tax increase, nor are ARP funds allowed to be deposited into a pension fund.
In late November, staff received updated information from Baker Tilly, the City’s Financial Advisor. Like the CARES Act, there may be game changing revisions to the rules. As such, Baker Tilly is advising its clients to “go slow” on implementation of the American Rescue Plan Act. As to exactly what a “go-slow” implementation might look like, staff is putting together a plan outline. The basic idea behind this approach is that there is no need to rush into decisions at this point, not only because of potential changes in how ARP funds may be used, but also the timeline for committing to projects is December 31, 2024. Additional information regarding
The recent Senate passage of the “State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act”, would allow states, tribes, territories, and localities to use certain COVID-19 relief funds for new categories of spending, including for natural disasters and new categories of infrastructure projects. It also makes changes to expenditure deadlines and other aspects of the ARPA.
Specifically:
- Recipients may use funds for emergency relief from natural disasters and associated negative economic impacts of natural disasters
- Recipients may use a portion of their COVID-19 relief funds for designated infrastructure projects, such as nationally significant freight and highway projects
- Allows recipients to obligate COVID-19 relief funds on these types of infrastructure projects until September 30, 2026. Under current law, recipients must obligate the funds by December 31, 2024
Other changes in the bill include:
1. Modifying eligibility and allocation requirements for funding set aside for counties and Indian tribes that are near public lands
2. Allowing Indian tribes an additional year to expend their COVID-19 relief funds
3. Establishing a process for government entities to decline COVID-19 relief funds and requiring any declined funds to be used to reduce the federal deficit
4. Permitting use of Fiscal Recovery Funds for the provision of government services up to an amount equal to the greater of:
a) the amount of calculated revenue loss; or
b) $10,000,000
Potential game changers include the expansion of road funding and the authority to use a minimum of $10 million in Fiscal Recovery Funds for government services. (Previously, only the amount of documented revenue loss could be used for this purpose.) Many local governments received less than $10 million in Fiscal Recovery Funds, so this legislation would permit use of the funds with very few restrictions.
Per Baker Tilly, the “Flexibility Act” has passed the Senate and is currently under consideration in the House. With 111 bipartisan House co-sponsors at this time, the legislation appears to be gaining momentum toward the President’s desk.
Next Steps
Following the Workshop discussion, staff will reconvene ARP review committee to draft an ARP plan for review at a later workshop. Steps would include:
• Reconvene staff ARP review committee
• Identify goals/projects
• Identify costs of projects and ability to fund
• Review plan with Council and prioritize spending plan
• Execute plan
• Monitor plan/projects
Staff Recommendation
Review staff report and discuss potential uses of ARP funds
Attachment List
ARP Economic Development Program Ideas
ARP Fund Infrastructure Ideas