TO: ADAM PIRRIE, CITY MANAGER
FROM: JEREMY STARKEY, FINANCE DIRECTOR
DATE: OCTOBER 8, 2024
Reviewed by:
City Manager: AP
SUBJECT:
Title
AMERICAN RESCUE PLAN ACT (ARPA) UPDATE AND FUND BALANCE
Body
SUMMARY
On March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law by President Biden. In May 2021, The United States Department of the Treasury (Treasury) published the Interim Final Rule (IFR) describing eligible and ineligible uses of funds (as well as other program provisions), sought feedback from the public on these program rules, and began to distribute funds.
On January 6, 2022, the Treasury issued its Final Rule, which took effect on April 1, 2022. The final rule delivers broader flexibility and greater simplicity in the program, responsive to feedback received during the comment process. The final rule provides state and local governments with increased flexibility to pursue a wider range of uses, as well as greater simplicity so governments can focus on responding to the crisis in their communities and maximizing the impact of their funds. Among other clarifications and changes, the final rule offers a standard allowance for revenue loss of up to $10 million. Recipient agencies that select the standard allowance may use that amount, in many cases their full award, for general government services, with streamlined reporting requirements. The City of Claremont received $8.7 million in ARPA funding and is therefore eligible to use the standard allowance for the full amount of the City's APRA allocation.
In March 2022, the City conducted two surveys with community members and businesses, asking for input on what ARPA funding priorities they would like to see for the community. The 385 community respondents ranked thirteen potential uses of the funding in the Claremont community which were most important to them, while twenty-seven businesses provided feedback on the types of assistance that would be helpful for their businesses/ organizations now and in the future.
In May 2022, the City Council authorized the appropriations of $4.5 million in ARPA funds and provided direction to staff to return with recommendations on the remaining $4.1 million. Throughout the 2022-24 Budget period, additional funds were allocated and appropriated by the City Council.
In June 2024, the City Council made additional allocations and appropriations of ARPA funds that would be included in the 2024-26 Budget. The purpose of this staff report is to provide an update on ARPA funding used as of the date of this report and provide an update on remaining funds included in the current budget.
RECOMMENDATION
Recommended Action
Staff recommends the City Council receive and file the American Rescue Plan Act Update and Fund Balance report.
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ALTERNATIVE TO RECOMMENDATION
In addition to the recommendation, there is the following alternative:
• Request additional information from staff.
FINANCIAL REVIEW
The staff cost to prepare this report is estimated at $3,350 and is included in the operating budget of the Financial Services Department.
ANALYSIS
The Final Rule was released by the Treasury on January 6, 2022 and took effect on April 1, 2022. State and local funding allocated in the American Rescue Plan Act is subject to the specifications outlined in the Final Rule. The Final Rule also provided a comprehensive list of eligible, encouraged, and prohibited expenditures.
Claremont had elected to use the standard allowance for determination of revenue loss in order to use the allocated amount of $8.7 million for revenue replacement. Recipient agencies that select the standard allowance may use the amount allocated for general government services, with streamlined reporting requirements.
Claremont has been required to submit annual reports through the Treasury portal on the Project and Expenditure Report form. The first annual report was due in April 2022 and two updates were provided each April in 2023 and 2024. Each of the annual reports indicated that Claremont has elected to use the standard allowance to allocate the entire $8.7 million as revenue replacement.
A key deadline approaches on December 31, 2024, which requires that all funds awarded, including those allocated as revenue replacement, be obligated according to the Treasury’s definitions. Funds obligated by December 31, 2024 are allowed to be spent through the end of December 31, 2026.
As of the date of this ARPA update, staff is providing the following breakdown on the status of the funds awarded to the City. The table below shows the amounts expended (spent) according to the program or project that was approved by City Council.
The total amount of ARPA funds awarded to the City is $8.7 million, of which $8.0 million has been expended, appropriated or authorized through the budget. As of the date of this report, $4.7 million has been expended with the remaining $4.0 million to spend. Of the unspent funds, approximately $3.3 million has been appropriated or authorized and will require further action to meet the obligation requirement. Additionally, another $0.7 million, which has not yet been appropriated, will need to be obligated by the deadline.
The Treasury’s Final Rule requires that all funds must be obligated by December 31, 2024. Staff will also encumber or obligate additional ARPA funds in the next few months for items included in the 2024-26 Budget to meet this threshold. Funds obligated by December 31, 2024 are allowed to be spent through the end of December 31, 2026.
In cooperation with Hdl ECONSolutions (the consultant contracted to support the City in the administration and reporting of ARPA funds), staff will bring another report to the City Council before the end of this year to memorialize the decision to allocate the ARPA funds awarded to the City as revenue replacement.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City’s strategic and visioning documents and finds that it applies to the following City Planning Documents: Council Priorities, Sustainable City Plan, Economic Sustainability Plan, General Plan, and the 2024-26 Budget.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by:
Jeremy Starkey
Finance Director