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HomeMy WebLinkAboutItem 01 American Rescue Plan Act of 2021 (ARPA =) GuidanceAGENDA ITEM SUMMARY Meeting Date: 9/13/2021 Meeting Type: Work Session Staff Contact/Dept.: Nathan Bell Staff Phone No: 541-726-2364 Estimated Time: 45 Minutes SPRINGFIELD Council Goals: Provide Financially CITY COUNCIL Responsible and Innovative Government Services ITEM TITLE: AMERICAN RESCUE PLAN ACT OF 2021 (ARPA) GUIDANCE ACTION Provide direction to City staff on the use of the City's ARPA allocation. REQUESTED: ISSUE The City received its first allocation of ARPA funds in May of 2021 and City staff STATEMENT: is looking for guidance on potential uses of these funds ahead of the first FY22 Supplemental Budget that is scheduled for the October 18' Council meeting. ATTACHMENTS: Attachment 1: Council Briefing Memorandum Attachment 2: General Fund Five-year Forecast DISCUSSION/ The American Rescue Plan Act of 2021 (ARPA) was signed into law by President FINANCIAL Joe Biden on March 11, 2021. It provides for 65 billion in direct allocation to IMPACT: cities. The City of Springfield will receive $13,956,221, to be paid in two equal payments with the first payment of $6,978,110 already deposited into the City's bank account on May 191, 2021 and the second payment expected one year later. City staff will be bringing the first FY22 Supplemental Budget to Council for adoption on October 18' in regular session. Staff will use the guidance provided this evening to incorporate any requested uses of ARPA funds in FY22 into this Supplemental Budget. MEMORANDUM City of Springfield Date: 9/13/2021 To: Nancy Newton, City Manager COUNCIL From: Nathan Bell, Finance Director BRIEFING Subject: ARPA GUIDANCE MEMORANDUM ISSUE: The City received its first allocation of ARPA funds in May of 2021 and City staff is looking for guidance on potential uses of these funds ahead of the first FY22 Supplemental Budget that is scheduled for the October 18' Council meeting. COUNCIL GOALS/ MANDATE: Financially Responsible and Stable Government Services BACKGROUND: The American Rescue Plan Act of 2021 (ARPA) was signed into law by President Joe Biden on March 11, 2021. It provides for 65 billion in direct allocation to cities. The City of Springfield will receive $13,956,221, to be paid in two equal payments with the first payment of $6,978,110 already deposited into the City's bank account on May 19', 2021 and the second payment expected one year later. While ARPA was signed into law in early March, details regarding qualifying uses and the amount the City would receive were not known until early May, well into the City's fiscal year 2022 (FY22) budget process and too late for thoughtful inclusion in the FY22 Budget recommended to Council for adoption on June 21St, 2021. It was decided at this time to schedule a work session in September to discuss qualifying uses of the funds and for Council to provide direction on how they would like to see the funds used. Over the previous months, the Federal Government has released additional guidance on the use of these funds and provided trainings that City staff have attended. From a publication from the U.S. Department of the Treasury, a broad summary of qualifying uses of ARPA funds is as follows: o Support Public Health Response o Replace Public Sector Revenue Loss o Water and Sewer Infrastructure o Address Negative Economic Impacts o Premium Pay for Essential Workers o Broadband Infrastructure Based on the Federal Guidance for revenue replacement, staff's calculation for lost revenue through December 31St, 2020 is just over $7M. With the qualifying period extending to December 31St, 2024, the City will most likely be able to qualify the entire $14M ARPA allocation under revenue replacement. This would be the easiest way, through an administrative and audit lens, to qualify the funds and allow for the broadest use. The only real restrictions are that the funds must be used for the provision of government services and cannot be used cover debt service, settlement agreement expense, or put into a reserve. Attachment 1, Page 1 of 5 Best Practices for Use of One -Time Funds: The ARPA funds are one-time in nature and best practice regarding the use of such funds is to use them for one-time or limited duration purposes. The Governments Finance Officers Association recently reinforced that practice with the release of recommended guiding principles for ARPA funds as follows: Temporary Nature ofARPA Funds. ARPA funds are non-recurring so their use should be applied primarily to non-recurring expenditures. Care should be taken to avoid creating new programs or add-ons to existing programs that require an ongoing financial commitment. Use of ARPA funds to cover operating deficits caused by COVID-19 should be considered temporary and additional budget restraint may be necessary to achieve/maintain structural balance in future budgets. Investment in critical infrastructure is particularly well-suited use of ARPA funds because it is a non-recurring expenditure that can be targeted to strategically important long- term assets that provide benefits over many years. However, care should be taken to assess any on-going operating costs that may be associated with the project. ARPA Scanning and Partnering Efforts. State and local jurisdictions should be aware of plans for ARPA funding throughout their communities. Local jurisdictions should be cognizant of state -level ARPA efforts, especially regarding infrastructure, potential enhancements of state funding resources, and existing or new state law requirements. Consider regional initiatives, including partnering with other ARPA recipients. It is possible there are many beneficiaries of ARPA funding within your community, such as schools, transportation agencies and local economic development authorities. Be sure to understand what they are planning and augment their efforts; alternatively, creating cooperative spending plans to enhance the structural financial condition of your community. Take Time and Careful Consideration. ARPA funds will be issued in two tranches to local governments. Throughout the years of outlays, and until the end of calendar year 2024, consider how the funds may be used to address rescue efforts and lead to recovery. Use other dedicated grants and programs first whenever possible and save ARPA funds for priorities not eligible for other federal and state assistance programs. Whenever possible, expenditures related to the ARPA funding should be spread over the qualifying period (through December 31, 2024) to enhance budgetary and financial stability. Adequate time should be taken to carefully consider all alternatives for the prudent use of ARPA funding prior to committing the resources to ensure the best use of the temporary funding. Attachment 1, Page 2 of 5 The influx of funds will undoubtedly benefit state and local finances, and aid in the recovery from the budgetary, economic, and financial impacts of the pandemic. Rating agencies will evaluate a government's use of the ARPA funds in formulating its credit opinion and, importantly, will consider your government's level of reserves and structural budget balance, or efforts to return to structural balance, as part of their credit analysis. Finance officers will play a critical role in highlighting the need to use ARPA funds prudently with an eye towards long-term financial stability and sustainable operating performance. The funding provided under ARPA provides a unique opportunity for state and local governments to make strategic investments in long-lived assets, rebuild reserves to enhance financial stability, and cover temporary operating shortfalls until economic conditions and operations normalize. Potential Uses of ABPA Funds: The Budget Team has continued to meet regularly to identify critical needs that could be addressed with these funds. Our guiding values when selecting project concepts for recommendation to Council are whether they are one-time in nature, provide a significant and visible community benefit, and help to address the General Fund's financial structural imbalance. In addition to the potential projects Council puts forward this evening, staff has complied some additional potential uses of these funds and cost estimates where available as follows: Cover Projected General Fund Deficit Spend — $4-5M — I have attached an updated five-year forecast that shows the projected deficit spend and declining reserves through FY26. ARPA funds can be expended through December 3151, 2024 and, if qualified under revenue replacement, could be used to cover the deficit spend through FY25. This would maintain current staffing and service levels and buy us precious time while we continue to work on solutions that address our long-term structural imbalance. Limited Duration Positions for Project Delivery — $300-450K annually — With the level of development currently happening in our community, state mandates around transportation, housing, and climate change, two urban renewal districts picking up in activity, and an infusion of Federal funds to be used in a short timeframe, staff analysis has determined the need for limited duration employees in key areas to assist in ARPA funding project delivery. The limited duration would be accomplished through posting as limited duration for some positions and vacancy management for others. Carter Building Remodel — $350-500K — Several systems are close to failure on the Carter Building and we have been limping them along with the thinking that the building would be torn down for a new library. We need to re -assess the future of this building and invest in it if we are going to continue using it as a lease property. Tenants in the building are a mix of for-profit and non-profit organizations including companies which represent key Springfield target sectors like the technology industry. The space has historically offered valuable right -sized startup spaces for these companies to grow while generating lease income in the range of 100K annually. The building needs a new roof, HVAC, siding, and other modernizations which represents the low end of the range with the higher end for other repairs that may be needed. City-wide Legacy Street Light Replacement — $2.5-3M — This has been a project that has been considered for many years but lacked funding. As a result, the lights are being replaced as they fail by SUB and at a greater cost than if we were to do it in whole as a single project. This project would also pay for itself in energy savings with an estimated break-even point of 11 years. Attachment 1, Page 3 of 5 Justice Center Roof Replacement — $300K — The roof to the Justice Center is failing prematurely and has an estimated remaining life of five years. City Hall Roof and HVAC Replacement — $5-6M — Over 40 of the HVAC units on City Hall are at end -of -life and risk of failure. Additionally, it's an outdated system that was designed for this building under a completely different use and without regard to the health of the occupants. With the assumption that this building will be the long-term City Hall, now would be a good time to modernize the HVAC system. This would mostly like involve 1-2 units on the ground and a complete reworking of our ductwork system. This would also necessitate a roof replacement and the corresponding seismic retrofits from doing that. Website Enhancement — TBD — The City's website could become a robust platform that better meets the needs of the Springfield community, businesses, partners, and staff by improving the way we provide services and information virtually. Throughout the pandemic, we've shifted and adopted new ways of doing business. The need for online accessible information, services, and interactions with the City has grown. It is anticipated that even in a post -pandemic world, the desire to access services and conduct business digitally anywhere and at any time will remain. Improving the website would move our organization forward in the effort to meet customer service needs 24/7. Council Chambers and Court Security — $150K — Council has made this a high priority project, however, funding has not yet been identified. FLS Radio Replacement — $450-600K — This would replace our Fire Department's existing radios, which are approaching end -of -life, with a model that could be used within buildings. This is a planned replacement without identified funding. Museum Elevator — $150K — The elevator serving the museum is at end -of -life and currently needing an expensive repair with an estimated cost of $ l OK. Rather than make an expensive repair on an outdated asset that may not have much life left, staff would recommend replacing it. The other two elevators are also approaching end -of -life and replacing one of the three with a modern technology would provide a level of security if we were to have a major failure and significant downtime of the others. These elevators play a critical role in providing all community members access to City services. City Hall Space Remodel — $100K — Our library has out -grown it's space and the technology infrastructure is not meeting community needs. There is a need for more diverse meeting and programming space and the teen and children's area has reached capacity for collections. Staff is looking for creative ways to address this space need. One idea is to relocate the City Manager's office to another location within City Hall, such as the vacant Fire Admin space, and allow the library to expand into that space. Revenue Share for Parks — TBD — While Special Districts have been impacted by the pandemic, no ARPA funds were directly allocated to them. Willamalane has exhausted different avenues for securing funding and has been told by their State representatives that funding for parks would come from the cities they reside in. Parks and recreation is typically a department within a City, however, Willamalane is relatively unique in being its own district. Willamalane has informally approached City staff and we expect a formal request soon. Based on the Federal Guidance for revenue replacement, Willamalane's calculation for lost revenue through December 31st, 2020 is just over $3.6M. Attachment 1, Page 4 of 5 City Hall External Security Camera System — $200K — Over the previous year, we have seen an increase in security issues around City Hall including multiple fires resulting in significant cost to the City. A security camera system would be a cost-effective way to monitor the facility and catch the perpetrators. North Gateway Planning_— $1 M — Determine how to address the transportation issues at GatewayBeltline as the critical path in realizing employment potential in North Gateway. Council Initiatives — TBD — Council may have some additional projects in mind that may align well with ARPA funds. Our goal for this evening is to start the conversation on how to best utilize the City's ARPA funds. As I mentioned earlier, we have until December 31, 2024 to expend the funds and therefore do not need to identify how to use the entire $14M allocation. We recognize that the use of these funds and the delivery of projects associated with it will happen in phases. We are looking for guidance on the first phase to be incorporated into the FY22 Supplemental Budget 1 so that work can begin in the current fiscal year. There will be more opportunities for future conversations as we put together future year budgets or other high priority needs emerge. RECOMMENDED ACTION: Provide direction to City staff on the use of the City's ARPA allocation Attachment 1, Page 5 of 5 General Fund Five Year Forecast Refresh Date: 8.25.21 Total Operating Revenue Operating Expenditures Personal Services Material & Services Capital Outlay Total Operating Expenditures Fiscal Transactions Transfer to Street Fund (1) Transfer to Ambulance Fund (2) Transfer to Reserve for ADA Projects (3) Transfer to Building Preservation Reserve (4) Transfer to Special Revenue Fund (5) Transfer to Development Assessment Capital Fund (6) Debt Service Total Fiscal Transactions TOTAL Expenditures Current Operating Revenue over Expenditures Beginning Cash Ending Cash Ending Cash as a Percent of Operating Expenditures Actual Actual Actual Actual Actual Adopted FCST FCST FCST FCST FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 $ 35,936,676 $ 37,128,696 $ 38,206,005 $ 40,006,281 $ 41,095,826 $ 40,213,596 S 41,827,382 $ 42,824,169 S 43,949,562 S 45,140,586 27,943,949 28,622,368 30,347,735 31,424,511 31,867,620 33,100,028 34,134,157 35,416,362 36,515,150 38,643,023 6,875,347 6,784,185 6,600,655 6,708,153 7,809,297 6,978,585 7,092,264 7,207,648 7,324,762 7,443,634 435,803 124,025 234,649 165,894 76,156 94,300 100,000 100,000 100,000 100,000 35,255,098 35,530,578 37,183,039 38,298,558 39,753,073 40,172,913 41,326,421 42,724,010 43,939,913 46,186,657 415,501 423,873 436,006 412,038 489,350 462,300 464,040 474,596 485,422 496,524 - - - - - 654,007 812,042 954,307 1,053,563 1,115,680 - 13,250 - 100,000 100,000 - - - - - - - - 400,000 400,000 - - - - - - - - 503,500 5,616 - - - - - - - - 64,293 56,312 56,312 56,311 56,311 56,311 56,311 532,103 - - - - - - - - - 947,604 437,123 436,006 1,479,831 1,051,278 1,172,619 1,332,393 1,485,214 1,595,296 1,668,515 36,202,702 35,967,701 37,619,045 39,778,389 40,804,351 41,345,532 42,658,814 44,209,224 45,535,209 47,855,172 (266,026) 1,160,995 586,960 227,892 291,475 (1,131,936) (831,432) (1,385,056) (1,585,646) (2,714,586) 8,666,256 8,574,037 9,735,032 10,321,992 10,549,884 10,841,359 9,709,423 8,877,991 7,492,935 5,907,289 $ 8,400,230 $ 9,735,032 $ 10,321,992 $ 10,549,884 $ 10,841,359 $ 9,709,423 $ 8,877,991 $ 7,492,935 $ 5,907,289 $ 3,192,703 24% 27% 28% 28% 27% 24% 21% 18% 13% 7% FISCAL TRANSACTIONS NOTES: 1.) Right of Way use fee charged by the Street Fund to the Stonnwater and Sanitary Sewer Funds. The fee is 5% of total revenues in those funds but 3% is transferred to the Street Fund to support work in the ROW. 2.) This transfer is an estimate based on the level of need projected in the Ambulance Fund. 3.) Transfer to reserve in the Development Projects Fund 420 to fund projects listed as needed in the City's ADA transition plan. 4.) Transfer to a reserve in the Vehicle and Equipment Fund 713 to save for building maintenance and preservation projects at City owned buildings. 5.) Transfer to Special Revenue Fund of Tech Fee Reserve, Library grant award and CMO special events budget. 6.) Transfer to Development Assessment Capital Fund for BOARD software purchase. Attachment 2, Page 1 of 1