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05/25/2021 04 American Rescue Plan Act guiding principles 't..an,gtntj ka d E$A aY !,?) BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEM ENT Item No. 4. For Meeting of: May 25, 2021 ITEM TITLE: American Rescue Plan Act guiding principles SUBMITTED BY: Bob Harrison, City Manager Steve Groom, Director of Finance and Budget SUMMARY EXPLANATION: US Department of Treasury released its "Interim Final Rule" guidance on May 10, 2021 which now provides local governments the initial rules on accessing funding to address economic harm resulting from the COVI D-19 emergency. The program is to cover budgetary and financial stability needs through 2024. Staff will provide information, analysis and process planning to assist council policy-level decision making. ITEM BUDGETED: NA STRATEGIC PRIORITY: Public Trust and Accountability APPROVED FOR SUBMITTAL BY THE CITY MANAGER RECOMMENDATION: ATTACHMENTS: Description Upload Date Type re 5/21/2021 r Me 2 MEMORANDUM TO: Honorable Mayor and members ofthe Yakima City Council From: Bob Harrison, City Manager Date: May21, 3021 RE: ARPAGuide|ines 4RPAGuide|ines The City ofYakima is to receive approximate$26 million in American Rescue Plan Act(ARPA)funds. This will be distributed in two payments of approximately$13 million each. The first payment was received on May 19, 2021. The second payment will be in 2022° The City has 4 years to obligate the funds for various projects. Attached isa fact sheet which has more COUNCIL STRATEGIC PRIORITIES detailed information on the Act and how itcan be ^ utilized. Below are some suggestions from the Public Safety Administration for Council consideration. We also Investment in Infrastructure would use the Council strategic priorities to help guide Strengthening Partnerships usin the evaluation of potential projects. These Housing _ categories are fairly broad as the City has several Fisco/Susto/nob///ty projects for which m/e have applied for grants that, if funded, could lessen the need for ARPA funds. ^— �----�----�� The general categories follow: Lost Revenue Cities are allowed to recover lost revenue. Treasury's interim final rule establishes a methodology that each recipient can use to calculate its reduction inrevenue. Treasury provides a process for this calculation with the Finance Director was using to calculate the lost revenue number for the City of Yakima. However,there are some challenges in the formula used for lost revenue that need to be clarified in order to calculate the final number. Most importantly, once a shortfall in revenue is identified,the City will have broad latitude to use the ARPA funds to support government services, up to this amount of lost revenue. Given that the City has such latitude, and that the City was able to balance the budget last year due to reductions in some expenses, we would suggest acquiring 2 fire engines and ordering several police vehicles. The 2022 budget shall include a transfer to an Equipment Replacement Fund. Over time, by funding the depreciation of this equipment annually,the City will have the cash available to pay for fire apparatus and police vehicles on a regular replacement schedule and when these items are due. o Investing in water and sewn/ infrastructure � The Act allows for investment in the Citxs water and sewer infrastructure. VVe would suggest investments in the following: * Mill Site Water/Sewer: The City is obligated to add water and sewer infrastructure in the ROW tu serve the future development of the Mill site. ARPA funding could be used for this project. Additionally, because it is in the LIFT area,the City is able to leverage the LIFT to match dollar for dollar up to $l million annually. w Unaexvered areas (existing neighborhoods): The City has several neighborhoods that don't have access tnthe municipal sewer system. The City has submitted a request for a congressionally directed appropriation for$2.S million through Senator Murray's office. Attached are some maps ofunsexvered areas in the City. • Unsexvered Areas(Potential growth opportunitied: There could bea sewer interceptor installed that would allow the City to provide sewer service to portions of Terrace Heights that have future development opportunities that would require annexation into the City. , Addressing the negative economic impacts caused by the public health emergency In this category,to help alleviate economic hardships caused by the pandemic,the City of Yakima may provide aid too individuals and households, small businesses, and impacted industries. The good news , is that the City of Yakima was able to provide over$2 million in grants to businesses and non-profit agencies with last year's CARES act dollars. Furthermore, with the State anticipating lifting restrictions by the end of June 2021, many of our businesses that were hard hit due to virus mitigation policies(like shutdowns) should be recovering financially. Opportunities in this category include: , * Delivering assistance to workers and families, including aid to unemployed works and job _ training, as well as aid to households facing food, housing, or other financial insecurity. • Supporting small businesses through loans,grants, in-kind assistance, and business counseling programs toassist in their rebound from the economic downturn. This support would be to help them address financial challenges caused by the pandernic and to make investments in COV|D'19 prevention and mitigation tactics. • Speeding the recovery of the tourism,travel, and hospitality sectors. Similarly impacted economic sectors within a local area are also eligible for support. � Supporting the Public Health Response � ARPA funds may be used to address broad range of public health needs acrossCOV|D'19 mitigation, , medical expenses, behavioral healthcare, and public health resources. Opportunities in this area include: * Services and programs to contain and mitigate the spread of COVID-19, including support for prevention, mitigation, or other services in congregate living facilities and schools. � 4 � Capital investments in public facilities to meet pandenmicoperational needs are eligible expenses. w Services to address behavioral healthcare needs exacerbated by the pandemic, including mental health treatment, substance misuse treatment, crisis intervention,services or outreach to promote access to health and social services. Serving the hardest-hit communities and families There are several opportunities in this category for partnerships and targeted service, Afevvexanop|es of eligible services include: * Addressing health disparities and the social determinants of health including community violence intervention programs ` � * Investments in housing and neighborhoods, such as services to address individuals experiencing homelessness, and affordable housing development. w Addressing educational disparities through new or expanded early learning services, providing additional resources to high-poverty school districts, and offering educational services like tutoring or afterschool programs as well as services to address social, emotional, and mental health needs * Promoting healthy childhood environments, including new or expanded high quality childcare, home visiting programs for families with young children, and enhanced service for child welfare- involved fanni|iesandfosteryouth. There are two additional categories of opportunities to utilize funds including providing premium pay for essential workers and investing in broadband infrastructure. There is more information inthe attachment on these two categories. Next Steps 1. The Administration will continue to look at existing and potential new partnerships within our community to address issues identified in the strategic priorities in order to make strategic investments that will move the needle an some of our longstanding issues. Our goal would be to report back to the Council study session on September 7,�~xvithpotenda| partnershipsfor Council consideration. 3. We will continue to work with our professional associations and our federal officials tmget clarity around the lost revenue challenges. VVe will report back to Council once that has been definitively answered. 3. We have several grants applications that have been submitted to federal agencies. Either through an established grant process oran earmark request. Given that there iypotential overlap in all of these areas(between an earmark and the use of ARPA funds),these grant award decisions should be known byfall. 4. We won't wait till September 7, if we are able to get answers to some of these questions by then. We will report back to Council if we are able to finalize some of these items in advance of n Septemmber7. This will also provide the Administration some time before the City budget for � 2023 to incorporate the areas of focus for ARPAfunds in the 2022 budget. , ' , ° � Distributed at the, Meeting s- s-o iw LJ- FACT SHEET: The Coronavirus State and Local Fiscal Recovery Funds Will Deliver $350 Billion for State, Local, Territorial, and Tribal Governments to Respond to the COVID-19 Emergency and Bring Back Jobs May 10,2021 Aid to state, local, territorial, and Tribal governments will help turn the tide on the pandemic, address its economic fallout, and lay the foundation for a strong and equitable recovery Today,the U.S. Department of the Treasury announced the launch of the Coronavirus State and Local Fiscal Recovery Funds, established by the American Rescue Plan Act of 2021,to provide$350 billion in emergency funding for eligible state, local,territorial, and Tribal governments. Treasury also released details on how these funds can be used to respond to acute pandemic response needs,fill revenue shortfalls among these governments, and support the communities and populations hardest-hit by the COVID-19 crisis. With the launch of the Coronavirus State and Local Fiscal Recovery Funds, eligible jurisdictions will be able to access this funding in the coming days to address these needs. • State, local,territorial, and Tribal governments have been on the frontlines of responding to the immense public health and economic needs created by this crisis—from standing up vaccination sites to supporting small businesses—even as these governments confronted revenue shortfalls during the downturn. As a result,these governments have endured unprecedented strains,forcing many to make untenable choices between laying off educators,firefighters, and other frontline workers or failing to provide other services that communities rely on. Faced with these challenges, state and local governments have cut over 1 million jobs since the beginning of the crisis. The experience of prior economic downturns has shown that budget pressures like these often result in prolonged fiscal austerity that can slow an economic recovery. To support the immediate pandemic response, bring back jobs, and lay the groundwork for a strong and equitable recovery,the American Rescue Plan Act of 2021 established the Coronavirus State and Local Fiscal Recovery Funds, designed to deliver$350 billion to state, local,territorial,and Tribal governments to bolster their response to the COVID-19 emergency and its economic impacts. Today,Treasury is launching this much-needed relief to: • Support urgent COVID-19 response efforts to continue to decrease spread of the virus and bring the pandemic under control; • Replace lost public sector revenue to strengthen support for vital public services and help retain jobs; • Support immediate economic stabilization for households and businesses; and, • Address systemic public health and economic challenges that have contributed to the inequal impact of the pandemic on certain populations. The Coronavirus State and Local Fiscal Recovery Funds provide substantial flexibility for each jurisdiction to meet local needs—including support for households, small businesses, impacted industries, essential workers, and the communities hardest-hit by the crisis. These funds also deliver resources that recipients can invest in building, maintaining, or upgrading their water, sewer, and broadband infrastructure. 1 Starting today, eligible state,territorial, metropolitan city,county, and Tribal governments may request Coronavirus State and Local Fiscal Recovery Funds through the Treasury Submission Portal. Concurrent with this program launch,Treasury has published an Interim Final Rule that implements the provisions of this program. FUNDING AMOUNTS The American Rescue Plan provides a total of$350 billion in Coronavirus State and Local Fiscal Recovery Funds to help eligible state, local,territorial, and Tribal governments meet their present needs and build the foundation for a strong recovery. Congress has allocated this funding to tens of thousands of jurisdictions. These allocations include: Amount Type ($ billions) States& District of Columbia $195.3 Counties $65.1 Metropolitan Cites $45.6 Tribal Governments $20.0 Territories $4.5 Non-Entitlement Units of $19.5 Local Government Treasury expects to distribute these funds directly to each state,territorial, metropolitan city, county, and Tribal government. Local governments that are classified as non-entitlement units will receive this funding through their applicable state government. Treasury expects to provide further guidance on distributions to non-entitlement units next week. Local governments should expect to receive funds in two tranches,with 50% provided beginning in May 2021 and the balance delivered 12 months later. States that have experienced a net increase in the unemployment rate of more than 2 percentage points from February 2020 to the latest available data as of the date of certification will receive their full allocation of funds in a single payment;other states will receive funds in two equal tranches. Governments of U.S.territories will receive a single payment. Tribal governments will receive two payments,with the first payment available in May and the second payment, based on employment data,to be delivered in June 2021. USES OF FUNDING Coronavirus State and Local Fiscal Recovery Funds provide eligible state, local,territorial, and Tribal governments with a substantial infusion of resources to meet pandemic response needs and rebuild a stronger, more equitable economy as the country recovers. Within the categories of eligible uses, recipients have broad flexibility to decide how best to use this funding to meet the needs of their communities. Recipients may use Coronavirus State and Local Fiscal Recovery Funds to: 2 • Support public health expenditures, by funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff; • Address negative economic impacts caused by the public health emergency, including economic harms to workers, households, small businesses, impacted industries, and the public sector; • Replace lost public sector revenue, using this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic; • Provide premium pay for essential workers, offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and, • Invest in water,sewer,and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet. Within these overall categories,Treasury's Interim Final Rule provides guidelines and principles for determining the types of programs and services that this funding can support,together with examples of allowable uses that recipients may consider. As described below,Treasury has also designed these provisions to take into consideration the disproportionate impacts of the COVID-19 public health emergency on those hardest-hit by the pandemic. 1. Supporting the public health response Mitigating the impact of COVID-19 continues to require an unprecedented public health response from state, local,territorial, and Tribal governments. Coronavirus State and Local Fiscal Recovery Funds provide resources to meet these needs through the provision of care for those impacted by the virus and through services that address disparities in public health that have been exacerbated by the pandemic. Recipients may use this funding to address a broad range of public health needs across COVID-19 mitigation, medical expenses, behavioral healthcare, and public health resources. Among other services,these funds can help support: • Services and programs to contain and mitigate the spread of COVID-19,including: ✓ Vaccination programs ✓ Enhancement of healthcare capacity, ✓ Medical expenses including alternative care facilities • Testing ✓ Support for prevention, mitigation,or ✓ Contact tracing other services in congregate living ✓ Isolation or quarantine facilities and schools ✓ PPE purchases ✓ Enhancement of public health data ✓ Support for vulnerable populations to systems access medical or public health services ✓ Capital investments in public facilities to ✓ Public health surveillance (e.g., meet pandemic operational needs monitoring for variants) ✓ Ventilation improvements in key settings ✓ Enforcement of public health orders like healthcare facilities ✓ Public communication efforts 3 • Services to address behavioral healthcare needs exacerbated by the pandemic,including: ✓ Mental health treatment V Crisis intervention ✓ Substance misuse treatment ✓ Services or outreach to promote access ✓ Other behavioral health services to health and social services V Hotlines or warmlines • Payroll and covered benefits expenses for public health, healthcare, human services, public safety and similar employees,to the extent that they work on the COVID-19 response. For public health and safety workers, recipients can use these funds to cover the full payroll and covered benefits costs for employees or operating units or divisions primarily dedicated to the COVID-19 response. 2. Addressing the negative economic impacts caused by the public health emergency The COVID-19 public health emergency resulted in significant economic hardship for many Americans. As businesses closed, consumers stayed home, schools shifted to remote education,and travel declined precipitously, over 20 million jobs were lost between February and April 2020. Although many have since returned to work, as of April 2021,the economy remains more than 8 million jobs below its pre- pandemic peak, and more than 3 million workers have dropped out of the labor market altogether since February 2020. To help alleviate the economic hardships caused by the pandemic, Coronavirus State and Local Fiscal Recovery Funds enable eligible state, local,territorial, and Tribal governments to provide a wide range of assistance to individuals and households,small businesses,and impacted industries, in addition to enabling governments to rehire public sector staff and rebuild capacity. Among these uses include: • Delivering assistance to workers and families, including aid to unemployed workers and job training, as well as aid to households facing food, housing, or other financial insecurity. In addition,these funds can support survivor's benefits for family members of COVID-19 victims. • Supporting small businesses, helping them to address financial challenges caused by the pandemic and to make investments in COVID-19 prevention and mitigation tactics, as well as to provide technical assistance. To achieve these goals, recipients may employ this funding to execute a broad array of loan,grant, in-kind assistance, and counseling programs to enable small businesses to rebound from the downturn. • Speeding the recovery of the tourism,travel,and hospitality sectors,supporting industries that were particularly hard-hit by the COVID-19 emergency and are just now beginning to mend. Similarly impacted sectors within a local area are also eligible for support. • Rebuilding public sector capacity, by rehiring public sector staff and replenishing unemployment insurance (UI)trust funds, in each case up to pre-pandemic levels. Recipients may also use this funding to build their internal capacity to successfully implement economic relief programs, with investments in data analysis,targeted outreach,technology infrastructure, and impact evaluations. 4 3. Serving the hardest-hit communities and families While the pandemic has affected communities across the country, it has disproportionately impacted low-income families and communities of color and has exacerbated systemic health and economic inequities. Low-income and socially vulnerable communities have experienced the most severe health impacts. For example,counties with high poverty rates also have the highest rates of infections and deaths,with 223 deaths per 100,000 compared to the U.S. average of 175 deaths per 100,000. Coronavirus State and Local Fiscal Recovery Funds allow for a broad range of uses to address the disproportionate public health and economic impacts of the crisis on the hardest-hit communities, populations, and households. Eligible services include: • Addressing health disparities and the social determinants of health,through funding for community health workers, public benefits navigators, remediation of lead hazards, and community violence intervention programs; • Investments in housing and neighborhoods,such as services to address individuals experiencing homelessness, affordable housing development, housing vouchers,and residential counseling and housing navigation assistance to facilitate moves to neighborhoods with high economic opportunity; • Addressing educational disparities through new or expanded early learning services, providing additional resources to high-poverty school districts, and offering educational services like tutoring or afterschool programs as well as services to address social, emotional, and mental health needs; and, • Promoting healthy childhood environments, including new or expanded high quality childcare, home visiting programs for families with young children, and enhanced services for child welfare-involved families and foster youth. Governments may use Coronavirus State and Local Fiscal Recovery Funds to support these additional services if they are provided: • within a Qualified Census Tract (a low-income area as designated by the Department of Housing and Urban Development); • to families living in Qualified Census Tracts; • by a Tribal government; or, • to other populations, households,or geographic areas disproportionately impacted by the pandemic. 4. Replacing lost public sector revenue State, local,territorial, and Tribal governments that are facing budget shortfalls may use Coronavirus State and Local Fiscal Recovery Funds to avoid cuts to government services. With these additional resources, recipients can continue to provide valuable public services and ensure that fiscal austerity measures do not hamper the broader economic recovery. 5 Many state, local,territorial, and Tribal governments have experienced significant budget shortfalls, which can yield a devastating impact on their respective communities. Faced with budget shortfalls and pandemic-related uncertainty, state and local governments cut staff in all 50 states. These budget shortfalls and staff cuts are particularly problematic at present,as these entities are on the front lines of battling the COVID-19 pandemic and helping citizens weather the economic downturn. Recipients may use these funds to replace lost revenue. Treasury's Interim Final Rule establishes a methodology that each recipient can use to calculate its reduction in revenue. Specifically, recipients will compute the extent of their reduction in revenue by comparing their actual revenue to an alternative representing what could have been expected to occur in the absence of the pandemic. Analysis of this expected trend begins with the last full fiscal year prior to the public health emergency and projects forward at either(a)the recipient's average annual revenue growth over the three full fiscal years prior to the public health emergency or(b)4.1%,the national average state and local revenue growth rate from 2015-18 (the latest available data). For administrative convenience,Treasury's Interim Final Rule allows recipients to presume that any diminution in actual revenue relative to the expected trend is due to the COVID-19 public health emergency. Upon receiving Coronavirus State and Local Fiscal Recovery Funds, recipients may immediately calculate the reduction in revenue that occurred in 2020 and deploy funds to address any shortfall. Recipients will have the opportunity to re-calculate revenue loss at several points through the program,supporting those entities that experience a lagged impact of the crisis on revenues. Importantly,once a shortfall in revenue is identified, recipients will have broad latitude to use this funding to support government services, up to this amount of lost revenue. 5. Providing premium pay for essential workers Coronavirus State and Local Fiscal Recovery Funds provide resources for eligible state, local,territorial, and Tribal governments to recognize the heroic contributions of essential workers. Since the start of the public health emergency,essential workers have put their physical well-being at risk to meet the daily needs of their communities and to provide care for others. Many of these essential workers have not received compensation for the heightened risks they have faced and continue to face. Recipients may use this funding to provide premium pay directly,or through grants to private employers,to a broad range of essential workers who must be physically present at their jobs including, among others: ✓ Staff at nursing homes, hospitals, ✓ Truck drivers,transit staff,and and home-care settings warehouse workers ✓ Workers at farms,food production ✓ Childcare workers,educators,and school facilities,grocery stores,and restaurants staff ✓ Janitors and sanitation workers ✓ Social service and human services staff ✓ Public health and safety staff Treasury's Interim Final Rule emphasizes the need for recipients to prioritize premium pay for lower income workers. Premium pay that would increase a worker's total pay above 150%of the greater of the state or county average annual wage requires specific justification for how it responds to the needs of these workers. 6 In addition, employers are both permitted and encouraged to use Coronavirus State and Local Fiscal Recovery Funds to offer retrospective premium pay, recognizing that many essential workers have not yet received additional compensation for work performed. Staff working for third-party contractors in eligible sectors are also eligible for premium pay. 6. Investing in water and sewer infrastructure Recipients may use Coronavirus State and Local Fiscal Recovery Funds to invest in necessary improvements to their water and sewer infrastructures, including projects that address the impacts of climate change. Recipients may use this funding to invest in an array of drinking water infrastructure projects,such as building or upgrading facilities and transmission, distribution, and storage systems, including the replacement of lead service lines. Recipients may also use this funding to invest in wastewater infrastructure projects, including constructing publicly-owned treatment infrastructure, managing and treating stormwater or subsurface drainage water,facilitating water reuse, and securing publicly-owned treatment works. To help jurisdictions expedite their execution of these essential investments,Treasury's Interim Final Rule aligns types of eligible projects with the wide range of projects that can be supported by the Environmental Protection Agency's Clean Water State Revolving Fund and Drinking Water State Revolving Fund. Recipients retain substantial flexibility to identify those water and sewer infrastructure investments that are of the highest priority for their own communities. Treasury's Interim Final Rule also encourages recipients to ensure that water,sewer, and broadband projects use strong labor standards, including project labor agreements and community benefits agreements that offer wages at or above the prevailing rate and include local hire provisions. 7. Investing in broadband infrastructure The pandemic has underscored the importance of access to universal, high-speed; reliable, and affordable broadband coverage. Over the past year, millions of Americans relied on the internet to participate in remote school, healthcare, and work. Yet, by at least one measure, 30 million Americans live in areas where there is no broadband service or where existing services do not deliver minimally acceptable speeds. For millions of other Americans,the high cost of broadband access may place it out of reach. The American Rescue Plan aims to help remedy these shortfalls, providing recipients with flexibility to use Coronavirus State and Local Fiscal Recovery Funds to invest in broadband infrastructure. Recognizing the acute need in certain communities,Treasury's Interim Final Rule provides that investments in broadband be made in areas that are currently unserved or underserved—in other words, lacking a wireline connection that reliably delivers minimum speeds of 25 Mbps download and 3 Mbps upload. Recipients are also encouraged to prioritize projects that achieve last-mile connections to households and businesses. Using these funds, recipients generally should build broadband infrastructure with modern technologies in mind,specifically those projects that deliver services offering reliable 100 Mbps download and 100 7 Mbps upload speeds, unless impracticable due to topography,geography, or financial cost. In addition, recipients are encouraged to pursue fiber optic investments. In view of the wide disparities in broadband access, assistance to households to support internet access or digital literacy is an eligible use to respond to the public health and negative economic impacts of the pandemic, as detailed above. 8. Ineligible Uses Coronavirus State and Local Fiscal Recovery Funds provide substantial resources to help eligible state, local,territorial, and Tribal governments manage the public health and economic consequences of COVID-19. Recipients have considerable flexibility to use these funds to address the diverse needs of their communities. To ensure that these funds are used for their intended purposes,the American Rescue Plan Act also specifies two ineligible uses of funds: • States and territories may not use this funding to directly or indirectly offset a reduction in net tax revenue due to a change in law from March 3,2021 through the last day of the fiscal year in which the funds provided have been spent. The American Rescue Plan ensures that funds needed to provide vital services and support public employees,small businesses, and families struggling to make it through the pandemic are not used to fund reductions in net tax revenue. Treasury's Interim Final Rule implements this requirement. If a state or territory cuts taxes,they must demonstrate how they paid for the tax cuts from sources other than Coronavirus State Fiscal Recovery Funds—by enacting policies to raise other sources of revenue, by cutting spending, or through higher revenue due to economic growth. If the funds provided have been used to offset tax cuts,the amount used for this purpose must be paid back to the Treasury. • No recipient may use this funding to make a deposit to a pension fund. Treasury's Interim Final Rule defines a "deposit" as an extraordinary contribution to a pension fund for the purpose of reducing an accrued, unfunded liability. While pension deposits are prohibited, recipients may use funds for routine payroll contributions for employees whose wages and salaries are an eligible use of funds. Treasury's Interim Final Rule identifies several other ineligible uses, including funding debt service, legal settlements or judgments,and deposits to rainy day funds or financial reserves. Further,general infrastructure spending is not covered as an eligible use outside of water,sewer,and broadband investments or above the amount allocated under the revenue loss provision. While the program offers broad flexibility to recipients to address local conditions,these restrictions will help ensure that funds are used to augment existing activities and address pressing needs. 8