Approve an American Rescue Plan Act of 2021, Coronavirus State and Local Fiscal Recovery Strategy

Approve the proposed uses for the City of Rocklin's American Rescue Plan Act funds.

In June 2021, Rocklin received the first half of the American Rescue Plan Act (ARPA) payment in the amount of $3,519,513. At the September 21, 2021 City  Council Meeting, staff proposed an ARPA project list that included spending for community support, internal support, and revenue loss. The City Council discussed the proposed projects and provided direction to staff. Since then, staff have been researching program options to determine feasibility and interest in the community.

ARPA funding can only be used for four categories of spending:

1. Public Health and Economic Impacts of COVID-19
2. Premium Pay
3. Revenue Loss
4. Investments in Infrastructure

The US Treasury released the Final Rule in January 2022, which provides further clarification for allowable uses of ARPA funding (Attachment A). The original allowable uses remain the same, but there is more flexibility for programming within the allowable categories.

Based on the City Council direction received in September 2021, further staff research, and the Final Rule, staff proposes funding be allocated to the following program areas:

A list of proposed projects is included as Attachment B.

Community Support - Public Health and Economic Impacts of COVID-19

In an effort to assist local small businesses and nonprofits, staff recommends $3.25 million for community support. Community Support is split between two program areas: business support and nonprofit support. The business support program would provide funds for the Rocklin Chamber of Commerce (Chamber), Quarry District business façade improvements, capacity building grants, and restaurant assistance. It would also include hotel and small business assistance grants up to $20,000 to businesses that experienced a revenue loss due to COVID-19. The hotel/small business grants program would exclude food and beverage establishments, which would fall under the separate restaurant assistance program. The nonprofit support would provide direct grants to nonprofits that serve Rocklin, particularly youth-focused programs, and fund a job training and upskilling program with local schools.

Of particular interest to the City Council was an outdoor dining program that would assist local food and beverage establishments in making their temporary outdoor dining structures compliant with building and safety codes. Staff met with the Chamber and local restaurateurs to discuss the challenges of COVID-19 and the interest in an outdoor dining assistance program. Following that meeting, staff circulated a survey to local food and beverage establishments with unpermitted outdoor dining throughout the COVID-19 pandemic. The establishments overwhelmingly support a restaurant assistance program that would help create permanent outdoor dining spaces. However, the costs of supporting this program vary depending on each establishment. For example, a 200 square foot outdoor dining expansion could cost over $18,000 in fees for design review, utility plan review, and permitting, not including any construction or operational costs.

In an effort to assist food and beverage establishments and to provide them with the flexibility they need to respond to the COVID-19 pandemic, staff recommends a general restaurant assistance program that would provide grant funds to restaurants up to $20,000 on first-come, first-served basis.  If restaurants were interested in creating permanent outdoor dining, this amount could cover a portion of expenses to expand their operations. However, establishments could also spend the grant funds on other operational costs as well.

The nonprofit grant program would be open to any nonprofit that operates in Rocklin and serves Rocklin residents, with priority given to those that serve youth. In order to qualify for the program, the applicants would need to demonstrate a revenue loss due to COVID-19 and could request a grant up to $20,000. ARPA nonprofit support programs in other jurisdictions have oversubscribed due to a decrease in revenue and an increase in operating expenses for nonprofits responding to COVID-19. Staff is also proposing a scholarship program to assist individuals who have been negatively impacted by COVID-19 who wish to change career paths into IT and technology fields. This scholarship would be administered by local colleges and schools.

Internal Support - Public Health and Economic Impacts of COVID-19

Staff is proposing $1.375 million for public health improvements to public facilities that include safer entryways, technology improvements to aid customer interactions, and improved air circulation through HVAC upgrades. ARPA funds present a unique opportunity to make improvements to City facilities to make them safer for employees and the public. Using ARPA funds frees the obligation of using general fund money to make these updates in the future.

Revenue Loss

The staff recommendation is for approximately $2.4 million to be realized as Revenue Loss for the provision of government service. Examples of this include the provision of safety services and the construction and maintenance of roads.

The City Council should note that, since the staff presentation in September 2021, the US Department of Treasury has updated the allowable uses of Revenue Loss. Recipient agencies are allowed to take up to $10 million for revenue loss without a requirement to calculate an exact amount. Therefore, the City could take the entire $7 million ARPA allocation and use it to supplement assumed lost revenue. The funds would then be added to the General Fund and could be used for a variety of programs that would not otherwise qualify under ARPA requirements. This would also decrease the burden of reporting requirements for City staff and the significant audit risks associated with ARPA funds. One consideration is that the ARPA program does allow for some uses that are not general “government services”; funds taken under revenue loss may be restricted if the use does not meet the identified criteria. However, it is not certain that the community and business support programs that would be implemented under ARPA guidelines would be allowed uses under the Revenue Loss guidelines. Therefore, staff is not recommending taking the City’s entire allotment under Revenue Loss.

Program Implementation

ARPA spending is regulated by a complex set of rules and regulations (Attachment C) that involve the recipient's intense vetting of grant applications and continuous monitoring and reporting.

Third-party Administration

In an effort to lessen the impact to City's limited staff resources, staff recommends the use a third-party administrator to administer $1.6 million of the of the ARPA funds. A third-party administrator  would work with the City to design the application and identify businesses and nonprofits that should be targeted. They will be responsible for determining eligibility based on criteria the City Council identifies. They would conduct outreach messaging and promotion, and would receive grant applications through a secure site built to house application data. They would also offer technical support and answer questions from applicants during the process. City staff would remain engaged through the entirety of the distribution process. Staff has identified the Sierra Business Council (SBC) as a potential third-party administrator. SBC would collect a 5% administrative fee that covers direct staff costs and other costs associated with grant administration. Administrative costs are an allowable use of ARPA funds under the Department of Treasury’s Final Rule. Staff is also evaluating other options to administer additional portions of the ARPA allocation.

Timeline

The City has already received half of the ARPA money,$3,519,513, and will receive the second allocation of ARPA funds this summer. Under the proposed program, funds would be distributed in two phases. The first phase would happen in the spring and would provide funds for a portion of the internal support needs, for nonprofits, and for half of the business assistance programs. The second phase would occur in the winter of 2022 and fund the remainder of the business assistance program and the internal support items. Distributing funds in two phases would allow for any adjustments if priorities change or if a greater need is identified in the community. Once all program areas are funded, the remainder of the funds would be used to replace revenue lost and for the provision of government services.

Due to the uncertainty of interest in each program area, staff is recommending flexibility in determining the amounts allocated to individual programs in the Community Support category. Staff requests the ability to move funds between programs to meet the needs of the community as they become more evident during the grant periods.

Next Steps

Staff recommends the City Council approve the proposed uses of APRA funds. Alternatively, the City Council can:

1. Support the funding of Phase One projects only, and provide further guidance on programs once the second ARPA payment is made; or

2. Approve individual components of the staff recommendation, and direct staff to return with further information on the remainder of the proposals; or

3. Take no action and direct staff to return with additional information.

None at this time. Based on City Council direction, staff will return to the City Council with a budget amendment to establish revenue and expenditure budgets for the first half ($3,519,512.50) of the ARPA funding in the FY 2021/22 Operating Budget in the American Rescue Plan Act Fund (Fund 266) and program the second half in the budget that will be prepared for FY 2022/23.

There is no grant matching requirement and funds may only be used for project costs initiated on or after March 3, 2021.