To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Matt Gohl, Special Projects Manager
Trish Muller, Finance Director
Michelle Schrote, Assistant Director - Accounting and Operations
Title
Discussion/Direction: American Rescue Plan Act (ARPA) Fund Use
Body
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Executive Summary
The American Rescue Plan Act (ARPA) became law on March 11, 2021 and provided direct funding to cities, towns and villages in the United States. The Town of Castle Rock will receive total funding of $5,703,100 that is eligible for specific uses. Half of the funds were received on May 21, 2021 with the remaining allocation to be received in 2022.
The U.S. Department of the Treasury released the final rule on January 6, 2022 determining how funds can be used. This final rule takes effect on April 1, 2022 and encompasses the amended interim final rule that was published on May 17, 2021. The full text of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) rule is available in Attachment A. Note that ARPA and SLFRF acronyms are used interchangeably in this memo.
While there are numerous eligible uses for SLFRF funding, staff recommends utilizing the revenue loss standard allowance of up to $10 million in funds and using the Town’s allocation to fund road improvements as allowed within the SLFRF’s definition of general government. Enhancing Town roads in an ongoing priority, and the SLFRF funding will enable the Town to complete more road projects in a shorter time period.
Funding current projects, like widening Ridge Road and Plum Creek Parkway, will provide additional budget capacity to complete other road projects sooner than currently planned. Two such projects include widening Prairie Hawk from Wolfensberger Road to the existing four-lane segment and widening Plum Creek Parkway from Wolfensberger Road to the existing MAC entrance - both of which could be constructed in 2024 rather than 2025 by utilizing the Town’s SLFRF funding.
Now that the final rule is in effect and given recent discussions about federal claw back of SLFRF funds, staff recommends utilizing SLFRF funds soon. Taking action at this point will also provide the Town opportunity to adjust to any reporting or compliance requirements that may be identified.
Discussion
The final SLFRF rule goes into effect on April 1, 2022. Funds may be used by recipients to cover costs incurred during the period beginning March 3, 2021 and ending December 31, 2024. Recipients must designate the use of funds by the end of 2024 and expend funds by the end of 2026. Funds not designated or used according to these timelines must be returned.
Eligible Uses
The U.S. Department of the Treasury released a publication in January 2022 titled “Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule” (Attachment B). In this publication, the eligible use categories were ordered from the broadest and most flexible to the most specific as follows:
• Replace lost public sector revenue
• Support the COVID-19 public health and economic response
• Provide premium pay for eligible workers performing essential work
• Invest in water, sewer, and broadband infrastructure
The final rule provides for a standard allowance of up to $10 million of SLFRF funds under the revenue loss category. Given the Town’s total award is less than this amount, the Town’s full SLFRF allocation could be recognized under this standard allowance. Funding utilized under the revenue loss category can be used for broader purposes than other eligible purposes.
As provided in the “Overview of the Final Rule” provided by the U.S. Treasury (Attachment B), “SLFRF funding may be used to pay for ‘government services’ in an amount equal to the revenue loss…” It further states that “government services generally include any service traditionally provided by a government, including construction of roads and other infrastructure, provision of public safety and other services, and health and educational services. Funds spent under government services are subject to streamlined reporting and compliance requirements.”
The Final Rule in Attachment A further specifies that “Government services include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure; health services; environmental remediation; school or educational services; and the provision of police, fire, and other public safety services.” More information regarding government services can be found on pages 259-260 of the final rule text. Note that there are certain restrictions on SLFRF funding including debt service, replenishing financial reserves or satisfying obligations related to a judicial settlement or judgment - more discussion about these restrictions begins on page 314 of the final rule text.
Recommendation
After reviewing the SLFRF Final Rule, staff recommends that the Town utilize the standard allowance of up to $10 million under the revenue loss category for the Town’s total SLFRF allocation of $5,703,100. This funding would then be used for government services, specifically for road improvements, as provided for in the final rule.
Staff recommends utilizing the SLFRF funds to support the current Ridge Road and Plum Creek widening projects. This approach will free up other funding that can be used to advance two other projects in the current capital improvement program:
• Prairie Hawk widening from Wolfensberger Road to the existing four-lane segment
• Plum Creek Parkway widening from Wolfensberger Road to the existing MAC entrance.
Utilizing SLFRF funds as proposed would allow the Town to construct these two projects in 2024 rather than in 2025.
The Town’s Finance Department will be required to submit “Project and Expenditure” reports to the U.S. Treasury with the first due by April 30, 2022 and then quarterly thereafter. Note that funds are to be obligated no later than December 31, 2024 and fully expended by December 31, 2026.
Staff continues to research reporting and compliance standards associated with “streamlined reporting and compliance requirements” that are permitted under the government services use of SLFRF funds. It appears that expending funds for this purpose eliminates certain requirements under the Federal uniform guidance for grant financial management. However, staff has not been able to determine the exact “streamlined” reporting and compliance guidelines at this time. Should Council approve the recommended use of funds, staff will ensure that all reporting and compliance requirements are properly followed.
Budget Impact
The Town received the first tranche of the SLFRF funds in May 2021, totaling $2,851,550. The remaining funds are expected to be received during the second quarter of 2022. Once received, the Town will have the full amount of $5,703,100 in a dedicated account.
Following Council approval for use of the SLFRF funds, Town staff will prepare for an upcoming budget amendment to properly recognize the revenue and to increase expenditure appropriations to accommodate spending.
Proposed Motions
Recommended Motion
“I move to approve the use of the Town’s ARPA-SLFRF funding as recommended.”
Alternate Motions
“I move to approve the use of the Town’s ARPA-SLFRF funding for _______________.”
“I move to continue this item to the Town Council meeting on (date) to allow additional time to (list information needed).”
Attachments
Attachment A: Coronavirus State & Local Recovery Funds Final Rule - Full text
Attachment B: Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule