Title
Recommendation to Assign a Portion of the $28.68 Million of Funding from the Federal Government through the American Rescue Plan Act (ARPA) of 2021 to Assist with Recovery from the Impacts of the COVID-19 Pandemic. (City Manager 10021030/Finance 10024051)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The City of Alameda (City) will receive a total of approximately $28.68 million in American Rescue Plan Act of 2021 (ARPA) funding. On June 17, the City received the first $14.34 million tranche of funding. The second tranche is expected approximately one year later (May/June 2022). Eligible costs must be incurred or obligated to projects by December 31, 2024, and the period of performance for obligated funds will run until December 31, 2026.
The funding provided under ARPA provides a unique opportunity for the City to make strategic investments using these funds.
This report includes general principles, as well as general categories with specific projects, which staff is putting forward for the City Council’s consideration. The recommendation is based on evolving best practices for ARPA relief fund management, and early input provided by the City Council at the Budget Workshop on May 20, 2021.
The Proposed Guiding Principles include:
A. Prioritize “one-time” expenditures over ongoing
B. Invest in critical infrastructure
C. Seek and explore state and regional partnerships
D. Focus on City Council Priority Areas
E. Apply an equity lens
F. Identify projects that support/unburden the General Fund
G. Take the necessary time to invest strategically
H. Carefully track and report regularly to the City Council and Community
Using the aforementioned principles, and with input from the City Council in May, staff is recommending that the following general categories be the focus of the City of Alameda’s (City’s) ARPA spending plan:
A. Supplementing revenue loss
B. Addressing housing, homelessness, and behavioral health
C. Investing and building broadband infrastructure
D. Providing household and local small business assistance
The potential projects that fall into these general categories are referenced in Exhibit 1 - All Requests. The funding requests in Exhibit 1 total approximately $51 million.
Also attached as Exhibit 2 is staff’s recommendation to the City Council, which gets the near-term spending in-line with the approximately $14 million that came as part of the first tranche of ARPA funding, and allows the City Council to continue to evaluate needs in future years.
BACKGROUND
Based on published initial estimates, staff previously reported to the City Council in April and May 2021 that the City’s allocation was unofficially estimated at $28.95 million (see File 2021-897). According to the allocations published by Treasury in May 2021, the City is eligible to receive a total of $28,679,908. Since the City is classified as a “metropolitan city,” Treasury distributed the first tranche of $14.34 million directly to the City on June 17, 2021.
Treasury refined the guidance on eligible uses of ARPA funding in the Interim Final Rule published in May 2021. The latest guidance is detailed in Exhibit 5.
DISCUSSION
Guiding Principles
To help provide a framework for decisions related to ARPA spending, staff has drafted the following Guiding Principles for the City Council’s consideration and use:
A. Prioritize “one-time” expenditures
a. Care should be taken to avoid creating new programs or add-ons to existing programs that require an ongoing financial commitment.
B. Invest in critical infrastructure
a. Investment in critical infrastructure is a 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.
C. Seek and explore state and regional partnerships
a. Be cognizant of state-level ARPA efforts, especially regarding infrastructure, potential enhancements of state funding resources, and existing or new state law requirements.
b. 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, create cooperative spending plans to enhance the structural financial condition of your community. Focus on general categories and specific projects that can be tied back to the City Council’s Priorities and/or City Council programs initiated in response to the COVID-19 Pandemic.
D. Focus on City Council Priority Areas
a. In 2020, the City Council established five key priority areas to help guide the use of local resources.
E. Apply an equity lens
a. Decisions about ARPA spending are focused on COVID-19 recovery; many of our most vulnerable and/or less affluent were impacted to a greater extent. As part of our recovery spending plan, ensure that project and program selection prioritize equity.
F. Identify projects that support the General Fund
a. The City’s General Fund is responsible for a significant portion of the services delivered to the community. Where feasible, fund projects that would otherwise rely on the General Fund.
G. Take the necessary time to invest strategically
a. 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.
H. Carefully track and report regularly to the City Council and Community
a. ARPA spending will be carefully tracked and regular updates will be made to the City Council, as well as the reporting required by the United States Department of Treasury (Treasury).
Topic Areas/Categories
Based on the discussion and guidance provided by City Council at the budget workshop on May 20, 2021, staff has organized possible funding options into the following categories:
• Revenue loss
• Housing, homelessness, and behavioral health
• Broadband investment
• Household and local small business assistance
• Ineligible requests
Revenue Loss
According to the revenue loss formula provided by Treasury, the City is eligible for $8,487,916 in funding to cover general revenue loss (see Exhibit 6). This funding could be used to help the City balance the budget over the next two years and provide supplemental funding to Council-led priorities as part of the mid-year budget update for FY 2021-22 and the mid-cycle budget update for FY 2022-23.
Housing, Homelessness, and Behavioral Health
The Community Development Department has proposed the following projects and funding allocations for addressing homelessness and housing needs in the community.
a. Supportive Transitional Housing Program - Community Development - $2,000,000 one time; $600,000 annually
Provide temporary, transitional housing for up to six months (extended on a case-by-case basis) for chronically homeless and unhoused individuals who need physical and psychosocial support. Provide wrap-around services, including on-site housing navigators, case managers, peer support, and other services to assist individuals in ending their homelessness and build skills towards self-sufficiency. Includes one-time costs of $2,000,000 for purchase, delivery, and installation of cabins/structures for 20 residents, 2 offices, a communal space; furniture, fixtures, and equipment. Ongoing operational costs for program administration and support services, bi-weekly mobile shower and laundry service, drinking water service, sanitation service, on-site mental health counseling, and transitional support post housing placement are estimated at $600,000 annually.
b. Hotel Acquisition - Community Development - Estimated at $20,000,000 one-time based on acquisition and improvements to property; $1,500,000 annually/ongoing.
Acquisition and renovation of the hotel is estimated to cost approximately $20,000,000 depending on the improvements. Providing permanent housing with on-going wrap-around psychosocial support, such as on-site mental health, job placement, and financial counseling is estimated to cost $1,500,000 annually. This funding could be combined with other funding sources.
Broadband Investment
The Information Technology and Library departments have identified potential projects for investing in broadband infrastructure improvements that would deliver service to unserved or underserved households and businesses in the community.
a. Smart City Master Plan - Information Technology - $6,000,000
The proposed project would build out an administrative fiber network and offer public Wi-Fi to business districts and vulnerable neighborhoods, according to the AUSD vulnerable schools population data. Initial fiber runs in core areas of the city would include Webster Street to City Hall West, Santa Clara Avenue, Park Street, and Broadway to the Golf Course (with a potential link to San Leandro’s fiber network for a smart traffic corridor).
Potential benefits of the Alameda Smart City Master Plan Broadband projects are as follows:
• Equitable Internet: Increased equity of internet access for telecommuting, tele-schooling and tele-health to ensure digital inclusion, especially for disadvantaged populations;
• Climate Action: Reduced traffic emissions, water and electricity use, and improved tracking of environmental quality indicators such as air quality and protecting the environment using sensor technology;
• Government Transparency: Improved quality of life by enhancing interactions and government transparency and responsiveness with the potential for open data portals;
• Safety: Improved safety with emergency response optimization, disaster early-warning signals and vehicle-to-vehicle communications including advanced collision avoidance systems while reducing threats from cyber-attacks;
• Transportation Operations: Improved efficiency of transportation operations such as with regionally interconnected traffic signals, autonomous vehicles, real-time public transit information, multimodal data collection, smart parking, smart street lights, predictive maintenance and car/bike sharing; and
• Economic Vitality: Improved economic vitality by ensuring innovation with new technologies and considering pilot modal smart neighborhoods such as Alameda Point, Northern Waterfront or Webster Street area.
b. Wireless Hotspot Lending Program - Library - $50,000
To help bridge the digital divide for families, the Library proposes offering approximately 30 wireless hotspots for lending to community members at no cost to borrowers. The hotspot provides internet access to families and library patrons who do not have a connection at home. The lending program will allow students, parents, teachers and families working and studying remotely, access to a free and reliable internet connection. The portable hotspots connect Wi-Fi enabled devices such as laptops, tablets or smartphones to the internet. The hotspots can connect up to 10 devices at one time and work almost anywhere in the continental U.S.
Patrons must have a library card in good standing in order to check out a hotspot. The lending period is 21 days, and they are available for renewal if there is no waitlist. The hotspot kits would come with a case, instructions and charging cord. This request would launch and fund this project for about three years as a continuing funding source is sought during that period.
Household and Local Small Business Assistance
At the May 20 budget workshop, City Council indicated interest in exploring options for providing rent assistance to landlords and tenants. According to the Interim Final Rule, rent assistance for households is an eligible use of ARPA funding; however, assistance to landlords for offsetting deferred or unpaid rent is not identified as an eligible use. Rental assistance is being provided by the County, so staff are not requesting funding for rental assistance at this time. Assistance to small businesses and non-profits is an eligible use for mitigating financial hardship due to the public health emergency or offsetting the costs of implementing COVID-19 prevention tactics.
Alameda Municipal Power and the Community Development Department have proposed potential programs for providing utility assistance to households, and small business and non-profit assistance, respectively.
a. Household Utility Assistance - Alameda Municipal Power - Up to $1,500,000
Households affected by the public health emergency would be able to apply for cash assistance with unpaid and overdue utility bills.
b. Assistance for Local Businesses, Artists, and Non-Profits -- $2,000,000
Staff is also recommending a program to provide $2,000,000 in one-time grants to 200 to 300 local businesses, artists, and non-profits. Assistance would be contingent upon criteria established during program set up. The criteria would be similar to that set up for Alameda Strong for businesses and non-profits. Additional staff or a consultant would be required to administer this program.
Ineligible Requests
Upon review of the Interim Final Rule and additional guidance from Treasury, staff have determined that the following funding requests from departments are not eligible for ARPA funding:
• Alameda Point Adaptive Reuse Backbone Infrastructure Phase 2
• Various requests for park improvements and parkland acquisition
Staff also consulted with representatives from the Alameda Housing Authority about the request for funding for housing vouchers and determined that other funding sources are available for this purpose, so assignment of the City’s ARPA funding for housing vouchers is not recommended at this time.
Summary of All Requests and Staff’s Recommendation
The requests that staff identified as potentially eligible for funding are summarized in Exhibit 1 and total approximately $51 million.
Exhibit 2 includes staff’s recommendation, which shows approximately $15 million in spending in 2021 and approximately $14 million in spending in the years 2022-2026. This approach was achieved by removing the purchase and operating costs of the hotel and the utility bill item. The hotel acquisition would be a substantial investment and creates significant ongoing operating costs of at least $1.5 million per year, not including potential additional staff resources needed for administering the program. The utility bill offset is a combination of General Fund and Non-General Fund costs and may be achieved through other relief, as well as through discussions between rate payers and public utilities. The proposed staff recommendation adheres to the draft Guiding Principles, and would allow the City Council to continue to evaluate priorities and have a discussion next year when the second tranche of ARPA funding is scheduled to be distributed to the City.
Possible Changes to the Program
If projects or programs are not realized, or if there are issues with moving forward with parts of the spending plan, staff will bring the items back to the City Council for additional discussion and direction.
Reporting
The Federal Government is requiring regular reporting. All regular reporting shared with the Federal Government will also be shared with the City Council and community. Staff will be developing a webpage to enhance transparency and awareness about how the ARPA funding is being used in Alameda.
ALTERNATIVES
Option 1 (Staff Recommendation) - Staff recommends moving forward with the proposed spending plan identified in Exhibit 2. The hotel acquisition and operation has been removed from the list because:
• the hotel acquisition would require spending approximately $20 million (more than two thirds of the City’s total ARPA allocation) and the transitional housing project allows the City to address housing for the unhoused in a different fashion at this time;
• the hotel operation would result in a significant (at least $1.5 million) ongoing cost to the City, which may be more significant as facility maintenance and replacement costs are realized over time; and
• the transitional housing site allows for the City to take on a lower ongoing cost as we continue to address homelessness in the community.
The recommended alternative also removes the utility bill assistance program, since more utilities already have a COVID-relief program in place for rate payers in need. It should also be noted that funding for Alameda Municipal Power ratepayers would not have the same impact on the General Fund. Finally, the Alameda Housing Authority request has also been removed as the City works towards addressing housing needs in an alternative fashion at this time.
Staff’s recommendation would allow the City Council to support four of the five City Council Priority areas and leaves room to reprogram approximately $8.5 million in General Fund Revenue Loss, and an additional approximately $7.0 million of ARPA funding at a future date, since only about $22 million is programmed in this option. This recommendation is guided by the principles included in this staff report and the direction that was provided by the City Council at a prior meeting.
Option 2 a (Focus on Unhoused) - Unhoused and under-housed individuals in our community have become a significant concern. Option 2 is summarized in Exhibit 3 and would see the City focusing the ARPA funding on the purchase and operation of the hotel ($20 million in one-time funding and nearly $8 million in ongoing costs over the next 5 years or so). The operations and maintenance costs, estimated at around $1.5 million for operating costs only would continue for as long as the facility is operated as a housing site. The second part of this option would be the Transitional Supportive Housing site ($2 million for setup and approximately $3.5 million to operate the site for the first 5 years). Since the total for this program would exceed the $28.68 million in ARPA relief funding, the City Council would also likely have to direct staff to see grants, partnerships (i.e. County of Alameda), or other funding sources to fully implement.
Option 2 b (Hotel Only) - The purchase and operation of the hotel for the first four to five years would cost approximately $28 million. While this amount aligns with the City’s ARPA funding allocation, this program results in significant ongoing operational (and maintenance) costs, which should only be undertaken with a plan to sustain the program over many years.
Option 3 (Non-Housing Proposals) - Rather than putting ARPA funding to support the unhoused at time, the City Council could choose to fund the items that were not housing focused. Specifically, this option would see the City moving forward with: replenishing revenue loss; Smart City master plan/broadband; wifi hotspot service; household utility support; and small business and non-profit assistance. This option would program approximately two-thirds ($17.7 million) of the City’s ARPA funding, and would allow the City Council more time to consider where to allocate the remaining approximately $10.9 million in remaining funding.
Option 4 (Other Projects) - The City Council may wish to provide additional clarification or other projects to be considered as part of the City’s ARPA funding and programming efforts.
Option 5 (Principles and Council Priorities) - The City Council may wish to review and provide further direction to staff to refine the Guiding Principles and/or City Council priorities before focusing specific projects.
FINANCIAL IMPACT
Providing staff with direction on the allocation of ARPA funds does not commit the City to any specific uses of the funds or have direct financial impacts. Following the direction from City Council, staff intends to return to City Council with a supplemental budget resolution for Council’s consideration for appropriating the funds designated for immediate use in the FY 2021-22 budget.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
ENVIRONMENTAL REVIEW
This action is not subject to environmental review as the activity is not a "project" for purposes of the California Environmental Quality Act (CEQA) because it is an organizational or administrative activity of the City that will not result in direct or indirect physical changes in the environment, in accordance with CEQA guidelines, section 15378(b)(5).
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
To allocate $28.68 million of funding from the Federal Government through the American Rescue Plan Act (ARPA) of 2021 to assist with recovery from the impacts of the COVID-19 pandemic.
CITY MANAGER RECOMMENDATION
To add to the overall recommendation. The City Manager recommends that the City Council focus on the two aspects of the ARPA report. Staff is looking for Council discussion and direction on specific goals that you would like to see accomplished as outlined and that the City’ focuses on the first year of funding which is approximately $14 Million.
Respectfully submitted,
Eric Levitt, City Manager
Financial Impact section reviewed,
Annie To, Finance Director
Exhibits:
1. All Requests
2. Details of Recommendations for Option 1: Staff Recommendations
3. Details of Recommendations for Option 2: Housing Proposals
4. Details of Recommendations for Option 3: Non-Housing Proposals
5. Treasury’s Guidance on Eligible Uses
6. ARPA Revenue Loss Calculations