Title
American Rescue Plan Proposed Strategic Plan - June 8, 2021 Update
Description
This report serves as a follow up to the May 18, 2021 report that provided City Council with information about creating a framework for the use of federal American Rescue Plan Act (ARPA) funds. Over the next two years the City will receive approximately $396 million in State and Local Fiscal Recovery Funds in two separate allocations. The first allocation of $198 million was received on May 19, 2021. On May 27, 2021, the Department of Treasury revised "The State and Local Fiscal Recovery Fund Frequently Asked Questions" (Attachment A). The changes to the "State and Local Fiscal Recovery Fund FAQs" are highlighted within the attachment. This report presents City Council with a revised strategic plan based on the discussion and follow-up from the May 18, 2021 City Council meeting.
THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.
Report
Summary
Over the next two years, the City of Phoenix will receive approximately $396 million in State and Local Fiscal Recovery Funds under the umbrella of the previously approved American Rescue Plan Act which was signed by President Biden in March. Funding is anticipated to be received in two equal distributions 12 months apart. The City received the first allocation of approximately $198 million on May 19, 2021. The second allocation of $198 million will be awarded approximately one year from now and is not expected to be available to spend until FY 2022-23. Based on this and the discussion with Council over the last two months, this report focuses primarily on the first allocation of funds.
According to federal guidance, these funds may only be used to cover costs that are necessary expenditures caused by COVID-19 incurred between March 3, 2021 and Dec. 31, 2024. Per the revised guidance and language currently available, funds can only be used to:
- 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.
The proposed strategic options included in this report are based on input from councilmembers and designed to fit within the parameters set forth in the recently released federal guidance. Some of the proposals are continuations of programs that were successfully implemented under the $293 million Coronavirus Relief Fund (CRF) Strategic Plan and others are new initiatives which will require additional time and resources to fully develop and deploy.
Allocation 1 ($198 million)
Like the CRF strategic plan, this proposed strategic plan includes three areas of emphasis: Community Investment ($143 million), City Operations ($50 million) and a Contingency for Future Operational Needs ($5 million). Attachment B provides the Council with a detailed summary of the programs that staff have identified to address important community and operational initiatives. Guidance from the federal government will likely continue to evolve and the City will need to be nimble to adjust programs to ensure compliance with the ever-changing federal guidance. The following is a high-level summary of the information contained in Attachment B.
Community Investment - $143 million
The Community Investment category, the largest proposed allocation in this plan, is strategically focused on providing assistance to vulnerable populations, businesses and those hardest hit by the COVID-19 pandemic. This portion of the plan includes six distinct focus areas consisting of multiple programs. The proposed strategic plan assumes Community Investment will receive approximately 72% of ARPA funding, or $286 million, over two years. If the proposed Contingency is ultimately allocated to further enhance the programs listed below it would result in 75% of funding, or $296 million, being allocated to Community Investment. The six Community Investment focus areas include the following:
Phoenix Arts, Business and Employee Assistance - $40,000,000
Small business is the heart and soul of the local economy. Many of our small businesses are still struggling to stay open due to COVID-19. These funds will provide resources that Phoenix businesses, including our vibrant arts community, need to stay open, pay employees, and cover other operational costs due to the downturn in business. Funds are also proposed to provide robust job training opportunities for those that lost their jobs during the downturn. Additionally, as the local economy recovers, staff is proposing a robust arts program that provides the arts community with a lifeline that will ultimately provide working capital to the struggling arts industry.
Mitigation and Care of Vulnerable Populations - $31,500,000
Research shows that the pandemic has disproportionately impacted underserved populations. This focus area proposes funding that provides resources to address homelessness, mental and behavioral health, veterans issues, and funding for the senior and refugee community. Some of the funding in this category also lends itself to a larger regional approach to address the issues of homelessness and mental and behavioral health.
Youth Sports, Recreation, Education, After-School and Wireless - $28,800,000
As parents return back to the workplace and families struggle to give recreational and educational opportunities to their children, staff is proposing to use ARPA funds to provide resources to restore after-school programs, provide financial assistance to youth sports leagues and to enhance library programs. As well, funding will be used to continue the development of the large wireless project that staff has been working on with regional partners and to further enhance free wireless access for Phoenix residents in public housing and for customers in City facilities.
Household and Residential Assistance - $28,000,000
Funding in this category is intended to provide families with the resources needed to address rent, mortgage and utility shortages. More specifically, these funds are intended to provide resources for residents who do not qualify for the Emergency Rental Assistance Programs (ERA 1 or 2). Funding is also proposed to provide families with financial assistance to cover childcare costs and other household necessities. Staff will need Council discussion and direction on the scope of any such program. Funds are also proposed to provide public transportation subsidies to those in need of financial assistance due to loss of wages or employment because of COVID-19. Also included is a plan to provide childcare options for impacted workers at Phoenix Sky Harbor Airport.
Phoenix Resilient Food System - $9,700,000
One of the City's most successful CRF-funded programs was the Feed Phoenix Food Program. This allocation of funding builds off of that success and provides additional resources to develop more sustainable food options for Phoenix residents. Based on Council input, this program also includes funding to provide resources to local and neighborhood food banks and food kitchens.
Better Health and Community Outcomes - $5,000,000
This funding would be used to expand the use of the mobile testing vans that the City has deployed to assist underserved communities with COVID-19 testing. These funds could also be used to offset any costs associated with the City taking on a more active role in vaccine distribution.
City Operations - $50 million
The City Operations category, the second largest of the three plan areas, is strategically focused on General Fund (GF) resiliency and capitalizing on the one-time nature of this funding source to address issues that will free up future GF resources and support transformational investments. The proposed strategic plan assumes City Operations will receive approximately 25% of ARPA funding, or $100 million, over two years. This area includes the following areas of focus:
Infrastructure, Technology and Capital Needs - $23,000,000
This funding will be used to provide resources needed to address key infrastructure, technology and capital projects that have been deferred or exacerbated as a result of the pandemic. One example is to provide resources to upgrade the 27th Avenue Recycling Facility. The need to replace this facility has intensified due to the increase in residential tonnage due to COVID-19. Funding can also be used for other capital and technology projects that improve the efficacy of economic relief programs designed to address negative impacts to targeted populations. An example of such a project is the replacement of the Case Management System used by Human Services staff to provide resident services. The system is antiquated and does not allow for online applications. Replacing this aging system would enhance the delivery of services to our residents. Staff also recommends critical stormwater, flood control and energy conservation projects that comply with federal guidance.
Revenue Replacement - $22,400,000
Unlike CRF funds, ARPA funds are allowed to be used for revenue replacement. Because of the pandemic, the Phoenix Convention Center has been severely impacted due to the downturn in the travel, tourism and hospitality industry. As a result, there are significant concerns about how long that industry will take to recover and how deep of an impact that recovery will have on the Convention Center's fund balance. It is important to note that the Convention Center is ultimately backed by GF revenues. If the tourism and convention downturn lags as long as some economists suggest, this could impair Convention Center revenues enough that the GF would be forced to make reductions to provide working capital. Allocating ARPA funds to replace a portion of the revenue lost by the convention center over the last 15 months would be a sound financial decision that would be viewed favorably by the City's rating agencies. The proposed plan assumes the Convention Center would receive approximately $31 million in relief over the two allocations. Additionally, ARPA allows the City to offset costs for trust fund expenses that are directly tied to COVID-19 expenses. For example, the City has seen over $2.4 million in worker's compensation related claims due to COVID-19. Staff recommends these claims are eligible to be replaced with ARPA funds and would reduce the actuarial impact to future City resources.
Administrative Oversight and Staff Augmentation to Support New ARPA Funded Initiatives - $4,000,000
In order to successfully deploy the wide range of programs that the ARPA funds will provide, service levels must be enhanced in key areas of the organization. These staffing enhancements will also provide the oversight and compliance functions that are critical to ensure a clean audit at the end of funding cycle.
PPE, Cleaning, Sanitizing/Testing and Vaccine Distribution - $600,000
One thing the City learned during the first few months of the pandemic was that the City did not possess an adequate supply of PPE and sanitizing agents needed to ensure that employees were adequately protected. We also realized like many other cities across the country that the impact of not being fully prepared led to significant supply chain disruption. This allocation of funds will be used to stockpile equipment and supplies needed to ensure that our staff is adequately protected against the spread of COVID-19 and to ensure that the City is not a victim to future disruptions in the supply chain for these necessary items. Funding could also be used to address additional employee testing and vaccination related costs as needed.
Contingency - $5 million
A $5 million contingency is proposed to preserve resources in case the federal government changes guidance to allow the funds to be used in new areas of concern for the Council or to supplement funding for an approved program that exhausts its allocation of funds before more funding becomes available. The contingency would also be available to cover other unexpected COVID-19 expenses that could occur later in the year. The reserve is not a requirement and Council could allocate this funding immediately or at any other point in the fiscal year as necessary. In an effort to address more initiatives, the contingency allocation has been reduced by 50% since our last report.
Staff is seeking Council feedback, direction and possible action on the proposed strategic plan. Based on the Council’s strategic direction and feedback, staff will return (if necessary) to a future meeting with refined recommendations or start working on deploying these programs for our community.
Department
Responsible Department
This item is submitted by City Manager Ed Zuercher and Assistant City Manager Jeff Barton.