Title
American Rescue Plan Act Obligation Deadline and Final Reallocation - Citywide
Description
This report provides an update on American Rescue Plan Act (ARPA) spending to date, the reallocation of current unspent ARPA funds, and the steps taken to obligate all funding before the US Treasury obligation deadline. The City is on track to meet all ARPA spending deadlines.
Report
Summary
The federal government allocated $396 million to the City of Phoenix as part of ARPA. On June 8, 2021, and June 7, 2022, City Council approved the ARPA Strategic Plan and at several subsequent Council meetings, approved additional programs which included new programs in affordable housing and homelessness funded through the first large reallocation in December 2022. Additional homelessness programs were funded through the second reallocation in November 2023 and a third reallocation in February 2024.
There are currently over 70 programs across 19 City departments and as of September 2024, near $280 million (about 70 percent) has been spent. The 2024 Recovery Plan was submitted to the US Treasury in July 2024 and can be found at www.phoenix.gov in the Open Data Portal on the ARPA website.
Reallocation of Unused, Underspent, or Reprioritized ARPA Funds
During the June 7, 2022, City Council Formal meeting, staff indicated reallocation exercises would be performed throughout the remaining duration of the grant to analyze all programs with unused, underspent, or reprioritized funding that may be used for other ARPA eligible uses. The intent of the reallocation exercises is to ensure full utilization of all awarded ARPA funds. The ARPA covered period will end December 31, 2024, and all funding must be obligated by this date. To avoid any funding returning to the US Treasury, staff has been diligent in its four reallocation exercises, and this action serves as the final reallocation.
The first reallocation exercise on December 14, 2022, resulted in the approval of $21.2 million, for three affordable housing and homelessness projects. The second reallocation exercise on November 15, 2023, resulted in the approval of $19.6 million to fund various homelessness programs.
The second reallocation included four programs that required additional funding which had not yet been identified. This had been reduced to three programs and funding was identified, reallocation totaling $3.84 million. The third reallocation exercise on February 21, 2024, resulted in the approval of approximately $15 million to various programs including several homelessness projects and one Library project.
While this is the last reallocation exercise for the ARPA grant, a method of reclassification is available if the City needs to move funding before the expenditure deadline of December 31, 2026. Staff will provide updates should reclassification occur before the end of the expenditure deadline.
Reallocation Programs
As the City continues to work towards providing solutions for homelessness and increasing the supply of affordable housing units, staff is recommending the use of the remaining ARPA funds to continue current homelessness programs and using ARPA interest strategically to alleviate pressure from the General Fund in Fiscal Year (FY) 2025-26 and beyond. All ARPA funds will be expended by June 30, 2026, to allow for six months of close-out procedures. Several programs supporting homelessness services are on-going and will be moved to the General Fund beginning FY 2026-27. Funding sources are identified in the summary below.
In order to meet the obligation deadline and provide continued resources to programs that would otherwise require General Fund resources to continue, staff’s recommendation includes the following reallocation of ARPA funding and the use of ARPA interest-earned funding. Moreover, should staff need to repurpose any funds prior to the end of this calendar year to meet obligation requirements, funds will be moved to homelessness budget projects planned to be included in the proposed General Fund for FY 2025-26.
71st Avenue Shelter: St. Vincent de Paul Neighborhood Brigade Program - $438,281
Funding will support St. Vincent de Paul’s work readiness program, Neighborhood Brigade, at the 71th Avenue Shelter. Participants in the program become part-time St. Vincent de Paul employees and have access to employment-specific case management services. All funds will be expended by June 30, 2026. This program will be funded in the General Fund beginning July 1, 2026, with an annual budget of $150,000.
Homeless Services: Central Arizona Shelter Services (CASS) Contract - $453,000
Funding will continue to support the City’s contract with CASS, providing emergency shelter and wraparound services to individuals experiencing homelessness. All funds will be expended by June 30, 2026. The City currently provides CASS with an annual program budget of $1,047,000 from the General Fund. This program’s General Fund budget will increase beginning July 1, 2026, bringing total program annual budget to $1,500,000.
Overnight Summer Heat Respite - $650,000
Funding will support overnight summer heat respite services from April - June 2025. This program will be funded in the General Fund beginning July 1, 2025, with an annual budget of $3,900,000.
71st Avenue Shelter: Community Bridges, Inc. (CBI) Contract - $800,000
Funding will provide shelter wraparound services by CBI at the 71st Avenue Shelter for FY 2025-26. This program will be partially funded in the General Fund beginning July 1, 2026, with an annual budget of $800,000.
Washington Shelter: CBI Contract - $971,250
Funding will provide case management, behavioral health, and outreach services by CBI at the Washington Street Shelter. All funds will be expended by January 2026.
Homeless Services: Keys to Change Contract - $1,500,000
Funding will provide shelter wraparound services at the Keys to Change, Key Campus. All funds will be expended by June 30, 2026. This program will be funded in the General Fund beginning July 1, 2026, with an annual budget of $1,500,000.
Homelessness Projects: Safe Outdoor Space (SOS) CBI Contract - $1,600,000
Funding will provide case management, behavioral health, and outreach services at the SOS by CBI. All funding will be expended by June 30, 2026. This program will be funded in the General Fund beginning July 1, 2026, for an additional six months with a contract value of $600,000.
Homelessness Projects: SOS Keys to Change Contract - $7,500,000
Funding will provide operational services at the SOS by Keys to Change. All funding will be expended by June 30, 2026. This program will be funded in the General Fund beginning July 1, 2026, for an additional six months with a contract value of $2,500,000.
ARPA Interest Programs
71st Avenue Shelter Operational Costs - $330,555
Funding will be used for operational costs for the shelter located on 71st Avenue and Van Buren Street. Costs include utilities and maintenance. All funds will be expended by June 30, 2026.
Modified Bus Route Program - $500,000
The Public Transit Department will utilize funds to modify Route 27 (27th Avenue) to provide service on Durango Street between 27th and 35th avenues. The route modification will provide additional connections and access to the county’s court system and resources in the area. These funds will support the route modification for one year, beginning in January 2025, during which Phoenix will work with Maricopa County on a longer-term funding strategy if the service proves successful, via ridership analysis.
Mercy House Contract - $538,663
Funding will be used for operational costs including facility lease at 4120 E. Van Buren Street, meals, and case management services for a temporary lodging site which has capacity to provide emergency shelter for up to 50 people per night. All funds will be expended in FY 2024-25.
XWings Senior Bridge Project - $750,000
Funding will be used to support the construction of 40 units of temporary housing on a campus located at 2853 E. Van Buren Street which includes 65 units of affordable housing for older adults, aged 55 and over. The 40 non-congregate temporary housing units are constructed from converted shipping containers and are solar powered. All funds will be expended by June 30, 2026.
North Mountain Healing Center Renovation - $751,565
Funding will be used for the renovations needed to convert an existing office building to a 100-bed emergency shelter. Renovation work includes masonry, roofing, plumbing, HVAC, electrical, and concrete work. All funds will be expended by June 30, 2026.
Eviction Protection Services and Legal Assistance - $1,263,032
This program will fund legal assistance to qualifying households who are facing eviction in the City, which includes assistance with resolving evictions both in and outside the courtroom. The services will include tenant outreach and education, landlord-tenant mediation, court navigation services, legal advice, representation, and counsel, post eviction services to assist with sealing a record or satisfying a judgement and housing stabilizing services to avoid eviction filing or judgment or to reduce negative impacts of eviction. Funds will be expended according to contract award.
Digital Divide Program - $2,210,487
ARPA funds were used to cover costs of system development, equipment, and installation of the Phoenix Digital Education Connection Canopy (PHX DECC). This funding will be used to cover maintenance and operational costs for the first five years of full implementation and for planned equipment refurbishment in FY 2029-30.
71st Avenue Shelter Construction - $13,000,000
Funding will be used to provide a temporary structure and complete construction of the permanent shelter located on 71st Avenue and Van Buren Street. Once construction is complete, this facility will house 280 individuals. All funds will be expended in FY 2024-25.
Attachment A summarizes each proposed program and funding amounts.
Obligation Deadline
Phoenix is on track to obligate all funding by the US Treasury deadline of December 31, 2024. Most programs will be obligated by the traditional method of an order placed for property and services (such as purchase orders) and entering into contracts, subawards, and similar transactions that require payment including payroll. The US Treasury provided another avenue to obligate funds: interagency agreements. The City will enter into an interagency agreement between the City Manager’s Office and seven departments. The total amount of programs obligated in this manner is approximately $80 million.
Expenditure Category 6.1: Revenue Replacement - Provision of Government Services
Several programs are better served to be categorized in Expenditure Category (EC) 6.1 as part of revenue replacement detailed by the US Treasury reporting. ARPA guidelines state recipients may use funds for the provision of government services to the extent of reduction in revenue, making the following projects an eligible use of the grant. The City reported over $294 million in revenue loss due to the COVID-19 public health emergency and only utilized $20 million in revenue replacement, which was allocated to the Convention Center and has since been spent.
The following programs and amounts are recommended to be reported in the revenue replacement category, totaling $23,100,000.
Infrastructure, Technology, and Capital Needs: 2021 Local Drainage Mitigation Program - $13,000,000
This entire project will be moved to EC 6.1 to meet reporting requirements as outlined by the US Treasury.
Heat Response/Temporary Shelter - Washington Shelter - $8,000,000
Only a portion of this program will be moved to EC 6.1. Expenditures include operational costs and lease payments.
Homelessness Projects - Safe Outdoor Space Capital and Operating Expenses - up to $2,100,000
Only a portion of this program will be moved to EC 6.1. Expenditures include capital costs and future operational costs.
Recommendation
Staff requests approval to reallocate approximately $13.9 million in ARPA funds and to utilize approximately $19.3 million in ARPA interest funds for the programs listed on Attachment A, to support the City’s efforts to assist residents experiencing homelessness.
Department
Responsible Department
This item is submitted by City Manager Jeffrey Barton and the City Manager's Office.