Title
American Rescue Plan Proposed Strategic Plan - Update
Description
This report serves as a follow up to the April 27, 2021 report that provided City Council with information to begin discussing a framework for the use of federal American Rescue Plan Act (ARPA) funds. At the time of that report, guidance from the federal government was very limited and the City expected to be awarded approximately $416 million. On May 10, 2021, the Department of Treasury released "The State and Local Fiscal Recovery Fund Fact Sheet" (Attachment A) and the "Interim Final Rule" (Attachment B) which provided staff with the information needed to develop a more detailed and robust list of programs (Attachment C) for City Council consideration. Treasury also revised the City's anticipated allocation down from earlier estimates to approximately $396 million. This report presents City Council with a strategic plan based on the recently released guidance and the discussion from the April 27, 2021 City Council meeting.
THIS ITEM IS FOR INFORMATION AND DISCUSSION.
Report
Summary
Based on information released earlier this week, the federal government is expected to award the City of Phoenix 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 expects the first allocation of approximately $198 million within the next few weeks. The second allocation of $198 million will be awarded one year after the first allocation and is not expected to be available to spend until FY 2022-23. Based on this and the discussion with Council last month, this report focuses on only 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 respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;
- to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the state, territory, or tribal government that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work;
- for the provision of government services to the extent of the reduction in revenue of such state, territory, or tribal government due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year of the state, territory, or tribal government prior to the emergency; or
- to make necessary investments in water, sewer, or broadband infrastructure.
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 ($118 million), City Operations ($70 million) and a Contingency for Future Operational Needs ($10 million). Attachment C provides the Council with a detailed summary of the programs that staff have developed 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 C.
Community Investment - $118 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 six focus areas include the following:
Phoenix Arts, Business and Employee Assistance - $36,000,000
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 to cover other operational costs due to the downturn in business. Funds are also proposed 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 - $30,500,000
Research shows that the pandemic has been extremely hard on underserved populations. This focus area proposes funding that provides resources to address homelessness, mental and behavioral health, veterans issues and community and senior center needs. 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. Attachment C provides a summary of proposed programs included in this focus area.
Household and Residential Assistance - $24,000,000
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 don't qualify for the Emergency Rental Assistance Programs (ERA 1 or 2). Funding is also proposed to provide families with young children financial assistance to cover childcare costs and grocery expenses. Staff will need Council discussion and direction on the scope of any such program. Additionally funding is proposed to provide public transportation subsidies to those in need of financial assistance due to loss of wages or employment because of COVID-19.
Youth Sports, Recreation, Education and After-School - $15,500,000
As parents return back to the workplace and others struggle with having the resources needed to have recreation and educational opportunities for their children, staff is proposing to use ARPA funds to provide resources that could be used 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 broadband project that staff has been working on with regional partners and to further enhance free broadband access for Phoenix residents in public housing and for customers in City facilities. Attachment C provides a robust list of proposals for Council to consider that addresses this area of concern.
Phoenix Resilient Food System - $9,000,000
One of our most successful CRF funded programs was our Feed Phoenix Food Program. This allocation of funding builds off of that success and provides additional resources to encourage and develop more sustainable food options for Phoenix residents. Based on conversation and discussion with Council on April 27, this program also includes funding to provide resources to local and neighborhood food banks and food kitchens.
Better Health and Community Outcomes - $3,000,000
This funding would be used to extend the use of the mobile testing vans that the City has deployed to assist underserved communities with COVID-19 testing. If necessary, these funds could also be used to offset any unexpected costs associated with the City taking on a more active role in vaccine distribution.
City Operations - $70 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. This area includes the following areas of focus:
Infrastructure, Technology and Capital Needs - $40,000,000
This funding would 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. This facility was deferred due to economic pressures, however, 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 technology projects that address enhanced cyber security. Attachment C provides other examples of projects that staff has identified. Additional projects will be vetted and brought back to Council.
Revenue Replacement - $25,000,000
Unlike the CRF fund, the ARPA funds are allowed to be used for revenue replacement. Because of the pandemic, the Phoenix Convention Center has been severely impacted due 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. Additionally, ARPA allows for 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. It is the City's opinion that 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 - $3,000,000
In order to successfully deploy the wide range of programs that the ARPA funds will provide requires enhancing service levels in key areas of the organization. These staffing enhancements will also be instrumental in providing the oversight and compliance functions that will be critical to ensuring a clean audit at the end of funding cycle.
PPE, Cleaning, Sanitizing/Testing and Vaccine Distribution - $2,000,000
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 - $10 million
A $10 million Reserve 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 Reserve 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.
Staff is seeking Council feedback and direction on a draft strategic plan with priorities for implementation. Based on the Council’s strategic direction and feedback, staff will return to a future meeting with refined recommendations reflecting the feedback received from Council and the community.
Department
Responsible Department
This item is submitted by City Manager Ed Zuercher and Assistant City Manager Jeff Barton.