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CC 2020-10-13_11b Update on CARES Act 2020 Funding MEMORANDUM TO: CITY COUNCIL BY: WHITNEY MCDONALD, CITY MANAGER MICHAEL STEVENS, ADMINISTRATIVE SERVICES DIRECTOR SUBJECT: CONSIDERATION OF AN UPDATE ON CARES ACT 2020 FUNDING AND DIRECTION AND AUTHORIZATION ON THE USE OF THOSE FUNDS DATE: OCTOBER 13, 2020 SUMMARY OF ACTION: Council will receive an update regarding funding from the CARES Act of 2020 and consider providing direction on the City’s use of those funds, including potential allocation to certain grant programs. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: The City is expected to receive $218,384 in allocated CARES Act funding in FY 2020-21. The City is entitled to reimbursement up to a maximum of $218,384, with proof of eligible COVID-19 expenditures. To date, the City has identified and reported approximately $3.2 million in eligible expenditures. However, the City is only eligible to receive the maximum amount of CARES Act dollars allocated by the State. Because CARES Act funding was not known at the time of budget development, it was not included in the FY 2020-21 Adopted Budget. Staff has described a number of options for Council to consider in authorizing use of those funds. The options include:  retention of funding to reimburse the City for COVID-19 related expenditures, some of which have already been spent or are encumbered for future payment  retention of funding to replenish the City’s reserve  establishing a grant program for local businesses impacted by COVID-19  providing additional funds to non-profits through the City’s Community Service Grant Program  providing funding to offset the cost of holiday lighting within the village, typically funded with proceeds from the Arroyo Grande Strawberry Festival, which was cancelled due to COVID-19 precautions. RECOMMENDATION: It is recommended the City Council receive an update on the CARES Act 2020 funding and provide direction to staff on use of those funds, including consideration of an allocation of a portion of the City’s CARES Act revenue to a business assistance grant program, the Community Service Grant program, and/or a grant for holiday lights in the Village. Item 11.b. - Page 1 CITY COUNCIL CONSIDERATION OF AN UPDATE ON CARES ACT 2020 FUNDING AND DIRECTION AND AUTHORIZATION ON THE USE OF THOSE FUNDS OCTOBER 13, 2020 PAGE 2 BACKGROUND: The federal Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides funding through the Coronavirus Relief Fund (CRF) for state and local governments to pay costs incurred in responding to the COVID-19 pandemic. The California State Budget for FY 2020-21 was signed into law which gave authorization for the Department of Finance (DOF) to allocate $500 million dollars directly to cities to cover expenses related to the public health and public safety impacts of COVID-19. Cities with populations between 300,000 and 500,000 were allocated $225 million, and cities with populations of less than 300,000 were allocated $275 million. Generally, the population of the city was used to determine their share of the allocation, with no city receiving less than $50,000. The amount of CARES Act dollars allocated to the City of Arroyo Grande is $218,384. The CARES Act will reimburse eligible COVID-19 costs incurred during the period beginning March 1, 2020, and ending December 30, 2020. ANALYSIS OF ISSUES: Funding requirements The CARES Act funding may only be used to cover costs that: 1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19); 2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act); and 3. were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020. Payment cycle CARES Act funding will be provided in four payments. The first, second and third payments of $36,397 each were received on July 30th, August 24th and September 17th, which is equivalent to one-sixth (1/6) each and a total of 1/2 of the City’s total allocation. After review of the September reported data by each city, the State Controller’s Office plan will initiate a final payment of the remaining balance of funds. Reporting requirements The Budget Act of 2020 requires cities to report their COVID-19 expenditures, obligations, and projections in order to receive funding. The State reporting is structured to include a breakout of expenditures for the first quarter (March 1, 2020 – June 30, 2020), expenditures for July and August (if available), and a projection of costs to be incurred through December 30, 2020. The Department of Finance (DOF) recommends that each agency report all eligible COVID-19 expenditures incurred within the funding period, even if the number exceeds the agency’s allocated amount of reimbursement. The State hopes to use this data to argue for additional COVID-19 Relief funding from the legislature. Item 11.b. - Page 2 CITY COUNCIL CONSIDERATION OF AN UPDATE ON CARES ACT 2020 FUNDING AND DIRECTION AND AUTHORIZATION ON THE USE OF THOSE FUNDS OCTOBER 13, 2020 PAGE 3 Reporting deadline The first deadline for cities to report their COVID19 expenditures, obligations, and projections was September 4, 2020. As part of this reporting requirement, cities were required to report their data directly to the State, which will then report to the federal government. The State created a web portal where cities are required to register and report their actual and future COVID-19 expenditures. City staff met the first reporting deadline and entered the City’s eligible expenditures and other required information into the State’s web portal on August 31, one week before it was due. First reporting period amounts For its first reporting period, the City identified total eligible expenditures of $3,188,015, clearly exceeding the City’s set allocation amount of $218,384. As mentioned, it was requested that cities report all expenditures, even those in excess of the allocation. A listing of the 18 distinct categories of expenditures deemed eligible by the U.S. Department of the Treasury - Office of the Inspector General (OIG) is included in Attachment 1. The majority of the eligible costs reported by the City were within the Payroll for Public Health and Safety Employees category. Payroll expenses related to City Public Safety employees whose services are substantially dedicated to mitigating or responding to the COVID-19 pandemic are eligible costs for CARES Act reimbursement. City administrative staff confirmed with the DOF that the City’s police patrol staffing costs are an eligible CARES Act expenditure. The DOF explained that, as a matter of administrative convenience, the City may presume that payroll costs for patrol services are substantially dedicated to mitigating or responding to the COVID-19 public health emergency and are therefore eligible. The following Table 1 represents all the eligible expenditures reported to the State in the first reporting period. Table 1- Eligible expenditures reported Category Expense Amount Reported I Improve Telework Capabilities of Public Employees $6,950 L Payroll for Public Health & Safety Employees $3,141,594 N Public Health Expense (protective supplies) $23,471 P Unemployment Benefits $16,000 Total Reported $3,188,015 COVID-19 Eligible Expenditures As discussed, the City was required to report on CARES Act eligible expenditures by the State’s first reporting deadline of September 4th, 2020. The majority of the eligible expenditures reported during the first reporting cycle were related to payroll costs for Public Safety employees, more specifically Police Patrol costs. Because payroll costs for Police Patrol services were included as part of the FY 2019-20 and FY 2020-21 budgets, Item 11.b. - Page 3 CITY COUNCIL CONSIDERATION OF AN UPDATE ON CARES ACT 2020 FUNDING AND DIRECTION AND AUTHORIZATION ON THE USE OF THOSE FUNDS OCTOBER 13, 2020 PAGE 4 CARES Act reimbursement for these costs would be accounted for as an increase in Fund Balance Available (FBA, or reserve). Some of eligible expenditures identified and reported (Table 1) by the City were directly related to the City’s COVID-19 response or a consequence of the virus. In addition to these direct “hard” costs, the City is expecting to incur additional COVID-19 related expenditures, including the following: 1. Installation of a Plexiglas barrier and safety measures at City Hall to reduce the risk of transmission of the virus and control public access into the interior of the building. This future project is estimated to cost approximately $50,000. 2. Concrete K-Rail barriers installed and paid by the City to facilitate parklets for local food and personal care establishments. Parklets are a way for food and personal care establishments to convert adjacent public parking spaces to usable space to place outdoor tables and chairs. Costs for the concrete K-Rails are anticipated to cost approximately $20,000. 3. Additional protective supplies, including costs associated with cleaning and disinfection of public areas as the COVID-19 pandemic continues. This cost is estimated at approximately $9,000. Staff anticipates that, during the period of March 1, 2020 through December 30, 2020, the following costs will be paid for by the City that would be eligible for reimbursement and that exclude the category of Payroll for Public Health & Safety Employees: Table 2- Anticipated Eligible Costs, Minus Category L Category Expense Amount I Improve Telework Capabilities of Public Employees $6,950 N Public Health Expense  protective supplies  protective barrier system to be installed at City Hall  additional protective supplies $23,471 $50,000 $8,963 O Business Assistance  Concrete K-Rails for Parklets $20,000 P Unemployment Benefits $16,000 Total Anticipated Costs, Minus Public Safety Salaries $125,384 Options for Council’s Consideration Staff has outlined three options the Council may consider for providing direction on the use of the City’s CARES Act funding. Item 11.b. - Page 4 CITY COUNCIL CONSIDERATION OF AN UPDATE ON CARES ACT 2020 FUNDING AND DIRECTION AND AUTHORIZATION ON THE USE OF THOSE FUNDS OCTOBER 13, 2020 PAGE 5 Option 1. No Further Action Taking no further action would allow the full amount of the CARES Act award to be used for eligible COVID-19 related expenditures already identified and reported to the State. This would include Public Safety costs already budgeted. Because these Public Safety costs are already budgeted, the unanticipated revenue would increase the City’s Fund Balance Available to be used as a source in future funding requirements. Option 1 would not create any new programs. Other funding sources (ex. SB 1090, General Fund) would need to be used if Council’s wishes were to provide direct assistance to local businesses that may have been impacted by the COVID-19 pandemic. Option 2. Allocate Some CARES Act Revenue to Grant Programs While Retaining Funds to Reimburse the City for Direct Costs Realizing the significant impacts COVID-19 has had on both the City’s financial resources, in addition to the impact it has had on the community of Arroyo Grande as a whole, staff is recommending that Council consider directing the use of CARES Act funding for a blend of reimbursement to the City for the outlay of direct COVID-19 expenses on the one hand and a few different grant programs on the other hand:  Reimbursement for the City’s COVID-19 expenditures The City has identified approximately $125,384 in unbudgeted COVID-19 related expenditures, some of which have already been spent or are obligated for future payment (see Table 2). COVID-19 costs already spent include those reported to the State (see Table 1), excluding the Public Safety costs. As discussed, other future COVID-19 costs include those related to the safety measures at City Hall and parklet costs to assist local businesses. It is recommended that at least $125,384 of the CARES Act funding be retained to reimburse the City for these costs.  Small Business Assistance Program The Federal CARES Act guidelines states that funds may be spent on “the provision of grants to small businesses to reimburse the costs of business interruption caused by required closures.” A Small Business Assistance program may be established that would aim to assist between 10-15 small businesses with micro-grants of up to $5,000 in one-time financial assistance to help meet immediate funding needs due to COVID-19 impacts. Similar micro-grant programs using CARES Act funding have been successful in the Cities of San Luis Obispo, Grover Beach and Paso Robles. The total amount and percentage of their CARES Act allocations that these cities have allocated to small business assistance programs has varied significantly. Were a business assistance grant program to be established by the City using CARES Act funds, staff recommends requiring the following of potential grantees: o The business must be located in Arroyo Grande o The business must hold a valid business license Item 11.b. - Page 5 CITY COUNCIL CONSIDERATION OF AN UPDATE ON CARES ACT 2020 FUNDING AND DIRECTION AND AUTHORIZATION ON THE USE OF THOSE FUNDS OCTOBER 13, 2020 PAGE 6 o The business was required to close completely or close indoor operations for some period of time between March 1, 2020, through December 30, 2020 o There are no active or ongoing code enforcement matters involving the business o The business must submit a completed COVID-19 self-certification form supplied by the County of San Luis Obispo o Priority will be given to businesses that have not received other forms of aid offered by the State or federal governments as part of a COVID-19 relief program o The business must demonstrate a need for the grant and identify how the funds will be spent o Allowed uses of the grant funds will include: rent, costs associated with changes to business operations required by State or County orders (e.g. protective barriers, improvements to outdoor spaces, equipment alterations needed to provide space between patrons, etc.), technological changes to accommodate remote working o The business must report and provide documentation of the use of the funds by December 15, 2020 Staff recommends that Council consider allocating a portion of the City’s CARES Act revenue to a business assistance grant program to be administered by City staff.  Community Service Grant Program The City currently offers Community Service Grant awards funded through the General Fund to eligible community non-profit organizations. The City recognizes the value of such groups that provide specialized social service, educational, cultural, beautification and recreation programs and projects benefiting its citizens. The year 2020 grant awards were primarily awarded to projects and programs that directly assisted individuals that have been affected by the COVID- 19 pandemic. The Fiscal Year 2020-21 budget allocates $20,000 to the Community Service Grant Program. At its regular meeting on August 25, 2020, Council directed that an additional $5,000 previously allocated to the Tourism Business Improvement District be redirected to the Community Service Grant Program. During the COVID-19 crisis, many non-profit service organizations have been unable to conduct their regular fundraising events, which they rely on to be able to continue providing important services to the community. Staff is recommending that Council consider allocating a portion of the City’s CARES Act revenue to increase the Community Service Grant Program fund.  Village Holiday Lighting celebration The Arroyo Grande Strawberry Festival is usually held on Memorial Day weekend. A portion of the proceeds generated from the festival provides funding for the Item 11.b. - Page 6 CITY COUNCIL CONSIDERATION OF AN UPDATE ON CARES ACT 2020 FUNDING AND DIRECTION AND AUTHORIZATION ON THE USE OF THOSE FUNDS OCTOBER 13, 2020 PAGE 7 annual holiday lighting in the Village. This year’s Strawberry Festival was canceled due to tourism restrictions as a result of COVID-19 pandemic. The holiday lighting in the Village helps to support the businesses in the City as it entices patrons to shop locally in a festive environment. The South County Chambers of Commerce (Chamber) is interested in facilitating the installation of the holiday lights. However, additional funding is needed to cover a portion of the costs for a contractor to install the lights. Staff recommends that the Council consider using a portion of the CARES Act revenue to provide a grant to the Chamber to support continuation of the holiday lighting in the Village for the upcoming holiday season. Staff is estimating that the total costs for the lighting installation will be between $10,000 to $15,000. Table 3, below, depicts an example of the allocations that may be made of the City’s CARES Act revenue to the programs discussed above. Table 3- Illustration of Potential CARES Act Revenue Allocations Recipient Description of Use/Program Amount City Reimbursement of Hard Costs Associated with COVID-19 Response $125,384 Local Businesses Business Assistance Grant Program $60,000 Community Service Organizations Increase to Community Service Grant Program Fund $25,000 Chamber Holiday Lights in the Village $8,000 Total $218,384 This table is supplied for illustration purposes. The amounts may be modified as directed by Council. Option 3. Allocate the City’s CARES Act Revenue to Other Programs In addition to the options described above, Council may provide direction to staff on other eligible uses of the funding. Attachment 1 describes the types of eligible uses of CARES Act funds. ALTERNATIVES: The following alternatives are provided for Council’s consideration: 1. Receive the CARES Act 2020 funding update and provide direction and authorization regarding use of the revenue; 2. Receive the CARES Act 2020 funding update and provide no further direction to staff, resulting in Option 1 described above; or 3. Provide other direction to staff regarding the CARES Act funding. Item 11.b. - Page 7 CITY COUNCIL CONSIDERATION OF AN UPDATE ON CARES ACT 2020 FUNDING AND DIRECTION AND AUTHORIZATION ON THE USE OF THOSE FUNDS OCTOBER 13, 2020 PAGE 8 ADVANTAGES: Receiving the update regarding CARES Act 2020 funding and confirming a plan on how the $218,384 revenue should be spent will help ensure that the funding is spent appropriately and transparently. Additionally, reporting on the status of the CARES Act funding and identifying how the money will be spent is important in achieving Council’s identified Top 10 Priorities of ensuring fiscal stability and promoting economic development. DISADVANTAGES: No disadvantages have been identified at this time. ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted at City Hall and on the City’s website in accordance with Government Code Section 54954.2. Attachment: 1. Categories for reporting Coronavirus Relief Fund (CRF) expenditures Item 11.b. - Page 8 ATTACHMENT 1 The U.S. Department of the Treasury, Office of Inspector General (OIG) has identified 18 distinct categories for reporting Coronavirus Relief Fund (CRF) expenditures. The list provides examples of appropriate expenditures for each of the 18 categories. A. Administrative Expenses  Costs for providing CRF payments to other entities or individuals  Costs for implementing new programs (such as a new grant program) designed to respond to or mitigate COVID-19  Administrative expenses of an audit conducted under the Single Audit Act. B. Budgeted Personnel and Services Diverted to a Substantially Different Use  Costs of diverting educational support staff or faculty to develop online learning capabilities (if information technology support is not part of their ordinary responsibilities)  Costs of diverting any staff from their normal, routine duties to duties that are substantially dedicated to mitigating or responding to the COVID-19 (The exception is staff diverted to support testing or contact tracing. These costs should be included in the category below.)  Costs of redeploying corrections facility staff to enable compliance with COVID-19 public health precautions through work such as enhanced sanitation or enforcing social distancing measures C. COVID-19 Testing and Contact Tracing  Costs of providing COVID-19 testing, including serological testing  Payroll costs or contract costs for staff conducting contract tracing D. Economic Support (Other than Small Business, Housing, and Food Assistance)  Costs for a government payroll support program  Grants to individuals facing economic hardship to allow them to pay for and continue to receive essential services such as utility bills E. Expenses Associated with the Issuance of Tax Anticipation Notes (TANs)  Payment of the interest expense payable on TANs by the borrower  Unbudgeted administrative and transactional costs, such as necessary payments to advisors and underwriters, associated with the issuance of the TANs F. Facilitating Distance Learning  Technological improvements such as increasing broadband capacity  Software purchases that enable distance learning  Hardware purchases for students and/or teachers such as laptops and tablets G. Food Programs  Costs for establishing and operating a food bank  Costs for food delivery to residents, including senior citizens and other vulnerable populations  Costs for expanding farming and meat processing capacity, including by paying overtime to USDA meat inspectors, if expanding the capacity is necessary to respond Item 11.b. - Page 9 to COVID-19, i.e., increased capacity is necessary to allow farmers and processors to donate meat to food banks, H. Housing Support  Rental assistance  Mortgage assistance  Emergency shelters and housing that facilitate compliance with public health orders, including quarantine and isolation I. Improve Telework Capabilities of Public Employees  Technological improvements such as increasing broadband capacity and setting up virtual private networks  Software purchases that enable employees to telework  Hardware purchases such as laptops and tablets  Costs for developing online or automated processed for work that previously required in-person visits for employees and customers/citizens J. Medical Expenses  COVID-19-related expenses of public hospitals, clinics, and similar facilities.  Expenses of establishing temporary public medical facilities and other measures to increase COVID-19 treatment capacity, including related construction costs  Emergency medical response expenses, including emergency medical transportation, related to COVID-19  Expenses for establishing and operating public telemedicine capabilities for COVID- 19-related treatment K. Nursing Home Assistance  Expenses incurred to specifically assist a nursing home with responding to and mitigating the COVID-19 public health emergency L. Payroll for Public Health and Safety Employees  Payroll expenses for public safety, public health, human services, and similar employees (including salaries, benefits, and overtime pay) whose services are substantially dedicated to mitigating or responding to the COVID-19 public health emergency. Payroll costs for public health and public safety employees may be presumed to be payments for services substantially dedicated to mitigating or responding to the COVID-19 public health emergency, unless the chief executive (or equivalent) of the relevant government determines that specific circumstances indicate otherwise.  Can include sworn officers, firefighters, and ambulance staff/EMTs  Costs of redeploying police to support management and enforcement of stay-at-home orders M. Personal Protective Equipment (PPE)  Costs for acquisition and distribution of PPE  Costs to create a reserve of PPE N. Public Health Expenses  Costs for communication and enforcement of public health orders related to COVID- 19 Item 11.b. - Page 10  Costs for acquisition and distribution of medical and protective supplies, including sanitizing products, for medical personnel, police officers, social workers, child protection services, and child welfare officers, direct service providers for older adults and individuals with disabilities in community settings, and other public health or safety workers in connection with the COVID-19 public health emergency  Costs for disinfection of public areas and other facilities, in response to the COVID-19 public health emergency  Costs for technical assistance to local authorities or other entities on mitigation of COVID-19-related threats to public health and safety  Costs for public safety measures undertaken in response to COVID-19  Costs of providing paid sick and paid family and medical leave to public employees to enable compliance with COVID-19 public health precautions  Costs of sanitation and improvement of social distancing measures at state prisons and county jails  Costs for care provided to the homeless population to mitigate COVID-19 effects and enable compliance with COVID-19 public health precautions  Costs to address increase in solid waste, such as relates to the disposal of used PPE O. Small Business Assistance  Costs for a small business grant program, including the actual grant costs and the administrative costs of the program  Costs for any assistance provided to reimburse the costs of business interruption caused by required closures  Costs to assist small business with complying with public health orders such as providing tents for outdoor dining  Costs for small business loans P. Unemployment Benefits  Unemployment benefits costs that will not be reimbursed by the federal government pursuant to the CARES Act or otherwise Q. Workers’ Compensation  Increased worker’s compensation costs to the government due to first responders and critical health care workers that contract COVID-19 R. Items Not Listed Above  Users may define additional groupings  This field may also be used to aggregate “obligations” as an alternative to detailing obligations in the categories above. All expenditures must be allocated to specific expenditure categories or in a user-defined field with a description of the cost incurred. Item 11.b. - Page 11 THIS PAGE INTENTIONALLY LEFT BLANK Item 11.b. - Page 12