Report Prepared by: Scott McBride, City Manager
Title
SUBJECT: Seeking Direction on Other Reinvestment - Reallocation Options on the City Council Adopted American Rescue Plan Act (ARPA) Strategic Investment Plan
REPORT IN BRIEF
Seeking direction on other reinvestment - reallocation options on the City Council adopted American Rescue Plan Act (ARPA) Strategic Investment Plan.
RECOMMENDATION
City Council - Provide staff direction on reinvestment - reallocation options related to the ARPA Strategic Investment Plan.
Body
AUTHORITY
Charter of the City of Merced, Section 200.
BACKGROUND
In 2021, the City of Merced was allocated $27,427,882 in ARPA funding from the Federal Government. The funds were intended to provide support to State, local, and Tribal governments in responding to the impact of COVID-19 and their efforts to contain COVID-19 on their communities, residents, and businesses. Eligible uses are public health and economic impacts, premium pay, reduction in revenue, and investments in infrastructure. The Final Rule, which is a guiding document issued by the Federal Government requires the City obligate the funding by December 2024 and expend all funds by December 2026.
During the October 18, 2021, Study Session, Staff and Council reviewed the survey results and public input regarding the ARPA funding allocation. During the Study Session Council received input from the public and provided staff areas of interest for ARPA funding allocation.
During the November 1, 2021, Public Hearing, the Council received input from the community and provided a refined list of projects for staff to evaluate. Those projects included: Affordable Housing, Water - conservation & SB 244, Broadband, Applegate Zoo, Downtown - Public Spaces & Street Scape, CP-42/Sports Fields, Utility Bill Relief, Job Training, Tourism, Stimulus Payments, Expanded Youth Services, On-going Operational Needs, Kiddie Land/Non-Profit Support, and City Beautification.
In addition to the areas above, the City Council also considered a program for Universal Basic Income (UBI). After discussion, the Council voted 4-3 to not move forward with the program. For this reason, UBI was not evaluated for future direction. During December 6, 2021, Public Hearing, the City Council adopted the ARPA Strategic Investment Plan.
As part of the Mid-Year Budget update in February of 2023, the City Council directed staff to evaluate potential options for re-investment and to return prior to the presentation of FY 2023-24 Budget to receive additional direction.
On May 1, 2023, Staff brought the ARPA Strategic Investment Plan to the City Council for evaluation of potential options for re-investments. The Council adopted changes to the plan that were incorporated in the FY 23-24 budget.
On November 6, 2023, per City Council request, staff provided a Utility Bill Relief Program update. The City Council chose to continue the program until March 31, 2024. At that time any funding left from this program would automatically be re-invested in the construction of Community Park #42. On March 31, 2024, $557,948 was remaining in the program and was re-invested per Council Direction.
On May 6, 2024, Staff brought the ARPA Strategic Investment Plan to the City Council for re-evaluation of potential options for re-investments. Street Parklet ($200,000) and Broadband ($1,051,020) projects were determined to not be able to meet ARPA’s timeline for obligation and Stimulus Program had a balance of $9,500. Therefore, funding was reallocated to Applegate Zoo renovation, Community Park 42, and Stephen Leonard Park.
On November 4, 2024, the City Council made additional amendments. Those included allocating $10,000 from Broadband to the Bob Hart Square Expansion Project. Funding from the Affordable Housing allocation in the amount of $1,000,000 was also pledged towards Bob Hart Square. There was an additional reallocation of funds from the Downtown One Way Project to Bob Hart Square in the amount of $208,041.
DISCUSSION
Staff is requesting direction on some final modifications of ARPA funds. The City Council has previously provided direction to commit funds and then encumber funds when necessary for the following projects and activities.
Current ARPA Funding Allocation
|
Category |
Amount |
|
Affordable Housing |
$6,500,000 |
|
Water |
$0 |
|
Broadband |
$88,980 |
|
Applegate Zoo Renovation/Expansion |
$2,050,000 |
|
Applegate Restroom |
$425,000 |
|
Bob Hart Square Expansion |
$2,018,041 |
|
Mainstreet Directional Enhancements |
$541,959 |
|
Parklets/Beautification |
$0 |
|
Community Park #42 |
$9,976,304 |
|
Stephen Leonard Rehabilitation |
$150,000 |
|
Utility Bill Relief |
$442,052 |
|
Job Training Program |
$2,200,000 |
|
Stimulus Payments |
$762,500 |
|
Expanded Youth Programs |
$250,000 |
|
Non-Profit Support |
$1,500,000 |
|
COVID-19 City Expense |
$523,046 |
|
Est. Total |
$27,427,882 |
|
ARPA Allocation |
$27,427,882 |
|
Remaining Funds |
$0 |
Final Amendments
CalVIP Local Match - This program had an ARPA allocation of $250,000 to serve as the local match to the grant. The program is ongoing and was recently extended from June 2025 to December 2025. Staff recently requested an amendment to the grant which included changing the local match to include employee salaries and benefits. The original local match uses only included support items associated with the program. By adding in salaries and benefits there is now a larger portion of local match that can be counted as expended or encumbered to support the program. The full amount of $250,000 will not be expended. The city will continue to support the project to completion but there are additional ARPA funds that will need to be reallocated. Finance and Administrative staff are continuing to work to cover items that can be considered match but there’s an expected range of funding, from $23,000 to $60,000 that will be available to be used towards another ARPA project.
Bob Hart Square - At the November 4, 2024, council meeting the Bob Hart Square Expansion was discussed in considerable detail. As noted, bids were opened on October 22nd. The lowest responsive bidder had a total project cost of $3,098,041 - which did not include contingency, testing, or inspection costs.
In the original budget there were two separate funding sources, water enterprise funds which are necessary to replace an aging line and the project remainder to be funded using ARPA funds. Since this is not a roadway project it is limited in the funding sources that can be used. At that meeting staff identified a funding shortfall of $208,041.
During the November 4, 2024, meeting it was noted that of the $800,000 in ARPA committed to the project approximately $120,000 was used for design and engineering. At that time the available amount of ARPA Funds committed to this project was approximately $680,000. Based on the lowest responsive bid the water enterprise funds to be committed are approximately $1,200,000. During the meeting the council provided direction to allocate additional funds from the Downtown One-Way project (Main Street Directional Enhancements), Affordable Housing allocation, and Broadband. After these funds were applied, they bridged the shortfall of $208,041.
It was also noted in the administrative report and presentation that there were no funds for contingency, inspection, or testing associated with the Bob Hart Square project. Staff has calculated those additional costs and prepared a cost sharing allocation to address those items.
After final analysis of the ARPA and Water Enterprise contributions to the project, the amount needed for contingency, inspection, and testing is $245,896. Staff has worked to identify potential funding options to cover this last remaining need. Potential options include - General Fund, Measure Y, Park Developer Impact Fee, or a reallocation from an existing ARPA project. In cooperation with the Finance Department, it has been determined that the most viable funding options to cover contingency, inspection, and testing are an allocation from the General Fund or an ARPA reallocation from another project. Staff is recommending a reallocation from the Downtown One-Way Project to fill this gap, further discussion to follow.
This project will be scheduled for contract award consideration by the Council at the December 16, 2024, meeting.
Downtown One-Way Project (Main Street Directional) - this project was originally bid at the same time as the Bob Hart Square Project but received no bids. The project specifications were updated, and it was rebid. Bids were received on Thursday, November 21, 2024. The lowest responsive bid was $965,805. The total project cost with 15% contingency and 10% for inspections and testing is $1,207,256.
Of the $750,000 in ARPA committed to the project approximately $80,000 was used for design and engineering. Based on the council actions on November 4, 2024, to reallocate a portion of the original commitment towards Bob Hart Square updated available amount of ARPA Funds to this project is $459,033.
Should the council support the reallocation of $245,896 from this project to Bob Hart Square to address contingency, testing, and inspections the updated amount of ARPA funds for the project would be $213,137. To backfill the amount necessary to complete the project and address contingency, testing, inspections an allocation of $694,119 would be necessary. As a roadway project there are multiple funding sources that can be used to support this project. This project already has $300,000 in Regional Surface Transportation Program funds (RSTP) committed. When the project award is considered by council, scheduled for December 16, 2024, the remainder of the project will be recommended from Measure V Local Projects to Be Determined in the amount of $694,119.
As previously noted, the Downtown One-Way project is a mitigation measure for the environmental document for the Hwy 59 safety improvement project. There has been some discussion of potentially splitting the project into pieces or phases. As of the time of the preparation of this admin report staff does not know if that would affect the Hwy 59 project since this is a mitigation measure.
Stephen Leonard - Staff is recommending that $23,000 to $60,000 in unencumbered CalVIP program funds be reallocated towards this project. There are items that are not currently being addressed from the claims related to fire, water, and vandalism damage. There was a previous commitment of ARPA in the amount of $150,000 in support of this project. This additional funding will help assist with items that were part of the original bid but removed due to funding shortfalls. Examples include roll up door replacement and the building exterior.
Options for Consideration
Staff is recommending that the council consider the following options related to ARPA funding.
1. Reallocate $245,896 of ARPA funding from the Downtown One Way Project to the Bob Hart Square project to cover contingencies, inspections, and testing.
2. Authorize Staff to reallocate unencumbered ARPA funds from the CalVIP program to support the Stephen Leonard renovation, within the range of $23,000 to $60,000.
3. Should the council want to consider other options that are not ARPA please provide staff direction on the funding source such as a General Fund, Measure Y, or other source allocation. This direction will be taken into consideration and be brought back when the Downtown One Way and Bob Hart Square projects are considered - December 16, 2024.
IMPACT ON CITY RESOURCES
No impact on City resources at this time. It should be noted that contracts for these two improvement projects must be executed prior to the end of the calendar year to meet the ARPA Final Rule deadline or funds will be lost.
ATTACHMENTS
1. Presentation