Council Work Session


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     2.       
Meeting Date: 07/06/2021  
TITLE:    American Rescue Plan Act (ARPA) Overview
PRESENTED BY: Andy Zoeller
Department: Finance  

RECOMMENDATION
Staff will be presenting an overview of the American Rescue Plan Act funding opportunities that exist for the City of Billings. On July 12th, Council will be asked to authorize the City to apply for a State of Montana Competitive Grant created under ARPA.  The projects that are being proposed for application will be presented at this meeting. Future uses of other ARPA funds will come back to Council for consideration and approval through future budgets, budget amendments, or other future council action items.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
American Rescue Plan Act
The American Rescue Plan Act was a Federal Bill passed in March 2021 to spur economic stabilization and promote infrastructure. Money was distributed to individuals and state and local governments for various causes. Billings is eligible for both state and federal funds under ARPA. The State created grant programs have various deadlines, described below. While an overview of the entire ARPA program will be provided to City Council. Staff will be specifically seeking feedback on the State Competitive Grant Program, which has the most immediate deadline approaching.

Due to the language in Montana’s ARPA bill (HB632), state funds for local governments are limited only to infrastructure projects for water, wastewater, and storm water. The allocation direct from the US Treasury has additional allowable uses.


The Federal Government has allocated $15,940,314 for the City of Billings based on population size and the CDBG formula as a Metropolitan area over 50,000 in population. The City of Billings has received half of this amount and will receive the second half in May 2022.

Direct Federal ARPA Allocation
For the federal funds, the US Treasury Interim Final Report authorized 5 categories of spending through local governments; Revenue Loss Replacement; Water, Wastewater, and Broadband Infrastructure; Premium Pay; Economic Impact Programs; and Public Health Expenditures

Revenue Loss Replacement
Across the states, local governments saw a decrease in revenue from park programs, airport travel, and loss of tax revenue. The federal government allows local governments to use a portion of the Federal allocation to replace the lost revenue. The Treasury guidance provides the formula for determining the amount of revenue loss experienced at the City. The prescribed formula uses either a rate of growth at 4.1%, or the actual growth rate if the city exceeded 4.1% over the prior three years. Historical amounts show that Billings grew at less than 4.1% during the prior three years, so Billings has used 4.1% as the base rate of growth for this calculation. Then, the difference between the assumed rate of growth (4.1%) and the actual for calendar year 2020 is the revenue loss amount. Using the prescribed formula for the City of Billings, the revenue loss calculated for 2020 is $7,394,678.

The revenue loss calculation allows for a wider variety of uses than the other 4 categories. The US Treasury allows for broad latitude by local governments for the amount calculated but generally suggests following the list of eligible uses, including the maintenance or building of infrastructure including water, wastewater, and roads. The funds may also be used for the provision of fire, police, and public safety services. Additionally, Billings can invest in cybersecurity including hardware, software, and protection of infrastructure. And finally, the city can also use the revenue loss replacement funds to cover environmental projects, such as potential pollution remediation.

Water, Sewer, and Broadband Infrastructure
The focus for infrastructure in this federal bill is solely for water, wastewater, and broadband. The emphasis is to provide these public services to areas that are lacking or need repairs. By directly applying the funds towards infrastructure without calculating revenue loss, we are limited to the four main infrastructure types; water, wastewater, storm water, and broadband.

Water and Wastewater projects should meet drinking water standards and reach portions of the city that are needing improvements or build pipelines and storage to meet usage needs. This does include failing treatment or distribution systems and should address water quality or pollution.
Storm water is the second option. The primary focus of this infrastructure addresses pollution so that the water can be treated and reused in an efficient and safe manner.

Finally, there is broadband. This was meant to create public service for broadband meeting specific upload and download speeds for areas not meeting service needs. Generally this is contracted through companies and is meant for more rural populations. Since we do not have a public broadband utility this may be difficult for the city to implement in the time allotted. Additionally, Montana is granting money directly to entities for fiber optic installation across the state.

Other Eligible Uses

The third federal use category would be establishing economic impact programs that use funding to support lost public sector revenue for businesses or individuals facing economic insecurities. Local governments can also subsidize public health expenditures by mitigating COVID19, and support public health staff. The final allowable use of the federal funds would be to provide premium pay for essential workers.

State of Montana ARPA Grant Funds: House Bill 632
The State of Montana has received $2.7 Billion from the federal government to distribute amongst the state, cities, towns, counties, and other programs. Montana House Bill 632 created two grants for local government water and wastewater projects, a minimum allocation grant and a competitive grant. The state bill only allows these funds to be used for infrastructure of water, wastewater, or storm water.

Minimum Allocation Grant
The first grant through the state is the Minimum Allocation Grant and is allocated by the same formula as the gas tax. Based on the state allocation of funds to all eligible cities, towns, and counties, Billings is eligible for $15.6 Million.  There is a required one-to-one match component of up to $3.9 million per application. The City can apply for multiple projects up to the $15.6 Million cap, but must provide a match  for each application. This grant is not competitive with other cities, but must follow the American Rescue Plan requirements. The application must be submitted by the end of 2022.

Competitive Grant
The second state grant established in HB 632 is the Competitive Grant. The City is able to apply for multiple grants at any amount up to $25M per project. Since the money flows through the state from the federal government, we must meet the same requirements for “necessary” improvements. Additionally, the state has required a match of some level from the government and the higher our match means greater approval odds. There will be a “ranking” system for competitiveness that will be based on the match amounts and other details. As Billings is competing against other cities and counties, this project(s) should demonstrate a high level of necessity.

The timeline allows Billings to be able to pay for projects retroactively going back to March 3rd of 2021. The state competitive grant will need to be submitted by the 15th of July. The Minimum Allocation Grant’s final deadline will be January 1, 2023, but is currently open for submittal. Billings has through December 2024 to obligate all the funds and must spend the entire amount by December 2026 so that we do not need to return funds to the treasury.

Projects for Competitive Grant Application

Both water and sanitary sewer have many projects included in the five year Capital Improvement Plan (CIP).  After review of the ranking system, staff selected projects that would score the highest for both water and sewer.  The criteria strongly favors projects that address existing deficiencies.  The criteria for both water and sewer is included in the attached presentation.  The projects being planned for application are:
  • Influent Lift Station (sanitary sewer)
  • Zone 6 Reservoir and Redundant Line (water)
  • Water Storage Improvements Zone 1 (water)
  • Staples Reservoir (water)
  • West End Distribution and Treatment Plant (water)
  • 2021 and 2022 Water Rehabilitation (water)
While there are many projects in the CIP that are important, these are the ones that most closely meet the criteria of the competitive grant.  Staff will present other projects for consideration when the federal and state allocations are discussed at future meetings. 

 
ALTERNATIVES
No immediate action will be needed, as such, alternatives have not been analyzed.
FISCAL EFFECTS
The City has received substantial funding from the American Rescue Plan Act. Both directly from the Federal Government and additionally through the State of Montana. Each of the available programs and related amounts are described in detail above. The potential grant funding available to the City of Billings is as follows:
Direct Federal Allocation - $15,940,314
State of Montana Minimum Allocation Grant* - 15,607,145
State of Montana Competitive Grant* - up to $25,000,000 per project

*Local matching requirement exists for these grants

Attachments
ARPA Presentation


    

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