The city cannot use any of the $52,625,975 it will receive from the $1.9 trillion American Recuse Plan Act (ARPA) to replenish financial reserves used during the pandemic, recover money used to keep the Rose Bowl afloat, or cover more than $8 million in unpaid customer bills to the city’s utility, according to interim guidance released by the U.S. Treasury Department
Since the pandemic began, the city has expended tens of millions of dollars on COVID-19-related issues, including $15 million from reserves and $3.5 million of a benefits fund to provide pandemic relief.
The city is also looking at dealing with $7 million in unpaid utility bills and $10 million used to cover the Rose Bowl’s debt, which the city could continue to cover into the coming fiscal year.
“The interim guidance prohibits using funds to replenish financial reserves used to respond to the COVID-19 pandemic,” city Finance Director Matthew Hawkesworth wrote in a memo to City Manager Steve Mermell. “As the City Council is aware, the City expended almost all of its 5% General Fund Operating Reserve to cover revenue losses of both the City and the Rose Bowl Operating Company.”
The ARPA focuses on four key program areas:
- Support urgent COVID-19 response efforts to continue to decrease the spread of the virus and bring the pandemic under control,
- Replace lost revenue for eligible state, local, territorial and Tribal governments to strengthen support for vital public services and help retain jobs
- Support immediate economic stabilization for households and businesses
- Address systemic public health and economic challenges that have contributed to the unequal impact of the pandemic.
The funds cannot be used towards pension liabilities.
When it was announced at a City Council meeting in March that the city would receive upwards of $52 million, local residents called on the city to spend the money on housing, but it is unlikely the money can be used for housing.
The city was scheduled to receive 50% of the funds in May. The remaining 50% is expected to come in next year.
The city hoped usage of the funds would be retroactive to March 2020 when the pandemic began, but the use of ARPA funds are retroactive to March 3, 2021 which means the city cannot recover costs or lost revenues dating back to the beginning of the pandemic, according to the memo.
“With this not being the case, it means that the City is not able to recover costs for expenditures such as the CARES Act mandatory sick leave payments, which the City expended more than $3.5 million.”
According to the memo, possible uses include:
- Reinstituting reductions approved by the City Council on Feb. 8 by backfilling the General Fund for the revenue losses leading to these reductions, which have to be prorated for March 3, 2021-June 30, 2021. Those reductions included:
- Building Maintenance – $541,000
- Vehicle Replacement – $780,000
- Library Fund Transfer – $500,000
- Recouping vaccination clinic staff expenditures, including full-time staff working regular hours, to their respective funds for clinics held on March 3 or later.
- Recouping special Fire Academy or Police Department training costs that have increased due to COVID-19 incurred after March 3.
- Amending the Proposed FY 22 Operating Budget to show the Public Health Funding of $250,000 for Health Equity coming from ARPA and the $225,000 for second PORT Team as both being funded by ARPA.
- Adoption of a revised FY 22 Operating Budget based on “pre-COVID-19” revenue forecast as prescribed in the Interim Guidance document and use ARPA funds to backfill lost revenue.
- Full personnel budget instead of a flat personnel budget for eligible funds where revenue losses have occurred.
- Fund revenue to reinstate all reductions made as part of FY 2021 Operating Budget adoptions.
- Review non-General Fund revenues, including Operating Companies, to determine where losses were created by COVID-19 and have resulted in service delivery, personnel or overall budget reductions.
- Provide funding to the Operating Companies to cover re-opening operational costs related to COVID-19 protocols.
- Fund police and fire projects with ARPA funds-PD Mobile Operations, PD Remodel, Fire Station Remodels.
- Fund Public health tenant improvements to accommodate staffing to support ongoing vaccine distribution, contract tracing, and other related efforts, not currently in budget, but expressed as a new need from Public Health – $250,000.
- Transfer portions of ARPA to PUSD or other eligible non-profits if they have eligible expenditures to respond to COVID-19.
But even under those conditions, the city has to proceed cautiously because the money must be used before 2025.
“The ARPA funds must be expended by the end of 2024, and therefore could put Pasadena in a very difficult position financially, if it initiated programs and services allowed without having a funding source identified to continue programs or services beyond 2024,” according to the memo.