The Government Finance Officers Association (GFOA) has calculated that the City of Independence should receive $20.3 Million from the ARPA. Eligible uses of these funds include:
- Revenue replacement for the provision of government services to the extent of the reduction in revenue due to the COVID-19 public health emergency, relative to revenues collected in the most recent fiscal year prior to the emergency,
- COVID-19 expenditures or negative economic impacts of COVID-19, including assistance to small businesses, households, and hard-hit industries, and economic recovery,
- Premium pay for essential workers,
- Investments in water, sewer, and broadband infrastructure.
Restrictions on the uses of these funds include:
- Funds allocated to states cannot be used to directly or indirectly to offset tax reductions or delay a tax or tax increase;
- Funds cannot be deposited into any pension fund.
- Funding must be spent by the end of calendar year 2024.
Implementation will be an extensive process as new or updated guidance and FAQs are developed and released by the U.S. Treasury, including an application process. Guidance from the GFOA cautions municipalities that:
- Temporary Nature of ARPA Funds. ARPA funds are non-recurring so their use should be applied primarily to non-recurring expenditures.
- Care should be taken to avoid creating new programs or add-ons to existing programs that require an ongoing financial commitment.
- Replenishing reserves used to offset revenue declines during the pandemic should be given high priority to rebuild financial flexibility/stability and restore fiscal resiliency.
- Use of ARPA funds to cover operating deficits caused by COVID-19 should be considered temporary and additional budget restraint may be necessary to achieve/maintain structural balance in future budgets.
- Investment in critical infrastructure is particularly well suited use of ARPA funds because it is a non-recurring expenditure that can be targeted to strategically important long- term assets that provide benefits over many years. However, care should be taken to assess any on-going operating costs that may be associated with the project.
The funding provided under ARPA provides a unique opportunity for the City to make strategic investments in long-lived assets, rebuild reserves to enhance financial stability, and cover temporary operating shortfalls until economic conditions and operations normalize.
Staff has developed a preliminary use of funds that embrace the GFOA guidance above.
This is being presented to the City Council Audit and Finance Committee on April 9, 2021 and will be updated with any feedback from that committee prior to the City Council Work Session on April 12.