ORDER-2022-18 : Acceptance of the American Rescue Plan Act (ARPA) grant in the amount of $8,374,174.

Transcript (~28 min @ 58:30)

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▶ 58:33 Jeff McNaught: Next we have with us Mr. DellaRusso. We also have Margot Fleischman and Hannah York from the mayor's office. This is in regards to Order 2022-18, acceptance of the American Rescue Plan Act. also known as ARPA, acronym A-R-P-A, a grant in the amount of $8,374,174. Mr. De La Rosa, we'll let you take it from there.

▶ 59:07 Speaker 4: Thank you. Good evening, and I appreciate candidly being here. It's an order that will benefit clearly the community as a whole, and it's going to require great study and diligence to complete the program in a way that's going to be most beneficial to the city. I believe, through the chair, that my god, Fleishman has some initial comments you'd like to make on behalf of the mayor, if that would be okay.

▶ 59:35 Speaker 2: Absolutely. Ms. Fleishman, the floor is yours.

▶ 59:39 Speaker 5: Good evening. I just want to confirm, is the mayor not with us? I can't see. I wasn't being able to see the participants.

▶ 59:48 Speaker 1: He's unmuted.

▶ 59:51 Speaker 2: Didn't see him on our list.

▶ 59:53 Jeff McNaught: Hello there. Happy to have him.

▶ 59:56 Speaker 5: So with that, I think I will just turn this over to the mayor, who will be able to give some opening remarks relative to the memo that we presented to the council.

▶ 1:00:09 Paul Brodeur: There I am. Good evening, everyone. I very much appreciate the time. It's good to see everyone rested and relaxed after another outstanding Victorian fair, which the Patriots did a game one as well as the fair did. but we had a good showing from our new quarterback. In any case, just some brief opening remarks about the ARPA funds. We all know how important they are to the city. The technical names are a little bit funky, but they're important as we go along. So the Coronavirus State and Local Recovery Funds Program, which we know as ARPA or ARPA money is intended to provide to states, territorial, local, and tribal governments some support in responding to, writ large, the economic and certainly public health impacts and other stresses of COVID-19 and in their efforts to contain impacts on our communities. In this case, Melrose is receiving a little bit shy of $8.4 million over a series of payments. To give you some context, particularly for folks that might be watching in town, because I know that you folks, the council, are well aware of what's going on with the allocations. And they vary wildly in some respects by community, though with some sense of order. So as an example, Malden, as a so-called metropolitan community, will be getting a little bit more than $34 million. There's about 60,000 people in Malden. Medford, which isn't a so-called metropolitan community, is getting $48.5 million. and that's for 57,000 residents, and our other neighbors, Stoneham, Saugus, and Wakefield, all get roughly the same on a population basis. That is just the way the various formulas work, but it's important to understand that context, I think. So, hopefully, you've had a chance to read the memo that was contained with the packet and was, I think, circulated a little bit before that the program does allow for funds to be used in ways that best suit the needs the needs of each community as long as the use fits into one of four broad statutory categories again this is part of the federal language that controls where arpa money can be spent so number one perhaps most obviously to respond to the covet 19 public health emergency or its negative economic impacts To respond to workers performing essential work during COVID-19 public health emergency by providing premium pay to eligible workers, to replace revenue lost during the COVID-19 public health emergency, and four, to make necessary investments in water, sewer, or broadband infrastructure, again, with some restrictions on possible uses within that category. But as such, the city, we will be taking great care to identify projects that fit into one or more of these eligibility categories. Mindful, of course, that there will be a future federal audit of all funds spent, which to why Hannah York is on the call with us is because we saw the need to get an outside expert, given the serious nature and the amount of funds in play, to vet all spending proposals through an independent expert to make sure, as best we can, that they comply with all federal and state law and regulation. As you might imagine, our priority is to use these funds to invest in the city in meaningful ways that are also financially responsible, to help us achieve our goals, preserve our ability to continue to respond to the negative effects of the pandemic, in the years ahead. I think it's very important to note that. And we are also endeavoring to make sure that we are not duplicating any programming or efforts that are underway with other branches of government at the state or federal level in areas where the need does exist on the ground here in Melrose. And I do want to stress again that these funds are mitigation for COVID impacts for the next several years, and we cannot expect to get additional funding depending on what course the pandemic takes over the next three years or so. It is important to note that our over $8 million allocation is not insignificant. As I mentioned before, other communities are getting substantially more. And clearly, you've heard from the conversation you've had about the bond authorization for highways, for roads, that even the $8.4 million will not be enough to meet every eligible need that will be identified over the course of this process. So, we also want to be very cautious about using these funds in such a way that could potentially present a fiscal cliff once our funding is expired. By that, I mean, as an example, we don't want to incur an ongoing HR expense unless we are 100% confident in the out years that we either won't need that position anymore once the COVID-related need goes away or that we have a plan for funding that after that money goes away. By way of detail, these funds must be obligated, must be committed by December 31st, 2024, and spent by December 31st, 2026. So the uses that we settle on particular around major capital investments for things that have to be actionable for planning and execution within the timeframe we mentioned. So as a general proposition, we want to invest in things that have the biggest community benefit, the biggest bang for the buck, if you will, and are consistent with sound financial planning with a goal towards deploying resources in effective ways that are sustainable over time. And with that, by way of intro, Mr. Del Russo and Ms. Fleischman and Hannah are all available, I believe, for statements and, of course, to answer any questions

▶ 1:06:57 Jeff McNaught: any council member may have thank you mr mayor and before we do that i'm just going to have council mcmaster do a quick sound check again and have a lot of problems thank don't worry he's not speaking next council master you there can you hear me mr chairman we can thank you all right now be quiet we're going to move on to uh miss fleishman and mr de la russa mr can i interrupt

▶ 1:07:18 Paul Brodeur: just one second mr chairman do you know if it would be helpful for particularly for members of the administration who aren't directly addressing the council to shut off their video

▶ 1:07:35 Jeff McNaught: to improve bandwidth i am uh i am no i.t director if that helps i'll take your word for it

▶ 1:07:51 Speaker 5: um sure excellent yeah thank you so good evening counselors and i will just uh to chime in and concur with everything the mayor just said very much in line with the memo that we presented you and also just to give you a sense of the regulatory environment that we're living in with these funds um i spend a lot of time with the um the guidance for reporting that we will have to be following in the year and years ahead and um the the system that they have set up is quite specific and in some cases considerable in terms of the documentation that we will have to provide to justify these expenditures. And I think as the memo pointed out, we have no final authority the way we may have in the past with the state of someone to come and bless our expenditures. So we have to be very thoughtful and carefully vet every project that we do undertake, mindful, again, of that possibility of a federal audit and clawback if we do something that the feds don't like. But then also, we do have reporting requirements for specific to our type of governmental unit. Beginning this October, we'll have to start reporting and then ongoing throughout the years of ARPA and, of course, retain our documentation for a period of time afterwards. So, that is part of the process, front-loading as we go forward the information so that when the reporting time comes around, we will be prepared to directly report to the federal government on the use of these funds consistent with the statute and consistent with the reporting requirements. I'm happy to pass it over to Patrick if he has something to add.

▶ 1:09:36 Speaker 4: Hi. Thank you, Margo. Yes, by May. I would ask if for a moment we could bring in here in New York, the Clifton Larson, to give her perspective on what she's seeing in other communities. Again, she is versed very well in the guidance and the requirements for reporting. And then from there, obviously, I will be happy to speak after that, too. Hannah, if you're there.

▶ 1:10:09 Speaker 6: I'm here. Can you hear me?

▶ 1:10:11 Speaker 4: Yes. And if you could also perhaps speak a little bit about revenue replacement, that it's an ongoing process that we're working towards. It's a federal formula that most people, unless you're Albert Einstein, can't figure out. But I'll leave it at that.

▶ 1:10:27 Speaker 6: Yeah. Yeah. So thank you, Patrick. So, first, can I just say I have really enjoyed working with this team on this project. I think that Melrose has set up a fantastic group of people to work on this. Everybody is very willing to do the upfront work that we need to do and reviewing projects upfront to make sure things are going to be allowable. I think that puts Melrose a step ahead of a lot of communities who are still trying to wrap their arms around this program. Just as a couple, a little bit of background information on it. First of all, the Treasury has issued what they call the interim final rule, which gives much more detail. It's about a 240-page document that goes into all the details of what you can and cannot spend this money on. I'd want to point out that part of that name is interim. so this is not the final final rule uh throughout the interim final rule they have questions um that they pose to the readers that they basically opened it up said you know gave a certain amount of time where people could comment back and then they're supposed to be coming out with a final final rule um any day now so one of the things that i have cautioned and i think it's you know, the team at Melrose has been very cognizant of is, you know, we don't want to go too far down the planning pipe until we get the final ruling on certain items. The most risky being, as Patrick pointed out with the revenue loss calculation, I suspect that's going to be an area that has the most changes. The current, the current way of doing it is that you have a base year. I'll kind of do the short non-accountant version of it. There's a base year that you have to compare all of your future revenue loss to for the city of Melrose that is fiscal year 2019. So basically the gist of it as we take all the revenues that the city of Melrose has received during those years we back out certain ones that the federal formula says you can't include and then we're going to compare it to calendar year there'll be a calculation for calendar calendar year 2020 one for 2021 22 and 23 so there are four calendar year calculations for that revenue loss one of the things they have a set 4.1 percent assumed increase in year-over-year revenue that you can use instead of going back and calculating four or five years of your own. If you can prove that your own is higher, then you can do that. Very few people can do that. So most are just using this at 4.1%. What they are not allowing you to do, though, is to make adjustments for known and planned revenue increases. So if you budgeted a large revenue increase from one year to the next. And that inherently is going to show that you didn't have as much of a loss as if you had held everything equal from 2019 forward. So if you think about your tax levy, if your 2019 tax levy just had the standard increase from year over year, then that's going to show your normal revenue loss would have been for that time period. When you have a budgeted increase, override, items like that, that actually will offset some of that revenue loss that you may have had in your local receipts or from other sources. So that's just something to think about. Like I said, this is not final yet. There may be some adjustments to the formula. There may be some adjustments to the allowability. With the revenue loss, though, you can't just take that money. So whatever calculation that comes out to, you can't just take that money and put it back into your free cash or into your, you know, other stabilization type funds. That actually has to then be spent on governmental services. The idea of it is that you're going to use that revenue loss to help get your governmental services back to their pre-pandemic place. So, it's fairly wide open what you can use it for. With about four or five specific expenses, you can't. One of which is replenishing rainy day funds or reserve funds or stabilization. You cannot use it for debt service payments. You cannot use it for funding OPEB. And there's a few items like that that it's unallowable for, but outside of that, it can be used for basically thinking any general, you know, outside of those couple items, general government type services. So the revenue loss is probably the one that has the most questions out there, the most that we're watching for. I have a team of eight consultants that are working with dozens of communities across the state, and we're watching every time new questions come out, new compliance documents come out. We're keeping up to date with everything, and we'll be using that information to help the city to make the best decisions and to comply with all the reporting.

▶ 1:15:57 Speaker 2: Thank you, Ms. York.

▶ 1:16:00 Speaker 4: Just to add to that, what we've established is right now we have a team of 14 people that work with the COVID-19 task force. I think if you recall, we had set that up earlier for the CARES Act. So it's a model that's actually following that. and what we've established is also an actual and we're automating it an input form just for the can't see it but for the purposes of comment tonight it's called a city of morrow's opera project request form and it highlights the different areas for particular areas that the mayor alluded to and that the bigger larger segments and what we then do is we have the department had actually peer down what the request will look like and we put it through the entire task force the documentation has to be sufficient as was indicated earlier to meet an audit the requirement to maintain that documentation is significant and the fact of the matter is and I have to stress this, is it has any and all projects must make that tie in to address a COVID-19 pandemic related matter. It's not set to the side. If you go through the information that's been put out, they put out what's called a frequently asked question, Department of Revenue and the treasury. And this one here, for example, is 41 pages. And it comes out about once every month now. And it's extremely technical as far as the regulations and what is permitted or not permitted. And I do want to stress that oftentimes it would not be a surprise to see that some of the um allowances have been adjusted or modified to better fit the need on these documents so there's a tremendous amount of attention that anyone that um works on this part these projects have to pay here to everyone receives copies of this i i myself send them out to all the members once a month um particularly these past three and four months just so just to keep everyone on the same page so that we do meet it's a meaningful meeting and they can come to the table with concepts projects that they're considering that they believe is the best interest of the city and we can work together as a task force to address that and again through the mayor's office make a determination as to which projects need to go forward and when it's not an open-ended game literally you have um a couple years december 30 um first 2024 to make those decisions to get the programs to get the procurements in place and you have until the two years thereafter to actually expend the complete funds again the 8.4 million it's um something that we are responsible for it does not go to the state for confirmation unlike kia's this will be treasury we'll be auditing this our process here and every year will be audited by the outside auditors as well um so it's intensive i don't want to disenchant anyone there's nothing easy about it it's not light work it's it's it's um intense work but i think it needs to be i think just expand these kind of funds, we need to be sure that we're strictly in compliance and that we're doing

▶ 1:19:55 Jeff McNaught: things to the best interest of the city as a whole. Thank you, Mr. DeLaRusso. Yes, thank you. I believe first up we have Vice Chair Eccles. You did have your hand. You're waving to someone at

▶ 1:20:10 Jack Eccles: home, Vice Chair Eccles. You broke up for a second. You did say my name. I'm definitely in yeah right now thank you yeah you were first yep thank you mr chairman awesome so um thank you mr dellarosa miss fleshman mayor brother for being here um the first question i have is uh kind of just to talk a little bit about um the revenue replacement aspect of the rescue plan money do we have a good picture of what that is since it is the most flexible form of of using this money

▶ 1:20:42 Speaker 4: I'll ask Keanu if I may to address that.

▶ 1:20:47 Speaker 6: Yes. So we have a, what I call preliminary calculation on that for this year. Preliminary, because as I said, they haven't come out with the final, final rule. So based on how they currently have it defined, we do have a calculation for that for the first year. That being said, and I alluded it to it in the discussion on how that calculation is done because the city of Melrose had that, had the override in 2020, I think was the first year it happened. That really ate into most of the loss. So in reality, the city of Melrose doesn't appear by the federal calculation to have had a great revenue loss. So for this year, but then once again, like I said, it will happen every December 31st. It goes by calendar year. So at the end of this calendar year, we'll do the calculation again for 2021. But unfortunately, you know, because of the way the calculation works, it doesn't make allowances for those, you know, items like override and other things that does offset the loss that you guys did

▶ 1:22:02 Jack Eccles: realize in local receipts. Gotcha. That makes sense. So it seems like most of any disbursement arpa funds are going to have to fall into the the other buckets that's right correct awesome cool and then um we did we did receive a little bit of a few constituent inquiries about the use of the arpa funds i just have two questions kind of based on what we got um one one of which being um do we have any plans to maybe use these for any housing related tasks i understand we don't have an itemized list but has anyone have there been any preliminary discussions about maybe possibly contributing to the Affordable Housing Trust, if that would be an appropriate use of these funds or kind of other ways to directly help families in need in Melrose?

▶ 1:22:45 Paul Brodeur: So I'm going to jump in and then let, I'm sorry, I was going to say I will jump in real quick and then let Hannah make sure I'm not saying anything incorrect. So the trick to a lot of this is the particular application of the fund. So we have received a couple of requests, one from the Affordable Housing Corporation and one from a nonprofit that deals in food insecurity. What we cannot do is, as I understand it, is put this money into a trust fund. And it is ultimately, in some respects, designed to be, in part, stimulus money. So there are things that would be terrific investments or terrific financial practices that we simply can't do. The one that a lot of communities that are a lot more flush than us in terms of their upper money are talking about things like, well, can we cut taxes or can we pay down our pension obligations? That is a hard no, and so the details matter in what the proposal might be.

▶ 1:24:11 Speaker 6: ended. Does that make sense? Did I get anything wrong? Yeah. So in essence, we can't put it just in a truck because that's not spending the money, right? So what I have seen other communities do for those who might need help with mortgage, you can absolutely use the money to directly assist those in need with rent assistance, mortgage assistance, food insecurity assistance. So what I have seen done in some other communities is the town works with one of the housing, not-for-profits for them to review applications because they're set up more for that. And then once they're approved, the town or city can actually cut the check directly to the homeowner for assistance. So you can run programs like that, but just putting it into a housing trust

▶ 1:25:02 Paul Brodeur: is not something that is allowable under this. And to put a little bit of another perspective on it is uh to a certain degree as we think about these things in cooperation with the council and the community is um is there another place is there another place to access those funds meaning if there is if there is a a state arpa commitment to um rental assistance uh eviction prevention we obviously want to make sure that our residents uh that may have a need are aware of that right now and that we are not using these funds, which are substantial but not bottomless, are accessing that because there is some programming like that up and running right now. And again, that's just a snapshot of one particular area.

▶ 1:25:51 Speaker 6: Yes. So, Mayor Broder is absolutely correct. There are several other grants out there, like the ERA grant that does emergency rental assistance. In fact, I was on a call a couple weeks ago with the state and they're looking to try to put together a website where people can go and find out about all the different funding sources and how to get help on different particular issues. So I think that's something that they're working on getting out there, but there are a lot of different grants going around helping a lot of different, very specific type of support services that are needed.

▶ 1:26:31 Jack Eccles: Well, thank you both so much. That actually answered both my questions. Thank you, Mr. Chairman.

▶ 1:26:37 Jeff McNaught: you vice chair Eccles I think we're at two minutes left here we're running very close to the having a gavel into the city council and I've got two councillors in queue at this