The U.S. Department of Treasury requires all the funding to be obligated by the end of 2024 and fully spent by the end of 2026. Deputy Chief Financial Officer Meagan Elliott told City Council this week that Detroit’s pandemic relief allocation will be spent more than a year before the deadline, setting a goal to exhaust the funds by June 2025.
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The city had spent $95 million in American Rescue Plan Act (ARPA) funds as of June 6, representing 11.5% of the total funding. Another $347 million (42%) in spending has been obligated, meaning it was approved by City Council but hasn’t been spent yet. That leaves a little under half of the funding available, though most of the dollars have been programmed for specific projects.
“I think it’d be irresponsible to not have it all programmed,” Elliott told BridgeDetroit. “We need to be moving.”
Elliott said $97 million will be obligated in contracts that are expected to be approved by the City Council before its summer recess which begins July 26. An additional $148 million in contracts is expected for approval by the winter recess on Nov. 22. That would put the city on track to have 75% of its ARPA funding obligated by the end of this year, leaving only a quarter of the funding left over for approval in 2024.
“We now anticipate a significant ramp up, especially if we have all these contracts out the door,” Elliott said.
Irvin Corley, executive policy manager for the Detroit City Council’s Legislative Policy Division, said local governments across the country are anxious about the federal government taking back ARPA funds intended to address a national emergency that officially ended in May.
Unspent COVID-19 relief funds were a bargaining chip in negotiations between Congress and the White House over the national debt ceiling. Republicans in Congress, including representatives from Michigan, proposed reclaiming unspent funding to cut costs. President Joe Biden brokered a deal to take back unspent billions in funding from federal agencies, but not local governments. Congress approved bipartisan legislation last week to avoid a default on the government’s debt.
“I was on the phone with folks in (Washington,) D.C. every single day, making sure their definition of obligation did not impact the city’s (pandemic aid),” Elliott said. “We also put in place a backup plan to ensure that if those dollars were ever at risk, we would bring before (the city council) a strategy for revenue replacement to fully encumber all the dollars. It’s an important strategy that we have in place and we’re ready to activate should there ever be another kind of political jockeying with these precious resources.”
Mayor Mike Duggan warned other mayors to spend their pandemic relief funds sooner than later during a January U.S. Conference of Mayors gathering. Corely said the potential for clawbacks was a major theme at a Government Finance Officers Association Conference he attended recently.
“No one wants any of these dollars to go back to the federal government,” Corely said. “At the time of the discussion, the debt ceiling issue was not resolved. They really talked about the possibility of the federal government claw backing these dollars if they’re not fully obligated by December 31, 2024.
The city is hiring a director of ARPA implementation to remove roadblocks to spending the funding and ensure compliance with federal regulations. The starting salary is listed between $130,000 and $160,000.
Chief Financial Officer Jay Rising told BridgeDetroit the new position will help support Elliot; he said she has been hustling to stand up the city’s ARPA program but is scheduled to go on temporary leave later this summer.
“I’m excited to get someone to really think about pushing these obligations forward,” Rising said. “It’s making sure we’re watching every project and understanding whether it’s going slow, do we need to re-obligate or do something else before it’s too late?”
The city previously hired two companies to ensure compliance with federal rules about how ARPA dollars can be spent. The firms are paid with pandemic relief funds. AECOM Great Lakes, Inc. was awarded $15 million to provide compliance support and grant management services. UHY LLP received $1.5 to review those compliance determinations.
Detroit also awarded a $1.27 million contract to Procurement Consulting Group, LLC, to work with city officials on the procurement of ARPA-funded contracts.
Rising said the main goal is to obligate all of Detroit’s ARPA allocation by the end of next year. He said it was expected to take more time on the front end to establish priorities and design programs, followed by a “swell” of spending.
ARPA dollars were intended to be used for new and transformational programs that address the negative impacts of the coronavirus pandemic, Elliott said. The funding could create opportunities that the city wouldn’t normally take on, either due to lack of funding or because of General Fund dollars have specific uses under the law.
Other programs coming before City Council for approval this year focus on down payment housing assistance, emergency shelters, funding for nonprofits, community violence intervention programs, a virtual reality police training simulator, traffic enforcement, expansion of the Joe Louis Greenway, parks improvements, digital equity and workforce training.
ARPA funds have trained more than 400 residents to work for the city’s General Services Department, according to a fact sheet the city released in May.
Council members said they’re looking forward to seeing the future impact of ARPA-funded programs, but also expressed concern about the rapid ramp up in spending during a Wednesday Budget, Finance and Audit committee meeting.
“That’s a lot of money,” said Council Member Coleman Young II. “We don’t want to have to come back here with an (Office of Auditor General) report saying this money wasn’t spent the proper way.”
Elliot said she understands the concern but is comfortable that the city spent enough time building up compliance, documentation and invoicing policies during the last two years. An online spending dashboard is updated weekly. Elliot said a new map will be released “in the next few months” that shows ARPA spending by each City Council district.
“That’ll be a great way to enhance transparency moving forward,” she said.