Updates and Resources for Local Governments

Engagement. Service. Improvement.

Tuesday, October 26, 2021

Disclaimer: The U.S. Department of Treasury has issued interim rules for the American Rescue Plan Act. These rules are subject to change. The information provided during this webinar is solely intended for general reference and is not comprehensive or final information. It is recommended that local governments review all guidance from federal Treasury and contact their legalcounsel and auditor for your specific situation.

Welcome GreetingNick BrousseauSection Manager,

Community Engagement and Finance, Department of Treasury

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Updates and Resources for Local Governments: 14thWebinar

I. Welcome & Introductions Heather Frick, Acting Deputy Treasurer, State and Local Finance, Michigan Department of Treasury

II. Updates from State Budget OfficeChristopher Harkins, State Budget Director

III. American Rescue Plan Act (ARPA) UpdatesRod Taylor, Community Engagement and Finance Administrator, Michigan Department of Treasury

IV. Michigan Housing Development Authority (MSHDA) Trends and InitiativesDavid Allen, Chief Market Analyst

V. Question and Answer

VI. Closing Remarks Heather Frick, Acting Deputy Treasurer, State and Local Finance, Michigan Department of Treasury

Welcome & Introductions

Heather FrickActing Deputy TreasurerState and Local Finance

Department of Treasury

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Updates from the State Budget Office

Christopher HarkinsState Budget Director

State Budget Office

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FY22 Budget UpdateOctober 2021Director Chris Harkins

Budget Process

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FY22 Budget• The FY22 General Fund Budget was

signed on September 29• The budget provides strong investments

which will:• Build a strong state economy

• Lower the cost of childcare for working families

• Invest in education and skills for Michigan's workforce

• Protect access to affordable healthcare

• Clean up our water and environment

• Rebuild crumbling bridges

FY22 Budget• Total Budget $68.6b, down 9%

• Federal $30.2b, down 22%

• General Fund $11.8b, up 7%

• School Aid Fund $15.6b, up 6%

• School aid budget was signed in July

Federal44%

Local/Private1%

School Aid23%

Other State Restricted

15%

GF/GP17%

TOTAL BUDGET BY SOURCE

FY22 General Fund Budget

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General Fund: About 80% of GF/GP appropriations fund health care, the protection of vulnerable children and adults, public safety, and education.

Total General Fund by Category

Health & Human Services

46%

Public Safety22%

Higher Education

11%

All Other Departments

21%

Total: $11.8 billion

FY22 Major Investments

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• Local Bridge Bundling ($196m)• High Water and Resilient Infrastructure ($14m)• Dam Safety Emergency Fund ($19m)

Infrastructure

• Direct Care Worker Wages ($100m)• Behavioral Health Improvements ($118m)• Programs to address Racial Health Disparities

($15m)

Public Health

• Reconnect ($55m)• Futures for Frontliners ($25m)• Child Care ($1.4b)• Community Revitalization Program ($100m)

Opportunity

• Contaminated Site Cleanup ($20m)• PFAS and Emerging Contaminants Grants ($14m)• Emergency Drinking Water Fund ($15m)

Water and Environment

• Michigan Indigent Defense ($31m)• Raise the Age ($29m)• Clean Slate ($20m)

Justice Reform

FY22 Local Investments

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• Revenue Sharing – 2% Ongoing Revenue Increase

• Public Safety Personnel Recruitment and Training Grants ($5m)• Grants are to support local efforts to expand recruitment, improve training, and

provide additional professional development and support to first responders• First responders include law enforcement, firefighters, EMTs, paramedics, and

local unit of government corrections officers

• Bridge Bundling ($196m)• Bridge bundling will cover several projects under one contract, streamline

coordination and permitting, increase economies of scale, and improve bridge conditions on local routes

Federal COVID Relief

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March 2020 April 2020 December 2020 March 2021

CARES Act Coronavirus Aid, Relief, and

Economic Security Act

PPPHCE Act Paycheck Protection

Program and Health Care Enhancement

CRRSA Act Coronavirus Response and

Relief Supplemental Appropriations Act

ARPAAmerican Rescue Plan

Act

$6 billion $340 million over $5.0 billion $14 billion

ARP State Fiscal Recovery Guiding Principles

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Pandemic:

Equity:

Transformational:

Leverage:

Sustainability:

Efficacy:

Implementation:

Does the proposal address a change in societal opportunity and/or eliminate disparities/gaps in outcomes for underserved and underrepresented populations?

What is the opportunity for transformation and/or social change for Michigan’s residents?

Does the proposal leverage additional resources from the private, public, and/or philanthropic sectors? How can we work with local units of government to combine state and local ARP funds through match or through regional efforts?

How sustainable is the proposal? Will it require ongoing support? What is the potential return on investment?

How effective would the proposal be in solving a defined problem? Does it use techniques that are highly likely to achieve the desired outcome? Does it clearly define how success will be measured?

How much support does the proposal currently or likely will have? Is there capacity to implement it now?

How does the proposal address issues created by or exacerbated by the COVID-19 pandemic?

Governor’s Proposed Investments to Build Stronger Communities

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• Regional Resiliency Fund - $250M• Creates public/private “Regional Resiliency Councils” that will develop regional economic resiliency plans

• Brownfield Bridge Fund - $200M Provides bridge funding for brownfield projects while waiting for tax capture revenue to accrue, allowing for more investment in communities that otherwise would not be able to redevelop

• Community Revitalization and Placemaking Grants - $100M (PA 87 of 2021)• Provides revitalization/placemaking grants to attract and retain talent and business

• Residential Clean Energy Improvements - $50M Invests in grants and/or a Green Bank to provide affordable financing for clean energy improvements and pre-qualification investments for low-income families to leverage other state and federal programs

• Large & Strategic Site Development - $100M Provide incentives to offset costs to large site development

• Housing and Community Development Fund - $100M • Expands availability of affordable housing and provide flexible funding for MSHDA to support activities that boost

homeownership, property improvement, and rental development

Next Steps

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American Rescue Plan Act (ARPA) Updates

Rod TaylorAdministrator

Community Engagement and FinanceDepartment of Treasury

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Information and Resources: • The American Rescue Plan Act of 2021• U.S. Treasury Website

• Interim Final Rule• Frequently Asked Questions

(FAQs)• Non-Entitlement Community

Guidance• Fact Sheet

• U.S. Bureau of Census Classification Manual

• Register for U.S. Treasury COVID-19 Relief Updates

Coronavirus Local Fiscal

Recovery Fund

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Subhead• Text• Text

Subhead• Text• Text

Local Fiscal Recovery FundsTotal: $130.2 billion

Counties

$65.10 billion

Michigan estimate:

$1.93 billion

Entitlement Metropolitan

Cities

$45.57 billion

Michigan estimate:

$1.80 billion

Non-Entitlement

Units of Local Government

(NEU)

$19.53 billion

Michigan estimate:

$644 million

Counties • Payments based on the county’s relative

population• Direct payment from U.S. Treasury

Entitlement Metropolitan Cities• Payments based on Community

Development Block Grant (CDBG) Entitlement and a statutory formula

• Direct payments from U.S. Treasury

Non-Entitlement Units of Local Government (NEUs)

• Payments based on population• Funding distributed to States which

distributes to local governments

American Rescue Plan Act (ARPA)

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• Declined funds – 7• Non-responsive (37)

• In progress – 10• Not started – 27

• Application – In progress resubmission- 42• Received pending audit review – 317• Resubmission required – 160• Payments made or in progress - 1161

• www.michigan.gov/arpa• CLFRF NEU Status

NEU Statistics

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ARPA Allowable

Uses

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Disclaimer

The U.S. Department of Treasury has issued interim rules for the American Rescue Plan Act.

These rules are subject to change.

The information provided during this webinar is solely intended for general reference and is not comprehensive or final information.

All units that accept Local Fiscal Recovery Funds are responsible for being audited by U.S. Treasury.

It is recommended that local governments review all guidance from federal Treasury and contact their legal counsel and auditor for your specific situation.

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• Obligated by December 31, 2024Spending

Timelines

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Allowable uses include the following:1. Response to public health emergency or its

negative economic impacts2. Provide premium pay for essential workers,

within caps3. Provide government services to the extent of

revenue lost4. Make necessary investments in water, sewer, or

broadband infrastructure

Prohibited from using funds:• Pension contributions*• Replenishing budget stabilization fund, rainy day

fund, or similar reserve account• Legal settlements• Outstanding debt

June 17th webinar * Does not include portion part of “covered benefits”

Allowable Uses and

Prohibitions

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Senate Bill 3011Allowable Uses and

Prohibitions

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Assessing whether a program or service “responds to” the COVID-19 public health emergency requires the recipient to, first, identify a need or negative impact of the COVID-19 public health emergency and, second, identify how the program, service, or other intervention addresses the identified need or impact.

Allowable Use #1:Public Health

and Economic Impacts

Source: Interim Final Rule – II. Eligible Uses, A. Public Heath and Economic Impacts

Allowable Use #1:

COVID-19 Eligible Expenditures Eligible Uses Details (IFR p. 11-21)

Containing/Mitigating Covid-19(IFR p. 16)

•Vaccine programs, PPE, medical expenses•Enhancing public health data systems•Capital investments in public facilities to meet pandemic operational needs etc.

Behavioral Healthcare Needs(IFR p. 17)

•Mental health/substance abuse treatment•Crisis intervention/hotlines•Services to promote access to social services

Payroll/Benefits:Public health/safety

Human servicesSimilar employees

(IFR p. 18)

•Eligible to the extent that the work completed was for COVID-19 response/mitigation.•For administrative convenience, public health/safety workers, recipients can use funds to cover the full payroll and covered benefits costs for employees or operating units or divisions primarily dedicated to the COVID-19 response.(FAQ 2.14)•Payroll and covered benefits can also be used for an employee’s pension benefits as part of their payroll contribution to their pensions . (FAQ 2.14)

Sources: GFOA27

Allowable Use #1:

Negative Economic ImpactEligible Uses Details (p. 21-38)

Impacted Industries(Tourism/Travel/Hospitality etc.)

(IFR p. 32)

•Implement COVID-19 mitigation/prevention measures to enable safe resumption of tourism, travel, and hospitality services(e.g. improvements to ventilation, physical barriers or partitions, signage to facilitate social distancing, provision of masks or personal protective equipment, or consultation with infection prevention professionals to develop safe reopening plans)

Rebuilding Public Sector Capacity to Pre-Pandemic Levels (IFR p. 32)

•Payroll Benefits•Rehiring public-sector staff•Replenishing UI trust funds

Small Business Support (IFR p. 30)•Loans, grants, in-kind assistance for operation continuity, mitigation/prevention, and counseling programs to rebound from the downturn

Hardest-Hit Communities (IFR p. 34)•Investing in socioeconomic disparities, housing/communities•Addressing disparities in education

Sources: GFOA 28

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Michigan has 565 QCTs• Facilitate access to resources that improve health outcomes• Community health workers to help access services• Navigators to help applying for public benefits or services• Housing services• Remediation of lead paint or other lead hazards• Violence intervention

Economic Impacts• Building strong communities through investment in housing

and neighborhoods• Addressing educational disparities• Promoting healthy childhood environments

Non-QCT (FAQ 2.11)• “…support their determination that the pandemic resulted

in disproportionate public health or economic outcomes to the specific populations, households, or geographic areas to be served.”

Source: Interim Final Rule: Page 37, Item 12

Qualified Census Tract

(QCT)

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Allowable Payment:• Eligible workers are those: “…needed to

maintain continuity of operations of essential critical infrastructure…”

• Additional pay up to $13/hour for all work.• May not exceed $25,000/person

• Can not reduce or substitute normal earnings

• Justification required if workers pay will be above 150% state or county average annual wage

• Retroactive pay allowed

Allowable Use #2:

Premium Payments

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How can you use these funds?“Government Services”

• Maintenance or new infrastructure, such as roads

• Health services• Environmental remediation• Police, fire, and other public safety

servicesExcludes

• Issuance of new debt or payment of outstanding debt

• Reserves• Paying settlements/judgements

Allowable Use #3:Revenue Loss

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Components of Revenue Loss Calculation• Determine your “general revenue” for base year

(for most locals FY 19)• Determine Growth Adjustment (whichever is

greater)• Average growth over three full FY prior to

1/27/20 or• 4.1 %

• n or the number of months elapsed from the end of the base year to the calculation date

• Actual revenue loss= general revenue collected during 12-month period ending on each calculation date.

Allowable Use #3:

Revenue Loss Calculation

𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝑦𝑦𝐵𝐵𝐵𝐵𝑦𝑦 𝑅𝑅𝐵𝐵𝑅𝑅𝐵𝐵𝑅𝑅𝑅𝑅𝐵𝐵 ∗ 1 + 𝑔𝑔𝑦𝑦𝑔𝑔𝑔𝑔𝑔𝑔𝑔 𝐵𝐵𝑎𝑎𝑎𝑎𝑅𝑅𝐵𝐵𝑔𝑔𝑎𝑎𝐵𝐵𝑅𝑅𝑔𝑔𝑛𝑛12 − 𝐴𝐴𝐴𝐴𝑔𝑔𝑅𝑅𝐵𝐵𝐴𝐴 𝑔𝑔𝐵𝐵𝑅𝑅𝐵𝐵𝑦𝑦𝐵𝐵𝐴𝐴 𝑦𝑦𝐵𝐵𝑅𝑅𝐵𝐵𝑅𝑅𝑅𝑅𝐵𝐵

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• Own source revenue• Includes

• Taxes, current charges, rentals, miscellaneous revenues

• All revenue streams (i.e. entity-wide FAQ 3.14)

• Other Government Transfers (i.e.. revenue sharing)

• Excludes• Federal Transfers (including CRF)• Utilities (water supply, electric power, gas

supply, and public mass transit systems) FAQ 3.15

• Refunds• Correcting transactions,• Proceeds issuance of debt• Sale of investments

Allowable Use #3:

Revenue Loss“General Revenue”

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Water and Sewer (FAQ 6.1 to 6.4)Clean Water State Revolving Fund (CWSRF)

• “construct, improve, and repair wastewater treatment plants, control non-point sources of pollution, improve resilience of infrastructure to severe weather events, create green infrastructure, and protect waterbodies from pollution”

• Includes Stormwater, cybersecurity, green infrastructure and climate change

Drinking Water State Revolving Fund (DWSRF)• “building or upgrading facilities and transmission,

distribution, and storage systems, including replacement of lead service lines”

• Includes consolidation, cybersecurity, and climate change

Additional Reporting (additional guidance at later date)

• “workforce plans and practices related to water, sewer, and broadband projects undertaken with Fiscal Recovery Funds”

Allowable Use #4:

Investment in Infrastructure

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BroadbandUnserved or Underserved

• Less than - download 25 Mbps and upload 3 Mbps

Required level• 100 Mbps symmetrical upload/download• Exception for lower speed due to geography, or

excessive costs

Allowable Use #4:

Investment in Infrastructure

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Disclaimer

The U.S. Department of Treasury has issued interim rules for the American Rescue Plan Act.

These rules are subject to change.

The information provided during this webinar is solely intended for general reference and is not comprehensive or final information.

All units that accept Local Fiscal Recovery Funds are responsible for being audited by U.S. Treasury.

It is recommended that local governments review all guidance from federal Treasury and contact their legal counsel and auditor for your specific situation.

OTHER INFORMATION

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Numbered Letter

2021-3American Rescue Plan Act - Revenue and Expenditure Recognition

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Reporting Requirements

• Compliance and Reporting Guidance

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Accepting Federal Funds

• Major requirements of recipients of federal awards:

• Financial management systems to separately identify, track, and effectively control each source of federal funds

• Written procedures covering at a minimum: cash management, allowability of costs, procurement, and compensation and benefits

• Establish and maintain effective internal control over both financial reporting and compliance with federal requirements

• In certain circumstances, recipients must have a “single audit” conducted

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• Talk with your auditors and legal counsel early and often

• Review the rules, FAQs, and other guidance from US treasury

• Be transparent

• Hold strategic planning sessions

• Stakeholder input

• Board/council priorities

• Long term budget impacts

• Look for reginal impacts

Suggestions for Successful

Implementation

Michigan State Housing Development Authority

(MSHDA) Trends and Initiatives

David AllenChief Marketing Analyst

Michigan State Housing Development Authority

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Recent Housing Trends in Michigan

Presented toUpdates and Resources for Local Governments Webinar

October 26, 2021

• Pre-COVID, issues with housing affordability and availability were evident in many markets

• These trends negatively impacted many Michiganders, especially those with lower incomes

COVID exacerbated an already stressed housing market in Michigan

• Households grew in number by about 5.5% since 2014, slow growth expected for near future.

• Employment has recovered about ¾ of its pre-COVID levels, but growth and participation has stagnated over the last few months.

• Government aid during the crisis (PPP, larger unemployment payments, etc.) managed to plug some gaping holes in household’s finances, but situation is still stressful out there:

• Nearly nine percent of Michiganders responding to the US Bureau of the Census’ Household Pulse Survey said they are late on housing payments (mortgage or rent) and have little confidence they can pay next month’s installment;

• About 47% of those not current on housing payments say that their eviction is at least somewhat likely;

• About 20% of Michigan adults were unable to pay at least one energy bill during the last 12 months.

Demand is generally strong for housing in the state, especially affordable housing

• Building permits show the slow pace of construction since the pre-Great Recession high in 2004.

• 2020 permits totaled about 19,735—indicating a slowing of growth in this data series as well.

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Building Permits by Structure Type in Michigan, 1980 to 2020

Single Family Mul�family

Supply is still lagging demand in many parts of the state.

• Zillow estimates that the median value of the middle tier price of housing in Michigan is currently $215,847. This is an increase of 17.3% over the last year.

• Statewide, rents for good-quality units have grown by 8.5% over the last year, and occupancy is up to 96.4%. Rents in lower-quality apartment complexes have increased by nearly 6%, with similar occupancy rates.

• COVID’s effects have focused mainly on those already at a disadvantage in the market. One aspect of this is the share of minority households that own their homes. Most groups, especially Blacks, had rates below white households before the pandemic, and the situation is likely worse now.

Steady demand + slow increases in supply = increasing prices, continued affordability issues and equity issues regarding homeownership.

Race or Ethnicity 2019 2014 2010 2000White 77% 76% 78% 78%Black or African American 43% 41% 46% 51%Native American and Alaskan Native 61% 63% 63% 60%Asian 61% 58% 59% 50%Hawaiian and Pacific Islander 68% 46% 54% 52%Other 54% 54% 53% 49%Two or More 55% 55% 56% 57%

Hispanic 56% 56% 55% 55%

Homeownership Rate

• Trends in the marketplace underline the need for expanded development of housing at a variety of price points. What tools exist to fill these needs?

• $100 million for the state’s Housing and Community Development Fund, announced by the Governor in late July of this year

• Creation of the first statewide housing plan is ongoing• The Michigan State Housing Development Authority and Michigan Economic

Development Corporation have a variety of housing and community development programs to assist in the construction or rehab of residential units.

• The Michigan Land Bank is an important resource as well in terms of acquisition and preparation of sites for a variety of uses including residential.

• MSHDA Program Guide

Questions

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Fiscally Ready Communities

Webinar Trainings

Capital Asset Management and Planning Trainings

• Thursday, December 9th at 6 p.m.

Register for this free training at:www.Michigan.Gov/FiscallyReady

Look soon for the 2022 trainings sessions on:• Budgeting for Fiscal Sustainability• Financial Best Practices Overview• Capital Assets Management and Planning• Internal Controls (new!)

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