Staff recommends that City Council approve the resolution authorizing staff to apply for ARPA Competitive Grant funds and authorize the Mayor to sign a financial commitment letter for each submitted project.

The American Rescue Plan Act (ARPA) of 2021 provides state and local aid to make necessary investments in water and sewer infrastructure.  The Montana State Legislature passed HB 632 which directed the federal funds available under ARPA for use in Montana.  One of the grants established in HB 632 is the Competitive Grant Program. The first round of applications for the Grant was due by July 15, 2021, and the City submitted eight (8) applications in the first round.  Rules under the first round of competitive grants established a ceiling of $25M per project and limited the funds to water and sewer infrastructure projects.  To qualify, projects must be eligible under the Drinking Water State Revolving Fund or Clean Water State Revolving Fund which includes projects for treatment, transmission and distribution, source, storage, collection, reuse, and stormwater.  The other primary eligibility criteria is the project should primarily be to address existing deficiencies rather than provide capacity for growth.  Water and sewer projects that help address documented and potential health risks or are needed to be in compliance with regulations rank higher.  Other ranking categories include readiness to proceed, rate affordability, and the amount of the local share match. 

The Department of Natural Resources (DNRC) is responsible for reviewing and ranking the projects and recommending them for funding to the Infrastructure Advisory Commission.  The Infrastructure Advisory Commission is responsible for reviewing the grant applications and providing recommendations to the Governor on which projects should be funded.  The Commission recommended capping the grant award of each project in the first round to $2 million and award the top ranking 73 projects and the Governor approved this recommendation.  The City had three (3) projects in the top 73 and was awarded $6 million in this first round.

The second round of competitive grant applications is due January 14, 2022.  There are two changes from the rules specified during the first round.  First, the ceiling for the grant has been reduced from $25 million per project to $2 million per project.  Second, the proactive compliance points were reduced by 25 points and the formal enforcement action points were increased by 25 points.  This change is detrimental to the City projects' ability to score well as the City does not have any outstanding formal enforcement actions.

Eligible projects must be in an approved planning document such as a Capital Improvement Plan (CIP).  Thus, staff is recommending submitting projects in adopted CIPs.  There are two projects that scored relatively high during the first round that staff is recommending re-submitting in the second round as staff is of the opinion that these projects have a higher chance of success in this next round of grants.  These two projects are West End Distribution and the FY22 Water Main Rehabilitation Program.  Staff is also recommending submitting for the FY23 Water Main Rehabilitation Program.  
  
While there are many projects in the CIP that are important, these projects most closely meet the criteria of the competitive grant program.  A resolution authorizing staff to apply for these funds is required.  

City Council may:

• Approve the resolution authorizing staff to apply for ARPA Competitive Grant funds; or,
• Not approve the resolution.  If the resolution is not approved, the City will not apply for ARPA Competitive Grant funds.

ARPA Competitive Grant funds up to $2 million per project can be applied for up until January 14, 2022.  Each project must have a match for the grant funding.  City staff is planning to apply for three water projects for total possible grant awards of $6 million.