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Preliminary information regarding federal aid freeze and implications for existing City contracts and subgrantees. (Sharon Ranals, City Manager)
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RECOMMENDATION
Recommendation
Staff is seeking early feedback from the Budget Subcommittee regarding whether to continue paying for certain contract work and reimbursing subgrantees where the City will eventually be seeking reimbursement from the federal government.
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BACKGROUND
On January 27, 2025, President Trump’s Office of Management and Budget released the memorandum included as Attachment 1 directing all federal departments and agencies to temporarily freeze all federal financial assistance programs and supporting activities. The order applies to all congressionally approved federal grants and loans, and excludes all assistance received directly by individuals. The freeze went into effect January 28, 2025 at 5:00 pm. While the memorandum suggests that the freeze is temporary, it is unclear when and whether the executive branch will release these funds.
DISCUSSION
This wide-ranging order could be used to deny states and communities key federal resources used to provide for community programs and complete public improvements. Many of these programs and improvements are delivered by contractors and subgrantees. In these arrangements, the City has a contract with a federal agency for the grant. The City then enters into contracts with subgrantees and/or contractors. When the work is completed by the subgrantee or contractor, the City receives an invoice, which it pays. The City then seeks reimbursement from the federal agency administering the funds.
As this freeze takes effect, the City is caught in the middle with subgrantees and contractors having completed work and potentially invoiced the City, but the City has not paid yet. Staff is raising this issue to the Budget Subcommittee and will potentially bring it to City Council to consider whether to pay these invoices to subgrantees and contractors understanding the City may not be reimbursed. Additionally, staff will seek feedback as to whether these subgrantees and contractors should be asked to pause work until there is more certainty as to what will be reimbursed by the federal government and when. Given the sudden emergence of this action by the Trump administration, the summaries of federal grants that was able to be aggregated by departments are included as Attachments 2 through 6.
FISCAL IMPACT
Staff is working on preparing a financial impact of this federal assistance freeze.
CONCLUSION
While little is known at this time about the full cost of this freeze, staff thought it prudent to begin to engage Council immediately regarding the short-term decision making that needs to occur as we receive invoices for work that has been completed understanding the federal government may not eventually reimburse those costs. While the freeze has been messaged as temporary, there is no indication yet of when funds may resume flowing.