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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 [NS1]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 ...
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