DATE: September 8, 2026
TO: Board of Supervisors
SUBMITTED BY: Paul Nerland, County Administrative Officer
SUBJECT: Second Amendment to State and Local Fiscal Recovery Funds
Subrecipient Agreement with Malaga County Water District
RECOMMENDED ACTION(S):
TITLE
Approve and authorize the Chairman to execute Amendment No. 2 to Subrecipient Agreement No. 22-172 with Malaga County Water District (MCWD) for provision of American Rescue Plan Act - State and Local Fiscal Recovery Funds (ARPA-SLFRF), which will revise the final reimbursement submission deadline to September 30, 2026, with no increase to the maximum compensation ($4,329,561)
REPORT
There is no Net County Cost associated with the recommended action, which will revise the final reimbursement submission deadline in the County’s agreement with MCWD to 5 p.m. on September 30, 2026, to ensure MCWD can spend all allocated SLFRF funds in time for the County to process reimbursements before the federal deadline of December 31, 2026. The recommended amendment also clarifies that any reimbursement requests submitted after the deadline will be treated as abandoned and unpaid, and that all project costs incurred beyond the deadline will be MCWD’s sole financial and legal responsibility. This item pertains to a location in District 4.
ALTERNATIVE ACTION(S):
If the recommended action is not approved, the agreement with MCWD will remain unchanged, including the original reimbursement submission deadline and existing terms. As a result, the County would continue to operate under the current deadlines and conditions; any delays in MCWD’s ability to complete the project and submit all required reimbursement requests in time for the County to process all documentation and issue payments before the federal ARPA-SLFRF expenditure deadline will limit the County’s ability to liquidate ARPA funds awarded to MCWD.
FISCAL IMPACT:
There is no increase to Net County Cost associated with the recommended action. The program is fully funded with ARPA-SLFRF. Sufficient appropriations have been included in the FY 2026-27 Recommended Budget for the Auditor-Controller/Treasurer-Tax Collector Org. 1033 - Disaster Claiming, Fund 0026, Subclass 91021, Account 7845 and will be included in the subsequent recommended budget.
DISCUSSION:
On November 20, 2023, the U.S. Department of Treasury (Treasury) published the Obligation Interim Final Rule (Obligation IFR) which amended the definition of “Obligations” and included additional flexibility with respect to the ARPA-SLFRF program.
After the SLFRF obligation deadline of December 31, 2024, Treasury’s guidance permits recipients to amend existing contracts after the obligation deadline, so long as the amended contract is within substantially the same scope, and for substantially the same purpose as the original contract.
On May 3, 2022, your Board approved Subrecipient Agreement No. 22-172 (Agreement) with MCWD to fund up to $1,850,000 for the final engineering design, environmental review, Department of Drinking Water permitting, construction and administration, construction review, operation and maintenance manual, and project management for the construction of the new Well 5A, which is necessary to maintain adequate and stable service levels, improve drinking water capacity, and provide an alternative water supply in case of emergency or drought in the Community of Malaga.
After the approval of the Agreement, MCWD received a second award under Subrecipient Agreement No. 22-339 (Water Storage Tank) for up to $2,567,225 in ARPA-SLFRF funding to fund the final engineering design, environmental review, permitting, administration and construction of a new water storage tank at the Well 5A location.
On April 23, 2024, your Board approved the First Amendment to the Agreement, which among several actions reduced the scope of work in Agreement No. 22-339 (Water Storage Tank) from planning, design, engineering, and construction of a new water storage tank at Well 5A to instead use only $87,664 in funding to complete the engineering and design of the water storage tank for Well No. 5A. Approval of the First Amendment also reassigned $2,479,561 in funding availability from Agreement 22-339 (Water Storage Tank) for the construction of Well 5A awarded under Agreement No. 22-172, which increased the maximum compensation available to MCWD by $2,479,561, from the initial $1,850,000 to $4,329,561.
Due to the length of time to review claims and issue ARPA payments, beginning in 2024, the CAO’s Office and ACTTC’s Office agreed to implement a June 30, 2026, expenditure deadline for the ARPA-SLFRF Program as a precautionary measure ahead of Treasury’s expenditure deadline of December 31, 2026. On March 3, 2025, the CAO’s Office provided written notice to the ARPA-SLFRF awarded departments and subrecipients with active programs to remind them of the Treasury’s expenditure deadline. To ensure the County can meet the expenditure deadline, the CAO’s Office required all subrecipients to complete their awarded programs and submit their last claims by June 30, 2026. Three additional written notices and quarterly reminders were provided to the Subrecipients to remind them of their program’s June 30, 2026, expenditure deadline.
Due to the complex nature of this water infrastructure project and the benefit it brings to the Community of Malaga, MCWD requested an extension to the June 30, 2026, expenditure deadline. The CAO is amenable to MCWD’s extension request, which would extend the expenditure deadline from June 30, 2026, to September 30, 2026.
Approval of the recommended action will amend the Agreement’s Timeline section and establish a firm final reimbursement submission deadline of 5 p.m. on September 30, 2026, for completed work on the MCWD project. Under the revised terms, any requests for reimbursement submitted after this final deadline will be deemed abandoned and will not be processed or paid by the County. The recommended amendment also clarifies that MCWD must submit all requests for reimbursements with sufficient time to the County by the final submission deadline. If the MCWD submits invoices with incomplete reports or documentation, MCWD will not have another opportunity to rectify their submission. Any project cost incurred after the final submission deadline will be the sole financial and legal responsibility of MCWD.
REFERENCE MATERIAL:
BAI #32, April 23, 2024
BAI #31, August 9, 2023
BAI #29, May 3, 2022
ATTACHMENTS INCLUDED AND/OR ON FILE:
On file with Clerk - Amendment No. 2 to Agreement with MCWD
CAO ANALYST:
George Uc