Sunnyside commissioners seek legal clarity on ARPA-funded revolving loan repayments

Sunnyside City’s Community and Economic Development Commission spent much of its meeting pressing staff for clear legal guidance on how to treat repayments to a small revolving loan program initially funded with American Rescue Plan Act money.

Commissioners and staff said the core question is whether repayments — including interest — must remain classified as ARPA funds and be spent under ARPA rules, or whether the city may reloan or otherwise treat those receipts as city money after the federal program’s deadlines. Commissioners said they have received partial answers from staff but not the definitive legal determination they need to resume or reconfigure the loan program.

The commission asked for a precise accounting of the program. Members reported the city budgeted $250,000 for the revolving-loan pool but that about $280,000 appears to have been disbursed; repayments have begun to come in, and payments and interest — small amounts to date — are being collected into a city account. Commissioners said they need an itemized ledger that lists each loan recipient, the original disbursement date and amount, repayment schedule, and current balance.

Commissioners raised two legal concerns. First, the American Rescue Plan Act (ARPA) and related federal guidance place deadlines on how ARPA dollars are to be expended; staff noted the city must follow the federal program’s terms and that some loans have maturities that extend beyond the federal deadline. Second, commissioners asked whether interest earned on ARPA-funded loans may be used locally to support additional services. Staff told the group the program guidance appears to allow interest to fund additional services, but that staff is seeking confirmation from the federal grantor and from the city attorney.

Several members urged rapid follow-up. One commissioner said finance and legal need to determine whether earlier disbursements require repayment to the federal government in some circumstances or whether those repayments may be recirculated locally as the original program intended. Staff acknowledged the city recently completed a federal audit that included ARPA spending, but said the audit did not fully resolve the revolving-loan questions.

The commission asked staff to produce a written status report that includes: (1) the original grant terms and any applicable federal or state rules; (2) a project-by-project accounting of loans made and repayments received; (3) legal counsel’s written opinion on whether repayments and interest must remain ARPA funds; and (4) recommended options for administration (continue as a revolving loan, convert to grants, or close the program). Commissioners said they will defer further program changes until they have those answers.

For now, staff described the matter as unresolved. Commissioners emphasized they want transparent, auditable records before moving funds or relaunching the program.