Memorandum: Vadnais Heights

11A
Kevin Watson                                                                              The City of Vadnais Heights
City Administrator                                                                            800 East County Road E
                                                                                           Vadnais Heights, MN 55127
651.204.6010 Phone
651.204.6110 Fax
Kevin.watson@cityvadnaisheights.com

Memorandum:
TO:              Mayor Gunderson and City Council Members

FROM:            Kevin Watson, City Administrator

DATE:            September 1, 2020

SUBJECT:         CARES Act Proposed Spending Plan

Recommended Action
City Council confirms the proposed spending plan for CARES Act dollars. Provide feedback as necessary.

Background
Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020 which
provided over $2 trillion in federal economic relief. Section 5001 of the CARES Act established the $150 billion
Coronavirus Relief Fund (CRF), providing payments to State, Local, and Tribal governments navigating the impact
of the COVID-19 outbreak. The CARES Act sets criteria that expenses must meet to be eligible for CRF funding.

In June the Governor and state legislature reached agreement allocating CARES funding to local governments in
Minnesota. Cities received an allocation of $75.34 per capita based on 2018 population which resulted in an allocation
of $994,341 to the City of Vadnais Heights that was received on July 29, 2020.

The Minnesota Department of Management and Budget (MMB) is responsible for overseeing the use of funds by
Minnesota local governments and has issued guidance and a reporting procedure on qualifying costs.

To qualify, expenses must satisfy three distinct elements:

   1. Necessary Expenditures – The expenditure is reasonably necessary for its intended use in the reasonable
      judgement of the government officials responsible for spending fund payments, and the expenditures must be
      due to the public health emergency and used for actions taken to respond to the public health emergency;
      including expenditures incurred to respond directly to the emergency, as well as expenditures incurred to
      respond to second-order effects, such as by providing economic support to those suffering from employment
      or business interruptions due to COVID-19-related business closures.
   2. Unaccounted-For Expenses - “Not Accounted For”: (a) the cost cannot lawfully be funded using a line item,
      allotment, or allocation within that budget; or (b) the cost is for a substantially different use from any expected
      use of funds in such a line item, allotment, or allocation. The “Most Recently Approved” budget is defined as
      the enacted budget for the relevant fiscal period for the particular government, without taking into account
      subsequent supplemental appropriations enacted or other budgetary adjustments made by that government in
      response to the COVID-19 public health emergency.
   3. Incurred During the Covered Period - To qualify, expenses must satisfy two distinct elements.
          1. “Incurred” - performance or delivery must occur during the covered period but payment of funds need
             not be made during that time (though it is generally expected that this will take place within 90 days of
             a cost being incurred.)
          2. “Covered Period” for Minnesota cities and townships: March 1, 2020 – November 15, 2020.

A brief listing of qualifying expenditures includes:

   1. Medical expenses – generally related to public hospitals, temporary public medical facilities, costs to provide
      testing, emergency medical response, costs related to operating public telemedicine capabilities.
   2. Public health – expenses for communication and enforcement of public health orders, acquisition and
      distribution of medical and protective supplies, disinfection of public areas, technical assistance to other
      entities on mitigation of COVID-19, public safety measures undertaken in response to COVID-19, expenses
      for quarantining individuals, contact tracing, and recovery planning projects or operating a recovery
      coordination office.
   3. Payroll expenses – The Fund is designed to provide ready funding to address unforeseen financial needs and
      risks created by the COVID-19 public health emergency, therefore a local government may presume that
      payroll costs for public health and public safety employees are payments for services substantially dedicated
      to mitigating or responding to the COVID-19 public health emergency, unless the chief executive (or
      equivalent) of the relevant government determines that specific circumstances indicate otherwise. The use of
      payments to cover payroll and benefit costs is limited to those employees whose work duties are substantially
      dedicated to mitigating of responding to the COVID-19 emergency. Payroll and benefit costs associated with
      public employees who could have been furloughed or otherwise laid off but who were instead repurposed to
      perform previously unbudgeted functions substantially dedicated to mitigating or responding to the COVID-
      19 public health emergency.
   4. Public health measures – The following are eligible expenses if to enable compliance with COVID-19
      public health precautions:
          1. Expenses to improve telework capabilities for public employees.
          2. Expenses of providing paid sick and paid family and medical leave to public employees.
          3. Provision of grants to small businesses to reimburse the costs of business interruption caused by
              required closures.
          4. Local government payroll support program.
          5. Unemployment insurance costs related to the COVID-19 public health emergency if such costs will not
              be reimbursed by the federal government pursuant to the CARES Act or otherwise.
          6. Other – Any other COVID-19 related expenses reasonably necessary to the function of government
              that satisfy the Fund’s eligibility criteria. 21

Expenses that do not qualify for CRF:
    Replacement of lost revenues, including property tax relief.
    Payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating
       or responding to the COVID-19 public health emergency. Workforce bonuses other than hazard pay or
       overtime, severance pay or legal settlements.
    Per capita payments to residents of a particular jurisdiction without an assessment of individual need.

City staff has attended several CARES Act funding webinars sponsored by the League of Minnesota Cities as well as
meetings with our neighboring cities. Since the level of funding is significant, a special federal single audit will be
required as part of the 2020 audit by our City Auditor. The federal treasury department has also released a Coronavirus
Relief Fund Frequently Asked Questions document that City staff has referred to regularly. The guidance from the
Treasury Department has been fluid and open to interpretation. Clarification provided by the federal government
allows cities to presume payroll costs for public safety employees are eligible for reimbursement under the CARES
Act.

In their words, “the Fund is designed to provide ready funding to address unforeseen financial needs and risks created
by the COVID-19 public health emergency. For this reason, and as a matter of administrative convenience in light of
the emergency nature of this program, a State, territorial, local, or Tribal government may presume that payroll costs
for public health and public safety employees are payments for services substantially dedicated to mitigating or
responding to the COVID-19 public health emergency, unless the chief executive (or equivalent) of the relevant
government determines that specific circumstances indicate otherwise.”

Based on the information obtained by staff, we are recommending the following allocation of CARES Act funding:
       Public Safety wages related to Ramsey County Sheriff’s contract in the areas of patrol, traffic and crime
          prevention since all these position are considered first responders and their job responsibilities and
          practices have changed substantially since the advent of COVID-19.
       Public Safety salary and benefits related to the Vadnais Heights Fire Department due to the fact that they
          are first responders to both fire and medical emergencies and their job responsibilities have changed
          dramatically since the advent of COVID-19.

The city has also been approached by several non-profits as well as both Regions and St. John’s hospitals (see attached
letters) and they have requested that the city consider contributing CARES funds to them due to the added
expenditures related to COVID-19. The State of Minnesota requires that the city contribute any unused funds to either
Regions hospital or another hospital in the county. Given the spending parameters established by the federal
government, the City will exhaust its funds internally and not have excess funds to distribute to outside parties.

The city is required to file an expense to date report monthly with State of Minnesota’s MMB. The city’s first report
is due and will be filed on September 8. MMB will be publishing local spending reports monthly, and expects
significant interest. The City expects that its funds will be fully expended sometime in September or October.

Attachments (2)
Letter From St John’s
Letter From Regions

St. John’s Hospital
                                                                                 1575 Beam Avenue
                                                                                 Maplewood, MN 55109
                                            August 21, 2020

Mr. Kevin Watson
City Administrator
City of Vadnais Heights
800 East County Road E
Vadnais Heights, MN 55127

Dear Mr. Watson:

Thank you for your consideration of St. John’s Hospital’s Coronavirus Relief Fund request
toward alleviating the financial impact of the COVID-19 pandemic.

Located in Maplewood, St. John’s opened in 1985 as a non-profit hospital and has proudly
served the surrounding communities which comprise 14 zip codes. It has 184 licensed inpatient
beds with more than 12,000 inpatient admissions, 40,000 emergency room visits, 3,000 births,
5,500 surgeries and 200,000 outpatient visits per year – St. John’s serves anyone who walks
through our doors. It is one of the largest employers in the area. Strengths include caring for a
culturally diverse population that equates to 63 different languages. Community partnerships
include Police and Fire Departments, Schools, Chambers of Commerce, Rotary Clubs, City
Administrators, Legislators, Business Leaders, Economic Development and Workforce Planning,
and others. St. John’s is a clinical training site for local Colleges and Universities to train
physicians, nurses, radiology techs, ultrasound techs, physical and occupational therapists,
respiratory therapists, pharmacists, and paramedics/EMTs.

As we discussed, the urgent actions that we took at St. John’s to care for COVID-19 patients
have been critical to our ability to successfully serve our community, but they have come at a
cost. We have been able to finalize our pandemic-related costs and have found that they span
several buckets:

Supplies and Equipment Costs: St. John’s had to acquire a significant amount of Personal
Protective Equipment (PPE) to keep our staff safe. Because of shortages of PPE, not only was it
hard to get, but prices increased over historic levels. We also needed to acquire additional
monitors, ventilators and other equipment to prepare for a COVID-19 surge.

Infrastructure Costs: St. John’s needed to make changes in our heating and ventilating (HVAC)
systems to convert rooms to negative airflow, as standard HVAC systems recirculate air
throughout the facility. In order to protect staff and other patients, rooms designated to house
confirmed or suspected COVID-19 patients needed to be negative airflow rooms, meaning that
air is no longer recirculated but discharged safely outside the hospital. In addition, St. John’s
needed to convert rooms from Med/Surg or Emergency to Intensive Care Units (ICU), which
have a higher level of capability to care for higher acuity patients admitted with the virus.

Equal Opportunity Employer

Training and Education Costs: Additional staff training had to be performed to better prepare St.
John’s staff to better care for COVID-19 patients, educate staff on how to properly don and doff
PPE without becoming infected in the process, and train staff deployed to different areas of the
organization due to changing needs resulting from the shut down of some parts of our operation.
In the midst of all of this, St. John’s had to institute furloughs and major salary reductions that
had impacts on our already burdened staff.

As we discussed, St. John’s received $5,229,889 in CARES Act Provider Relief Funds out of the
total $175 billion distributed by the U.S. Department of Health and Human Services to hospitals
and healthcare providers. This did help alleviate some of the early impact of COVID-19.
Unfortunately, during the months of March through June, St. John’s lost an unanticipated
$17,531,084 in revenue because of the pandemic that, for instance, led patients to cancel or defer
non-time-sensitive surgeries and other procedures.

St. John’s Hospital’s requests of local governments focus solely on the incremental costs due to
COVID-19 as detailed above, which totaled $871,096 from March through June. We respectfully
ask that Vadnais Heights allocate $32,405 from the $994,341 received by Vadnais Heights to
help St. John’s offset non-reimbursable costs that the hospital has incurred to-date for supplies
and equipment, infrastructure, and training and education in response to the coronavirus
pandemic. The amount we are requesting is the proportional market share of admissions to St.
John’s Hospital, 3.7%, which Vadnais Heights represents. We expect our incremental, excess
costs due to COVID-19 to continue to grow through the remainder of 2020 and into 2021 with
little, if any, potential for additional coronavirus pandemic funding expected from federal or state
sources.

We thank you for discussing this matter with us. If you require any additional information,
please feel free to contact me directly at LKeithahn@healtheast.org or cell or pager at (651) 983-
1657. Andy McCoy at AMCCOY2@Fairview.org and Mary Edwards at
MEDWARD1@Fairview.org may also be reached for questions.

We thank you for working with us and are available to provide additional information or discuss
our request further. We cherish our long-standing partnership in serving the community and plan
to continue to be able to do so, now and into the future.

With kindest regards, I am

                                              Sincerely yours,

                                              Laura Keithahn
                                              VP Hospital Operations

cc: Mayor Heidi Gunderson

Equal Opportunity Employer

From: "McClean, James M" 
Date: August 27, 2020 at 10:37:55 AM CDT
To: Kevin Watson 
Subject: Local Government CARES Act Funding

 Caution: This email originated outside our organization; please use caution.

Dear Mr. Watson,

I hope you are well! I’m writing to make sure you saw the state government guidance that unspent
CARES Act funding allocated to cities in Ramsey County for COVID-19 response efforts can be granted to
Regions Hospital to help offset hospital expenses related to the pandemic. See pg. 9, #5 in attached
guidance from Minnesota Management and Budget. This guidance reads:

        Any aid amount remaining unexpended by an eligible city or town on November 15, 2020, must
        be sent to the home county in which the city or town is located. For cities located in Hennepin
        County the funds must be transferred to Hennepin County Medical Center or granted to another
        hospital in the county’s boundaries. For the cities or towns located in Ramsey County the funds
        must be granted to Regions Hospital or another hospital in the county’s boundaries. The
        transfer must be made no later than November 20, 2020. Any amount of aid remaining
        unexpended by an eligible county by December 1, 2020 must be returned to Minnesota
        Management and Budget by December 10, 2020.

Despite challenges related to the pandemic, Regions Hospital serves as a full service community hospital
providing exceptional care as the east metro’s Level 1 Trauma hospital, burn center, and a center of
excellence for a full range of specialty care. Regions is also unique as a former county hospital and the
primary safety-net provider for the east metro. Regions provides more charity care than all other east
metro hospitals combined.

Regions has had significant unanticipated expenses to date to prepare and respond to the pandemic.
These expenses include retrofitting hospital space to expand bed capacity to treat COVID positive
patients while reducing the risk of infection for all other patients and visitors to the hospital. It also
includes the purchase of additional personal protective equipment (PPE), cleaning supplies and
materials, and pharmaceuticals to provide the best care possible for COVID patients, protect our staff,
and keep the hospital operational for all other critical community health needs.

We know local governments have their own significant budget challenges related to COVID to work
through, but if you have a timeline that you can share for determining the use of the City’s CARES Act
funding allocation or a sense of whether you will have any unspent funds, we would greatly appreciate
it. I would be happy to connect if you have any questions or would like additional information.

Thank you very much for your leadership and partnership to protect the public health and safety of our
community.

Sincerely,

James

James McClean
Government Relations Director
James.M.McClean@HealthPartners.com
Direct 952-883-7201 Cell 612-805-9670