HomeMy WebLinkAbout20260703_Letter Re OMB Regulation for Federal Financial Assistance_ City of San Luis ObispoCity of San Luis Obispo, Office of the City Council, 990 Palm Street, San Luis Obispo, CA, 93401-3249, 805.781.7114,
slocity.org
July 13, 2026
Office of Management and Budget
725 17th St., NW
Washington, DC 20503
Re: Comments on Proposed Regulation for Federal Financial Assistance (Docket No. OMB-
2026-0034)
The City of San Luis Obispo (City) appreciates the opportunity to comment on the Office of
Management and Budget's proposed Regulation for Federal Financial Assistance (Docket No.
OMB-2026-0034). The City of San Luis Obispo strongly opposes the proposed Regulation for
Federal Financial Assistance because it will have significant detrimental operational, fiscal,
and administrative impacts on local governments.
The City is a full-service municipality located on California’s Central Coast serving
approximately 49,000 residents. The City administers federal funding directly and through
pass-through entities to support transportation, public infrastructure, housing, emergency
management, climate resilience, environmental programs, and other essential public
services. These grants often require multi-year planning, local matching funds, and
coordination among federal, state, regional, and local partners.
This comment letter is consistent with the City's adopted Legislative Platform, which
supports fiscal sustainability, efficient government operations, preservation of local
authority, and opposition to actions that shift costs or administrative burdens to local
governments without corresponding resources or flexibility.
Although each proposed revision carries its own operational implications, the City is most
concerned about the cumulative effect of the proposal. Taken together, these changes
represent a significant restructuring of the federal financial assistance framework and would
require substantial modifications to financial management, procurement, contracting,
compliance, and grant administration practices across multiple City departments. The City's
concerns therefore extend beyond any individual provision to the combined operational and
fiscal impacts the proposal would impose on local governments. The City respectfully
requests that OMB reconsider or substantially revise the proposal for the reasons discussed
below.
1. Increased Administrative Burden
The proposal would substantially increase administrative responsibilities associated with
federal grant management, including subrecipient monitoring, contractor classification,
reporting, payment processing, procurement, and financial management. For the City of San
Luis Obispo, these additional requirements would affect numerous federally funded
programs administered across multiple departments, including Federal Transit
Administration (FTA) grants, Federal Emergency Management Agency (FEMA) grants,
California Department of Transportation (Caltrans)-administered federal transportation
funding, and other federal assistance supporting infrastructure, public safety, housing, and
climate resilience initiatives. Implementing these changes would require revisions to
financial management practices, procurement procedures, internal controls, staff training,
and grant administration processes, diverting limited staff resources from project delivery
and essential public services.
2. Reduced Certainty for Long-Term Projects
The proposal expands the authority of the funding agency to suspend or terminate awards
based on changing priorities while reducing procedural protections for recipients. The
proposal would also allow federal agencies greater discretion to modify award conditions
and align discretionary funding decisions with changing federal priorities over time. This
increased uncertainty makes long-term planning more difficult for local governments that
must commit substantial local resources years before projects are completed.
The City regularly undertakes multi-year capital projects that depend on stable federal
funding, including transportation improvements, water and wastewater infrastructure,
emergency preparedness projects, climate resilience initiatives, and Complete Streets
improvements. Many of these projects, including those supported through programs such
as Safe Streets and Roads for All (SS4A), Caltrans-administered federal transportation grants,
and FEMA mitigation funding, require years of planning, environmental review, engineering,
right-of-way coordination, procurement, and contracting before construction begins.
Increased uncertainty regarding awarded funding may delay or prevent project delivery,
increase costs, and discourage local governments from pursuing future federal funding
opportunities.
3. Impacts on Transit and Regional Programs
The City's transit system relies on a combination of Federal Transit Administration (FTA),
state, and regional funding to support transit operations, fleet replacement, accessibility
improvements, technology investments, and capital infrastructure. These investments are
coordinated with regional transportation partners, including the San Luis Obispo Council of
Governments (SLOCOG), and often involve multi-year implementation schedules. Additional
administrative requirements or uncertainty regarding federal funding could delay fleet
replacement, capital improvements, reimbursement processing, and regional transportation
initiatives while increasing administrative costs.
Historically, the City has received an average of $2.8 million annually in FTA formula funds.
Since 2021, the City has also been awarded more than $17 million in FTA competitive grant
funding. These federal investments are essential to supporting both on-going transit
operations and the replacement of aging fleet with zero-emission vehicles. Any reduction,
delay, or increased uncertainty in federal financial assistance could delay implementation of
federally funded capital projects, defer the transition to zero-emissions fleet in support of
state and regional policy goals, and increase reliance on limited state and local funding
sources. Ultimately, these impacts could reduce the City's ability to provide safe, reliable,
and sustainable public transportation to the community.
4. Pass-Through Grants
Like many California municipalities, the City receives federal funding through state and
regional partners, including programs administered by Caltrans, FEMA, Department of
Housing (HUD), and other agencies. Additional requirements for pass-through entities and
subrecipient monitoring would increase administrative responsibilities for both funding
agencies and local governments while reducing flexibility needed to efficiently administer
grant-funded projects.
5. Expanded Buy America Requirements
The proposed expansion of Buy America domestic preference requirements for purchases
beyond infrastructure will likely raise project costs and delay project completion. Non-
infrastructure supply chains are not generally equipped to provide proof of domestic
sourcing, manufacturing, production and/or final assembly in the U.S., so additional staff
time and expanded expertise on Buy America compliance will be required for a greater range
and number of projects. This will place an additional burden on procurement under federal
grants.
6. Economic Impact on Local Governments
The proposed regulation would fundamentally alter the framework governing federal
financial assistance across virtually every federal agency. Because these changes affect a
broad spectrum of grant recipients, including states, local governments, tribal governments,
institutions of higher education, nonprofit organizations, hospitals, and private entities, the
City believes the cumulative operational, administrative, and fiscal impacts warrant more
extensive evaluation.
OMB's Regulatory Impact Analysis estimates that, on average, more than 10,000 state, local,
and territorial governments receive federal financial assistance annually, the overwhelming
majority of which are local governments. Despite the broad applicability of the proposal, the
Regulatory Impact Analysis does not appear to fully quantify the administrative costs these
changes would impose.
Implementation of the proposed rule would likely require recipients to revise policies and
procedures, update financial management systems, modify procurement practices, provide
staff training, obtain additional legal review, and dedicate ongoing staff resources to new
compliance and reporting requirements. These implementation costs extend well beyond
the direct administration of individual grant awards and should be more fully evaluated
before the rule is finalized.
The City respectfully encourages OMB to conduct a more comprehensive assessment of the
cumulative economic and administrative impacts on local governments before adopting a
final regulation.
Conclusion
The City of San Luis Obispo respectfully requests that OMB withdraw or substantially revise
the proposed regulation to reduce unnecessary administrative burden, preserve
predictability for long-term public investments, maintain appropriate procedural protections
for recipients, clarify implementation requirements, provide an adequate implementation
period, and fully evaluate the cumulative fiscal and operational impacts on local
governments before finalizing the rule.
Sincerely,
Markie Kersten
Assistant City Attorney
City of San Luis Obispo
CC: San Luis Obispo City Council
Congressman Salud Carbajal
Senator John Laird
Assemblymember Dawn Addis
League of California Cities