ARPA Guidance for Municipalities

By Ana Schwab, Andre Monette and Gerard Lavery Lederer

The U.S. Treasury rolled out its Interim Final Rule on Coronavirus State and Local Fiscal Recovery Funds on May 10. With more than $350 billion offered for state and municipal governments, below is an overview of how municipalities of every size and budget can benefit from the program.

Disbursement of the Funds
As provided by Congress, funds are allocated for two categories of governments: metropolitan cities that receive money directly from Treasury and non-entitlement units of local government that are funded through their respective state. While funds to NEU governments are first sent to their state, the Interim Final Rules provides that states cannot impose any additional restrictions, rules or compliance. 

When Can Funds be Used?
All municipalities have until the end of 2024 to obligate received funds, but have until the end of 2026 to spend the funds. In general, ARPA is intended to help communities prospectively, but there are three important exceptions: 

1. premium pay for essential personnel, 
2. assistance to households and small businesses and 
3. the calculation of lost revenue. 

This is different from other federal resources available to municipalities that seek to offset costs incurred during the pandemic. Because there are multiple avenues of funding, Best Best & Krieger LLP recommends a municipality first explore available dedicated funding sources before employing ARPA funds that have greater flexibility in addressing challenges today and over the next two years.

Use of the Coronavirus State and Local Fiscal Recovery Funds
As explained by Treasury, “Coronavirus State and Local Fiscal Recovery Funds provide eligible state, local, territorial, and tribal governments with a substantial infusion of resources to meet pandemic response needs and rebuild a stronger and more equitable economy as the country recovers.” 

BB&K identified six main categories for recipients to use Coronavirus State and Local Fiscal Recovery Funds:

1. Support Public Health Expenditures- Report how funds have been used to respond to COVID-19 and the broader health impacts of COVID-19. When using funds under this category, the recipient must: 1) identify a need or negative impact of the COVID-19 public health emergency and 2) identify how the program, service or other intervention addresses the identified need or impact. 

2. Address Negative Economic Impacts Caused by the Public Health Emergency- In direct response to the economic impact of the COVID-19 pandemic, the Coronavirus State and Local Fiscal Funds can be used by local governments to provide expansive assistance to individuals, households, small businesses and impacted industries. Some examples of how this may be done include:

-Aid to unemployed workers
-Job training
-Assistance to households that face food, housing or other financial insecurities
-COVID-19 survivor benefits
-Rehiring of public sector staff and replenishing unemployment insurance trust funds (both to pre-pandemic levels)
-Loans, grants and in-kind assistance to small businesses to address financial challenges due to the COVID-19 pandemic and mitigation
-Support of local tourism, travel and hospitality
-Investments in technology infrastructure

3. Serving the Hardest-Hit Communities and Families- Funds can be used to address the disproportionate public health and economic impacts of the COVID-19 pandemic on the hardest-hit communities, populations and households. Under this section, local governments may provide unique support on services within a Qualified Census Tract, to families living within a Qualified Census Tract, by a tribal government or to other populations, households or geographic areas disproportionately impacted by the pandemic.​

4. Replace Lost Public Sector Revenue- A local government can calculate its losses in revenue and provide that the computation will be the extent of the reduction in revenue by comparing actual revenue to an alternative representative of what could have been expected to occur in the absence of the pandemic. Treasury specifies that any diminution in actual revenue relative to the expected trend can be presumed to be due to the COVID-19 public health emergency.

5. Provide Premium Pay for Essential Workers- Recognizing the continuous work of essential workers during the pandemic, the funds can be used for premium pay directly, or through grants to private employers for essential workers who were or are physically present at their jobs, including those whose work involves protecting the health and wellbeing of their communities.

6. Invest in Water, Sewer and Broadband Infrastructure- Funds can be used in a variety of ways regarding water and sewer infrastructure. Water and wastewater projects are eligible when the project(s) aligns with, and would be eligible for, the Clean Water State Revolving Fund or the Drinking Water State Revolving Fund. This includes projects that will upgrade or build facilities and the transmission, distribution, storage and replacement of lead service lines.

Regarding broadband, investment in wireline infrastructure that will provide a 100 Mbps symmetrical standard may be made only in areas that are unserved or underserved, which is defined as an area lacking a wireline connection capable of providing 25/3 Mbps speed.

Making a Plan for the Funds
ARPA funds are broadly designed to support communities across the country, and municipalities are encouraged to plan how each item fits within an eligible use category. In making the plan, it is important to note an intended use may fall into multiple categories. The municipality should be clear which eligible use category is intended for Reporting and Compliance purposes.  

This article first appeared in PublicCEO on July 20, 2021. Republished with permission.