U.S. Treasury Department (Treasury) released the Final Rule for the State and Local Coronavirus Fiscal Recovery Fund (Recovery Fund), which was authorized under the American Rescue Plan Act and allocated $65.1 billion in direct, flexible aid to local governments across America. Treasury also released an overview of the Final Rule, which is easier to read and comprehend. The Final Rule will go into effect on April 1, 2022. However, local governments can choose to take advantage of the Final Rule’s new flexibilities and simplifications now, even ahead of the effective date.
Important Changes in the Final Rule (Overview page numbers noted):
-
Lost revenue – The final rule adopts a significant change on lost revenue: it offers a “standard allowance” for revenue loss of $10 million or less. This means that local governments may choose to use the “standard allowance” and claim up to $10 million of their ARPA funds as lost revenue, OR they may do the full revenue loss calculation and claim that amount in revenue loss. The Final Rule expressly acknowledges that the Standard Allowance will be most helpful for smaller entities, which would seem to encompass nearly all local governments in the BHRC region. So long as the recipient consistently elects to utilize the Standard Allowance, rather than calculating revenue loss, the recipient may use up to $10 million for the provision of government services. (See pages 4, 6, 9, and 11.)
-
The final rule also allows local governments to subtract from their revenue loss calculation the effects of tax increases enacted before the adoption of the final rule Conversely, if a local government has enacted tax decreases before the final rule is enacted, they must also remove the effect of those decreases. (See page 10.)
-
The rule clarifies that for amounts up to the full revenue loss calculation, local governments can spend that money on any government services – which includes any services typically provided by the government. Examples cited by Treasury include, but are not limited to:
-
Construction of schools and hospitals
-
Road building and maintenance, and other infrastructure
-
Health services
-
General government administration, staff, and administrative facilities
-
Environmental remediation
-
Provision of police, fire, and other public safety services (including the purchase of fire trucks and police vehicles)
-
(See pages 4, 6, 9, and 11.)
-
-
Capital expenditures and broad public health definition – The final rule clarifies that municipalities can use their ARPA funds for capital expenditures that support an eligible COVID-19 public health or economic response. Additionally, the eligible uses of ARPA funds for “public health” explicitly include behavioral health care and “preventing and responding to violence.” (See pages 4, 6, 7, 13, 30, and 31.)
-
“Impacted” or “disproportionately impacted” communities – The final rule expands the range of households and communities that are presumed to be “impacted” or “disproportionately impacted” by the pandemic, and allows for a broader set of uses for spending ARPA money to restore these communities – for example, including child care and early learning services and making certain community and neighborhood development projects eligible for funding. (See pages 5, 6, 12, 13, 16, 17, 19, and 32-34.)
-
Infrastructure – The final rule significantly broadens eligible broadband infrastructure expenditure options and adds additional eligible water and sewer projects. (See pages 5, 7, 9, 11, 29, and 37-40.)