Are development impact fees recoverable under the revenue replacement provision of ARP?

Section 9901 of the American Rescue Plan Act of 2021 (“ARP”) specifies that Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) may be used, among other purposes,

for the provision of government services to the extent of the reduction in revenue of such [government entity] due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year of the State, territory, or Tribal government prior to the emergency.[1]  

Treasury’s Final Rule uses “General Revenue from Own Sources” as the standard to calculate the reduction of revenue eligible for replacement. The Final Rule defines general revenue as:

money that is received from tax revenue, current charges, and miscellaneous general revenue, excluding refunds and other correcting transactions and proceeds from issuance of debt or the sale of investments, agency or private trust transactions, and intergovernmental transfers from the Federal Government, including transfers made pursuant to section 9901 of the American Rescue Plan Act.[2]

Because of the breadth of the Final Rule’s definition of general revenue, it appears that development impact fees would be considered “money that is received from tax revenue, current charges, and miscellaneous general revenue.”[3] Therefore, it seems likely that development impact fees may be considered a component of a municipality’s general revenue calculation.

Municipalities may refer to Treasury’s Overview of the Final Rule for guidance on calculating revenue loss.[4] When using these funds, municipalities must calculate their lost revenue by summing all general revenue and comparing the total figure to the baseline case. Municipalities need not calculate revenue lost through individual revenue streams (i.e., development impact) separately.[5]

The Final Rule also allows recipients to select a one-time standard allowance of up to $10 million for the provision of government services.[6]

Last Updated: March 31, 2022