Program

COVID-19 Federal Assistance e311

Topics

Lost Revenue & Revenue Replacement

Can a city use ARP funds under revenue loss to advance an existing goal (climate, equity, community safety) under a new program?

I. Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Considerations for Programming Centered on Climate, Equity, and Community Safety Considerations

The U.S. Department of the Treasury’s (“Treasury”) Final Rule allows state, local, and tribal governments discretion to determine “how best to use” American Rescue Plan (“ARP”) funds pursuant to the eligible uses identified by the ARP and associated regulatory guidance.[1]

a. Climate

With respect to climate, “Treasury encourages recipients to consider green infrastructure investments and projects to improve resilience to the effects of climate change.”[2]

Treasury has provided some examples of investments and projects, and guidance on the use of funding. For example, “Green infrastructure projects that support stormwater system resiliency could include bioretention basins that provide water storage and filtration benefits, and green streets, where vegetation, soil, and engineered systems are combined to direct and filter rainwater from impervious surfaces.”[3]

b. Equity

Treasury has clarified the meaning of low- and moderate-income for the purpose of identifying various impacts of the health crisis on households and communities. The Final Rule “maintains the presumptions identified in the interim final rule and defines low- and moderate-income for the purposes of determining which households and populations recipients may presume to have been impacted. To simplify the administration of this presumption, the [Final Rule] adopts a definition of low- and moderate-income based on thresholds established and used in other federal programs.”[4] Treasury further states: “Recipients may determine whether to measure income levels for specific households or for a geographic area based on the type of service to be provided” and emphasizes "recipients’ ability to identify other impacted or disproportionately impacted classes.”[5],[6]

It should be noted that Treasury presumes eligibility of disproportionate impact when the population served falls within a Qualified Census Tract, is served by Tribal governments, is operating in a U.S. territory, or is considered low-income.[7] In this context, Treasury guidance states that Qualified Census Tract “has the same meaning [as] given in 26 U.S.C. 42(d)(5)(B)(ii)(I).”[8]

“Treasury agrees that allowing recipients to identify impacted and disproportionately impacted beneficiaries based on their eligibility for other programs with similar income tests would ease the administrative burden.”[9] The Final Rule recognizes categorical eligibility for the following programs and populations:[10]

  • Impacted households. Treasury will recognize a household as impacted if it otherwise qualifies for any of the following programs:
    • Children’s Health Insurance Program (CHIP)
    • Childcare Subsidies through the Child Care and Development Fund (CCDF) Program
    • Medicaid
    • National Housing Trust Fund (HTF), for affordable housing programs only
    • Home Investment Partnerships Program (HOME), for affordable housing programs only
  • Disproportionately impacted households. Treasury will recognize a household as disproportionately impacted if it otherwise qualifies for any of the following programs:
    • Temporary Assistance for Needy Families (TANF)
    • Supplemental Nutrition Assistance Program (SNAP)
    • Free and Reduced-Price Lunch (NSLP) and/or School Breakfast (SBP) programs
    • Medicare Part D Low-income Subsidies
    • Supplemental Security Income (SSI)
    • Head Start and/or Early Head Start
    • Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
    • Section 8 Vouchers
    • Low-Income Home Energy Assistance Program (LIHEAP)
    • Pell Grants
    • For services to address educational disparities, Treasury will recognize Title I eligible schools as disproportionately impacted and responsive services that support the school generally or support the whole school as eligible

c. Community Safety

With respect to issues related to community safety, CSLFRF funding is eligible for the provision of government services, to include, specifically, “the provision of police, fire, and other public safety services.”[11] Additionally, the Final Rule gives “recipients broad latitude to use funds for government services up to their amount of revenue loss due to the pandemic.”[12]

The Final Rule states: “For administrative convenience, the recipient may consider public health and safety employees to be entirely devoted to responding to COVID-19, and therefore their full payroll and covered benefits eligible to be covered, if the employee, or his or her operating unit or division, is primarily dedicated to responding to COVID-19, meaning that more than half of the employee, unit, or division’s time is dedicated to responding to COVID-19.”[13] Treasury has also provided detail in the Final Rule on public safety employees considered eligible, “police officers (including state police officers), sheriffs and deputy sheriffs, firefighters, emergency medical responders, correctional and detention officers, and those who directly support such employees such as dispatchers and supervisory personnel.”[14] While the above enumerated list is not exhaustive, it does provide recipients with both examples, as well as a degree of latitude, to determine eligible public safety employees.

Finally, “Treasury is clarifying that indirect costs for administrative, management, and financial management personnel to support public health and safety staff responding to COVID-19 are not permissible under this provision, given the relatively greater challenge of differentiating the marginal increase in staff time and workload due to pandemic response for indirect versus direct costs.”[15]

II. Revenue Loss

The Final Rule states that a municipality may use payments from CSLFRF to provide “government services to the extent of revenue loss due to the pandemic.”[16] Treasury measures reduction in revenue as “relative to revenues collected in the most recent full fiscal year of the government prior to the emergency.”[17] Guidance regarding calculating revenue loss can be found within the Final Rule.[18]

Additionally, the Final Rule:

offers a standard allowance for revenue loss of $10 million, allowing recipients to select between a standard amount of revenue loss or complete a full revenue loss calculation. Recipients that select the standard allowance may use that amount for government services.[19]

III. Duplication of Benefits

Prior to implementing new programming, communities should consider taking steps to detect and avoid any possible duplication of benefits (“DOB”). While the Final Rule does not expressly address the requirement of conducting a duplication of benefits analysis, Treasury has included language to clarify the meaning of duplication of efforts as “avoid[ance] [of] duplication of efforts and resources.”[20]

A duplication of benefits occurs when a person, household, business, government, or other entity receives financial assistance from multiple sources for the same purpose, and the total assistance received for that purpose is more than the total need for assistance.[21] Federal disaster law generally prohibits the provision of federal assistance in excess of need.[22] Before paying a cost with federal disaster assistance, a recipient must check to see whether the assistance would be a duplication of benefits, meaning that the cost has not or will not be paid by another source. Recipients are required to prevent the duplication of benefits when carrying out federally funded programs to provide disaster assistance.[23]

IV. Conclusion

A municipality should conduct a multi-layer evaluation before implementing any proposed program with funds derived from CSLFRF. For specific areas such as climate, equity, and community safety, the Final Rule provides discretion, specific requirements, and guidance. A municipality should also compare the Final Rule to any proposed program’s desired specifications and outcomes, as well as the option to choose a standard revenue loss allocation or conduct a full revenue loss calculation. In addition, municipalities should generally take measures to detect and avoid duplication of benefits when implementing a proposed CSLFRF-funded program.

Last Revised: April 1, 2022

[1] Treas. Reg. 31 CFR 35 at 5, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[2] Id., at 272.

[3] Id.

[4] Id., at 30.

[5] Id., at 31.

[6] Id., at 37.

[7] Id., at 36-37.

[8] Id., at 411.

[9] Id., at 40.

[10] Id., at 40-42.

[11] Id., at 260.

[12] Id., at 9.

[13] Id., at 172.

[14] Id., at 173.

[15] Id., at 177.

[16] Treas. Reg. 31 CFR 35 at 8, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[17] Id., at 233.

[18] Id., at 233-248.

[19] Id., at 7.

[20] Id., at 295.

[21] See Robert T. Stafford Disaster Relief and Emergency Declaration Act (“Stafford Act”), Public Law 93–288, Section 312, available at: Stafford Act, as Amended - FEMA P-592 vol. 1 May 2021; 44 CFR § 206.191-Duplication of Benefits, available at: eCFR :: 44 CFR 206.191 -- Duplication of benefits (for additional guidance).

[22] Id.

[23] Id.