ProgramCOVID-19 Federal Assistance e311
TopicsInfrastructure & Maintenance Investments, Lost Revenue & Revenue Replacement
Can a municipality use ARP funds on operational costs and capital improvements to facilities impacted by lost revenue from pandemic which, prior to COVID-19, generated their own revenue?
Under the Coronavirus Local Fiscal Recovery Fund (“CLFRF”) established by the American Rescue Plan Act (“ARP”) of 2021, municipalities have broad, but not unlimited, discretion as to how to allocate the resources provided to them. As detailed in Section 603(c)(1), the allowable uses of the funds are:
(1) USE OF FUNDS.—Subject to paragraph (2), and except as provided in paragraphs (3) and (4), a metropolitan city, nonentitlement unit of local government, or county shall only use the funds provided under a payment made under this section to cover costs incurred by the metropolitan city, nonentitlement unit of local government, or county, by December 31, 2024—
(A) to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;
(B) to respond to workers performing essential work during the COVID–19 public health emergency by providing premium pay to eligible workers of the metropolitan city, nonentitlement unit of local government, or county that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work;
(C) for the provision of government services to the extent of the reduction in revenue of such metropolitan city, nonentitlement unit of local government, or county due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year of the metropolitan city, nonentitlement unit of local government, or county prior to the emergency; or
(D) to make necessary investments in water, sewer, or broadband infrastructure.
The permissible uses outlined in the ARP provide municipalities with different options in terms of supporting impacted industries and key segments of the local economy whether they are owned and operated by the private sector or a government entity. On May 10, 2021, the U.S. Department of the Treasury (“Treasury”) issued specific guidance on the CLFRF and approaches to addressing negative economic impact and lost revenue in the Interim Final Rule (the “Interim Final Rule”). On that same day, Treasury also issued the Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (FAQ) document. Treasury has outlined a methodology that gives counties a great deal of flexibility to generate revenue loss including the use of a 4.1 percent annual revenue growth figure versus the use of actuals. The use of this growth factor, along with the ability to recalculate revenue loss at four points in time, provides counties with options to maximize this allowable use of CLFRF funding.
With respect to tourism, the Interim Final Rule states “[a]id provided to tourism, travel, and hospitality industries should respond to the negative economic impacts of the pandemic.” For example, “a recipient may provide aid to support safe reopening of businesses in the tourism, travel and hospitality industries and to districts that were closed during the COVID-19 public health emergency, as well as aid a planned expansion or upgrade of tourism, travel and hospitality facilities delayed due to the pandemic.”
Examples of allowable costs to facilitate the safe resumption of tourism, as provided by Treasury, include:
- improvements to ventilation;
- physical barriers or partitions;
- signage to facilitate social distancing;
- provision of masks or personal protective equipment; and
- consultation with infection prevention professionals to develop safe reopening plans.
Additionally, the Interim Final Rule requires “that State, local, and Tribal governments publicly report assistance provided to private-sector businesses under this eligible use, including tourism, travel, hospitality, and other impacted industries, and its connection to negative economic impacts of the pandemic.” The Interim Final Rule further states that recipients should also “maintain records to support their assessment of how businesses or business districts receiving assistance were affected by the negative economic impacts of the pandemic and how the aid provided responds to these impacts.”
Last Revised: May 26, 2021
 American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., Section 603, https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HAECAA3A95C4E4FFAB6AA46CE5F9CB2B5.
 U.S. Department of the Treasury Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule, 31 CFR Part 35 RIN 1505-AC77, at 37-40, https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.
 Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions, as of May 10, 2021, https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf
 Id. at 7.
 Id. at 4.
 U.S. Department of the Treasury Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule, 31 CFR Part 35 RIN 1505-AC77, at 37, https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.
 Id. at 36.
 Id. at 37.
 Id. at 38.