Can a municipality use CRF or another funding source to subsidize revenue loss from metered parking used for outdoor dining?

The CARES Act’s Coronavirus Relief Fund (“CRF”) most likely allows expenditures to replace revenue lost by vendors whose metered parking is impacted by street closures related to COVID-19 social distancing and other public health safety protocols.  FAQ #24^[1] of the U.S. Treasury guidance issued on January 15, 2021, states:  

“Governments have discretion to determine what payments are necessary. A program that is aimed at assisting small businesses with the costs of business interruption caused by required closures should be tailored to assist those businesses in need of such assistance. The amount of a grant to a small business to reimburse the costs of business interruption caused by required closures would also be an eligible expenditure under section 601(d) of the Social Security Act, as outlined in the Guidance.” 

FAQ #25 of the same guidance states that this discretion is available with or without a stay at home order: 

“Fund payments may be used for economic support in the absence of a stay-at-home order if such expenditures are determined by the government to be necessary. This may include, for example, a grant program to benefit small businesses that close voluntarily to promote social distancing measures or that are affected by decreased customer demand as a result of the COVID–19 public health emergency.” 

While the use of CRF funds appears to be permitted for this purpose, CRF funds should still be allocated using the appropriate method. The two FAQs referenced above discuss a grant and subrecipient relationship to a small business. If the municipality allocates the funding to the commercial entity in this manner it must 1) ensure that the entity first meets the definition of a small business; and 2) follow all relevant local and federal grants management compliance requirements, such as undertaking a risk assessment and monitoring subrecipients. The municipality can find additional compliance information in the Office of Management and Budget’s 2020 Compliance Supplement Addendum.^[2]

However, if the funding is not allocated through a grant, but rather through a contractual arrangement, then the municipality should follow its local procurement code.^[3] Municipalities have at least two options when allocating CRF funds through a contractual arrangement.  First, a municipality can ensure that its duty to make up lost proceeds for the vendor is spelled out in the contract. In this scenario, the municipality’s financial duties to the vendor should be clearly defined. Second, the municipality can enter into a short-term arrangement to lease or rent the spaces required for socially distanced restaurant operations.  In either scenario, a municipality should take care to: 1) follow the appropriate procurement processes; 2) establish a nexus between the COVID-19 crisis and the project to be funded; and 3) confirm that the relevant expenditures occurred during the CRF covered period.  Simply paying an invoice presented by the vendor without a contract in place will likely not be an allowable use and will risk recoupment.  

In any case, a municipality should consider implementing processes to detect and prevent potential duplication of benefits.  Federal, state, and local COVID-19 relief programs have allocated considerable resources to businesses for lost revenues and other impacts from COVID-19.  A municipality employing best practices will ensure that it is not providing funding for activities that have already been recouped by the business entity through other programs. 

Moving forward, the Coronavirus Local Fiscal Recovery Fund (“CLFRF”) program established by the American Rescue Plan (“ARP”) Act of 2021 may offer another funding option for this purpose.^[4]  FAQ #9^[5]  of the U.S. Treasury guidance issued on May 10, 2021 lists the following as an eligible use:

“Loans or grants to mitigate financial hardship such as declines in revenues or impacts of periods of business closure, for example by supporting payroll and benefits costs, costs to retain employees, mortgage, rent, or utilities costs, and other operating costs;”  

While the purpose appears to remain allowable under the CLFRF, compliance and reporting requirements apply, and the procurement requirements will most likely remain identical to those required under the CRF.

Last Revised: May 24, 2021