COVID-19 Federal Assistance e311


Lost Revenue & Revenue Replacement

Funding Source

American Rescue Plan Act

Can revenue streams from water and sewer funds be included in utility revenue for the purposes of revenue loss calculation?

Under the Coronavirus Local Fiscal Recovery Funds (“CLFRF”) program, water and sewer revenue streams are treated differently for the purposes of calculating a municipality’s revenue losses due to COVID-19. Municipalities can include sewer revenues as “general revenue” in their respective calculations of lost revenue but must exclude revenues derived from water services. 

The U.S. Department of the Treasury’s (“Treasury”) CLFRF Final Rule allows municipal governments to include or exclude recipient-owned utility revenue in their revenue loss calculation.[1] The Final Rule states the following:  

Treasury has adjusted the definition to allow recipients that operate utilities that are part of their own government to choose whether to include revenue from these utilities in their revenue loss calculation. This change responds to comments from recipients indicating that revenue from utilities is used to fund other government services and that utility revenues have declined on aggregate.[2]Furthermore, for utilities or other entities (e.g., certain service districts) that are not part of the recipient government, a transfer from the utility to the recipient constitutes an intergovernmental transfer and therefore is included in the definition of “general revenue.”[3]

Sewer systems do not generate utility revenue but rather generate general revenues and are therefore allowable in the loss calculation as confirmed in Treasury’s Frequently Asked Questions (“FAQ”)[4].

Treasury guidance generally adopts the Census Bureau’s Government Finance and Employment Classification Manual’s definition of “utility revenue” as the standard for identifying the various utility-generated revenue streams that must be excluded from the municipality’s general revenue. Notably, this definition includes revenue from operations of “publicly-owned and controlled water supply systems, electric power systems, gas supply systems, and public mass transit systems.”[5]  In contrast, sewer revenues are not part of utility revenues and may be included in the revenue loss calculation.[6]

Treasury’s FAQ includes a chart in the appendix delineating several revenue streams that municipalities should include or exclude for purposes of the revenue loss calculation; the chart examples  indicate that sewer and solid waste system revenues should be included, while water supply systems revenues should be excluded (see Revenue → General Revenue → Own Sources → Current Charges → Examples)  and (see Revenue → Utility Revenue → … water supply systems).[7]

Likewise, the Census Bureau Government Finance and Employment Classification Manual indicates that “[f]or combined water-sewer system,” municipalities should “include [as general revenue from own sources] segregable amounts derived from sewerage activities” when determining the amount of revenue derived from sewage.[8]

Last Revised: January 31, 2022

[1] Treas. Reg. 31 CFR 35 at 38, available at:

[2] Id.

[3] Id.

[4] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of January 2022) – FAQ #3.15, at 18, available at:

[5] Id.

[6] Id.

[7] Id., at 43 - Appendix: Interim Final Rule Definition of General Revenue Within the Census Bureau Classification Structure of Revenue.

[8] U.S. Bureau of the Census Government Finance and Employment Classification Manual (Updated 2006), at 4-36, available at: