How can cities maximize the chances that programs created as a result of recovery funding continue to be sustainable after the end of their funding?

According to the U.S. Department of the Treasury’s (“Treasury”) Final Rule for the American Rescue Plan Act of 2021 (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”), a recipient may only use funds to cover costs incurred during the period beginning March 3, 2021, and ending December 31, 2024.[1] The period of performance will run until December 31, 2026, which provides recipients additional time to complete projects funded with payments from the CSLFRF.[2] The CSLFRF provide state, local, tribal, and territorial governments with resources to respond to the COVID-19 public health emergency and its negative economic impacts through four categories of eligible uses.[3]

The Final Rule states that “the purpose of the [C]SLFRF funds is to mitigate the fiscal effects stemming from the COVID-19 public health emergency.”[4] One of the central uses of CSLFRF funds is to provide monies to businesses and individuals who suffered financial loss due to the pandemic and to assist in helping them return to pre-pandemic operations. The CSLFRF aims to mitigate the negative impact of the pandemic and provide the funding to better prepare municipalities for future events. These endeavors are largely envisioned as short-term projects, reimbursements, or investments in response to current fiscal challenges and to help communities prepare for the future.

While CSLFRF are approved for use as seed funds for eligible programs or projects that may exist in perpetuity (with the caveat that ARP funds must be expended by December 31, 2026), there is no guarantee that federal funding will be available in the future to sustain a program or project after December 31, 2026.[5] Municipalities should therefore consider how a program created with the intent to operate past that date will be funded through other means. This may be in the form of a tax, line-item budget from general funds, fees, grants, or other funding streams.

It should be noted that additional information may be provided when Treasury issues new Frequently Asked Questions (“FAQs”) specific to the Final Rule, as indicated by the Interim Final Rule FAQs.[6] Treasury also encourages municipalities to consider the guidance issued in the Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule.[7]

Last Updated: March 2, 2022