If a municipality transfers revenue from a utility fund to a general fund, can that be included in the calculation for general revenue?

The U.S. Department of the Treasury (“Treasury”) issued the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule as part of the American Rescue Plan Act of 2021 (“ARP”). The Final Rule keeps the Interim Final Rule’s definition of general revenue as “revenue collected by a recipient and generated from its underlying economy…  [that] capture[s] a range of different types of tax revenues, as well as other types of revenue that are available to support government services.”[1] However, the Final Rule also adds two new provisions to the definition, one of which addresses utility revenue.

The Final Rule allows recipients to choose whether to include revenue from utilities that are part of their own government in their revenue loss calculation.[2] The Final Rule further adds that “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] Therefore, government operated utilities are optional to be included as general revenue, while non-government operated utilities must be included.

Additional information may be provided when Treasury issues new Frequently Asked Questions (“FAQs”) specific to the Final Rule.[4] 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.[5]

Last Revised: February 1, 2022