Is the receipt of the second tranche of ARP funding contingent on the municipality spending the entire first tranche?

Based on current guidance, local governments that qualify as “metropolitan cities” are not obligated to spend the first tranche as a condition precedent for receiving the second tranche of funding through the American Rescue Plan Act of 2021’s (“ARP”) Coronavirus Local Fiscal Recovery Funds (“CLFRF”). Specifically, section 603(b)(7) of the ARP provides that the United States Department of the Treasury (“Treasury”) will make payments to local governments in two tranches, with the second tranche being paid twelve months after the first payment.[1]

Allocations to Non-Entitlement Units of Local Government (“NEUs”) will be made through their state governments. Treasury has indicated that guidance regarding the second tranche of funding will be released closer to May 2022.[2] The text of the ARP indicates that the measure of state unemployment[3] and the NEU operating budget limitation are the only limitations to receiving the second tranche of CLFRF funds. In the specific case of NEUs, the municipality will not be eligible to receive more than 75 percent of its respective operating budget.[4]

Last Revised: August 2, 2021