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What steps should a municipality take when planning how to allocate ARP funds?

Below are a few non-exhaustive steps municipalities can take to prepare for the distribution of funds: 

  1. Assess your government’s potential needs and uses for ARP funds:
    1. Complete an Unmet Needs Assessment / Gap Analysis – As a first step, municipalities should (i) identify unmet needs in current COVID-19 response and recovery operations; (ii) determine which COVID-19 response and recovery costs meet the municipality’s operational budgets (and which costs exceed the operational budgets); and (iii) determine which of those needs cannot be covered through additional funding sources provided through previous COVID-19 legislation, FEMA Public Assistance, or private funding sources. Eligible costs related to COVID-19 under the ARP can include, but are not limited to:
      1. vaccination programs;
      2. medical care;
      3. testing;
      4. contact tracing;
      5. support for isolation or quarantine;  
      6. support for vulnerable populations to access medical or public health services;
      7. public health surveillance (e.g., monitoring case trends, genomic sequencing for variants);
      8. enforcement of public health orders;
      9. public communication efforts;
      10. enhancement to health care capacity, including through alternative care facilities;
      11. purchases of personal protective equipment;
      12. support for prevention, mitigation, or other services in congregate living facilities (e.g., nursing homes, incarceration settings, homeless shelters, group living facilities) and other key settings like schools;
      13. ventilation improvements in congregate settings, health care settings, or other key locations;
      14. enhancement of public health data systems;
      15. public health responses; and
      16. capital investments in public facilities to meet pandemic operational needs, such as physical plant improvements to public hospitals and health clinics or adaptations to public buildings to implement COVID-19 mitigation tactics.[1]
    2. Identify Capital Improvement Priorities – Municipalities should consider identifying existing capital plans that could be expedited through ARP funding and would assist the community in recovering from the COVID-19 public health emergency. Costs for water, sewer, and broadband infrastructure are included as allowable uses within the ARP.[2] Certain other capital improvement projects may be funded using the Revenue Loss Reimbursement provision.
    3. Address Budget Impacts Through Revenue Loss Reimbursement – Municipalities can identify anticipated loss of revenue projections towards which ARP funds may be applied. The U.S. Department of the Treasury’s (“Treasury”) Interim Final Rule (“the Rule”) establishes a methodology by which each recipient can calculate its reduction in revenue. Under the Rule, recipients compute the extent of their reduction in revenue by comparing their actual revenue to an alternative revenue number which represents what could have been expected to occur in the absence of the pandemic.[3]
      1. Municipalities can analyze relevant trends by reviewing the last full fiscal year prior to the public health emergency and projecting forward at either (a) the average annual revenue growth over the three full fiscal years prior to the public health emergency; or (b) 4.1%, the national average state and local revenue growth rate from 2015-18 (the latest available data).[4]
      2. Generally, upon receiving funds, recipients may immediately calculate the 2020 reduction in revenue and deploy funds to address any shortfall. Recipients should have the opportunity to re-calculate revenue loss at several points throughout the program, which can help support entities experiencing lagging effects on revenue.[5]
      3. Treasury published additional guidance related to revenue loss in its Frequently Asked Questions (“FAQs”). Recipients are not required to use audited financials when calculating revenue loss. Further, where audited data is not available, recipients are not required to obtain audited data. Having said that, it is of course critical for fund recipients to submit complete and accurate information.[6] Treasury also makes clear that, “recipients should use their own data sources to calculate general revenue, and do not need to rely on published revenue data from the Census Bureau.”[7],[8] Recipients may provide data on a cash, accrual, or modified accrual basis, provided that recipients are consistent in their choice of methodology throughout the covered period and until reporting is no longer required.[9]
    4. Assess and Catalog Available Funding to Prioritize Needs – Municipalities should identify all available funding to create a strategy that defines when and how funds should be used, from most to least restrictive, to maximize all resources. Short-term and long-term fiscal impact of fund uses should also be considered. Cities should develop a fund deployment strategy that: (i) positively influences their credit rating; (ii) enables them to finance new projects; and (iii) assists in refinancing of existing debt.
  2. Engage stakeholders to identify priorities and additional unmet needs:
    1. Coordinate with Community Partners – Municipalities should consider working with community partners in response to the COVID-19 public health emergency. Municipalities can receive feedback and strategic direction from community partners to identify ways they can support the community’s recovery. In certain circumstances, ARP funding may be shared with subrecipients responding to the COVID-19 public health emergency for both new and existing programs.[10]
    2. Consider Public Engagement Opportunities Municipalities should consider holding public hearings to obtain feedback from residents on ways to best serve the community in responding to and recovering from the COVID-19 pandemic.
  3. Prepare to take Potential Certification Steps:
    1. Certification for Metropolitan Cities – Metropolitan cities (generally populations over 50,000) can now apply to receive funds directly through the Treasury Submission Portal.[11] Individuals applying on behalf of their municipality will be asked to provide the following information, at a minimum:
      1. Jurisdiction name, taxpayer ID number, DUNS Number, and address.
      2. Authorized representative name, title, and email.
      3. Contact person name, title, phone, and email.
      4. Funds transfer information, including recipient’s financial institution, address, phone, and routing number and account number.
      5. Completed certification document (to be signed by the authorized representative).

Certification for Non-Entitlement Cities – Non-entitlement cities are subject to rules and regulations of their State and generally are expected to receive guidance and payment from their State within 30 days of the State’s receipt of ARP funds.[12]

  1. Assess Available Resources to Manage ARP Funds:
    1. Municipalities in receipt of ARP funds are also responsible for ensuring proper oversight and management of funds. Based on each municipality’s unmet needs, additional internal resources may be required to monitor the implementation of ARP funds. Municipalities should assess internal resources and consult staff with significant experience to determine if there are any limitations or gaps in the support staff’s capabilities.

Considerations for Tribal Governments

In addition, Tribal governments should be aware of and prepare for the Treasury guidance regarding the disbursement in two tranches of Fiscal Recovery Funds specific to Tribes. Treasury’s Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (“FAQs”) document addressed this and then further refined this topic on July 19, 2021.[13]

The $1.9 trillion ARP funds are administered by numerous federal agencies, each of which sets its own rules regarding allowable uses of the funds. Distribution methodologies, application methods, and allowable uses vary from program to program. Some ARP funds may be received directly or indirectly by municipalities, as outlined below.

ARP Funds that Municipalities May Receive Directly

Program: ARP Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”)[14]
Federal Agency: Department of Treasury
Distribution Method: 
Metropolitan municipalities (generally, population over 50k) will receive a direct allocation from the US Treasury. Non-entitlement units (generally population under 50k) must apply through their state government. Award amounts are based on the population of non-entitlement units.
How to Apply for Funds: Metropolitan municipalities can apply directly for funds on the Treasury's Submission Portal[15]Municipalities requesting funds will be asked to provide:(1) Jurisdiction name, taxpayer ID number, DUNS; (2) Number, and address; (3) Authorized representative name, title, and email; (4) Contact person name, title, phone, and email; (5) Funds transfer information, including recipient’s financial institution, address, phone, and routing number and account number. Completed certification document (to be signed by the authorized representative). Typically, states are required to distribute funding to non-entitlement units (“NEUs”) within 30 days of receipt of funding, unless an extension is requested and approved. Contact your State's Governor’s Office to identify which State agency will oversee the distribution of funds and follow updates as available. In addition to the information listed above, NEUs must also submit copies of their total operating budget for the year that included January 27, 2020, to the state when requesting their allocations.
Allowable Uses: (1) Lost revenue (during the pandemic, compared to the prior full fiscal year).
(2) Addressing negative economic impacts of COVID-19 (including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality). (3) Premium pay to eligible workers performing essential work during the pandemic. (4) Necessary investments in water, sewer, or broadband infrastructure. Specific examples of how CSLFRF funds may be used can be found within
Interim Final Guidance or within the Treasury's Frequently Asked Questions guidance.

Program: Emergency Rental Assistance (“ERA2”)[16]
Federal Agency: Department of Treasury
Distribution Method: Direct Allocation to local governments with more than 200,000 residents.
How to Apply for Funds: Local governments receiving funding may apply using the same account used to apply for CSLFRF in the Treasury's Submission Portal[17]
Municipalities requesting funds will be asked to provide:
(1) Grantee Name and address; (2) DUNS Number; (3) Taxpayer Identification Number; (4) Authorized representative name and title
Allowable Uses: At least 90 percent of awarded funds must be used for direct financial assistance, including rent, rental arrears, utilities and home energy costs, utilities and home energy costs arrears, and other expenses related to housing.  Remaining funds are available for housing stability services, including case management and other services intended to keep households stably housed. ERA2 funds generally expire on September 30, 2025, in comparison to ERA1 funds, that generally expire on September 30, 2022.

Program: FTA Grants for Public Transportation[18]
Federal Agency: Federal Transit Administration
Distribution Method: Municipalities who operate transit agencies should receive direct allocations. Additional competitive planning grants have been made available.
How to Apply for Funds: Airports will most likely have to apply directly for funds from the Federal Transit Administration (“FTA”), but the agency has not yet provided an application on their website. Monitor updates by using the hyperlink provided in column B.
Allowable Uses: Intended to support public transportation systems. Funds should be available for payroll and operations (unless the recipient certifies that it has not furloughed any employees), payroll for public transit providers, including private providers of public transportation, operating costs of public transit during the public health emergency, including the purchase of personal protective equipment, and administrative leave for operations or contractor personnel due to reductions in service. Funds must be obligated by September 30, 2024, and disbursed by September 30, 2029. Additional funding is available under separate programs for Intercity Buses (an allocation to the State) and for Transportation for Seniors and the Disabled.

Program: FAA Airport Rescue Grants[19]
Federal Agency: Federal Aviation Administration
Distribution Method: Municipalities who operate commercial and non-primary commercial airports to receive direct allocations.
How to Apply for Funds: Airports will most likely have to apply directly for funds from the Federal Aviation Agency (“FAA”), but no updates have been provided by the agency since 3/16/21. Monitor updates by using the hyperlink provided in column B.
Allowable Uses: Intended to support all airports that are part of the national airport system, including all commercial service airports, all reliever airports, and some public-owned general aviation airports available at 100% federal share. $6.5B to be allocated for primary commercial service airports with more than 10,000 annual passenger boardings. $800M for relief to eligible in-terminal airport concessions. $100M for non-primary commercial service and general aviation airports.

ARP Funds available to States: These funds may be distributed to municipalities, community partners, or individuals/families and businesses within your community.

Program: Elementary and Secondary School Emergency Relief (“ESSER”) funding[20]
Federal Agency: Department of Education
Distribution Method: Direct Allocation to States. States will distribute funding to local school districts.
Generally, How to Apply for Funds: States will ultimately decide how to distribute ESSER funds to local school districts. Municipalities can work in partnership with local school districts to understand their ARP plan and identify any additional unmet needs that a City may support.
Allowable Uses Generally: Intended to help meet a wide range of needs arising from the coronavirus pandemic, including reopening schools safely, sustaining their safe operation, and addressing students’ social, emotional, mental health, and academic needs resulting from the pandemic.

Program: State Small Business[21]
Federal Agency: Department of the Treasury
Distribution Method: Direct Allocation to States, States to manage program. State to directly pay businesses.
Generally, How to Apply for Funds: Businesses can apply for assistance through each State's economic development agency or other agency designated to oversee the distribution of funds. Municipalities can monitor the State's economic development agency or Governor's Office for updates on how businesses can apply. Municipalities seeking to support businesses should share resources with their community on how to access funds.
Allowable Uses Generally: Intended to provide support to small businesses recovering from the economic effects of the COVID-19 pandemic, ensure that small businesses owners and socially and economically disadvantaged people have access to credit and investment, and to provide technical assistance to small businesses applying for support programs. States can use the funds to inject capital into state programs that support small businesses and provide small businesses with access to capital, provide collateral support, facilitate loan participation, and enable credit guarantee programs.

Program: Homeowner Assistance Fund[22]
Federal Agency: Department of the Treasury
Distribution Method: Direct Allocation to States; States to manage program. State to directly pay individuals.
Generally, How to Apply for Funds: Individuals can apply for assistance through each State's housing agency or other agency designated to oversee the distribution of funds. Municipalities can monitor each State's Housing or Governor's Office for updates on how individuals can apply. Municipalities seeking to support individuals should share resources on how to access funds with their community.
Allowable Uses Generally: Intended to prevent mortgage delinquencies and defaults, foreclosures, loss of utilities or home energy services, and displacement of homeowners experiencing financial hardship after January 21, 2020. Generally, funds from the HAF may be used for assistance with mortgage payments, homeowner’s insurance, utility payments, and other specified purposes. The law prioritizes funds for homeowners who have experienced the greatest hardships, leveraging local and national income indicators to maximize the impact.

Last Revised: August 2, 2021

[1] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021), FAQ #2 at 4, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[2]American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq. Section 603(c)(1)(D)), available at: https://www.congress.gov/117/bills/hr1319/BILLS-117hr1319enr.pdf.

[3] Treas. Reg. 35 CFR 31, at 58-59, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf

[4] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (as of July 19, 2021), FAQ #3.5, at 14, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[5] Treas. Reg. 35 CFR 31, at 118-119, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[6] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021), FAQ #3.10 at 16, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[7] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021), FAQ #3.11 at 16, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[8] Due to differences in timing, data sources, and definitions, recipients’ self-reported general revenue figures may differ somewhat from those published by the Census Bureau.

[9] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021), FAQ #3.12 at 16, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[10] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq. Section 603(c)(1)(A)), available at: https://www.congress.gov/117/bills/hr1319/BILLS-117hr1319enr.pdf.

[11] U.S. Department of the Treasury, Coronavirus Assistance for State, Local and Tribal Governments, Request Funding, available at: https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/state-and-local-fiscal-recovery-fund/request-funding.

[12] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq. Section 603(b)(2)(C)(ii)(I)), available at: https://www.congress.gov/117/bills/hr1319/BILLS-117hr1319enr.pdf.

[13] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021) – FAQ #1.4, at 2-3, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[14] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq. Section 603 available at: https://www.congress.gov/117/bills/hr1319/BILLS-117hr1319enr.pdf.

[15] U.S. Department of the Treasury, Coronavirus Assistance for State, Local and Tribal Governments, Request Funding, available at: https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/state-and-local-fiscal-recovery-fund/request-funding.

[16] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq. Subtitle B Section 3201 available at: https://www.congress.gov/117/bills/hr1319/BILLS-117hr1319enr.pdf.

[17] U.S. Department of the Treasury, Coronavirus Assistance for State, Local and Tribal Governments, Request Funding, available at: https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/state-and-local-fiscal-recovery-fund/request-funding.

[18] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq. Subtitle D Section 3401 available at: https://www.congress.gov/117/bills/hr1319/BILLS-117hr1319enr.pdf.

[19] Id., Subtitle A Section 7102.

[20] Id., Subtitle A Section 2001.

[21] Id., Subtitle C Section 3301.

[22] Id., Subtitle B Section 3206.