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:

Complete an Unmet Needs Assessment / Gap Analysis – As a first step, municipalities should (i) identify unmet needs in current and ongoing 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. Examples of eligible uses for COVID-19 mitigation and prevention described in the Final Rule include: 

• vaccination programs;
• medical care;
• testing;
• contact tracing;
• support for isolation or quarantine;  
• support for vulnerable populations to access medical or public health services;
• public health surveillance (e.g., monitoring case trends, genomic sequencing for variants);
• enforcement of public health orders;
• public communication efforts;
• enhancement to health care capacity, including through alternative care facilities;
• purchases of personal protective equipment;
• 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;
• ventilation improvements in congregate settings, health care settings, or other key locations;
• enhancement of public health data systems;
• public health responses; and
• 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]

Examples of eligible uses for COVID-19 medical expenses described in the Final Rule include: 

• costs related to medical care provided directly to an individual due to COVID-19 infection (e.g., treatment) or a potential infection (e.g., testing);
• medical costs to uninsured individuals;
• deductibles, co-pays, or other costs not covered by insurance;
• costs for uncompensated care at a health provider;
• emergency medical response costs; and
• excess health insurance costs due to COVID-19 medical care.[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 projects are included as allowable uses within the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”).[3] Certain other capital improvement projects may be funded using the Replacing Lost Public Sector Revenue Expenditure Category (discussed in greater detail below).

Address Budget Impacts Through Revenue Loss Reimbursement – Municipalities can identify anticipated loss of revenue projections towards which CSLFRF funds may be applied. The U.S. Department of the Treasury’s (“Treasury)” Final Rule offers municipalities a standard allowance for revenue loss of $10 million, or recipients can choose to follow the established methodology to calculate its reduction in revenue.[4] If taking the latter approach, 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.[5]

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:

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, leverage existing partnerships and funding opportunities, and maximize the impact of ARP funds. In certain circumstances, CSLFRF funding may be shared with subrecipients responding to the COVID-19 public health emergency for both new and existing programs.[6]

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:

Certification for Metropolitan Cities – Metropolitan cities (generally populations over 50,000) can now apply to receive funds directly through the Treasury Submission Portal, and 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).[7]

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 CSLFRF funds.[8]

(4) Assess Available Resources to Manage ARP Funds:

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 CSLFRF Frequently Asked Questions (“FAQs”) document addressed this and then further refined this topic.[9]

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.