Final ARPA Rule Gives Municipalities More Flexibility

What’s Changed

The U.S. Treasury Department has released its Final Rule for the State and Local Coronavirus Fiscal Recovery Funds program, which was authorized as part of the American Rescue Plan Act (ARPA).

The Final Rule offers added flexibility and clarity on how the $350 billion in funding to state, local, and Tribal governments can be used. While the adjustments include expanded eligible activities and fewer administrative hoops, the largest overhaul gives governments the option to put up to $10 million towards revenue losses.

Revenue Loss: Interim Rule vs. Final Rule

Interim Rule

The interim final rule identified revenue loss as an eligible use category. Recipients were required to follow a four (4) step formula which compared pre-pandemic revenue to current revenue. The calculation allowed for a standard growth percentage of 4.1% in determining how much revenue should have been collected.

Recipients could pay for government services to the extent of the revenue loss reported.

Final Rule

The Final Rule continues to identify revenue loss as an eligible use category, but it makes major changes to how revenue loss is calculated. The Final Rule allows for a standard allowance of up to $10 million for revenue loss or for a full revenue calculation to be performed as outlined above. The full calculation also increases the standard growth percentage from 4.1% to 5.3%.

What It Means

Under this eligibility category, recipients may use the funds for “government services.” The Final Rule provides specific examples of government services including construction of schools and hospitals, road building and maintenance and other infrastructure, health services, general government administration, staff costs, and costs related to administrative facilities, environmental remediation, provision of police, fire, and other public safety services (including purchase of fire trucks and police vehicles).

Next Steps for ARPA Recipients

• Review of total allocation from the Department of Treasury.
• Review project lists as well as the municipalities needs.
• Determine if there are government services that would benefit from ARPA funding, if so take a standard revenue loss of $10 million or less to cover identified government services.

The Final Rule becomes effective on April 1, 2022.

Please reach out to Bernstein Shur attorney Amanda Methot for additional information on the final rule changes as well as general ARPA guidance.