The American Rescue Plan’s Coronavirus Local Fiscal Recovery Fund was established to help turn the tide on the pandemic, address its economic fallout, and lay the foundation for a strong and equitable recovery.
Table of Contents
Congress passed the American Rescue Plan Act (ARPA) of 2021 (H.R. 1319) providing $1.9 trillion of relief and stimulus funding for vaccines, schools, small businesses, everyday Americans, and a whopping $350 billion for states and local governments, known as the Coronavirus Local Fiscal Recovery Fund.March 10, 2021
President Biden signed the bill into law, allowing relief funding to begin immediately flowing throughout the United States.March 11, 2021
Interim Final Rule
United States Treasury, charged with managing provisions of the American Rescue Plan, issued the Interim Final Rule to provide clarity to the Coronavirus Local Fiscal Recovery Fund component of the ARPA. Communities are invited to comment on the Rule until mid-July.May 10, 2021
First 1/2 Funding
Depending on the population of the locality, the first half of the allocated funding will be distributed to localities across the United States.May-July 2021
Second 1/2 Funding
Depending on the population of the locality, the second half of the allocated funding will be distributed to localities across the United States.May-July 2022
All funds must be incurred and obligated by localities.December 31, 2024
All funds must be expended to cover obligations and all work must be complete.December 31, 2026
Frequently Asked Questions
How and when will my city receive funding?
Counties, cities, towns, and villages fall into 1 of 2 categories for funding:
States, territories, metropolitan cities (generally with population greater than 50,000,) counties, and tribal governments fall into this category.
All direct submission localities are listed here with their federal allocation.
Funding is available now for direct submission localities and should be requested by clicking the Treasury Submission Portal button found here.
Non-Entitlement Units of Government (NEU)
All other localities fall into this category. While these localities are eligible to receive Coronavirus Local Fiscal Recovery Funds, they will receive their funding from their applicable state government.
State governments will receive a specific allocation of these funds from Treasury for this purpose and are responsible for distributing these funds to NEUs within their state. Award amounts are based on the population of the NEU.
Treasury has provided a step-by-step guide for states to allocate and distribute funds to their NEUs.
While each state has its own process and requirements, Treasury has provided a pre-submission checklist with basic information that every NEU should expect to provide when requesting funding from their respective state.
NEUs are encouraged to check with their state municipal league or with the state’s finance department on the status of their funding.
How can the funds be used?
The American Rescue Plan Act included 4 eligible uses for the Coronavirus Local Fiscal Recovery Funds. Treasury’s Interim Final Rule expanded that to 5 eligible uses.
- Water, sewer and broadband infrastructure: Make necessary investments to improve access to clean drinking water, invest in wastewater and stormwater infrastructure and provide unserved or underserved locations with new or expanded broadband access.
- Premium pay for essential workers: Offer additional compensation, up to $13 per hour in additional wages, to those – both city/county employees and other workers in the community – who have faced and continue to face the greatest health risks due to their service. Cities/counties should prioritize low- and moderate-income persons, with additional written justification needed for workers above 150 percent of the residing state’s average annual wage for all occupations or their residing city/county’s average annual wage, whichever is higher. Funds can be used retroactively back to January 27, 2020.
- Replace public sector revenue loss: Use funds to provide government services to the extent of the reduction in revenue experienced during the pandemic – this provision allows a much broader use of funds.
- Address negative economic impacts: Respond to economic harms to workers, families, small businesses, impacted industries.
- Support public health response: Fund COVID-19 mitigation efforts, medical expenses, behavioral health care and certain county public health, public safety, human services and other related staff.
Per the Interim Final Rule:
Localities have broad flexibility so long as they can demonstrate that these activities support the public health response or that recipients of the recovery funds have experienced economic harm from the pandemic.
Are there any ineligible uses?
There are 2 specific restrictions outlined in Congress’ American Rescue Plan Act:
- Pension funds: Recipients are not allowed to make an extraordinary deposit to a pension fund. However, recipients may use funds for routine payroll contributions to pensions of employees whose wages and salaries are an eligible use.
- Reduce net tax revenue (states and territories): States and territories are not allowed to use funding to reduce net tax revenue due to a change in law from March 3, 2021, through the last day of the fiscal year in which the funds provided have been spent.
The Interim Final Rule has outlined additional restrictions, which include the following:
- Using funds for non-federal match when barred by another federal regulation or statute, including EPA’s Clean Water SRF, Drinking Water SRF, Economic Development Administration or Medicaid
- Funding debt service, including costs associated with tax anticipation notes (TANs) or issuing short-term revenue
- Legal settlement or judgements
- Deposits to rainy day funds or financial reserves
- General infrastructure spending outside of water, sewer and broadband investments or above the amount allocated under revenue loss provision
- General economic development or workforce development activities, such as new jails, roads and bridges, and business parks, unless they directly address negative economic impacts of the public health emergency
What are the reporting requirements?
The U.S. Treasury is currently in the process of developing the Recovery Fund certification process. Below are the key takeaways for the U.S. Treasury’s reporting requirements of the State and Local Coronavirus Fiscal Recovery Fund.
- Local governments are required to provide “periodic reports” providing a detailed accounting of the use of funds.
- If a locality does not comply with any provision of this bill, they are required to repay the U.S. Treasury an equal amount to the funds used in violation.
What happens if my community spends funds on an ineligible use?
Failure to comply with restriction on use of funds will be identified based on reporting provided by the locality to US Treasury. The locality will receive a written notice of violation, and within 60-days of the notice, a locality can seek reconsideration of the violation based on supplemental information.
How far back can I look in my city’s budget for lost revenue due to COVID-19?
Recovery Funds may be used to replace revenue loss relative to the revenue collected in the full fiscal year prior to the COVID-19 public health emergency (January 27, 2020).
What can my city do with funding from revenue loss?
Localities can spend revenue loss funding on a variety of government services. Government services can include, but are not limited to,
- maintenance or pay-go funded building of infrastructure, including roads;
- modernization of cybersecurity, including hardware, software, and protection of critical infrastructure;
- health services;
- environmental remediation;
- school or educational services;
- and the provision of police, fire, and other public safety services.
However, expenses associated with obligations under instruments evidencing financial indebtedness for borrowed money would not be considered the provision of government services, as these financing expenses do not directly provide services or aid to citizens. Specifically, government services would not include interest or principal on any outstanding debt instrument, including, for example, short-term revenue or tax anticipation notes, or fees or issuance costs associated with the issuance of new debt.
Government services would not include satisfaction of any obligation arising under or pursuant to a settlement agreement, judgment, consent decree, or judicially confirmed debt restructuring in a judicial, administrative, or regulatory proceeding, except if the judgment or settlement required the provision of government services. That is, satisfaction of a settlement or judgment itself is not a government service, unless the settlement required the provision of government services. In addition, replenishing financial reserves (e.g., rainy day or other reserve funds) would not be considered provision of a government service, since such expenses do not directly relate to the provision of government services.
Who is eligible for premium pay?
Workers that are eligible for premium pay include:
- Any work performed by an employee of the state, local or tribal government
- Staff at nursing homes, hospitals, and home care settings
- Workers at farms, food production facilities, grocery stores, and restaurants
- Janitors and sanitation workers
- Truck drivers, transit staff and warehouse workers
- Public health and safety staff
- Childcare workers, educators and other school staff
- Social service and human services staff
Can localities provide back to work bonuses with these funds?
Yes. This assistance can include job training or other efforts to accelerate rehiring and thus reduce unemployment, such as childcare assistance, assistance with transportation to and from a jobsite or interview, and incentives for newly employed workers.
What are allowed uses under the infrastructure provision?
The Interim Rule aligns eligible water and sewer projects with those that are eligible to receive financial assistance from the Environmental Protection Agency’s (EPA) Clean Water State Revolving Fund and Drinking Water State Revolving Fund.
The types of projects eligible for CWSRF include:
- Projects to construct, improve, and repair wastewater treatment plants
- Control non-point sources of pollution
- Improve resilience of infrastructure to severe weather events
- Create green infrastructure, and
- Protect waterbodies from pollution.
The types of DWSRF projects that are eligible:
- Assist communities in making water infrastructure capital improvements, including the installation and replacement of failing treatment and distribution systems. In administering these programs, States must give priority to projects that:
- Ensure compliance with applicable health and environmental safety requirements
- Address the most serious risks to human health, and
- Assist systems most in need on a per household basis according to State affordability criteria.
Other eligible uses of recovery funds for infrastructure include projects related to:
- Stormwater runoff
- Water pollution
- Flood control
- Green infrastructure that support stormwater resiliency, including rain gardens and green streets
Eligible Broadband projects are expected to meet or exceed symmetrical upload and download speeds of 100 Mbps. However, in instances where required speeds cannot be achieved (due of the geography, topography, or excessive costs), the affected project would be expected to meet or exceed 100 Mbps download with a minimum of 20 Mbps upload with scalability to a symmetrical minimum of 100 Mbps.
Can my city purchase a building or equipment with these funds?
Yes, if the purchase falls within one of the eligible uses of funds. Making the case that the purchase of the building or equipment is in direct response to the negative impacts of the COVID-19 pandemic will be critical.
How can I support my community small businesses?
Localities may provide assistance to small businesses to adopt safer operating procedures, weather periods of closure, or mitigate financial hardship resulting from the COVID-19 public health emergency, including:
- Loans or grants to mitigate financial hardship, such as declines in revenues or impacts of periods of business closure, for example by supporting payroll and benefits costs, costs to retain employees, mortgage, rent, or utilities costs, and other operating costs
- Loans, grants, or in-kind assistance to implement COVID-19 prevention or mitigation tactics, such as physical plant changes to enable social distancing, enhanced cleaning efforts, barriers or partitions, or COVID-19 vaccination, testing, or contact tracing programs
- Technical assistance, counseling, or other services to assist with business planning needs
How flexible is the eligible use of responding to the negative impacts of COVID-19?
Localities have broad flexibility as long as they can demonstrate that the activities or programs support the public health response to COVID-19 or that the recipients of Recovery Funds have experienced economic harm from the pandemic.