On September 30, 2021, the United States Department of Treasury extended a key reporting deadline for municipalities receiving American Rescue Plan Act (“ARPA”) funds. This LEGALcurrents provides a “refresher” on ARPA funding and describes the new reporting deadline.
The COVID-19 pandemic dramatically impacted local governments, prompting the federal government to adopt two significant pieces of relief legislation. The first was the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which established the Coronavirus Relief Fund of $150 billion for state, tribal, and local governments. See 42 U.S.C. § 801. The second was ARPA, which provides $219.8 billion to states and tribes, and $130.2 billion to local governments. See 42 U.S.C. §§ 802, 803.
How can local governments receive and use ARPA funding?
The Process for Receiving ARPA Funding Depends on the Type of Local Government.
ARPA divides localities into three categories: “metropolitan cities” (receiving $45.57 billion); “nonentitlement units of local government” (receiving $19.53 billion); and counties (receiving $65.1 billion”). See 42 U.S.C. § 803.
Which locality falls into which category is not always intuitive. Whether an entity is a county is obvious. See 42 U.S.C. § 803(g)(1). But the definition of “metropolitan city” is more complicated, and generally includes any municipality (including towns and other local governments) with a population of 50,000 or more. See 42 U.S.C. § 5302(a)(4),(5). A “nonentitlement unit of local government” (“NEU”) includes all other local governments with a population of less than 50,000. See 42 U.S.C. §§ 803(g)(5), 5302(a)(5). Consequently, several large New York towns (such as Cheektowaga, Greece, and Irondequoit), and even villages (e.g., Hempstead), qualify as metropolitan cities for purposes of ARPA funding.
Metropolitan cities and counties receive allocations directly from the federal government. See 42 U.S.C. § 803(b)(1)(B). The amount of money available to each metropolitan city can be found at https://home.treasury.gov/system/https://hselaw.com/files/136/fiscalrecoveryfunds-metrocitiesfunding1-508A.pdf. To request funding, metropolitan cities and counties must use the Department of Treasury’s online submission portal, available at https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/state-and-local-fiscal-recovery-fund/request-funding. Applicants must provide Treasury with the following information: (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; and (5) completed award terms and conditions (to be signed by the authorized representative).
NEUs—again, generally municipalities with populations less than 50,000—receive payments from their state governments. In New York, NEUs, unlike metropolitan cities and counties, were required to submit forms to the Division of Budget either requesting or declining funding by August 11, 2021. A list of NEUs, and the amount of estimated total allocations to them, is available at https://www.budget.ny.gov/localarpa/local-ARPA-NEU-allocations.pdf.
Deadline for Incurring Costs, and Permissible Uses of ARPA Funds.
ARPA funds may only be used for costs incurred by December 31, 2024. See 42 U.S.C. § 803(c)(1). There are four permissible uses of ARPA funds:
“(A) to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;
(B) to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the metropolitan city, nonentitlement unit of local government, or county that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work;
(C) for the provision of government services to the extent of the reduction in revenue of such metropolitan city, nonentitlement unit of local government, or county due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year of the metropolitan city, nonentitlement unit of local government, or county prior to the emergency; or
(D) to make necessary investments in water, sewer, or broadband infrastructure.” Id.
The Department of Treasury offers guidance for determining whether an incurred cost qualifies for funding under these four categories. See 86 Fed. Reg. 93, 26786 (May 17, 2021) (the “Treasury Guidance”) (available at https://home.treasury.gov/system/https://hselaw.com/files/136/FRF-Interim-Final-Rule.pdf). The Treasury Guidance is voluminous, and localities should review it carefully—and confer with counsel—before spending ARPA funds.
The first category (see A above) broadly allows the use of ARPA funds to respond to the public health emergency of COVID-19 and to address its economic impacts.
Responses to the public health emergency may include (but is not limited to):
- medical efforts, such as testing, vaccination, contact tracing, or support for quarantine.
- enhancements to public facilities to improve operational capacity, improve ventilation, et cetera.
Responses to the negative economic impacts of the pandemic may include:
- assistance to households—such as food/rent/utility/mortgage assistance.
- assistance to small businesses, such as loans or grants to mitigate financial hardships.
- cash transfers to households, proportionate to the negative economic impact experienced by the household.
- financial assistance to nonprofits that respond to the negative economic impacts of the pandemic.
The second category (see B above) is to help essential workers by offering them premium pay. Essential workers are those in critical infrastructure sectors, such as healthcare, nursing homes, education and childcare, transportation, sanitation, grocery and food production, and public health and safety. Premium pay should be prioritized to those eligible workers who have lower incomes.
The third category (see C above) is to compensate localities to address reductions in revenue caused by the pandemic and to avoid cuts to government services. To determine whether a locality has lost revenue due to the pandemic, a locality should compare its actual revenue to a counterfactual trend representing what could have been expected in the absence of the pandemic (by looking at the fiscal year preceding the pandemic and applying a growth adjustment of 4.1 percent). The Treasury Guidance provides a detailed four-step process for performing this calculation.
The fourth and final category (see D above) allows investments in infrastructure, including water, sewer, and broadband.
Reporting
Localities must submit various reports to the Treasury Department concerning their use of ARPA funds.
Metropolitan cities and counties must submit an interim report (was due August 31, 2021) and additional Project and Expenditure reports (either on a quarterly or annual basis depending on size and amount of funds received). Large (population of 250,000 or greater) metropolitan cities and counties must also submit annual Recovery Plan Performance Reports.
Importantly, Treasury recently extended a key reporting deadline. Counties and metropolitan cities were formerly required to submit their first Project and Expenditure Report on October 31, 2021. That deadline has now been extended to January 31, 2022. NEUs were formerly required to submit their first annual (not quarterly) Project and Expenditure Report on October 31, 2021. That deadline has now been extended to April 30, 2022.
Treasury has released compliance and reporting guidance (available at https://home.treasury.gov/system/https://hselaw.com/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf) and a user guide for using Treasury’s online portal for recipient reporting (available at https://home.treasury.gov/system/https://hselaw.com/files/136/SLFRF_Treasury-Portal-Recipient-Reporting-User-Guide.pdf).
Treasury also anticipates releases a “User Guide” for submitting Project and Expenditure Reports. We will update this LEGALcurrents currents when the User Guide becomes available.
Conclusion
ARPA funding represents a lifeline to local governments across the country, but local governments must be careful to use the funds only in the manner contemplated by Congress and the Department of Treasury. If you have additional questions about this LEGALcurrents, we would be happy to advise you about the prudent and lawful expenditure of ARPA funds. Please contact any member of our Municipal Law group at 716.853.1616 or 585.232.6500.