US Treasury Releases More Guidance on ARPA Funds

June 1, 2021

Treasury provided new information on May 27 about eligible uses of the funds and how local governments should assess their revenue loss.

The U.S. Department of Treasury updated its FAQs document related to the American Recovery Plan Act (ARPA) Coronavirus Local Fiscal Recovery Funds on May 27. It now further explains permissible uses for the funds and addresses other questions that have been raised by city and county officials.

View the Treasury’s FAQs (pdf)

Payroll expenses

According to the FAQs, permissible uses of the funds include covering payroll expenses for public safety, public health, and similar employees who are substantially dedicated to mitigating or responding to the COVID-19 public health emergency.

Under the 2020 CARES Act Coronavirus Relief Funds, local units of government could consider the payroll for these employees as an eligible use. Under the ARPA Coronavirus Local Fiscal Recovery Fund, payroll for these employees can be covered only to the extent that the employee’s time is dedicated to responding to the COVID-19 public health emergency.

The FAQs explain that employers can presume the employee is entirely devoted to responding to the public health emergency if the person is spending more than half of their time on pandemic response activities. But they also note that supporting documentation is required related to the determination by the employer.

The FAQs also further define public safety and public health employees to include those who directly support such employees such as dispatchers and supervisory personnel.

Assessing revenue loss

The FAQs also provide some limited additional clarification on the revenues included in assessing the revenue loss for a recipient jurisdiction. The document provides a link to the U.S. Census Bureau’s Government Finance and Employment Classification manual, which provides a definition of “general revenue from own sources.” The definition is similar but not identical to the broadly defined term in ARPA.

The FAQ guidance document is expected to be regularly updated to reflect additional questions that arise as local units of government assess the guidance and begin to use the funds.

Funds for non-entitlement units

On May 24, U.S. Treasury had released information about the distribution of American Recovery Plan Act (ARPA) Coronavirus Local Fiscal Recovery Funds for non-entitlement local units of government (generally cities under 50,000 in population and townships) in all 50 states.

The Treasury website currently has information on eligible jurisdictions, including the 2019 census population estimate for each jurisdiction, but does not include the specific allocation estimates of the nearly $377 million set aside for individual cities and townships in Minnesota.

Verifying list of cities, townships

Minnesota Management and Budget (MMB), the state agency charged with allocating funds to non-entitlement jurisdictions, has contacted the League of Minnesota Cities and the Minnesota Association of Townships to confirm the completeness and accuracy of the Treasury lists of cities and townships.

This initial audit of the more than 2,600 cities and townships is an important first step, given that under ARPA, the allocations to non-entitlement jurisdictions are to be initially based on a per-capita distribution. Although early congressional estimates of the distributions to Minnesota omitted nearly 50 cities, the League has confirmed that all cities in the state are included on the list.

In addition to the audit of eligible non-entitlement jurisdictions, ARPA specified that the distribution to any individual jurisdiction cannot exceed 75% of the jurisdiction’s most recent annual budget as of Jan. 27, 2020. To streamline the certification process, the League is working with MMB to identify whether official data previously collected by the Office of the State Auditor or from other sources can be used to apply this limitation.

What’s my city’s distribution?

Unfortunately, until the audit of entities is complete and until the 75% percent can be applied to the initial distribution to each city and township, final figures will not be posted by MMB.

To get a rough estimate of your city’s allocation, take your 2019 census population estimate from the Treasury spreadsheet and multiply it by $105. This amount does not account for the 75% budget limitation but, based on a rough analysis of city summary budget information submitted to the Office of the State Auditor, the League only identified a few very small cities that might be affected by the limit.

Next steps

MMB has indicated that the certification process for non-entitlement jurisdictions to request funding will open sometime in June, which will allow them to begin the 75% limitation test. More information on the specific parameters of the certification process will be released by MMB in the coming weeks.

Cities are encouraged to review the Treasury pre-submission checklist, which contains the basic information that every non-entitlement jurisdiction should expect to provide when making a funding request to MMB.

View the Treasury pre-submission checklist (pdf)

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