Important Update: Since publication of this blog on May 18, 2021, Treasury has released additional guidance with specific details for how non-entitlement unit of government allocations should be processed by States. This additional NEU guidance can be found at this Treasury webpage, along with other helpful information.
Center for Community Progress has been closely following developments related to the American Rescue Plan Act’s (ARPA) $360 billion State and Local Fiscal Recovery Fund (SLFRF), which we first alerted stakeholders to in an earlier blog posted the day after ARPA was signed into law. This unprecedented amount of direct federal support to every state, territory, Tribal government, county, and municipality in the country is being administered by the Treasury Department, which released critical information and resources on May 10. It is imperative that stakeholders engaging in programming these ARPA funds at the state and local level review these Treasury resources, which can all be found on Treasury’s State and Local Fiscal Recovery Fund landing page.
Most importantly, Treasury has released its eagerly awaited Interim Final Rule containing detailed regulations interpreting the statutory language contained in ARPA. These regulations are in effect immediately. We have heard from local leaders who were hesitant to go too far down the road of planning and programming their ARPA funds until this guidance from Treasury was published. It’s here, and we encourage all stakeholders to dig into the Rule and engage with their local leaders.
Accessing ARPA Funds Directly from Treasury
Another critical resource accessible through Treasury’s landing page is the Treasury Submission Portal, where every state, territorial, Tribal, county, and metropolitan city government eligible to receive their SLFRF allocations directly from Treasury can electronically request their ARPA SLFRF allocations. The page linked above that leads to the portal contains important technical information and should be read carefully.
An important note: units of local government with populations below 50,000 (also referred to as “non-entitlement units” (NEUs) or “other non-counties”) cannot request their allocations directly from Treasury – these allocations will be distributed by States, and additional guidance about NEU allocations is available at this Treasury webpage.
Local governments will receive funds in two equal payments, with the first half coming as soon as May 2021 and the balance delivered approximately 12 months later. For state allocations, those states that have experienced a 2% or more net increase in the unemployment rate from February 2020 to now will receive their full allocation of funds in a single payment; states that do not meet this criterion will receive funds in two equal tranches 12 months apart. Territorial governments will receive a single payment. Tribal governments will receive two payments, with the first payment available in May and the second payment, based on employment data, to be delivered in June 2021.
Updated Allocation Amounts
In our initial March 12, 2021 blog post, we shared estimated allocations across all levels of state, county, and local governments prepared by the House Oversight Committee. Treasury has released final allocation amounts for jurisdictions eligible to receive funds directly from Treasury, as well as their detailed methodology, which can all be accessed at the SLFRF landing page. Community Progress has developed an updated map tool which contains these final Treasury allocations, along with additional helpful information.
For NEUs, Treasury has calculated the aggregate amount of relief coming to each state for distribution and will be relying on states to determine the exact allocations for each recipient community based on population. Individual NEU allocations will be capped at 75% of their most recent annual 2020 budget (prior to January 2020). States will have 30 days from receipt of the aggregate allocation from Treasury to distribute these NEU funds, and cannot place additional requirements or conditions on NEU communities.
Important Update About Spending Timelines
Treasury’s Interim Final Rule takes the approach that SLFRF allocations must be obligated by the statutory deadline of December 31, 2024, but that obligated funds may continue to be spent until December 31, 2026. Treasury recognizes that Congress intended ARPA SLFRF allocations to provide more general fiscal relief over a broad timeline, and notes that ARPA expressly permits the use of these funds for water, sewer, and broadband infrastructure improvements, projects that naturally require longer timeframes. This two-year spending extension is welcome news for communities strategizing about complex, transformational projects.
Treasury Guidance on Eligible Uses
Treasury’s Interim Final Rule details the ways governments may use SLFRF allocations, organized in four categories:
a) To respond to the public health emergency 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;
c) For the provision of government services to the extent of the reduction in revenue due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency; and
d) To make necessary investments in water, sewer, or broadband infrastructure. (Interim Final Rule, p. 7)
Flexible Uses to Address Negative Economic Impacts
Treasury reiterates that Congress’ goal in allocating these ARPA funds to state and local governments was to give “States, local and Tribal governments […] broad latitude to choose whether and how to use the Fiscal Recovery Funds to respond to and address the negative economic impact” of the COVID-19 health and economic crisis. (Interim Final Rule, p. 31) In order for a proposed use to be eligible, grantees must identify an economic harm that resulted from or was made worse by the COVID-19 public health emergency, and then demonstrate how the proposed use of ARPA funds reasonably and proportionally responds to that harm.
In some places in the Interim Final Rule, Treasury gives specific examples of the types of programs that would be eligible as responses to the negative economic consequences caused or exacerbated by COVID-19. For example, according to Treasury, activities such as rent, mortgage, or utility assistance, and emergency home repair and weatherization funds, are included in a non-exhaustive list of eligible household assistance uses. (Interim Final Rule, p. 31; 33-34)
Emphasis on Racial Equity and Meeting the Needs of Disproportionately Impacted Communities
Treasury’s guidance frequently discusses the intersection of low-income households, communities, and people of color, and poverty with the pandemic, and recommends that states, cities, and other SLFRF recipients use the funds in ways that are equitable across communities and people. The Interim Final Rule notes that the pandemic had “severe impact on households and small businesses, including in particular low-income workers and communities and people of color” and Treasury “encourages recipients to provide assistance to those households, businesses, and non-profits in communities most disproportionately impacted by the pandemic” and its negative economic impacts. (p. 11)
To incentivize programs that provide support to communities with the greatest needs and hit hardest by the health and economic impacts of the COVID-19 emergency, Treasury has created a list of activities and investments that will be deemed presumptively eligible when they are provided in a Qualified Census Tract. (p. 21) A Qualified Census Tract is defined as any census tract in which at least 50 percent of households have an income less than 60 percent of the Area Median Gross Income (AMGI), or which has a poverty rate of at least 25 percent. These presumptively eligible activities span programs directly addressing public health, social services, education, childcare, and housing insecurity.
Of particular note to community development stakeholders and housing advocates, the list of presumptively eligible uses in Qualified Census Tracts includes programs or services that address housing insecurity, lack of affordable housing, or homelessness, including development of affordable housing to increase supply of affordable and high-quality living units. (Interim Final Rule, pp. 141-143)
Spread the Word, Stay Informed, and Be Engaged!
There is much to digest and analyze in the Interim Final Rule, and we urge local leaders and community stakeholders to seek out independent legal advice as you engage in the planning and programming of ARPA funds coming to your towns, counties, Tribes, and states. The Rule details other important components of the SLFRF program, including programs to assist small businesses and nonprofits, criteria for rehiring government employees laid off as a result of the COVID-19 crisis, guidance for eligible infrastructure investments, and formulas for utilizing these funds to make up for lost revenue. For additional help in unpacking and understanding all of the implications of the Treasury guidance, our partners at the National League of Cities have resources and a recent webinar that are worth reviewing.
To quote the Interim Final Rule (p. 9) directly, “Treasury urges State, territorial, Tribal, and local governments to engage their constituents and communities in developing plans to use these payments, given the scale of funding and its potential to catalyze broader economic recovery and rebuilding.” For this recovery to be truly equitable and transformational, this engagement must be a two-way street, and Community Progress encourages robust participation from local community leaders, the nonprofit community, elected officials, and impacted community members and stakeholders.
The Center for Community Progress continues to be a resource and partner to local governments seeking to create equitable communities where unsafe properties and systemic vacancy no longer exist. If we can help your community, please email us at firstname.lastname@example.org or visit https://communityprogress.org/focus/vacancy/covid19/.