Nearly 100 American Rescue Plan Act (ARPA) coordinators participated in ICMA’s January 28 "Conversation about Treasury’s Final Rule" for the Fiscal Recovery Funds (FRF) with experts from Holland and Knight (H&K).  In a lively question and answer format (recording available here), H&K attorneys responded to questions about allowable uses, premium pay, lost revenue, infrastructure, and broadband.  Here are some highlights:

Streamlined revenue loss provision

The Final Rule is generally broader and more helpful to local governments regarding eligible uses of FRF.  The best news for many jurisdictions is that they can now spend a standard amount, up to $10 million (or the total allocation if less than $10 million), within the revenue loss category—even if they did not actually experience a revenue loss.  They have broad latitude to use their entire standard allocation to support local government services and avoid many of the other categories’ additional requirements.

Nonprofits and small businesses

If providing funds to a nonprofit or small business to carry out work on behalf of the local government, they are considered a subrecipient and are subject to the same requirements as the local government.  For example, if providing funds to a nonprofit to run a vaccine clinic, the nonprofit is acting as an arm of the local government and must follow the same compliance and reporting rules.  Check the latest Treasury guidance on how to monitor them. 

On the other hand, if the local government is providing a grant to a small business or nonprofit that has suffered economically, they are considered a beneficiary, not a subrecipient.

Capital expenditures

Participants raised questions about construction or expansion of various types of new facilities, such as a congregate homeless shelter, a correctional facility, or a wastewater treatment plant. Panelists highlighted key provisions that could apply to these types of investments, noting that the rules vary depending on the expense category. For example, capital projects intended to address health or economic impacts of COVID-19 must be explicitly justified as reasonably proportional responses—potentially a stretch for new facilities—and require extra documentation and written justification if over $1 million. However, the same project might be more easily justified as a government service investment under the revenue loss category.

Eligible broadband investments under the infrastructure category need to meet specific standards and be designed for specific households and businesses (unserved or underserved).  The Final Rule requires that broadband infrastructure funding be used to address the affordability needs of low-income consumers in accessing broadband networks.  Projects to upgrade existing capabilities might be a better fit for revenue loss spending or other federal programs.

Best practices

The webinar concluded with advice on the importance of these practices:

  • Follow an open, transparent process with public input to guide investment decisions.
  • Use reporting requirements as a decision-making tool and build in ways to measure success.
  • Look for transformative investments.  Direct, funding allocation provides a unique opportunity to make high-impact investments.
  • Remember the optics and think about how investments will be viewed by the public.  What would the headline be?
  • Use the investments as a relationship building tool with your congressional delegation and the Biden Administration and let them know how the funds are being used.
  • Highlight the ways that your community is using its investments with the media.

ICMA is working to develop a series of upcoming events to assist ARPA coordinators and local leaders in the planning and management of these resources. Interested in being a part of this network and notified of future learning opportunities? Provide your contact information via this form.

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