After the American Rescue Plan Act was signed into law by President Biden on March 11, 2021, it guaranteed direct relief to cities, towns and villages in the United States (Sec. 9901: Coronavirus State and Local Fiscal Recovery Funds). The U.S. Department of the Treasury is responsible for overseeing this unprecedented program. NLC is sharing information about municipal allocations by state and city leaders’ questions with the Treasury.
NLC has identified your frequently asked questions about Coronavirus Local Fiscal Recovery Fund grants. These answers will be updated as additional information becomes available.
We’ve organized the frequently asked questions in sections to help guide you.
Introduction to the American Rescue Plan Act
- Where can I find in-depth information on the American Rescue Plan Act (ARPA)?
- What is Interim Final Rule?
- What guidance is available?
- What does my city need to do to receive funds?
- What is a DUNS number?
- What is an active SAM registration?
- How will my city receive its funds?
- Can Governors or state legislatures interfere with the allocation or spending of Coronavirus Local Fiscal Recovery Funds?
- What is the allocation method for Metropolitan cities?
- How much money will my city receive?
- When will my municipality receive funds?
Compliance and Reporting
- What will I need to report to the Treasury?
- How can my city create an interim or annual report? Are there certain templates or forms that should be used?
- Where do I submit a report?
- Is there a deadline to use the funds?
- What are the eligible uses of SLFRF funding?
- Can recovery funds be used to fund lost revenue?
- Can recovery funds be used for stormwater projects and expenses?
- Can my city decrease taxes after receiving these funds?
- What infrastructure projects can funds be used on?
- Can recovery funds be used to cover administrative costs?
- Can recovery funds be used to relieve other payroll costs?
- Can recovery funds be used for pensions?
- Are infrastructure projects subject to the Davis-Bacon Act?
- Can cities transfer their allotted funds to counties?
Introduction to the American Rescue Plan Act
Where can we find in-depth information on the American Rescue Plan Act (ARPA)?
The following list includes some of the available resources that provide guidance on ARPA, compliance, and reporting requirements:
- Senate Bill Summary Links:
- Treasury Resource Links:
In addition, NLC has created and continues to develop resources for members on specific ARPA-related questions/issues. A number of these are referenced throughout the answers to these Frequently Asked Questions.
What is Interim Final Rule?
The Interim Final Rule (IRF) was released on May 10, 2021. State and Local Fiscal Recovery Funding is subject to the guidance specified in the IRF. The IRF includes a non-exhaustive list of eligible expenditures, encouraged expenditures, and prohibited expenditures. Treasury sought comments on the IRF until July 16, 2021.
What guidance is available?
The U.S. Department of the Treasury released guidance on May 10, 2021, that included information about eligible uses, ineligible uses, allocations for Metropolitan cities, reporting requirements for Metropolitan cities, and receiving guidelines for Metropolitan cities. Guidance information, including the Interim Final Rule can be found here.
Additional guidance for Non-entitlement Units of Local Government (NEU) was released on May 24, 2021. This guidance sets forth a process by which the state can download a list of local governments from the Treasury website alongside a step-by-step guide to allocating and distributing funds to their NEUs. Information regarding states with no eligible counties do not appear in this guidance document but additional instructions for those states/cities will be provided in the near future.
On June 17, 2021, Treasury released the Compliance and Reporting Guidance for the State and Local Fiscal Recovery Fund Program. This provides additional detail and clarification for each recipient’s compliance and reporting responsibilities. NLC provides a high-level overview of the guidance in a recording of this webinar. Treasury has also facilitated a series of webinars to provide an overview of the SLFRF Compliance and Reporting Guidance. The recordings and presentations for those webinars can be found here.
Updated guidance on the interpretation for the 75 percent budget cap calculation was released on June 30, 2021.
NEU guidance information, including a checklist for NEUs to receive payment, can be found here. Regularly updated Frequently Asked Questions on Distribution of Funds to Non-entitlement units of Local Government can be found here.
The Act provides that the Secretary shall substitute “all metropolitan cities” for “all metropolitan areas” in each place it appears. This substitution removes urban counties, which are provided for separately under the Act, 4 from the ratios used in the calculation of allocations for metropolitan cities. The Act also provides that the Secretary shall allocate and pay to each metropolitan city an amount determined for the city “consistent with” the CDBG formula.
As noted, the CDBG formula uses six weighted variables.5 This formula reflects an approach taken since the 1970s on how to assess communities’ needs for funds to provide suitable living environments and expanded economic opportunities, particularly for low-income communities. But applying the formula solely by substituting “all metropolitan cities” for “all metropolitan areas” has the effect of changing the relative importance of the variables: in particular, it alters the weight normally assigned to “population growth lag.”
While substituting “all metropolitan cities” for “all metropolitan areas” ensures that all of the metropolitan cities’ allocation will be distributed, a substitution that changes the relative importance of the variables that drive the underlying CDBG formula would produce results that are not “consistent with” with the formula, as the statute requires. To achieve the statutorily mandated consistency with the CDBG formula, while still “substitut[ing] ‘all metropolitan cities’ for ‘all metropolitan areas’ each place it appears,” Treasury has adjusted the relative weights of the ratios that make up the formula to reflect the same relative importance of the ratios absent the substitution.
What does my city need to do to receive funds?
The Coronavirus Local Fiscal Recovery Fund grants are formula grants and under the formula every municipal government is entitled to receive a calculated share of the $65.1 billion for cities, towns and villages. These are not competitive grants and local governments will NOT have to submit an application or certification to justify their needs in advance. Municipalities do need to take certain steps to make sure they receive their grants, however.
Metropolitan cities (population greater than 50,000) should ensure they have a valid DUNS number, an active SAM registration, and payment information – including Entity Identification Number (EIN), name, and contact information; name and title of authorized representative of the entity; and financial institution information.
Non-entitlement Units of Local Government (population less than 50,000) must have a valid DUNS number to meet reporting requirements. Since they will be receiving their grants through their state government, they do not need an active SAM registration.
What is a DUNS number?
Metropolitan cities and Non-Entitlement Units of Local Government must have a valid DUNS number to meet reporting requirements in the Coronavirus Local Fiscal Recovery Fund.
A DUNS number is a unique nine-character number used to identify an organization and is issued by Dun & Bradstreet. The federal government uses the DUNS number to track how federal money is allocated. A DUNS number is required prior to registering with the SAM database, which is outlined below. Registering for a DUNS number is free of charge.
If an entity does not have a valid DUNS number, please visit https://fedgov.dnb.com/webform/ or call 1-866-705-5711 to begin the registration process.
What is an active SAM registration?
SAM is the official government-wide database to register with in order to do business with the U.S. government. All Federal financial assistance recipients must register on SAM.gov and renew their SAM registration annually to maintain an active status to be eligible to receive Federal financial assistance. There is no charge to register or maintain your entity SAM registration.
Metropolitan cities will need an active SAM registration to receive funds, and ALL cities will need an active SAM registration to submit reports through the Treasury reporting portal. NEUs who have not previously registered with SAM.gov may do so after receipt of the award, but before the submission of mandatory reporting.
If an entity does not have an active SAM registration, please visit, SAM.gov to begin the entity registration or renewal process. Please note that SAM registration can take up to three weeks; delay in registering in SAM could impact timely payment of funds.
How will my city receive its funds?
Metropolitan cities will receive direct funding under the America Rescue Plan Act.
The Act designates Metropolitan cities will receive their funds directly from the U.S. Department of Treasury. The Act designates Non-Entitlement Units of Local Government will receive federal funds that through their state.
Metropolitan cities can now request their funds through this Treasury Department portal.
Can governors or state legislatures interfere with the allocation or spending of Coronavirus Local Fiscal Recovery Funds?
No, a State may not impose stricter limitations than permitted by statute or Treasury regulations or guidance on an Non-entitlement Units of Local Government’s use of Fiscal Recovery Funds based on the Non-entitlement Units of Local Government’s proposed spending plan or other policies. States and territories are also not permitted to offset any debt owed by the Non-entitlement Units of Local Government against the Non-entitlement Units of Local Government’s distribution. Further, States and territories may not provide funding on a reimbursement basis—e.g., requiring Non-entitlement Units of Local Government’s to pay for project costs up front before being reimbursed with Fiscal Recovery Funds payments—because this funding model would not comport with the statutory requirement that States and territories make distributions to Non-entitlement Units of Local Government’s within the statutory timeframe.
What is the allocation method for Metropolitan cities?
Metropolitan cities are provided with $45.57 billion under the Act. The term “Metropolitan city” is defined “in section 102(a)(4) of the Housing and Community Development Act of 1974 (42 U.S.C. 5302(a)(4)) and includes cities that relinquish or defer their status as a metropolitan city for purposes of receiving allocations under section 106 of such Act (42 U.S.C. 5306) for fiscal year 2021.”
To identify cities that have relinquished or deferred their status as a metropolitan city in the CDBG program, Treasury consulted with HUD staff. Based on these consultations, Treasury determined that there are 142 such cities, which are treated as metropolitan cities for the purpose of CLFRF in accordance with the Act. The Act also specifies that each metropolitan city shall receive “an amount determined for the metropolitan city consistent with the formula under section 106(b) of the Housing and Community Development Act of 1974 (42 U.S.C. 5306(b)), except that, in applying such formula, the Secretary shall substitute ‘all metropolitan cities’ for ‘all metropolitan areas’ each place it appears.”
How much money will my city receive?
As of May 10th, The Treasury Department released the final allocations for Metropolitan cities. Final allocations are not yet available for Non-Entitlement Units but are expected to be released soon. However, you can find those non-final estimates of your allocation on our Local Allocations in the American Rescue Plan.
Of the $65.1 billion total, $45.57 billion, or 70% of funds, will be allocated to Metropolitan cities using a modified Community Development Block Grant formula calculation. The remaining $19.53 billion, or 30% of funds, will be allocated using a simple per-capita calculation, with total grant size for non-metro cities capped at 75% of the locality’s most recent budget as of January 27, 2020.
When will my municipality receive funds?
Cities designated as “Metropolitan cities” can begin applying for the funds now through this portal. Non-Entitlement Units of Local Government will receive their money as late as 90 days after the signing of the law (March 11, 2021).
Funding will be released to state and local governments by Treasury in two tranches. Half the funding each city is entitled to will be released under the first tranche beginning May 10, 2021; and the second half of funds will be released under the second tranche one year after the disbursement of the first tranche.
Compliance and Reporting
What will I need to report to the Treasury?
Metropolitan cities will be required to submit one interim report and thereafter quarterly Project and Expenditure reports through the end of the award period on December 31, 2026.
The interim report will include a recipient’s expenditures by category at the summary level from the date of award to July 31, 2021 and, for States and territories, information related to distributions to nonentitlement units. Recipients must submit their interim report to Treasury by August 31, 2021.
Non-entitlement units of local government are not required to submit an interim report. Cities will need a valid DUNS number to meet the reporting requirements for the Coronavirus Local Fiscal Recovery Fund.
How can my city create an interim or annual report? Are there certain templates or forms that should be used?
Treasury has released the “User Guide: Treasury’s Portal for Recipient Reporting”, as well as an Annual Recovery Plan Template. Both of these resources can be found here. The template for the Interim Report is contained within the reporting portal. The User Guide includes screen shots and instructions for completing the templates. Recipients should also follow the reporting instructions in the Compliance and Reporting Guidance released on June 17, 2021.
Where do I submit a report?
The reporting portal for Interim Reports and Recovery plans was launched on Monday, August 9th. According to Treasury, the link to access the reporting portal was sent to recipient points of contact based on the contact information provided during the funding process. If you are a recipient and did not receive the email but should have, Treasury has advised recipients to contact them at SLFRP@treasury.gov.
Is there a deadline to use the funds?
Funds do not have to be obligated until December 31, 2024, and unexpended funds are not subject to recapture or return until December 31, 2026.
What are the eligible uses of SLFRF funding?
Funding must fit into one of the following four statutory categories:
To respond to the COVID-19 public health emergency or its negative economic impacts
To respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to such eligible workers of the recipient, or by providing grants to eligible employers that have eligible workers who performed essential work;
For the provision of government services, to the extent of the reduction in revenue of such recipient due to the COVID–19 public health emergency, relative to revenues collected in the most recent full fiscal year of the recipient prior to the emergency; and to make necessary investments in water, sewer, or broadband infrastructure.
These four uses are split into 7 summary expenditure categories:
- Public Health
- Negative Economic Impacts
- Services to Disproportionately Impacted Communities
- Premium Pay
- Revenue Replacement
All SLFRF award funds must be used in compliance with these requirements. The IRF details compliance responsibilities, and provides additional information on eligible and restricted uses. Each expenditure category has distinct reporting requirements.
Can recovery funds be used to fund lost revenue?
Yes, recipients can use Fund dollars to fund lost revenue. This is one of the eligible uses of ARPA funds. The definition of General Revenue draws on the Census definition of General Revenue of Own Sources (excluding utilities). The IRF gives recipients broad latitude to use funds to provide government services to the extent of the reduction in revenue. Government services can include but are not limited to, maintenance of infrastructure, modernization of cybersecurity, health services, school or educational services, and public safety services. When calculating lost revenue, recipients should sum across all revenue streams covered as general revenue, for administrative ease.
For further information on eligible uses, recipients should refer to the Compliance and Reporting Guidance. In addition to Treasury’s resources, NLC has created a resource with information on how to calculate lost revenue and eligible uses: Lost Revenue: What Municipalities Need to Know.
Can recovery funds be used for stormwater projects and expenses?
Recipients may use Coronavirus State and Local Fiscal Recovery Funds to invest in necessary improvements to their water and sewer infrastructures, including projects that address the impacts of climate change. Recipients may use this funding to invest in an array of drinking water infrastructure projects, such as building or upgrading facilities and transmission, distribution, and storage systems, including the replacement of lead service lines.
Recipients may also use this funding to invest in wastewater infrastructure projects, including constructing publicly-owned treatment infrastructure, managing and treating stormwater or subsurface drainage water, facilitating water reuse, and securing publicly-owned treatment works.
To help jurisdictions expedite their execution of these essential investments, Treasury’s Interim Final Rule aligns types of eligible projects with the wide range of projects that can be supported by the Environmental Protection Agency’s Clean Water State Revolving Fund and Drinking Water State Revolving Fund. Recipients retain substantial flexibility to identify those water and sewer infrastructure investments that are of the highest priority for their own communities.
Can my city decrease taxes after receiving these funds?
The rule that would prohibit tax decreases is a restriction only on states. The local government section of the bill contains no prohibition on lowering taxes.
What infrastructure projects can funds be used on?
General infrastructure spending is not covered as an eligible use outside of water, sewer, and broadband investments or above the amount allocated under the revenue loss provision.
Recipients may use funds for maintenance of infrastructure or pay-go spending for building of new infrastructure under general services, but it is capped at the amount of revenue lost due to the public health emergency. For more information on acceptable infrastructure projects, recipients should refer to eligible uses as outlined in the IRF and the Compliance and Reporting Guidance.
In addition, NLC has created resources on using funds for infrastructure projects:
- Using American Rescue Plan Act Funds for Water, Wastewater and Stormwater Infrastructure Projects
- Treasury Expands Broadband Eligibility for ARPA in a Win for Cities
- How Local Leaders Can Help Residents Access the Emergency Broadband Benefit
Can recovery funds be used to cover administrative costs?
Yes, funds may be used to pay administrative costs, including payment to consultants and/or payroll to assist with the implementation of ARPA projects. This includes costs of consultants to ensure effective project management, as well as legal and regulatory compliance. Funds may be used to increase staff capacity in order to stabilize government operations.
Can recovery funds be used to relieve other payroll costs?
Under the Interim Final Rule, recipients may use funds for premium pay for essential public safety, public health, health care, human services, and similar employees for their time responding to the COVID-19 public health emergency. This premium pay is in addition to a worker’s regular rate of wages, and is not a substitute for normal earnings. Employees who worked remotely from a residence are not eligible for premium pay. This pay may be applied retrospectively for work performed since the beginning of the COVID-19 public health emergency. Cities can transfer these funds third-party employers with eligible workers performing essential work.
For further information, you can access the following NLC resource: How to Use ARPA Funds to Provide Premium Pay to Eligible Workers
Can recovery funds be used for pensions?
The statute provides that recipients may not use Fiscal Recovery Funds for “deposit into any pension fund.” For the reasons discussed below, Treasury interprets “deposit” in this context to refer to an extraordinary payment into a pension fund for the purpose of reducing an accrued, unfunded liability. More specifically, the interim final rule does not permit this assistance to be used to make a payment into a pension fund if both:
- the payment reduces a liability incurred prior to the start of the COVID-19 public health emergency, and
- the payment occurs outside the recipient’s regular timing for making such payments.
Under this interpretation, a “deposit” is distinct from a “payroll contribution,” which occurs when employers make payments into pension funds on regular intervals, with contribution amounts based on a pre-determined percentage of employees’ wages and salaries.
Are infrastructure projects subject to the Davis-Bacon Act?
40 U.S.C. 3141, known as the “Davis-Bacon Act”, is a federal law which requires the payment of prevailing wages on public works projects. These requirements do not apply to projects funded solely with award funds from the SLFRF program, except for SLFRF-funded construction projects undertaken by the District of Columbia. Recipients may be subject to the requirements of the Davis-Bacon Act when funds are used on a construction project in conjunction with funds from another federal program that requires the enforcement of the Davis-Bacon Act. Corollary state prevailing-wage-in-construction laws (commonly known as “baby Davis-Bacon Acts”) may apply to projects.
Treasury indicated in the IRF that infrastructure projects should be carried out to produce high-quality infrastructure, avert disruptive and costly delays, and promote efficiency. Treasury is encouraging recipients to ensure that these projects use strong labor standards, including labor and community benefit agreements that offer at or above the prevailing rate and include local hire provisions. Treasury also indicated in reporting guidance that recipients must document wages and labor standards for projects over $10 million, and these requirements can be met with certifications that the project is in compliance with the Davis-Bacon Act. More information on the reporting requirement may be found on page 21 of the Reporting and Compliance Guidance.
Can cities transfer their allotted funds to counties?
The statute provides four categories in which a city can transfer funds.
- A private nonprofit organization
- A public benefit corporation involved in the transportation of passengers or cargo
- A special-purpose unit of State or local government
- A state government
The statute is silent on transferring funds to a county.
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