Arkansas Municipal League deciphers new American Rescue Act funding rules for member cities
The latest round of stimulus payments from the federal government includes a second round of funds for cities and towns in Arkansas, funds that, under finalized rules from the US Treasury Department, can be used to replace lost revenue resulting from the coronavirus pandemic.
To ensure city officials have the most up-to-date information on applying for these funds, the Arkansas Municipal League has included a session on the American Rescue Plan Act and the latest round of funds coming out later. later this year on the last day of its annual winter conference on March 28. A panel of three Municipal League lawyers — John Wilkerson, Caran Curry and Blake Gary — provided information on access to funds and rules on how funds can be used.
According to the US Treasury Department, the American Rescue Plan Act of 2021 created the Coronavirus State and Local Fiscal Recovery Funds to provide $350 billion in emergency funding to eligible state, local, territorial and tribal governments that have supported much of the cost of the pandemic response over the past two years.
Of that money, $45.6 billion has been set aside to relieve metropolitan cities and $19.5 billion for small towns with populations under 50,000.
Of that pool of funds, Wilkerson told the Arkansas Democrat-Gazette on Friday that $412 million was for direct payments to cities and towns in Arkansas. Half of that money, $206 million, he said, came in last July and the rest is expected to come out in July. On the first round, he said, less than half of Municipal League member cities spent a portion, instead waiting for the final rules to be announced.
“We advised patience because we knew the rules were going to change,” he said. “We knew it was a moving target.”
Under the final rule, he said, municipalities can use the funding to replace revenue lost in 2021 and 2022 and use that money to pay for a wide range of government services, including roads, cybersecurity, utility services, and more. health, environmental sanitation and public safety. Under previous rules, eligible expenses were limited to paying for negative health or economic impacts related to the covid-19 pandemic, bonuses for city employees at risk of exposure to covid-19 due from their job, infrastructure expenses such as water, sewer or broadband, or to replace lost income.
Wilkerson said Cindy Frizzell, the Municipal League’s chief financial officer, worked with city officials last year with the calculations to determine what revenue constituted forfeited revenue under the interim rule. But, he said, the final rule simplified the equation for almost everyone with a simpler application process and more latitude in how the money was spent.
“It was a dramatic and life-altering change that the Treasury made,” he told conference attendees. “Pretty much all the flexibility you need Treasury has given you and I think it’s because Treasury realizes how difficult it is, even for Treasury, to manage how all that money goes. be spent.
“It turns out the feds are saying, ‘You know what? It’s all going to be a loss of revenue,'” Wilkerson continued, “which means we can use it for any government service.”
In asking for the money, city leaders were told last week they could choose one of two options in this year’s annual report; perform the calculations to determine the actual amount of lost revenue or choose the standard allocation option to use the full award – up to a maximum of $10 million – for lost revenue replacement, freeing up that money to use it when needed. The deadline for submitting annual reports – and for choosing one of two reporting options – is April 30.
“If you want the answer to the test,” Wilkerson said, “pick the standard allocation. Pick the $10 million. It’s a lot easier.”
Funding amounts are determined by population, Wilkerson told the Democrat-Gazette, at about $200 per person. As an example, he said, the town of Highfill received about $120,000 while Conway was approved for $11.4 million.
Both cities, he said, can opt for the standard allowance with its less onerous reporting requirements, but, he said, if Conway’s actual revenue loss exceeds $10 million, the city would have to calculate its actual revenue loss in order to claim the full amount. as a loss of earnings. Otherwise, the amount above $10 million should be used in one of the three categories included in the previous rule: pandemic impact mitigation, bounties, or infrastructure.
Highfill, on the other hand, because its allocation is well below the $10 million threshold, would be better served by opting for the standard allocation with its simplified reporting requirements.
This round of funding is expected to be disbursed by July 26. All bailout funds must be committed by December 31, 2024, and funds must be spent by December 31, 2026. Qualifying expenses under the final rule must have been incurred. after March 3, 2021.
Since police and fire expenses can represent 60% to 70% of the budget of cities that maintain these services, Curry recommended that those cities take advantage of the final rule that includes public safety as a qualified expense.
“Shift, shift, back up now, we say, claim police and fire costs,” she said.
Expenses that are not eligible include debt service, city-owned pension fund deposits, reserve fund replenishment, cost of new debt, or legal fees. Additionally, losses incurred while attempting to contravene covid-19 mitigation efforts, such as voiding mask mandates or refusing to apply other mitigation efforts, are not eligible.
“They want to make sure you’re trying to stop covid,” Wilkerson said, “so you can’t pay to stop stopping covid.”
To get the most out of the funds, Gary suggested partnering with other cities, counties or the state. One area of opportunity for state partnerships, he said, is broadband expansion.
“At the end of the day,” Gary said, “even if you have $5 million, $5 million in fiber doesn’t go very far at all, so partnerships are almost necessary for projects of this magnitude… When it comes to broadband, you can’t have too much money for that.”
Wilkerson said the news is a welcome change from previous reporting requirements, which he says place a significant administrative burden on cities.
“Treasury said the default is everyone gets up to $10 million,” he said. “We have 491 cities that shouldn’t even consider any option other than the standard allocation because they can’t get more than $10 million anyway.”