American Rescue Plan Act of 2021 Information Page
Signed by the President on March 11, 2021, the American Rescue Plan is projected to allocate $194 million to New Hampshire towns (including village districts) and cities.
What is Included?
The American Rescue Plan (ARP) Act of 2021 – the latest COVID-19 stimulus package – is a $1.9 trillion economic stimulus bill. Within the ARP, the Coronavirus Local Fiscal Recovery Fund provides $350 billion for states, municipalities, counties, tribes, and territories, including $130 billion for local governments split evenly between municipalities and counties. Many details will continue to emerge as agencies issue guidance to implement provisions of the bill. NHMA is working with NLC and our Congressional Delegation to provide timely updates and information.
Below are some key resources of interest to towns, cities, and village districts.
- State and Local Fiscal Recovery Funds Fact Sheet
- Subtitle M, Coronavirus State and Local Fiscal Recovery Funds
- Searchable Location Allocations Tool (Allocations are still estimates)
- Searchable Summary of Relevant ARPA Provisions
- The American Rescue Plan: Impacts on New Hampshire
- GFOA Analysis of ARPA
- GFOA Presentation on ARPA to NH House Ways & Means Committee
- Title-By-Title Summary of the Entire Act
- Text of the full bill (H.R. 1319)
- Changes made by the U.S. Senate before passing bill
- NLC COVID19/ARPA Information Page
Amount of Distributions to Local Government
The U.S. Department of Treasury is in the process of refining the estimates for allocations from the State and Local Fiscal Relief Funds, but estimations for each municipality have been released. Use this NLC allocation tool to find out how much your community is eligible for.DISCLAIMER: These are estimates from the House Committee on Oversight, not final allocations. (Source: NLC)
Estimated Allocation Amounts to state & local governments (3/08/2021, NLC)
Nonentitlement – Additional Distribution Information:
- “Nonentitlement” is short for “nonentitlement unit of local government,” which is the term used for cities, townships, villages, and small municipalities that generally have fewer than 50,000 inhabitants. Those allocations would be made proportionate to population and are subject to a cap of 75% of the locality’s most recent budget as of January 27, 2020.
- Overlapping Governments (Village Districts/Precincts) – Projected allocation amounts may be distributed to more than one nonentitlement government to the extent that eligible nonentitlement governments have overlapping populations (for example, residents of a village district or precinct)
- Cap on Distribution: The American Rescue Act includes a provision stating no city with less than 50,000 residents can receive a grant that is larger than an amount equal to 75% of their pre-pandemic budget, regardless of whether the estimates indicate an amount greater than that figure. This is not accounted for in the “estimated allocation amounts” because data on small city budgets is not systematically collected by any federal entity. We expect Treasury to provide a way for small cities and towns to certify what that cap amounts to for the municipality.
- Reference Guide: Understanding further allocations between CDBG communities and nonentitlement communities (NLC)
Timing of Distributions
- First Tranche Amount – 50%: To the extent practical, not later than 60 days from the date of enactment.
Nonentitlement Distributions - Because it could take a full year for the Department of Treasury to calculate and disburse the allocations for smaller local governments (generally those with under 50,000 inhabitants, comprising over 33,000 entities), the Department of Treasury is instead required to send the first tranche fund amounts to the states within 60 days of the law’s enactment. States would then have 30 days to disburse the funds to the local governments (“nonentitlement units of local government”) based on population. A state could ask Treasury for an extension for distributing one or more of those allocations if necessary, but it would need to justify why the extension is warranted. States would have no discretionary authority to change the amount of, or attach additional requirements to, the payments allocated to local governments
- Second Tranche Amount – 50%: Not earlier than 12 months after the date of the First Tranche Amount.
- As with the first tranche distributions, nonentitlement second tranche amounts are also required to be passed through the states.
What can we use the funds for?
The U.S. Department of Treasury will produce additional clarifying guidance, but below is what we know from statute. The funds must be used to cover qualifying expenses during the covered period, which ends December 31, 2024. Qualifying use of funds:
- respond to the public health emergency with respect to COVID-19 or its negative economic impacts, including assistance to households, small businesses and nonprofits, or aid to impacted industries such as tourism, travel and hospitality
- for the provision of government services to the extent of the reduction in revenue due to the public health emergency relative to revenues collected in the most recent full fiscal year
- make necessary investments in water, sewer or broadband infrastructure, or
- include premium pay for eligible workers performing essential work during the pandemic
NLC is working with U.S. Department of Treasury on the implementation of the American Rescue Plan Act in our nation’s municipalities, by writing letters to the Department on the details and timing of the anticipated guidance; they will work to make suggestions on behalf all local governments.
We must be patient until Treasury can provide an accurate and official calculation of grants to municipal governments. In the meantime, local leaders should continue to assess the needs in your community.
- In the final version of the legislation, all recipients of money will have to provide periodic reports to Treasury.
- Entitlement Cities will receive a direct allocation from the Treasury Department within 60 days of the bill signing.
- Non-Entitlement municipalities will receive a pass through from their state within 30 days.
- There is iron clad language in the ARP that uses the word “shall” to ensure that states pass the money through to municipalities.
- The Secretary of Treasury can allow up to 120 days for the state to pass through the money if they can show undue burden, including penalties on the states if they do not share.
Other key provisions
- states are not allowed to use the funds to either directly or indirectly offset a reduction in the net tax revenue that results from a change in law, regulation or administrative interpretation during the covered period that reduces any tax
- No funds shall be deposited into any pension fund
- state and local governments are allowed to transfer to a private nonprofit organization, a public benefit corporation involved in the transportation of passengers or cargo, or a special-purpose unit of state or local government
As we await Treasury Guidance, please provide any questions that you have about ARP’s direct relief to local government.
Reporting Requirements, Certification and Recoupment
- States are required to report how funds are used and how their tax revenue was modified during the time that funds were spent during the covered period (covered period begins on March 3, 2021, and ends on the last day of the fiscal year a state or local government has expended or returned all funds to the U.S. Treasury).
- Local governments would be required to provide "periodic reports" providing a detailed accounting of the use of funds
- If a state, county or municipality does not comply with any provision of this bill, they will be required to repay the U.S. Treasury an equal amount to the funds used in violation
- Certification: The Act does not require local government entities to "certify need" to justify receiving their funding. Cities, towns, and villages are all entitled to their calculated share without any further hurdles or application/certification process. There has been some confusion about this, particularly for the CDBG entitlement communities. But NLC has made clear that only the formula is being used from CDBG: No other processes, rules, or requirements from CDBG apply to ARPA funds.
Paid Sick Leave Tax Credit Extension for State and Local Governments
ARP extends eligibility for the refundable tax credit to be used by state and local employers who were previously ineligible. Explanatory Note: The Families First Coronavirus Response Act (FFCRA) included requirements for certain employers to provide employees with paid sick leave benefits related to COVID-19. FFCRA also provided private sector employers with a refundable payroll tax credit to alleviate the financial burdens of the sick leave, but prohibited state and local governments to claim it.
NHMA is awaiting further information on how this tax credit will work for local government. Preliminarily, we understand that local government will file a Form 941 to be paid the amount of the credit. We are also awaiting confirmation of whether cities and towns will get the benefit of the April 1 FFRCA "reset" that private employers qualify for.
What should cities and towns do now?
- Be patient while we await Treasury Guidance.
- Send questions you wish for Treasury to answer to NLC.
- Read NLC's Five Principles for ARP Implementation.
- Familiarize yourself with the provisions of ARP. There are many programs that can benefit municipalities and their communities beyond the direct funding.
- Use dedicated grants and programs FIRST whenever possible. Save the direct funding for gaps and priorities NOT ELIGIBLE for other federal and state assistance programs.
- Assess government operations and community needs.
- Start talking with staff and departments NOW to conduct a comprehensive needs assessment. This will also assist you in determining what other programs and funding sourcing you can take advantage of.
- Meet with your governing bodies and valuable stakeholders in the community to assess community needs.
- Maintain records and document success: Show what you are doing and how you are doing it!
- Communicate with your Congressional Delegation on the successes you have in using these funds to return to fiscal stability and benefit your communities!
Government Finance Officers (GFOA) ARPA Guiding Principles
Temporary Nature of ARPA Funds. ARPA funds are non-recurring so their use should be applied primarily to non-recurring expenditures.
- Care should be taken to avoid creating new programs or add-ons to existing programs that require an ongoing financial commitment.
- Replenishing reserves used to offset revenue declines during the pandemic should be given high priority to rebuild financial flexibility/stability and restore fiscal resiliency.
- Use of ARPA funds to cover operating deficits caused by COVID-19 should be considered temporary and additional budget restraint may be necessary to achieve/maintain structural balance in future budgets.
- Investment in critical infrastructure is particularly well suited use of ARPA funds because it is a non-recurring expenditure that can be targeted to strategically important long- term assets that provide benefits over many years. However, care should be taken to assess any on-going operating costs that may be associated with the project.
ARPA Scanning and Partnering Efforts. State and local jurisdictions should be aware of plans for ARPA funding throughout their communities.
- Local jurisdictions should be cognizant of state-level ARPA efforts, especially regarding infrastructure, potential enhancements of state funding resources, and existing or new state law requirements.
- Consider regional initiatives, including partnering with other ARPA recipients. It is possible there are many beneficiaries of ARPA funding within your community, such as schools, transportation agencies and local economic development authorities. Be sure to understand what they are planning and augment their efforts; alternatively, creating cooperative spending plans to enhance the structural financial condition of your community.
Take Time and Careful Consideration. ARPA funds will be issued in two tranches to local governments. Throughout the years of outlays, and until the end of calendar year 2024, consider how the funds may be used to address rescue efforts and lead to recovery.
- Use other dedicated grants and programs first whenever possible and save ARPA funds for priorities not eligible for other federal and state assistance programs.
- Whenever possible, expenditures related to the ARPA funding should be spread over the qualifying period (through December 31, 2024) to enhance budgetary and financial stability.
- Adequate time should be taken to carefully consider all alternatives for the prudent use of ARPA funding prior to committing the resources to ensure the best use of the temporary funding.
The influx of funds will undoubtedly benefit state and local finances, and aid in the recovery from the budgetary, economic, and financial impacts of the pandemic. Rating agencies will evaluate a government’s use of the ARPA funds in formulating its credit opinion and, importantly, will consider your government’s level of reserves and structural budget balance, or efforts to return to structural balance, as part of their credit analysis. Finance officers will play a critical role in highlighting the need to use ARPA funds prudently with an eye towards long-term financial stability and sustainable operating performance. The funding provided under ARPA provides a unique opportunity for state and local governments to make strategic investments in long-lived assets, rebuild reserves to enhance financial stability, and cover temporary operating shortfalls until economic conditions and operations normalize.
Municipal officials can register to attend weekly NLC Update Calls, or just view the materials from prior Update Calls on the NLC webpage!
New updates to this page are highlighted. Last Update: April 9, 2021