KLC Briefs Cities on ARPA

Kentucky League of Cities Executive Director/CEO J.D. Chaney briefed city leaders on requirements, allocations, uses, and reporting of American Rescue Plan Act (ARPA) funds. The U.S. Department of the Treasury released initial guidelines on Monday regarding the law that President Biden signed in March.

Kentucky cities will receive more than $931 million total. A majority of that, $607 million, will go to the commonwealth’s nine Kentucky Community Development Block Grant (CDBG) entitlement cities. Non-entitlement cities will receive $324 million collectively, although an official allocation for non-entitlement cities is yet to be announced.

Chaney explained that unlike Coronavirus Aid, Relief and Economic Security (CARES) Act funding, “This is not a race to get the money or spend the money.”

Municipalities have until December 31, 2024, to make an expenditure or obligate their ARPA funds. All funds must be spent by December 31, 2026.

Half of the money is available now for entitlement cities. They will receive funding from and report to the U.S. Department of the Treasury. The Kentucky Department for Local Government (DLG) must make the first installment to non-entitlement cities by June 9, unless DLG seeks a federal extension.

Entitlement cities will see their second tranche of funds by May 10, 2022. Non-entitlement cities should access their second half by June 9, 2022.

A national CDBG formula determined how much entitlement cities received, whereas the amount for non-entitlement communities is based solely on population.

“Recipients may use this funding to address a broad range of public health needs across COVID-19 mitigation, medical expenses, behavioral health care, and public health resources,” Chaney explained.

Eligible uses include (1) supporting the public health response; (2) addressing the negative economic impacts of the public health emergency; (3) targeting low-income communities; (4) replacing lost public sector revenue; (5) providing premium pay for essential workers; and (6) investing in water, sewer, and broadband infrastructure.

Recipients may not use Local Fiscal Recovery Fund (LFRF) money to make an extraordinary contribution to a pension system to reduce accrued unfunded liability; however, recipients may use funds for routine payroll contributions for employees whose wages and salaries are an eligible use of funds. Cities may not fund outstanding debt service, legal settlements or judgments, financing expenses, or deposits into rainy day or other reserve funds. Cities also generally cannot use LFRF money to meet non-federal match requirements for most federal grant programs.

Financial records and supporting documents related to the award must be retained for a period of five years after all funds have been expended or returned to the Treasury. This includes all documentation that demonstrates that the awarded funds were used for eligible purposes. All reporting, for both entitlement and non-entitlement communities, will go to the Department of Treasury.

Only Louisville and Lexington must prepare, publish, and post online recovery plan performance reports. Those reports will include descriptions of the projects funded and information on the performance indicators and objectives of each award, helping residents understand how their government is using the funds.

The initial recovery plan performance report is due August 31, 2021, and will cover activity from the day of the award to July 31, 2021. Reports thereafter will cover a 12-month period synchronous with the city’s fiscal year and are due 30 days after the close of each fiscal year. Other entitlement communities must submit their first quarterly report by August 31, 2021, and non-entitlement communities must submit their first annual report by October 31, 2021.

Go here to view final CDBG entitlement city allocations and preliminary estimates for Kentucky’s remaining cities.

Go here to view the entitlement cities fact sheet.