The U.S. Department of the Treasury released on Wednesday additional responses to frequently asked questions about the Local Fiscal Recovery Fund provided through the American Rescue Plan Act (ARPA). The information addresses parks and recreation, increased community violence, utility projects, and more.
Parks and Recreation
Kentucky League of Cities (KLC) members have frequently asked about whether they could use the ARPA funding to improve parks, provide additional recreation activities, or replace equipment. Treasury considers these items as ways to build stronger communities, which the interim final rule provides for in low-income areas designed by the Department of Housing and Urban Development (HUD) as Qualified Census Tracts (QCTs).
While most Kentucky cities do not have any QCTs, Treasury notes that local governments “may also provide these services to other populations, households, or geographic areas disproportionately impacted by the pandemic.” Specifically, “investments in parks, public plazas, and other public outdoor recreation spaces may be responsive to the needs of disproportionately impacted communities by promoting healthier living environments and outdoor recreation and socialization to mitigate the spread of COVID-19.”
As a result, cities can invest in various park and recreation improvements if they can demonstrate that the investments would help those who have been negatively impacted by the pandemic. These can also serve those who have not been impacted by COVID-19, but the city’s reporting would need to identify how the investments help those disproportionately affected communities.
Many cities had increased usage of parks during the pandemic that resulted in damage or increased maintenance needs. Treasury notes that the interim final rule states that “‘decrease[s to] a state or local government’s ability to effectively administer services’ can constitute a negative economic impact of the pandemic.” Therefore, cities can replace equipment or perform maintenance in parks if the city can link these needs with pandemic usage.
The new guidance also allows cities to provide various programs or services related to childhood education, health, and welfare within QCTs or for other groups disproportionately impacted by the pandemic. These can include summer education and enrichment programs, enhanced services for foster youths and home visiting programs, and summer camps and recreation.
Violence and Policing
Treasury notes that some communities have realized increased crime and violence because of the COVID-19 pandemic. The guidance outlines several examples of how local governments can use ARPA funding to promote public safety.
Cities can use ARPA money to rehire police officers or other public servants to their pre-pandemic levels, and they do not necessarily have to be the same person or perform the same function. For instance, if a city has five fewer employees now compared to pre-pandemic levels, the city can use ARPA money to hire five new people in any department or position.
The new guidance also allows cities to hire law enforcement officials above pre-pandemic levels or to pay overtime “where the funds are directly focused on advancing community policing strategies in those communities experiencing an increase in gun violence associated with the pandemic.” Funding can also go to community violence intervention (CVI) programs and to “technology and equipment to allow law enforcement to more efficiently and effectively respond to the rise in gun violence resulting from the pandemic.” These investments must be reasonably proportional to the harm experienced.
CVI programs can cover evidence-based practices and capacity-building efforts. Evidence-based practices include street outreach, violence interrupters, and hospital-based violence intervention models. They also cover wraparound services such as behavioral therapy, job training, and financial assistance. Capacity-building includes funding for more intervention workers and training and professional development.
Noting that violence stems from multiple factors, Treasury also allows a range of mental health and substance use disorder services, referrals to trauma recovery services for crime victims, assistance to households or populations facing negative economic impacts from the pandemic, and unemployment assistance.
Many cities have asked about pre-project development for eligible water, sewer, and broadband projects. These investments can take significant planning, design, and assessment work prior to project execution. Treasury will allow most pre-project development for these projects.
Water system development costs must be eligible according to the Drinking Water State Revolving Fund (DWSRF). These can include planning and evaluation uses, project authorization, and project start-up. Sewer projects must meet Clean Water State Revolving Fund (CWSRF) requirements, which allow several planning and assessment activities. For broadband projects, pre-project development uses and costs should be tied “to an eligible project or one reasonably expected to lead to such a project.”
All funds must be obligated within the statutory period between March 3, 2021, and December 31, 2024. The program use period runs through December 31, 2026. Projects that the city agreed to pay prior to March 3, 2021, would be ineligible for ARPA funding.
Revenue Loss Calculation
ARPA allows cities to perform almost any government service – outside of the other restrictions on COVID-related uses – if they can prove a loss of revenue associated with the pandemic. Cities need to perform a calculation each year to determine potential loss in general revenue in the previous period.
Treasury wants cities to use what the U.S. Census Bureau defines as “general revenue” less federal intergovernmental monies. Federal funds include money cities received through the Coronavirus Relief Fund (CRF) provided in the Coronavirus, Aid, Relief, and Economic Security (CARES) Act, as well as any other money provided directly by the federal government or through a state agency. For example, cities should exclude any grants received from the Department for Local Government (DLG) through the small cities portion of the federal Community Development Block Grant (CDBG) program.
For the purposes of the calculation, a city can use the revenue reported on the Uniform Financial Information Report (UFIR) less federal intergovernmental revenue and utilities as outlined below. The UFIR categories tie to the Census Bureau’s local finance structure.
The Census Bureau does not consider utility revenue as general revenue because a local government’s general fund does not support those services. As a result, cities would not include revenues from drinking water, electric, natural gas, and mass transit systems; however, the Census Bureau considers sewer and solid waste systems as general revenue. Currently, the guidance says to include sewer revenue within the revenue loss calculation. KLC is seeking clarification on this definition.