Senate Bill Would Expand ARPA Uses

The United States Senate passed by unanimous consent Tuesday a bill that would significantly expand the ability of cities to use their American Rescue Plan Act (ARPA) funds. The measure – which awaits House action – would allow more types of infrastructure projects and increase flexibility for government services.

ARPA allows cities to calculate their amount of revenue loss compared to Fiscal Year 2019 and use those funds, if any, for much more broadly defined government services in addition to other allowable uses. The State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act (S. 3011) would allow cities to spend on government services the greater of either their actual revenue loss amount or $10 million.

The U.S. Department of the Treasury has defined “government services” broadly, which includes streets and public works, public safety, environmental remediation, cybersecurity, and more. It does not include financing expenses, legal judgments, consent decrees, or rainy-day fund replenishment.

Government services do not need to address any negative impacts of the COVID-19 pandemic, so this provision provides more flexibility to city officials. All Kentucky cities except Ashland, Bowling Green, Covington, Lexington, Louisville, and Owensboro will receive a total ARPA allocation below $10 million. As a result, a $10 million cap would significantly expand options for cities, especially for those that did experience a loss of revenue.

The new legislation would also expand eligible infrastructure projects. Currently, ARPA only allows investments in water, sewer, and certain broadband projects outside of the revenue loss portion. The Senate bill would expand eligible infrastructure projects to include those authorized by most transportation laws, the Community Development Block Grant (CDBG) program, and more.

S. 3011 would further allow ARPA funds to provide emergency relief from natural disasters or the negative economic impacts of a disaster. Relief could include temporary emergency housing, food assistance, financial assistance for lost wages, or other immediate needs.

Four Republican and five Democratic senators sponsored the measure in the upper chamber. Although the act passed the Senate unanimously, its future in the divided House of Representatives remains unclear, either as a standalone measure or as part of a broader package.

Treasury has not yet released its final ARPA guidance or user guide on submitting Project and Expenditure Reports. The department just postponed the reporting deadline originally set for October 31, 2021, to January 31, 2022, for entitlement communities and April 30, 2022, for non-entitlement cities. Any congressional changes to the ARPA law would require additional guidance from Treasury.