Additional Flexibility in Local Fiscal Relief Fund Use Heading Into the New Year
Print
EmailThe bipartisan ARPA FLEX Act will provide additional flexibility for the $350 billion Coronavirus State and Local Fiscal Recovery Fund authorized under the American Rescue Plant Act.
Update: Thanks to the NACo Team for sharing their analysis into this issue:
"The Cornyn-Padilla Amendment (State, Local, Tribal and Territorial Fiscal Recovery, Infrastructure and Disaster Relief Flexibility Act) that was enacted as part of the Fiscal Year (FY) 2023 omnibus provides counties the flexibility of using the greater of $10 million dollars or 30% of their total ARPA funds for eligible transportation infrastructure and Community Development Block Grant (CDBG)-eligible projects. There is no limitation on how much a Recovery Fund recipient can use on natural disaster response projects. NACo's overview of eligible uses under the new flexibility rules can be found here.
This flexibility is separate from the $10 million standard allowance for lost revenue. Depending on the size of the Recovery Fund allocation, a county could hypothetically use up to $10 million (or more if calculating actual revenue) for government services and another $10 million or 30% of the award (whichever is greater) for transportation infrastructure and CDBG eligible projects.
Treasury is expected to release guidance related to the Cornyn-Padilla amendment and the additional flexibilities in the coming weeks. NACo will alert counties once the guidance is available. In the meantime, please see NACo's overview of the amendment linked above. We are happy to help with any additional questions."
On December 23, the U.S. Congress enacted the bipartisan State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act (ARPA FLEX) as an amendment to the Fiscal Year (FY) 2023 omnibus appropriations bill. The ARPA bill was amended to allow for local governments to invest the greater of $10 million or 30 percent of their total ARPA Local Fiscal Recovery funds to go toward disaster recovery and transportation infrastructure projects, in addition to a list of projects that previously fell under other grant funds such as Community Development Block Grant Projects. The bill also allows units to use these funds to meet local matching requirements for:
- Nationally Significant Freight and Highway Projects Program
- Transportation Infrastructure Finance Improvement Act (TIFIA) Loan Program – in addition to satisfying the TIFIA local match requirement, these funds could also be used to repay a TIFIA loan
- Fixed Guideway Capital Investment Grant Program
- National Infrastructure Project Assistance
(see references)
ARPA FLEX also codifies the standard allowance for lost revenue introduced under Treasury’s Final Rule. The standard allowance enables local governments to allocate up to $10 million (not to exceed their total grant allotment) as revenue replacement rather than undergo a formal revenue loss calculation. The Center has found that most local governments receiving under $10 million are opting to obligate funds under revenue replacement using this standard allowance. As of March 2022, over a third of funds to units receiving less than $10 million SLFR funds had already been obligated ($642 million remaining), with many local governments eager to obligate more before the end of 2022. As such, this new flexibility will likely have the largest impact on spending by larger recipients. Currently those 64 governments receiving more than $10 million have only obligated under a quarter of their SLFRF allocations (total allocation of $3.4 million), leaving a large portion of funds that could be used for more emergency relief programs or community development projects as expanded under this bill.
In addition to greater spending flexibility for another chunk of SLFRF allocations to local governments, a huge benefit of this bill will be restored technical assistance from the Treasury for grantees. Many smaller local units have low to no capacity for managing an award of this level so any increase in support is very much welcome.
ARPA Recovery Funds will still need to be obligated by December 31, 2024, and expended by September 24, 2026. The Center will continue reporting on ARPA SLFRF use as data becomes available from the Treasury.
References:
https://www.nlc.org/article/2023/01/13/congress-gives-cities-more-flexibility-for-recovery-funds/
https://www.naco.org/resources/featured/fiscal-recovery-fund-flexibility
https://www.congress.gov/bill/117th-congress/house-bill/5735/all-info
