ARPA allows direct recipients to use funds to replace lost revenue in order to avoid cuts to governmental services, or to return services to their pre-pandemic level. The Department of the Treasury's Final Rule allows for either a standard allowance with a maximum amount of $10 million to be taken for revenue loss or that the revenue loss be calculated at the entity-wide level.
Allocating grant funds to revenue loss is a multiple step process. First, direct recipients must decide whether they will calculate their lost revenue or use the $10 million standard allowance.
For recipients choosing to not calculate the revenue loss, they may take up to $10 million, but may not use more than their allotment.
For entities choosing to calculate the revenue loss, the Final Rule specifies which revenues are allowable and which are excluded. For Massachusetts communities, the last full fiscal year that ended prior to the pandemic was FY2019, which will become the “Base Year” for calculation purposes. Communities are then able to compare the base year to each of four periods: calendar years ending December 31, 2020; December 31, 2021; December 31, 2022 & December 31, 2023. Communities may opt to use fiscal year instead of calendar year. The base year is adjusted by a growth factor of 5.2% or average growth rate of the prior three years.
The County will be claiming the $10 million standard allowance and will release a separate allocation method to subrecipients.
Projects approved under the revenue loss category may be used to fund a wide range of governmental services, including capital expenditures. The Final Rule did specify some exclusions that the funds cannot support.
In addition, recipients may not use these funds to lower their tax rate. Finally, only costs incurred beginning March 3, 2021 are eligible.
Applicants will be required to describe the governmental service that the funds will be used for and certify that they funds will not be used for the excluded costs listed above.