American Rescue Plan Act (ARPA)

The Auburn Select Board held its first public hearing on ARPA funds on Monday, November 29, 2021 at 6:30 PM in the Select Board’s Room on the 2^nd floor of Town Hall, 104 Central Street, Auburn, MA 01501. View the Flier - Public Hearing Nov 29th 2021 (PDF) & Meeting Information (PDF).  

The Select Board continued the hearing until January 24, 2022.  Following discussion, the Board voted to continue the hearing to March 14, 2022.  In order to provide additional opportunity to solicit input from residents and businesses on the use of the Town’s ARPA allocation, the Board voted to continue the hearing again to March 28, 2022.  At the conclusion of the hearing, the Board voted to close the ARPA hearing.   In total, the public hearing was open from November 29, 2021 to March 28, 2022.

On March 28, 2022, the Select Board voted to classify the entirety of Auburn’s ARPA allocation as Revenue Loss under the Government Services category using the “standard allowance” option.  This provides for more flexibility with the use of ARPA funds in accordance with the U.S. Treasury Department regulations.  

See “REVENUE LOSS” for the U.S. Department of Treasury Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule.

The Select Board reviews and votes on requests for ARPA funding received by town administration.  Click on the AUBURN ARPA ALLOCATIONS link for specific information on ARPA allocations approved to date.

Under the Final Rule of the U.S. Department of the Treasury, ARPA funds can be used for Replacing Lost Public Sector Revenue.  Specifically, Coronavirus State & Local Fiscal Recovery Funds (SLFRF) may be used to pay for “government services” in an amount equal to the revenue loss experienced by the recipient due to the COVID-19 public health emergency.

Government services generally include any service traditionally provided by a government, including construction of roads and other infrastructure, provision of public safety and other services, and health and educational services. Funds spent under government services are subject to streamlined reporting and compliance requirements.

In order to use funds under government services, recipients should first determine revenue loss. They may, then, spend up to that amount on general government services.

Recipients have two options for how to determine their amount of revenue loss. Recipients must choose one of the two options and cannot switch between these approaches after an election is made.

1. Recipients may elect a “standard allowance” of $10 million to spend on government services through the period of performance.

Under this option, which is newly offered in the final rule, Treasury presumes that up to $10 million in revenue has been lost due to the public health emergency and recipients are permitted to use that amount (not to exceed the award amount) to fund “government services.” The standard allowance provides an estimate of revenue loss that is based on an extensive analysis of average revenue loss across states and localities, and offers a simple, convenient way to determine revenue loss, particularly for SLFRF’s smallest recipients. All recipients may elect to use this standard allowance instead of calculating lost revenue using the formula below, including those with total allocations of $10 million or less. Electing the standard allowance does not increase or decrease a recipient’s total allocation.

2. Recipients may calculate their actual revenue loss according to the formula articulated in the final rule.

Under this option, recipients calculate revenue loss at four distinct points in time, either at the end of each calendar year (e.g., December 31 for years 2020, 2021, 2022, and 2023) or the end of each fiscal year of the recipient. Under the flexibility provided in the final rule, recipients can choose whether to use calendar or fiscal year dates but must be consistent throughout the period of performance. Treasury has also provided several adjustments to the definition of general revenue in the final rule.

To calculate revenue loss at each of these dates, recipients must follow a four-step process:

a. Calculate revenues collected in the most recent full fiscal year prior to the public health emergency (i.e., last full fiscal year before January 27, 2020), called the base year revenue.

b. Estimate counterfactual revenue, which is equal to the following formula, where n is the number of months elapsed since the end of the base year to the calculation date:

𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 × (1 + 𝑔𝑟𝑜𝑤𝑡ℎ 𝑎𝑑𝑗𝑢𝑠𝑡𝑚𝑒𝑛𝑡) 𝑛

The growth adjustment is the greater of either a standard growth rate—5.2 percent—or the recipient’s average annual revenue growth in the last full three fiscal years prior to the COVID-19 public health emergency.

c. Identify actual revenue, which equals revenues collected over the twelve months immediately preceding the calculation date.

Under the final rule, recipients must adjust actual revenue totals for the effect of tax cuts and tax increases that are adopted after the date of adoption of the final rule (January 6, 2022). Specifically, the estimated fiscal impact of tax cuts and tax increases adopted after January 6, 2022, must be added or subtracted to the calculation of actual revenue for purposes of calculation dates that occur on or after April 1, 2022.

Recipients may subtract from their calculation of actual revenue the effect of tax increases enacted prior to the adoption of the final rule. Note that recipients that elect to remove the effect of tax increases enacted before the adoption of the final rule must also remove the effect of tax decreases enacted before the adoption of the final rule, such that they are accurately removing the effect of tax policy changes on revenue.

d. Revenue loss for the calculation date is equal to counterfactual revenue minus actual revenue (adjusted for tax changes) for the twelve-month period. If actual revenue exceeds counterfactual revenue, the loss is set to zero for that twelve-month period. Revenue loss for the period of performance is the sum of the revenue loss on for each calculation date.

The supplementary information in the final rule provides an example of this calculation, which recipients may find helpful, in the Revenue Loss section.

Recipients can use SLFRF funds on government services up to the revenue loss amount, whether that be the standard allowance amount or the amount calculated using the above approach. Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise. Here are some common examples, although this list is not exhaustive:

✓ Construction of schools and hospitals
✓ Road building and maintenance, and other infrastructure
✓ Health services
✓ General government administration, staff, and administrative facilities
✓ Environmental remediation
✓ Provision of police, fire, and other public safety services (including purchase of fire trucks and police vehicles)

Government services is the most flexible eligible use category under the SLFRF program, and funds are subject to streamlined reporting and compliance requirements. Recipients should be mindful that certain restrictions, which are detailed further in the Restrictions on Use section and apply to all uses of funds, apply to government services as well.

Restrictions on Use

While recipients have considerable flexibility to use Coronavirus State and Local Fiscal Recovery Funds to address the diverse needs of their communities, some restrictions on use of funds apply.

OFFSET A REDUCTION IN NET TAX REVENUE

• States and territories may not use this funding to directly or indirectly offset a reduction in net tax revenue resulting from a change in law, regulation, or administrative interpretation beginning on March 3, 2021, through the last day of the fiscal year in which the funds provided have been spent. If a state or territory cuts taxes during this period, it must demonstrate how it paid for the tax cuts from sources other than SLFRF, such as by enacting policies to raise other sources of revenue, by cutting spending, or through higher revenue due to economic growth. If the funds provided have been used to offset tax cuts, the amount used for this purpose must be repaid to the Treasury.

DEPOSITS INTO PENSION FUNDS

• No recipients except Tribal governments may use this funding to make a deposit to a pension fund. Treasury defines a “deposit” as an extraordinary contribution to a pension fund for the purpose of reducing an accrued, unfunded liability. While pension deposits are prohibited, recipients may use funds for routine payroll contributions connected to an eligible use of funds (e.g., for public health and safety staff). Examples of extraordinary payments include ones that:

•              Reduce a liability incurred prior to the start of the COVID-19 public health emergency and occur outside the recipient's regular timing for making the payment

•              Occur at the regular time for pension contributions but is larger than a regular payment would have been

ADDITIONAL RESTRICTIONS AND REQUIREMENTS

Additional restrictions and requirements that apply across all eligible use categories include:

• No debt service or replenishing financial reserves. Since SLFRF funds are intended to be used prospectively, recipients may not use SLFRF funds for debt service or replenishing financial reserves (e.g., rainy day funds).

• No satisfaction of settlements and judgments. Satisfaction of any obligation arising under or pursuant to a settlement agreement, judgment, consent decree, or judicially confirmed debt restructuring in a judicial, administrative, or regulatory proceeding is itself not an eligible use. However, if a settlement requires the recipient to provide services or incur other costs that are an eligible use of SLFRF funds, SLFRF may be used for those costs.

• Additional general restrictions. SLFRF funds may not be used for a project that conflicts with or

contravenes the purpose of the American Rescue Plan Act statute (e.g., uses of funds that undermine COVID-19 mitigation practices in line with CDC guidance and recommendations) and may not be used in violation of the Award Terms and Conditions or conflict of interest requirements under the Uniform Guidance. Other applicable laws and regulations, outside of SLFRF program requirements, may also apply (e.g., laws around procurement, contracting, conflicts-of-interest, environmental standards, or civil rights).

RESOURCES

The following resources are available to learn more about ARPA:

• U.S. Department of Treasury Coronavirus State and Local Fiscal Recovery Funds
• U.S. Department of Treasury Interim Final Rule (PDF)
• U.S. Department of Treasury Recipient Compliance and Reporting Responsibilities
• U.S. Department of Treasury Recipient Compliance and Reporting Update November 15, 2021 (PDF)
• National League of Cities ARPA Local Relief Frequently Asked Questions
• Massachusetts Executive Office of Administration and Finance Coronavirus State and Local Fiscal Recovery Fund Reporting Guide – Non Entitlement Units (PDF)
• Treasury Reporting Eligible Uses (PDF)
• U.S. treasury Department Final Rule (PDF)
• Coronavirus State and Local Recovery Funds (ARPA): Overview of the Final Rule  (PDF)
• Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule U.S. Department of the Treasury (PDF)