Replacing Lost Public Sector Revenue Discussion

The final rule offers a standard allowance for revenue loss of $10 million, allowing recipients to select between a standard amount of revenue loss or complete a full revenue loss calculation. Recipients that select the standard allowance may use that amount – in many cases their full award – for government services, with streamlined reporting requirements.

Under this option, 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 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. 

All recipients may elect to use this standard allowance instead of calculating lost revenue using the prescribed formula, including those with total allocations of $10 million or less. 

Recipients must make a one-time irrevocable election to utilize either the revenue loss formula or the standard allowance.

Government services generally include any service traditionally provided by a government, including construction of roads and other infrastructure. Government services is the most flexible eligible use category and funds are subject to streamlined reporting and compliance requirements.

The final rule takes effect on April 1, 2022. Until that time, the interim final rule remains in effect; funds used consistently with the IFR while it is in effect are in compliance with the SLFRF program. However, recipients can choose to take advantage of the final rule’s flexibilities and simplifications now, even ahead of the effective date.

Based on the discussion the consensus was that the city should elect to use the standard allowance and continue a focus on utilizing ARPA funding on impactful, general government capital expenditures.