Replace Public Sector Revenue Loss

ARPA allows 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.

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.

Excluded costs:

Debt service payments or issuance costs
Settlement agreement or judgement costs
Replenishment of reserve funds; including stabilization funds, Free Cash or Retained Earnings
Restriction on Pension deposits
Communities may not use revenue loss funds for projects that conflict with or contravenes the purpose of the American Rescue Plan Act, e.g. uses of funds that undermine COVID-19 mitigation practices in line with CDC guidelines and recommendations.

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.