When Congress passed the $1.9 trillion American Rescue Plan Act in 2021, it provided municipal governments around the nation $65.1 billion through the State and Local Fiscal Recovery Fund to respond to the COVID-19 public health emergency, offset their revenue losses, bolster economic recovery and provide premium pay for essential workers. Generally, South Carolina cities and towns received their payments from this in 2021 and 2022.
Municipalities now face a deadline of December 31, 2024, to have these funds obligated, or otherwise the funds may be clawed back.
It’s important to note that obligating ARPA funds is more than including the planned expenditures in a budget. For ARPA purposes, an “obligation” is defined in the U.S. Code of Federal Regulations as “an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment.” These are all steps that require time, and so taking action will be critically important for cities and towns that have not yet done so during the remaining months of 2024.
This requirement is also different than the reporting requirements that municipalities have encountered so far in the ARPA process. For a few years now, the U.S. Department of the Treasury has required many local governments receiving ARPA Local Fiscal Recovery Funds to submit a Project and Expenditure Report by April 30 of each year, but there has not yet been any deadline for obligating funds.
ARPA funds have a variety of allowable uses, including offsetting revenue loss and pay for government services in an amount equal to what they lost as a result of the pandemic. Those cities and towns that selected this option must still obligate their funds through purchase orders, contracts and similar transitions by December 31, 2024, according to the U.S. Department of the Treasury.
Many local governments have used ARPA funds, as well as funds from another pandemic-response law in 2021, the Infrastructure Investment and Jobs Act, to upgrade infrastructure such as water, wastewater and stormwater improvements, since the laws offered an unprecedented opportunity for major projects. The National League of Cities has a Local Government ARPA Investment Tracker to follow how funds have been spent on more than 16,000 projects around the nation.
The end-of-2024 deadline is not the last one that cities will have for their ARPA funds. All funds must be spent by December 31, 2026.
More resources
The Municipal Association maintains an ARPA guidance webpage connecting officials with extensive guidance on handling federal ARP reporting requirements, including user guides, recorded webinars and presentations.
Also, the Association’s field services managers, Charlie Barrineau and Naomi Reed, have helped local officials understand the technical issues involved in obligating and spending ARPA funds.