Background and Final Rule


Some background

On January 6, 2022 the U.S. Department of the Treasury released the Final Rule for State and Local Fiscal Recovery Funds (SLFRF) Program, enacted as a part of the American Rescue Plan (ARP), which delivers $350 billion in pandemic-related aid for state and local government. Vermont is receiving more than $1.25 billion of Coronavirus State and Local Fiscal Recovery Funding from ARP. While the state legislature and governor will decide how to allocate more than $1 billion of that funding, $200 million of it is going directly to Vermont’s cities, towns, and villages.

The Town of Essex is a Non-Entitlement Unit of Government (NEU).

Non-entitlement units of local government (NEUs), defined in section 603(g)(5) of the Social Security Act, as added by section 9901 of the American Rescue Plan Act of 2021, are local governments typically serving populations of less than 50,000. NEUs include cities, villages, towns, townships, or other types of local governments. 

Local ARPA totals

The Town of Essex received $1,649,975.73 in August 2021. It will receive its second payment in August 2022 to the total sum of $3,299,951.45.Katie Buckley VLCT GraphicGraphic courtesy: Katie Buckley, VLCT

The Final Rule and Reporting Obligations

ARPA is implemented through the Final Rule which was issued by Treasury on January 6, 2022 (replacing the “interim final rule”) lays out the requirements of CSLFRF/ARPA funding and includes a timeline.

All ARPA funds need to be obligated by December 31, 2024 and spent by December 31, 2026 or returned to Treasury. 
US Dept Treasury

The Final Rule includes  the same seven categories that the interim rule included, but with broader uses and more clarity.  Find a copy of the Final Rule here:

  1. Public Health
  2. Negative Economic Impacts
  3. Services to Disproportionately Impacted Communities
  4. Premium Pay
  5. Infrastructure
  6. Revenue Replacement
  7. Administrative

US Dept Treasury Expenditure CategoriesUS Dept Treasury Expenditure Categories pg 2Graphics courtesy: U.S. Department of the Treasury 

A closer look at the expenditure category, 6.1 Revenue Replacement for the provision of government services.

The biggest and most impactful adjustment in the Final Rule is that Treasury is now permitting recipients to determine the amount of revenue lost due to the pandemic either according to a formula or by claiming a standard allowance of up to $10 million (for the entire performance period). Therefore, recipients are permitted to use that amount (not to exceed the award amount) to fund “government services.”

This means that the Town of Essex could claim its entire ARPA award of $3,299,951.45 as lost revenue. This would ensure that all funds were used within the timeline outlined and that all reporting would be streamlined.

*In order to use to do this ALL non-entitlement units of local government (NEU), including the Town of Essex must make “a one-time, irrevocable election to utilize either the revenue loss formula or the standard allowance” by April 30th, 2022. 

Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise. Below are some examples, but not all:

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

Discussion of SPENDING the funds still to come!

The election to claim the entire ARPA award as lost revenue does not affect HOW the Town of Essex's ARPA funding is spent. Those discussions will include public input. Opting for this election ensures the Town of Essex will receive all of its ARPA funding. 

It is the recommendation of Vermont Government Finance Officers Association (VTGFOA) and Vermont League of Cities and Towns (VLCT) that any municipality that received less than $10 million in ARPA funding choose to use their entire award to replace lost revenue (Expenditure Category 6.1 Provision of Government Services). 

A municipality does not need to demonstrate the loss (it is "presumed" by Treasury). This approach provides the most flexibility in spending, lesser administrative burden and streamlined reporting requirements.

On April 18, 2022, the Town of Essex Selectboard voted to make the one-time irrevocable decision to elect the "Standard Allowance" approach for the ARPA award in the amount of $3,299,951.46, to spend on the provision of government services throughout the period of performance of the grant.