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American Rescue Plan Funding: 5 Considerations for Your Local Government

You're about to get money from the federal government—more money than you've ever received at one time for your community. This is the proverbial opportunity of a lifetime. Don't blow it.

That's right, the American Rescue Plan Act (ARPA) of 2021 is here, and it holds $350 billion reasons why you should pay attention to it as a state and local government leader. There are two big differences between ARPA and the CARES Act. First, CARES Act funding was reimbursement for allowable expenses whereas ARPA is a distribution with reporting. Second, the average local government will receive around 233 percent more funding with ARPA than it did with the CARES act, just to put it in perspective. That means a great deal more money is coming your way.

HOW WILL ARPA FUNDS BE ALLOCATED, NICK?

Great question. Of the $350 billion grand total, $195.3 billion will go to states and the District of Columbia, $65.1 billion to counties, $45.6 billion to metro cities, $20 billion to tribal governments, $4.5 billion to territories, and the remaining $19.5 billion will be allocated toward non-entitlement units of local government.

If you're a county or a large city with a population over 50,000, you received a direct distribution for half of the funds—the first "tranche"—from the Treasury on May 10, 2021, along with guidance on spending. If you're a smaller city, should have received half your money—your first tranche—from your state by June 9, 2021. One note for the 1,000 larger communities of over 50,000 population, your portion was based on a modified community block grant formula. For counties and smaller towns, it will be population-based.

Regardless of size, each community will receive its funding allocation in two installments: 50 percent by May 10 or June 9, 2021 and 50 percent no sooner than one year after this date. Oh, and entities have until December 21, 2024, to spend it, which means you can slow it down if you want.

EXAMPLES OF ALLOCATIONS
 

Tucson, Arizona | Population: 541,000 

Will receive an estimated distribution of nearly $140 million per the modified block grant formula. They received roughly $70 million from the Treasury on May 10, 2021, the other $70 million will come no sooner than May 10, 2022
 

Golden Valley Township, Minnesota | Population: 181
Will receive an estimated $20,384 from the state of Minnesota. The first $10,192 was received on June 9, 2021, and the other $10,192  will be received no sooner than June 9, 2022.

 

NOTE: BOTH ORGANIZATIONS HAVE UNTIL DECEMBER 21, 2024 TO USE THE FUNDS.

Organizations like the National League of Cities the National Association of Counties have developed excellent resources to help state and local governments get a better understanding of the estimated influx. I highly recommend you continue your research and check them out for more guidance.

THIS IS A ONCE-IN-A-GENERATION OPPORTUNITY.

These funds are a once-in-a-generation opportunity to create a meaningful impact. Yes, there will be scrutiny, but this is the single largest influx of unexpected cash your community has received. Bigger than the American Recovery and Reinvestment Act (ARRA). Bigger than the CARES ACT.

With CARES, we saw several communities hiring law firms to write legal guidelines on how the funds could be spent. Even though there was very flexible guidance and loose restrictions, several governments wanted more restrictions. This is what happens when you've had to do more with less for so long.

The pandemic has shifted the world's norm, the creativity is drained out of your employees, and you encounter burnout. But not this time. This time you know it's coming. This time you know a little more about the "new normal" we're facing, and hopefully, the first and second-wave crises will be averted. That means you have more warning and hopefully more readiness, more willingness to use these funds to the best of your ability.

WHAT WILL I DO WITH THE MONEY COMING MY WAY?

This might be a simple question at first. However, during my workshops with local governments, I have found that the most challenging question to answer is, "What would you do with a million dollars?" Government employees are so used to austerity being the norm. "Do more with less," is the tired mantra of local governments everywhere, and "Doing more with more," is almost a foreign concept.

The truth is your employees need to get a better introduction to how these funds could be best used. Here are five considerations to keep in mind.

1. KNOW YOUR OPTIONS

While there is guidance on allowable expenses, this should not limit your thinking in any way. Right now, your priority should be soliciting employee ideas and building a list of potential investments. From infrastructure to the restoration of government services, you have room to think big and cast your net pretty wide.

For example, have you considered upgrading your infrastructure management software or operational capabilities? Have you wanted to add additional functionality to your existing work and asset management system? What about if it was "free" to you?

Some communities are looking into using the ARPA funds to upgrade their systems and solutions. Here's what we're hearing from them:

  • According to the 150-page Interim Final Rule (oxymoron much?), the funds can specifically be used for water, wastewater, stormwater, or broadband projects. Per the guidance, "It is important that necessary investments in water, sewer, or broadband infrastructure be carried out in ways that produce high-quality infrastructure, averts disruptive and costly delays, and promote efficiency." Asset management software, like Cartegraph, addresses these challenges by helping you prioritize investments and operationalize intelligent decision-making.
  • In the same guidance on page 60, restoration of government services is also allowable, including various infrastructure projects, "including hardware, software, and protection of critical infrastructure." Hundreds of communities use Cartegraph operations and facilities management software to help protect their critical infrastructure assets.
  • There are multiple times the guidance mentions activities prioritizing public health/safety and the need for project transparency (e.g., future reporting requirements). Agencies can use the latest solutions to maintain oversight on all three. With budgeting and capital improvement planning tools like Cartegraph Scenario Builder, infrastructure owners can prioritize one water or stormwater project over another, track accurate costs, and provide simplified reporting. Meaning it is likely an eligible expense.
  • Displacement of dollars is another option. Some leaders plan to use their ARPA funds for a previously funded project and reallocate a portion of that original budget to upgrade infrastructure management software for facilities, parks, etc.

The point is that these funds are very flexible, and it should be easy enough to justify the needed upgrades that will simplify your ability to manage your assets in the future. That plays into the long-term mindset of being encouraged with these funds. In addition, remember this is an allocation, not a reimbursement, meaning you have much flexibility in determining how to spend them.

2. MONITOR OTHER FUNDING

More funds are coming to communities than just the direct allocation to your city or county. The ARPA has various funding sources such as transit, K-12, housing assistance, etc., to match up the funding sources to ensure you aren't spending money on unnecessary activities. In addition, both Democratic and Republican senators are pitching infrastructure bills that may provide additional funding for those efforts soon.

That's why having a list of the eligible or exciting projects in the whole organization is so critical—you can be prepared for every opportunity. And remember, you can always displace prior allocated funds and reassign them if you have more projects that could be funded by ARPA or one of the other funding options.

3. MAKE AN INVESTMENT IN ROI

This is tough, but we have to invest in the return-on-investment opportunities for our community. Investing in staff creates an ongoing expense and will not be sustainable. In contrast, investment in software is a force multiplier and community gain. This is the chance to invest in the future. This is an opportunity to shore up our nation's infrastructure with wise investments. Using tools to shorten the time between data and decision is essential.

4. DEVELOP A PLAN AND A FRAMEWORK

Develop a plan on how you will spend the funds BEFORE the funds become available. Once funds are released, there will be people lining up in the community who have a vested interest in how the money's spent and will want you to spend it quickly. By having a plan, you can create a framework for decision-making to defend the community at large. This helps you spend the money wisely and resist the urge to spend the money quickly to appease some squeaky wheels. It also allows you to be thoughtful and combat some of the pressure that is about to come your way.

And remember that any plan will ultimately involve the community. So there is no reason to wait to start the process of deliberative engagement with your community on these funds and their potential uses.

5. TAKE A RISK

As these funds are unexpected and substantial, please make sure you take a risk that can help reshape your community in the future. Try something that is unexpected and proactively addresses an opportunity you would never usually deal with. It's time to take a "risk" because the way we've always done it is the actual risk. We have to do something different moving forward, and now is the time to try something. Don't let it break the bank but take a bet and help to change your community for the better.

 

In summary, these are once-in-a-generation funds coming to your community. Don't limit your thinking. Start NOW by collecting your employee and community ideas. Develop a list of potential projects and a prioritization framework. Please don't rush to spend it all at once. Look to partner with other funding sources and for projects with ROI, and please—for the love of your community—take a risk. Your residents deserve it.

 


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