American Rescue Plan Funds Become Available to Certain Local Governments

by Meganne Trela

Recently, aid from the federal American Rescue Plan Act was made available to certain Illinois cities, towns, and villages classified as “Non-Entitlement Units of Local Government” (“NEUs”). The Act, better known as the second COVID-19 stimulus package, became effective in March 2021. One of its marquee components was to provide monetary aid to some local governments across the nation. The deadline to request funds closed on September 30, 2021, and qualifying local governments will now begin receiving federal stimulus. The below details how such money can be used and the remaining obligations of receiving entities.

Reportedly, the Act has made available more than $742 million for Illinois NEUs. These funds can be used to cover:

  1. Costs to respond to the public health emergency with respect to COVID-19 or its negative economic impacts, including assistance to households, small businesses and nonprofits, or aid to impacted industries such as tourism, travel and hospitality;
  2. Costs to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the municipality that perform essential work, or by providing grants to eligible employers that have eligible workers who perform essential work;
  3. Costs for the provision of government services to the extent of the reduction in revenue of a municipality due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year of the municipality; or
  4. Costs to make necessary investments in water, sewer, and broadband infrastructure revenue losses along with the costs of responding to the COVID-19 pandemic or its negative impacts on households, small businesses, impacted industries, essential workers, and communities hit hardest by the pandemic. Additionally, these funds can be used to invest in building, maintaining, or upgrading water, sewer, and broadband infrastructure.

However, such funds are only allowed to be used on such costs incurred up until December 31, 2024. Furthermore, funds cannot be deposited into any pension fund, used to fund debt service, used to offset reductions in tax revenue, used to fund legal settlements or judgments (unless related to COVID-19), or deposited in “rainy day” funds or financial reserves. Additionally, the funds cannot be used for general infrastructure and only should be directed to infrastructure related to water, sewer, and broadband infrastructure.

Payments will made on a per-capita basis in two tranches—one 30 days after completion and approval of the application and second payment approximately one year later. The funds are subject to a cap of not more than 75% of the NEU’s most recent annual budget. If the NEU has not done a formal budget, the NEU must self-certify its annual expenditures for purposes of determining the cap.

Communities that receive funds are required to provide project expenditure reports to the U.S. Treasury by October 31, 2021, and then annually thereafter. These reports will have to meet federal compliance and reporting responsibilities. Checklists and information regarding the reporting requirements and responsibilities for the U.S. Treasury can also be found on its web portal. Resources are also available through the Illinois Municipal League.