Since March 2020, cities and towns across North Carolina have dealt with a financial crisis caused by no action of their own, but rather by a deadly, global pandemic. Health measures, lockdowns, an inability to gather—these consequences of COVID-19 produced an economic fallout that has impacted all areas of our state. Thread through every cancelled event and empty street is a story of financial hardship, for residents, business owners and local governments alike.

​Cities' and towns’ coffers rely heavily on sales tax and occupancy tax—two revenue sources that were hit the hardest by the pandemic. As health precautions and rising unemployment hindered normal economic activity, less money changed hands, and less sales tax was collected; travel and tourism severely diminished, and less occupancy tax was collected.

This revenue is not excess. It is critical, and used to provide the key public services that our residents rely on: public safety, infrastructure, water, and more. As our citizens struggled through the pandemic, our municipalities suffered as a result. And as our municipalities suffered, our citizens were harmed even more.

This issue has been the top priority for the North Carolina League of Municipalities for 12 months. Led by local leaders across the state, we held regular educational sessions on how to adjust and persevere through the pandemic. Resources and updates were shared with members on a weekly—sometimes daily—basis, and with a grassroots effort, we advocated to both state and federal leaders on the need for assistance. Our mayors wrote op-eds. Our councilmembers contacted policymakers. And our League, as a whole, made abundantly clear the significant damage that would be done to our citizens and our state if assistance was not provided.

​Thanks to you, the members of the League, our voices were heard.

​With the passage of the American Rescue Plan on March 11, 2021, direct assistance will be provided to cities and towns for the first time since the onset of COVID-19. On this site, we detail what that means, what money can be expected, and what it can be used for. We also provide guidance and educational resources, ensuring that our municipalities make the most of this relief, not just to recover from a painful year, but to thrive for many years to come.

Once again, to all of our cities, towns, leaders and officials—thank you.

Summaries of the American Rescue Plan bill are provided below:

In addition to direct funding, the ARP provides specific funding for:

• Agriculture and nutrition programs, including extending SNAP and the Pandemic EBT program to keep families fed through the pandemic;

• Schools and institutions of higher education to safely reopen schools, address learning loss, and support students and staff, including support for broadband for students;

• Child care to help sustain child care providers and expand child care assistance to 857,000 children;

• COVID-19 vaccinations, testing, treatment, and prevention, especially for hard to reach communities and areas;

• Mental health and substance-use disorder services;

• Emergency rental assistance, homeowner assistance, and other housing programs to help families pay rent, mortgages, and utilities;

• Transit agencies to prevent layoffs of transit workers and prevent severe cuts to transit services that essential workers and the general public rely on.

• Multiemployer pension plans;

• Small business assistance, including specific programs for restaurants and live venues;

• Support for health care workers, transportation workers, federal employees, veterans, and other targeted populations;

• International and humanitarian responses and;

• Tribal government services.

The bill also includes provisions that:

• Extend enhanced unemployment benefits through September, providing an additional $300 per week on top of all state unemployment benefits;

• Provide direct economic impact payments of $1,400 per eligible individual and $2,800 for couples making up to $150,000 per year. Eligible families will also receive an additional $1,400 payment per child and adult dependent, amounting to $5,600 for an average family of four;

• Expand the Child Tax Credit and the Earned Income Tax Credit

• Provide premium assistance for certain health insurance coverage; and

• Require coverage, without cost-sharing, of COVID-19 vaccines and treatment under Medicaid and the Children's Health Insurance Program (CHIP).

Use of funds:

1. Respond to the COVID-19 emergency and address its economic effects, including through aid to households, small businesses, nonprofits, and industries such as tourism and hospitality.

2. Provide premium pay to essential employees or grants to their employers. Premium pay couldn’t exceed $13 per hour or $25,000 per worker.

3. Provide government services affected by a revenue reduction resulting from COVID-19.

4. Make investments in water, sewer and broadband infrastructure.

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Restrictions of Funds:

• State and local governments cannot use the funds towards pensions or to offset revenue resulting from a tax cut enacted since March 3, 2021.

Transfer Authority

• State and local governments could transfer funds to private nonprofit groups, public benefit corporations involved in passenger or cargo transportation, and special-purpose units of state or local governments, but only as allowed under state law and state constitutional provision.

Cities and towns can now use up to $10 million of ARP funds towards general government services under a new “standard allowance” for revenue replacement. The update was announced by U.S. Treasury in its State and Local Fiscal Relief Fund (SLFRF) final rule published Jan. 6, 2022.

Please note that recipients must still diligently track and report all ARP expenditures, despite the increased eligibility. Reporting and accounting requirements previously established by Treasury remain in place. Those guidelines can be found in the Reporting Compliance section.

The standard allowance serves as a significant development to one of the ARP’s four eligible spending categories: the replacement of lost revenue due to COVID-19 emergency. Previously, SLFRF recipients needed to calculate revenue loss through a provided formula that compared present economic data with pre-pandemic data. If a revenue shortfall could be proven using that calculation, that amount could then be used flexibly towards general government functions not otherwise eligible under the ARP, such as roads and public safety.

From the SLFRF Interim Rule:

… the Act provide(s) recipients with broad latitude to use the Fiscal Recovery Funds for the provision of government services. Government services can include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure; health services; environmental remediation; school or educational services; and the provision of police, fire, and other public safety services. (p60, Interim Rule)

That formula, however, proved restrictive for many municipalities, who found that they could use little or none of their ARP funds towards that spending category. Treasury acknowledged this feedback in the final rule (p240), noting that many comments on the interim rule highlighted the difficulty in applying the formula. The incorporation of the standard allowance removes those difficulties, and provides local governments with a set amount eligible to address revenue replacement, no calculation required. 

That formula, however, proved restrictive for many municipalities, who found that they could use little or none of their ARP funds towards that spending category. Treasury acknowledged this feedback in the final rule (p240), noting that many comments on the interim rule highlighted the difficulty in applying the formula. The incorporation of the standard allowance removes those difficulties, and provides local governments with a set amount eligible to address revenue replacement, no calculation required. 

From the SLFRF Final Rule:

Recipients may elect a “standard allowance” of $10 million to spend on government services through the period of performance. 

Under this option, which is newly offered in the final rule Treasury presumes that up to $10 million in revenue has been lost due to the public health emergency and recipients are permitted to use that amount (not to exceed the award amount) to fund “government services.” … All recipients may elect to use this standard allowance instead of calculating lost revenue using the formula below, including those with total allocations of $10 million or less. Electing the standard allowance does not increase or decrease a recipient’s total allocation. (p9, Overview)

The standard allowance is an alternative to the originally provided formula. Recipients may still choose to apply the formula, should the calculated amount be greater than $10 million. 

This update provides significant opportunities for North Carolina local governments. For the more than 500 municipalities receiving $10 million or less, the entirety of their American Rescue Plan funds can now be considered replacement revenue, open to any of the eligibilities allowed under that category. 

If you have any questions, please contact us at arp@nclm.org.

This category offers broad flexibility and clear eligibility. It also stands as an area of significant need in North Carolina.

​ARP Infrastructure Report

The League encourages municipalities to consider investment into water and wastewater infrastructure. This recommendation is made understanding the constraints of the ARP and the realities of North Carolina’s existing infrastructure challenges. Making investments in infrastructure represents one of the most likely paths to a lasting funding legacy.

The need, the eligibility, and the potential, all covered in-depth in our ARP Infrastructure Report.

NCLM Research Strategist Tammy DePhillip has detailed this spending category in our ARP blog, and you can read that full post here.

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Key points covered:

• What is the intention of this spending category?

• What is considered premium pay?

• Who is eligible for premium pay?

• How is premium pay calculated?

Read More | Premium Pay: Who is Eligible and For How Much?

Full texts, overviews, explainers and updates are available on our U.S. Treasury Guidance Page

Updated May 28, 2022

​Receiving and holding funds:

• We don’t see the need to open a separate bank account for these funds unless it is the only way the unit has to track the receipts and expenditure of the ARPA funds. If an entity can track both the revenue and expenditures within its accounting system without using a separate bank account, we believe that is acceptable.

Accounting points

• Do not comingle ARPA funds with CVR/CARES Act funds!

• ARPA funds cannot be used to build reserves. If an entity has unexpended ARPA funds at June 30, 2021 (and many of you will), it is likely best to put those funds in a Special Revenue Fund. If the funds will be spent on enterprise activities (utility infrastructure for example) they can be recorded directly in the Enterprise Funds. It is probably not a good idea to record the funds in the General Fund, because it could be construed as attempting to build reserves, and it will skew your revenue and expenditure trend information for your General Fund.

• At this time, it appears that the guidance states these funds are granted with eligibility requirements. As such, any unspent funds at year end will be recorded as a liability (not a deferral). We are awaiting additional guidance on this topic.

• Another area we are seeking more information on is the treatment of investment earnings. State statute requires that investment earnings are restricted in the same nature as the grant funds. ARPA guidance seems to say that if funds are comingled, the investment earnings are unrestricted. Only if they are not comingled are they restricted to the same purpose as the grant. Again, we are awaiting more guidance on this topic.

Auditing Points

• There is no reason to believe these funds will not be subject to single audit and yellow book requirements. However, it is important to remember that the thresholds for these audits is based on funds expended, not funds received. With some restraint, local entities that had not expected to be subject to yellow book or single audit requirements for 2021 can manage those expectations by not spending ARPA funds by June 30, 2021 in amounts that would exceed the threshold, including all other Federal and/or State grant funds.

Budgeting Points

• ARPA funds must be appropriated before they are obligated. Units that intend to obligate any of these funds on or before June 30, 2021, must amend their budgets to include the funds. Units that do not plan to obligate these funds on or before June 30, 2021, can likely get by without amending their 2021 budgets.

• An option that many local governments may want to consider is to budget ARPA funds in a Grant Ordinance, allowed by G.S. 159-13.2, which can be established for a grant that covers both capital and operating funding. The budget spans the life of the grant rather than a given fiscal year.

• All units that are receiving ARPA funds must ensure that the funds are included in the 2021-2022 budget, either in the original ordinance, or added with an amendment on or after July 1, 2022. Budgets must be in place before the funds are obligated!

General Guidance

• The UST has revised the deadline for expending ARPA funds to 2026, as long as the funds are obligated by 2024. This should give units some breathing room on their decision making with regards to these funds. It is not likely that local governments will see this level of federal aid again for many years. Units need to be thoughtful about how the funds are spent, not only to ensure compliance with the restrictions on the funds, but also to ensure they are put to their highest and best use. There will likely be multiple opportunities to leverage local dollars with State dollars for needs such as infrastructure. In addition, there are other sources of funds for purposes such as education, transportation, and affordable housing. Units should consider all available sources of funds before committing to spend their local dollars. This will require some patience by local officials but should lead to more informed decision making.

• Many units are asking questions about the restrictions on these funds, and we encourage units to seek guidance before spending the money. ARPA funds cannot be used to fund general operations or to provide for general capital needs. ARPA funds will be subject to audit, and units can expect to be required to repay funds that are not spent in accordance with the restrictions. Again, units have several years over which to spend these funds and there likely will be opportunities to leverage funds to achieve more significant outcomes. Please plan strategically and thoughtfully! 

With the launch of the American Rescue Plan's Coronavirus State and Local Fiscal Recovery Funds program on May 10, 2021, CDBG cities in N.C. will now be able to request funding directly from the U.S. Treasury. The 26 cities that can request funding directly from the federal government are identified in this document (link).

All other municipalities in N.C. will receive their funds through the state of North Carolina. To receive that funding, those non-CDBG cities will required to complete several pre-funding steps. 

​The North Carolina Pandemic Recovery Office has created a checklist for non-CDBG cities and towns to follow to ensure that the funding process proceeds quickly and seamlessly. That checklist can be downloaded here (link). 

​With questions, please visit our ARP: What is it? page. If additional assistance is needed, please reach out to us at arp@nclm.org. Questions about the Vendor Electronic Payment Form should be directed to N.C. PRO at ncpro@osbm.nc.gov.

​PLEASE NOTE: We have been made aware of scams targeting our members. DUNS and SAM registration is free through the federal government and resources are available to assist you if need be. You do not need to pay to register your town with the federal government.