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Published March 8, 2022

Important Reminder for MACo Members

The Treasury Final Rules have created a new opportunity to use your direct Local Government Recovery Funds for any governmental purpose.  The final rule package creates an option for all recipients to declare up to the first $10 million in funds received as “revenue replacement.”  By doing so, you can convert the money for your use for any general governmental purpose.  (Yes, really!)  You are given the flexibility to make that determination WITHOUT going through the previously required calculation formula, and even ARPA funds you have already expended can be retroactively designated as revenue replacement.  Most importantly, your reporting requirements are significantly less stringent once you make that determination and transfer the money into an eligible fund.

Despite the broad allowance of “any governmental purpose,” there are a few restrictions on the use of the funds once you declare them as “revenue replacement;” namely, you cannot use the funds to service debt, build reserves, or pay pension liabilities.  This new flexibility is significantly different from all you have been told regarding the use of the funds, which is confirmed by the National Association of Counties (excerpts below).

Lost Revenue Usage Examples

Counties may use “lost revenue” for general government services up to the revenue loss amount, whether that be the standard allowance amount ($10 million) or the amount calculated using Treasury’s formula:​

  • Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.
  • Common examples include, but are not limited to:​
    – Construction of schools and hospital​
    – Road building and maintenance, and other infrastructure​
    – Health services​
    – General government administration, staff, and administrative facilities​
    – Environmental remediation​
    – Police, first responders, and other public safety services (including the purchase of fire trucks and police vehicles)​

Recovery funds used to replace “revenue loss” are more flexible and may be used for a broad range of government services, programs, and projects outside of typical eligible uses of recovery funds under the final rule. However, revenue recoupment cannot be used for rainy day funds, debt services, and extraordinary pension contributions. 


Specifically, the following activities are NOT an eligible use of a county’s “revenue loss” allowance:​

  • Extraordinary contribution to a pension fund
  • Debt service payment, including Tax Anticipation Notes (TANs)
  • Rainy day or reserve account
  • A settlement agreement, judgment, consent decree, or judicially confirmed debt (with limited exceptions)
  • (NEW) Activity that conflicts with the purpose of the American Rescue Plan Act statute (e.g. uses of funds that conflict with COVID-19 mitigation practices in line with CDC guidance and recommendations)​
  • Violations of Award Terms and Conditions or conflict of interest requirements under the Uniform Guidance

Key Takeaways

  • Counties have two options to calculate revenue loss:
    1. Up to $10 million of ARPA allocation standard allowance, OR
    2. Calculate revenue loss with Treasury formula, with a new 5.2% default growth rate.
  • Final Rule increases the “average annual growth rate” from 4.1% to 5.2% when calculating revenue loss or the county can calculate its own average annual growth rate.
  • If your county previously declared “$04” for revenue loss in the Interim Report, the county may change and update this number in the first Project and Expenditure Report.
  • If your county is declaring revenue loss, you must still abide by the reporting requirements within the Project and Expenditure Report’s “revenue loss” category.

If you want further reassurance that the funds are as unrestricted as discussed above, please see the United States Treasury guidance (page 6) HERE (excerpt below):

Recipients May Use SLFRF Funds to . . .

  • Replace lost public sector revenue, using this funding to provide government services up to the amount of revenue loss due to the pandemic.
  • Recipients may determine their revenue loss by choosing between two options:
    1. A standard allowance of up to $10 million in aggregate, not to exceed their award amount, during the program—calculating their jurisdiction’s specific revenue loss each year using Treasury’s formula, which compares actual revenue to a counterfactual trend.
    2. Recipients may use funds up to the amount of revenue loss for government services—generally, services traditionally provided by recipient governments are government services, unless Treasury has stated otherwise.
Eric Bryson  | Executive Director |  |  (406) 441-5467
Jason Rittal  | Deputy Director |  |  (406) 441-5464