Cuyahoga County calculated a revenue loss of $264 million in 2020, according to a presentation by Maher Duessel, the County’s consultant advising on American Rescue Plan Act (ARPA) funding. Representatives from Maher Deussel presented at County Council’s May 16 Finance and Budgeting Committee meeting and shared that according to their calculations, the total actual revenue loss exceeds the county’s $239 million ARPA award.
The total actual revenue loss exceeds the county’s $239 million ARPA award.
The Final Rule allows for greater flexibility in spending
According to the most recent U.S. Treasury Guidance on ARPA, known as The Final Rule (read more about the final rule in this memo compiled by Cleveland City Council policy staff), local governments are allowed to elect a one time “standard allowance” of up to $10 million to spend on government services, OR they may calculate their actual revenue loss according to a formula provided in the guidance. The County has elected the latter option. Although ARPA funds are already fairly flexible, funding that is put toward government services under this allowance is actually the most flexible pot of funding under The Final Rule. Governments have a great deal of leeway to spend this funding on any service traditionally provided by a government, with only a few caveats (the funding can’t be used to pay debt service, can’t be put in a rainy-day account, and can’t be put toward pension accounts for example). The consultant’s presentation also noted that the funds are still subject to Uniform Guidance and federal procurement rules.
In other words, because Cuyahoga County had a revenue loss that exceeds their ARPA award, they can accept the funds as revenue loss and do not need to meet the other criteria for spending ARPA funds as laid out in The Final Rule. They still are required to submit quarterly reports, but because they are spending the funds on government services, the reporting requirements are not as burdensome. Ultimately, according to the consultant’s presentation, this frees up ARPA money that would have been spent on administration and reporting, to spend on other projects.
It is important to note that in many ways The Final Rule incentivized this move by Cuyahoga County.
County is moving forward with proposals for $239 million
The county has accepted their ARPA award of nearly $239 million, claimed the full amount for revenue replacement, moved the funding into the general fund, and expended it to fund government services. Meanwhile, the $239 million in ARPA funding that was added to the general fund is listed as falling under the “General Fund – American Rescue Plan Act Revenue Replacement/Provision of Government Services.” This is so that the county can continue to identify which projects are being funded that otherwise would not have been possible without ARPA. It seems that the County Administration and County Council are still planning to move forward with the projects outlined in the series of videos they released this spring, although technically they’ll be using that portion of the general fund to pay for the projects.
It is important to note that in many ways The Final Rule incentivized this move by Cuyahoga County. The intention of the U.S. Treasury Department was to encourage governments to spend ARPA funding to respond to whatever needs they were facing in their communities as a result of the pandemic. The Final Rule offers additional flexibility – like clarifying the revenue loss replacement formula and rules.
Through our work with The Greater Cleveland American Rescue Plan Coalition, we will continue to track how Cuyahoga County and The City of Cleveland are spending their ARPA awards as projects are approved and begin to be implemented.