Late on Friday afternoon, the Division of Local Government Services (DLGS) posted Local Finance Notice 2021-11 providing guidance for non-entitlement municipalities (municipalities with a population under 50,000 residents) that will receive their American Rescue Plan Local Rescue Funds through the state.
In order to receive the funds all non-entitlement municipalities must apply to the State through application portal. Much of the information in Local Finance Notice (LFN)2021-11 has previously been covered by the League’s multiple webinars, sharing the U.S. Treasury’s Interim Final Rule, Fact Sheet, FAQ’s, Quick Reference Guide, and posting on the Federal Page regarding application needs and compliance; deadlines to disburse funding; calculating revenue loss; as well as permitted and prohibited uses.
LFN 2021-11 does reiterate the permitted use of the funds to include replacing lost public sector revenue; investing in water, sewer and broadband infrastructure, providing premium pay for essential workers; supporting public health expenditures; addressing COVID-19 related negative economic impacts; and addressing the disproportional public health and economic impacts of the crisis on the hardest-hit communities, populations, and households.
LFN2021-11 does not include a full listing of final allocations of what each municipality should expect to receive over two years.
Among the new information outlined in LFN 2021-11:
The State takes the position that under the definition of “general revenue” county and municipal utilities except water utilities, electric utilities, and water supply related revenues from combined water/sewer utilities would qualify. However, water supply-related losses incurred by a municipal utilities authority would not apply. Lost revenues from local government-owned bus systems, except those systems established solely to transport elementary and secondary school pupils, should be excluded from a revenue loss calculation.
DUPLICATION of BENEFITS AVOIDANCE
Counties and municipalities should avoid duplicating assistance programs already offered through the State. Instead, it is strongly encouraged that the the State’s existing infrastructure (such as the infrastructure to administer COVID-19 Emergency Rental Assistance Program II) be utilized to administer funds for rental, utility, water or other assistance programs on behalf of your community.
The State administration can ensure the funds you dedicate to these programs are only expended on your residents. Examples include the various housing assistance and rental assistance programs offered through the Department of Community Affairs’ Division of Housing and Community Resources, along with the Economic Development Authority’s Small Business Emergency Assistance Grant Program.
To avoid a duplication of benefits between programs funded by State-created State Fiscal Recovery Funds (SFRF) and those locally created programs funded by Coronavirus Local Fiscal Recovery Fund (LFRF) proceeds, the Department of Community Affairs will be requiring information from all county and municipal LFRF recipients on programs created to determine whether a duplication of benefits risk may exist between a State and local program. If a duplication risk is identified, the Department will request more detailed beneficiary information from the county or municipality to further examine whether a duplication of benefits has or may occur. Additional guidance on this requirement will be forthcoming. The State will also make its SFRF program information available to all counties and municipalities to allow them to conduct their own federally required duplication of benefits review.
PROCEDURES AND REPORTING
Upon receipt of the LFRF proceeds from the state or federal government, the local units are to record the proceeds as a grant fund unappropriated reserve. The unappropriated reserve account will be the primary account where funds will be distributed for revenue losses, COVID-19 expenditures, and water, sewer, and broadband capital projects.
When using LFRF funds for revenue losses, the local unit must submit a completed Revenue Loss Calculation Excel Worksheet to LFRF@dca.nj.gov . In addition, the revenue loss calculation must be inserted on Sheet 10 of the 2021 Budget. If the local unit adopted a COVID Special Emergency for loss of revenue, regardless of whether or not COVID notes were issued, then the LFRF funds should be used to offset the special emergency deferred charge appropriation as set forth in Local Finance Notice 2020-24. This language appears to contradict the Interim Final Rule and the League is seeking clarification from our partners at the National League of Cities and will report later.
If LFRF proceeds are used for COVID-19 allowable expenditures, the local unit must adopt a Chapter 159 resolution, record the appropriation on Sheet 24 of the budget document, and move the proceeds from the unappropriated reserve account to a grant fund appropriation account.
When LFRF proceeds are utilized for a capital expenditure, a capital ordinance is required and the proceeds must be recorded as a capital fund appropriation by moving the funds from the unappropriated reserve account to the capital appropriation account. The Chapter 159 resolution, which must be submitted to the Division’s Chapter 159 inbox at email@example.com, will be automatic and does not require Division approval.
Compliance with federal government requirements on use of funds and supporting documentation are the responsibility of the local unit.
The League has asked if there is going to be further examples on sub-allocation to authorities, non-profits, and other permitted used guidance.
Contact: Paul Penna, Legislative Analyst, firstname.lastname@example.org or 609-695-3481 ext. 110