ARPA FAQ
1. What is Lost Revenue?
ARPA provides for four spending categories, the broadest of which is lost revenue. Under lost revenue, a government entity may spend on government services, which includes any cost that would come up in the course of running the township. Some examples of government services include purchasing laptops, audiovisual equipment, wages/payroll, roads, gravel, asphalt, mowing ditches, replacing culverts, renovating or building a townhall, maintaining a park, etc. This is a non-exhaustive list of government services. The general rule of thumb is that you can use the lost revenue category if you can pay for it normally.
2. Is there anything we cannot spend our ARPA money on in the lost revenue category?
Yes, you cannot spend to pay off debt, pay into pension funds, and place into a rainy day fund, meaning the town cannot save the funds past December 31st, 2024. Further, under lost revenue, if the town does not have the legal power from Minnesota to expend these funds, then lost revenue replacement does not give the town a new power to expend these funds.
3. How do we determine our lost revenue?
Lost revenue is defined by the Department of Treasury. It is determined through one of two options. Option A requires a complex formula. Option B is a “standard allowance” of $10,000,000 that all towns may elect to use. In other words, Option B states that if a town received less than $10,000,000 from ARPA, it may use the standard allowance, which would allow them to designate all of the ARPA funds it received as lost revenue. By the Department of Treasury’s definition of lost revenue, every township in Minnesota may use all of their ARPA in lost revenue by electing to use the standard allowance.
4. Is there any reason not to place all of our funds into lost revenue?
There are certain powers that ARPA provides not normally available to towns. These are (1) working with private broadband providers to bring broadband into the township, (2) premium pay to essential workers, and(3) providing grants to households or businesses.
5. What are the resolutions for, and must we complete them?
First, no, the resolutions are not required. However, the resolutions provide aid to towns in three distinct ways: (1) It provides good record keeping, (2) It will aid in streamlining reporting, and (3) If the town is audited, it will serve as evidence for the valid cost.
6. When do we complete our lost revenue resolution?
It is best to complete these resolutions as soon as you can. There may be other factors limiting the town from using all of its funds under lost revenue, as discussed in FAQ 5. If there are other projects the town wants to use ARPA funds on, the town may wait to pass the resolution.
7. How often do we complete the resolution?
You only have to complete this once for the lost revenue replacement resolution. However, if you are looking to complete other projects, you will have to prepare a resolution for each project.
8. What amount do we put in the resolution?
The town can place up to all of the revenue they are expected to receive. Remember, each town received its first half last fall, and the second half, which will be the same, will be distributed sometime during the summer or fall of 2022. Further, the town will insert the dollar amount rather than a percentage.
9. I heard we can’t use ARPA money towards pensions. Does that mean we can’t pay PERA with it?
ARPA restricts pension payments that are an extraordinary payment of an accrued, unfunded liability. This references two main types of pension payments, 1) a pension liability incurred prior to the start of the COVID-19 pandemic and 2) payments that are over and above the regular payments. Regular contributions via payroll are not restricted.
10. Can we lower our levy and offset that lowered levy with the ARPA fund?
Yes. Although, ARPA has a provision where certain governments cannot “offset a net reduction in tax revenue,” this provision explicitly does not apply to townships. With that being said, the purpose of ARPA is to hit the ground running as we exit the pandemic. The pandemic has magnified many deficiencies in government, and the purpose of ARPA is to mitigate some of those deficiencies. One of the areas of deficiency outlined in towns is the margin on which townships operate, meaning town levies usually cover the known year-to-year expenses and maybe allow for some savings in the case of an emergency. Towns should be increasing their levy annually to ensure they can keep up with inflation, and many towns have catching up to do to be in line with this goal. Towns can use lost revenue to help bridge that gap rather than greatly increasing the levy once or twice every 5 to 10 years.