As cities and towns make decisions on how to use the funds from the Local Fiscal Recovery Fund of the American Rescue Plan, officials must follow the U.S. Department of Treasury’s Final Rule governing the funds, as well as state law. Here are points to consider when budgeting a municipality’s allocation.
Do cities and towns have to make a formal appropriation of funds for the ARP allocation?
South Carolina law requires city and town councils to appropriate funds from the Local Fiscal Recovery Fund, even though the Department of Treasury does not require this. “Appropriate” in this case means councils should budget their ARP funds as a part of their annual budget or through a separate ordinance.
The SC Constitution, in Article 10, Sections 7 and 8, states that municipalities cannot spend funds until they are first appropriated. SC Section 5-7-260 requires the adoption of budgets by ordinance, and Section 6-1-80 requires a public hearing to take place before council adopts the budget.
Councils have to either pass a standalone ordinance or amend their annual budgets to appropriate their ARP funds. Cities may appropriate ARP dollars within an existing fund, or appropriate them into a dedicated special revenue fund exclusively for ARP.
When will cities receive the last of the ARP money?
The American Rescue Plan Act requires the Department of Treasury to distribute payments from the Local Fiscal Recovery Fund in two payments, with the second payment being released 12 months after the first. The majority of South Carolina cities and towns received their first payments in 2021 and can expect the second payment of the same amount in 2022.
Cities and towns will receive the second payment, or tranche, in the same manner as the first payment. The smaller municipalities, considered nonentitlement units of local government for ARP purposes, will receive the second tranche from the SC Department of Administration.
How long do cities have to spend ARP money?
Funds must be obligated to be spent for an intended purpose by December 31, 2024, and spent by December 31, 2026.
How can cities’ ARP money work in conjunction with ARP money received by the state?
Both the SC House of Representatives and Senate are proposing to allocate the state’s ARP dollars using similar priorities:
- Funding for the SC Department of Transportation to accelerate the projects of the Statewide Transportation Improvement Program
- Funding for the SC Office of Regulatory Staff to expand broadband infrastructure to unserved and underserved communities
- Funding for the SC Rural Infrastructure Authority to administer three competitive grant programs to provide for improvements in water, wastewater, and stormwater infrastructure
While it can be tempting for cities to immediately seek out potential uses for their ARP allocations, they may be able to create a greater impact by taking a slower approach and finding ways to leverage their ARP money by coordinating it with the RIA grant programs.
Here are the current details of the proposed grants:
Infrastructure grant
- The maximum grant amount will be $10 million per project or application.
- Large utilities will be required to provide a 25% match.
- Small utilities will be required to provide a 15% match.
Regional solutions grant
- This grant is designed for regional partnerships among large and small systems, including consolidation.
- The maximum grant amount is $10 million per project or application.
- A 15% match will be required.
Planning grant
- The maximum grant amount is $1 million per project or application.
- This grant is designed for very small systems that serve populations of 3,300 or less.
- No match is required.
For questions, contact Legislative and Public Policy Advocate Erica Wright at 803.354.4793 or ewright@masc.sc.