New Jersey Division of Local Government Services Local Finance Notice 2021-11

• The federal American Rescue Plan Act of 2021 provides funding for COVID-19 pandemic response and recovery. Municipalities and counties will receive funds in two tranches, with the second tranche released next year.

• To comply with LFRF reporting requirements, a local unit must have a valid DUNS number and an active registration with the federal government’s System for Award Management (SAM) database.
• The U.S. Treasury will distribute LFRF proceeds directly to counties and metropolitan cities in New Jersey. Counties and metropolitan cities must execute a Financial Assistance Agreement with the federal government.
• Municipalities that are not classified as metropolitan cities under the Act must submit a Local Fiscal Recovery Fund Distribution Request and Certification Form to the State Treasury.

Permitted Use of Grant Funds

• The state is investing in water, sewer, and broadband infrastructure, paying essential workers premiums, and supporting public health expenditures.
• The Treasury Interim Final Rule allows recipients a reasonable amount of time to complete LFRF-funded projects. Construction may continue past December 31, 2024 assuming that funds were obligated prior to that date.
• The U.S. Treasury’s Interim Final Rule establishes a methodology for calculating COVID-19 related general revenue reduction. Counties and municipalities will compute the extent of their reduction in general revenue by comparing their actual revenue to an alternative representing what could have been expected to occur.
• The Interim Rule states that general revenue does not encompass utilities, but the U.S. Treasury LFRF FAQ states that a recipient may consider the classification and instructions used to complete the U.S. Census Bureau’s Annual Survey of State and Local Government Finances.
• Step 2: Estimate counterfactual revenue, which is equal to base year revenue * [(1 + growth adjustment) ( n/12)].
• Upon receiving LFRF Funds, recipients must calculate the reduction in revenue as of December 31, 2020, and use this funding to support government services, up to this amount of lost revenue.
• Counties and municipalities may use LFRF funds to improve their water, wastewater, and stormwater infrastructure, including projects that address the impacts of climate change. These projects include building or upgrading facilities and transmission, distribution, and storage systems, including the replacement of lead service lines.
• Investments in broadband infrastructure should be made in areas lacking a wireline connection that reliably delivers minimum speeds of 25 Mbps download and 3 Mbps upload, and recipients are encouraged to pursue fiber optic investments.
• The U.S. Treasury encourages recipients to use project labor agreements and community benefits agreements for water, sewer, and broadband projects, as long as those projects meet applicable health-based standards, account for resilience to climate change, and establish or improve broadband service to unserved or underserved populations.
• To assess whether additional uses of COVID-19 would be eligible under the public health expenditure category, assess the identified need.
• Addressing COVID-19 related negative economic impacts requires considering whether an economic harm has been caused or made worse by the public health emergency, and whether the program or service would respond or address this harm.

Prohibited Use of Grant Funds

• States and territories may not use LFRF funds to offset a reduction in net tax revenue due to a change in law.
• The U.S. Treasury does not consider interest or principal on outstanding debt instruments, fees or issuance costs associated with the issuance of new debt, or replenishing financial reserves to be permitted uses of LFRF funds.

Reporting Requirements

• Counties and metropolitan cities receiving LFRF funds will be required to submit quarterly Project and Expenditure reports to the federal government. The reports will include financial data, information on contracts and subawards over $50,000, types of projects funded, and other information regarding a recipient’s utilization of the award funds.
• Municipalities receiving LFRF funds through the State must submit annual Project and Expenditure reports to U.S. Treasury by October 31 each year.
• Counties and metropolitan cities that receive LFRF funds must submit a Recovery Plan Performance report to U.S. Treasury on an annual basis. The report must include key performance indicators and mandatory indicators, as well as programmatic data in specific eligible use categories and other specific reporting requirements.

Budgeting and Recording American Rescue Plan Act of 2021 Receipts

• Upon receipt of the LFRF proceeds, local units are to record the proceeds in a grant fund unappropriated reserve.
• When using LFRF funds to offset revenue losses, the local unit must submit a completed Revenue Loss Calculation Excel Worksheet to LFRF@dca.nj.gov.
• If LFRF proceeds are used for COVID-19 allowable expenditures, a Chapter 159 resolution must be adopted, and the funds must be recorded as a capital fund appropriation in the capital ordinance.

Local Finance Notice 2021-11

Please follow the link below to read more about these items and guidance on how your local unit can implement them:https://www.nj.gov/dca/divisions/dlgs/lfns/21/2021-11.pdf

Contact Wielkotz & Company, LLC Today

For further information on Local Finance Notice 2021-11 and its implementation feel free to reach out to Steven Wielkotz at (973)-835-7900 ext. 201 or sdw@w-cpa.com.