New Jersey Division of Local Government Services Local Finance Notice 2022-07

• The United States Department of the Treasury has adopted a Final Rule concerning eligible uses of American Rescue Plan funds awarded to counties and municipalities under the State and Local Fiscal Recovery Funds Program.
• The Final Rule makes several changes to the LFRF program and codifies previous guidance. Counties and municipalities should review these documents to understand the permissible use of LFRF funds.
• To the extent a recipient has taken significant steps toward obligating LFRF funds prior to January 6, 2022, Treasury will generally not enforce provisions contained in the Final Rule.

Offsetting Lost Public Sector Revenue

• The Final Rule allows LFRF funding to be used to pay for government services in areas affected by the COVID-19 public health emergency.
• New Jersey counties and municipalities can use a standard allowance of $10 million for COVID-19 related revenue loss, instead of using a revenue loss formula.
• The final rule changes the revenue loss formula and requires municipalities on a State Fiscal Year budget cycle to use the June 30 date for COVID-19 revenue loss measurement. Counties and all other municipalities shall continue using the December 31 date.
• U.S. Treasury is amending its Project & Expenditure and Recovery Plan reporting forms to allow recipients to make a one-time, irrevocable election to utilize either the revenue loss formula or the standard allowance.
• If a municipality is using grant funds to offset revenue loss, it should budget on sheet 10 and identify the government services provided.

Responding to Public Health and Economic Impacts of COVID-19

• The Final Rule combines public health and economic impacts into one category and requires local units to design a program that benefits those impacted.
• The Final Rule gives counties and municipalities broad flexibility to identify and respond to other pandemic impacts, including classes of beneficiaries.
• The Final Rule presumes that certain households, communities, small businesses, and non-profits were “impacted” by the pandemic, while others were “disproportionately impacted”. These individuals and entities are presumptively eligible for specific uses of funds.
• The costs associated with acquiring, securing legal title, removing environmental contaminants or hazards from vacant or abandoned properties, greening or cleaning up vacant lots, and converting vacant or abandoned properties to affordable housing are covered.
• The Final Rule permits counties and municipalities to provide LFRF-funded aid to industries impacted by the COVID-19 pandemic, if the industry experienced at least eight percent (8%) employment loss from prepandemic levels, or if the industry experienced comparable or worse economic impacts as the national tourism, travel, and hospitality industries.
• Local units may define industries with respect to substantive or geographic scope. U.S. Treasury encourages recipients to define narrow and discrete industries eligible for aid, and aid should be generally broadly available to all businesses within the impacted industry to avoid potential conflicts of interest.
• U.S. Treasury recognizes that pre-existing disparities amplify pandemic impacts, so interventions may be designed to address broader pre-existing disparities that contributed to more severe health and economic outcomes during the pandemic.
• The Final Rule clarifies that counties and municipalities may use LFRF funds for capital expenditures to respond to the pandemic’s public health and negative economic impacts.
• Local units should compare the proposed capital project against at least two alternative capital expenditures and decide which capital expenditure is superior.

Premium Pay

• Local units may award premium pay to eligible workers performing essential work during the pandemic for up to $13 per hour. The total amount awarded cannot exceed $25,000 for any single worker.
• The worker must be eligible and perform essential work, which is defined as work involving regular physical handling of items used by patients, the public, or coworkers.

Water & Sewer Infrastructure

• Counties and municipalities may use LFRF funds to make necessary investments in water and sewer infrastructure, helping to increase water quality, reduce flooding, and ameliorate the consequences of long-term deferred system maintenance.
• The Final Rule allows LFRF funds to be used for additional types of projects beyond CWSRF and DWSRF eligible projects, so long as those projects are a necessary investment in infrastructure.
• Projects to create new drinking water systems, restore dams, or extend drinking water service to meet population growth needs must also be cost-effective. Local units are not required to conduct a full cost-benefit analysis, however, they should consider relevant factors.
• Investments in drinking water supply infrastructure to meet projected population growth must be projected to be sustainable over the infrastructure’s estimated useful life. If the source of drinking water will cease to be available to meet the population’s needs before the end of the estimated useful life, consider alternative sources of drinking water.

Broadband Infrastructure

• Local units may consider any available data, including existing broadband internet service performance, federal and/or state collected broadband data, user speed test results, interviews with community members and business owners, reports from community organizations, and other information they deem relevant in determining areas for investment. Local units may consider the actual experience of current broadband customers when making their determinations, and not just the experience of households with an identified need for additional broadband infrastructure investment.
• Local units must require the service provider for a completed broadband infrastructure investment project to either participate in the Federal Communications Commission’s Affordable Connectivity Program or provide access to a broad-based affordability program to low-income consumers.

Prohibited Uses; Compliance with Existing Laws

• The Final Rule maintains the prohibition on local units using LFRF funds towards debt service, satisfying settlements and judgments, or replenishing surplus, and expressly prohibits using LFRF funds for projects conflicting with or contravening the purpose of the American Rescue Plan Act.
• Local units are subject to the requirements of 2 CFR Part 200, including procurement standards, and the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, unless otherwise specified in program-specific guidance.

Procurement using LFRF Funds – Noteworthy Considerations

• Local units must follow the Local Public Contracts Law (LPCL) when procuring eligible goods or services using LFRF funds, unless the federal Uniform Guidance is more restrictive.
• Professional services are considered an eligible use of LFRF funds, but if the engineering firm was originally procured through a non-fair-and-open contract, a county or municipality must either solicit written quotations from multiple engineering firms or conduct a competitive procurement.

• An engineering firm procured through quotations pursuant to the Uniform Guidance could be paid from LFRF funds without further procurement action taken by the local unit.
• Local units should conduct due diligence before using a cooperative contract for LFRF-eligible procurements exceeding $250,000 and should obtain documentation from the lead agent to keep on file.
• Section 200.324 of the federal Uniform Guidance requires local units to conduct an independent price or cost analysis on a contract exceeding $250,000.
• Current State contract pricing available to other local governments, current contracts available to the contracting unit, and recently procured comparable contracts.
• A cost-savings analysis should consider the ability to avoid a separate procurement, lower minimum purchase requirements at a lower price, and additional costs which have been factored in before contract award.
• Local units must conduct an independent price analysis for cooperative contracts exceeding $250,000, and must keep documentation of the cost-savings analysis on file.

Local Finance Notice 2022-07

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/22/2022-07.pdf

Contact Wielkotz & Company, LLC Today

For further information on Local Finance Notice 2022-07 and its implementation feel free to reach out to Steven Wielkotz at (973)-835-7900 ext. 201 or sdw@w-cpa.com.