Permissible Expenditures of American Rescue Plan Act Funds

On March 10, 2021, Congress passed the American Rescue Plan Act of 2021 (the “Act”). The Act provides relief funding for states and local governments to alleviate the effects of the COVID-19 pandemic. The Act requires disbursement to local agencies by the US Department of the Treasury (the “US DOT”) to cities with populations under 50,000. Disbursements to larger cities are through their respective state governments. This memorandum will briefly summarize the types of eligible activities that can be funded by the Act.

Eligible Activities
The Act provides a total of $65.1 billion in relief for local governments. It also provides a non-exclusive list of allowable expenditures, encouraged expenditures, and prohibited expenditures for cities to use in planning their use of relief funds. The National League of Cities has provided a summary of these categories in a publication available at The US DOT has released Guidance, FAQ’s and an application portal available at Briefly, the categories of eligible activities include expenses relating to:

  1. COVID-19 Pandemic Response, including mitigation and prevention, medical expenses, behavioral healthcare, public health and public safety employees, execution of health programs, health disparities and survivor benefits.
  2. Economic Impacts, including direct cash and loan interventions, business assistance, impacted industries and workers, housing and community development, homelessness and childcare and education.
  3. Workforce & Personnel, including premium pay for essential workers.
  4. Necessary Water/Sewer Projects, including wastewater treatment plans, pollution control, green infrastructure, stormwater treatment, water reuse, and projects eligible under the Drinking Water State Revolving Fund. Additionally, expenses related to cyber security, climate change and resilience, and lead service line replacement are also eligible under this category.
  5. Broadband projects that are designed to provide service to unserved and underserved properties.
  6. Lost Revenue, including general revenue excluding utilities.

Specifically excluded from eligible activities are expenses related to pensions, infrastructure not addressed in the Act, and rainy-day funds, financial reserves, and outstanding debt. Additional guidance on how cities can access Act funds is forthcoming and will be available from several sources including the League of California Cities, the California Department of Finance, and the US Department of the Treasury.

Information on is for general use and is not legal advice. The posting of this Municipal Law Update is not intended to create, and receipt of it does not constitute, an attorney-client-relationship. Should you have any questions or require further clarification of the above, please contact Keith F. Collins at our office at (714) 446-1400, or by email at