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Eligible Expenditures

How to spend these appropriations will be a key question for our municipalities over the next several years. Certain spending categories, such as water and wastewater infrastructure, have broad eligibility. Others are less clear. 

On this page, we will provide clarity on eligible expenditures as information becomes available. 

Note: For towns receiving $10 million or less through the ARP, the entirety of your funding can now be qualified as replacement revenue due to the "standard allowance" created in Treasury's Final Rule. Learn more here, and view our Replacement Revenue section below. 

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Allowable Uses as Noted in the Law
Use of funds:
  1. Respond to the COVID-19 emergency and address its economic effects, including through aid to households, small businesses, nonprofits, and industries such as tourism and hospitality.

  2. Provide premium pay to essential employees or grants to their employers. Premium pay couldn’t exceed $13 per hour or $25,000 per worker.

  3. Provide government services affected by a revenue reduction resulting from COVID-19.

  4. Make investments in water, sewer and broadband infrastructure.

Restrictions of Funds:
  • State and local governments cannot use the funds towards pensions or to offset revenue resulting from a tax cut enacted since March 3, 2021.

Transfer Authority
  • State and local governments could transfer funds to private nonprofit groups, public benefit corporations involved in passenger or cargo transportation, and special-purpose units of state or local governments, but only as allowed under state law and state constitutional provision.

Allowable Uses as Noted in the Law
Water and Wastewater

This category offers broad flexibility and clear eligibility. It also stands as an area of significant need in North Carolina.

ARP Infrastructure Report

The League encourages municipalities to consider investment into water and wastewater infrastructure. This recommendation is made understanding the constraints of the ARP and the realities of North Carolina’s existing infrastructure challenges. Making investments in infrastructure represents one of the most likely paths to a lasting funding legacy.


The need, the eligibility, and the potential, all covered in-depth in the ARP Infrastructure Report

Eligibility through the CWSRF and DWSRF

Local ARP funds are eligible to be spent on any project that is eligible under the federal Clean Water and Drinking Water State Revolving Funds. Examples of eligible project categories include water treatment, water transmission and distribution, and centralized wastewater treatment.

The eligibility handbooks for these programs are linked below:

  • CWSRF Eligibility Handbook

  • DWSRF Eligibility Handbook

Water and Wastewater
Clean Water State Revolving Fund Eligibilities
Drinking Water State Revolving Fund Eligibilities
Premium Pay

NCLM Research Strategist Tammy DePhillip has detailed this spending category in our ARP blog, and you can read that full post here.

Key points covered:

  • What is the intention of this spending category?

  • What is considered premium pay?

  • Who is eligible for premium pay?

  • How is premium pay calculated?


Read More | Premium Pay: Who is Eligible and For How Much?

Premium Pay
Replacement Revenue

An eligible use of ARP funds for cities and towns is the replacement of lost revenue due to the COVID-19 pandemic, and federal guidance provides a formula by which to determine that number. 

Recipients can now choose to use either the formula provided by Treasury or a the "standard allowance" of $10 million. (Note: For the more than 500 towns that are receiving $10 million or less through the ARP, the standard allowance in effect means that you can qualify 100% of your funding as replacement revenue.)


To help with the calculations, we have published an online calculator created by the Government Finance Officers' Association. That calculator can be found on our blog, here


Read More | Newly Flexible ARP Allows $10 Million 'Standard Allowance' for Revenue Loss

Read More | Calculate Your Town's COVID-19 Lost Revenue

Replacement Revenue
U.S. Treasury Guidance

U.S. Treasury Guidance on Eligibility
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