A helpful calculator from NLC to figure pandemic-related losses and help with the revenue replacement process. (Edited June 16 to include a new, more detailed calculator from the Government Finance Officers Association.)
One eligible use of ARP funds for cities and towns is the replacement of lost revenue.
The law, when listing eligible uses, reads:
"For the provision of government services to the extent of the reduction in revenue of such metropolitan city, nonentitlement unit of local government, or county due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year of the metropolitan city, nonentitlement unit of local government, or county prior to the emergency."
To determine the what would have happened in absence of the pandemic, cities, towns, and villages, will use a predetermined growth rate of 4.1% or the average annual growth rate over the three full fiscal years prior to the pandemic. Recipients should calculate the extent of the reduction in revenue as of four points in time: December 31, 2020; December 31, 2021; December 31, 2022; and December 31, 2023.
Steps to Calculating Lost Revenue
Identify the revenue collected in the most recent full fiscal year prior to the pandemic (i.e. Jan. 27, 2020). This is the base year.
Estimate the growth rate your city, town, or village would have experienced using either 4.1% or the average annual revenue growth in the three full fiscal years prior to the public health emergency, whichever is higher.
Identity actual revenue collected over the past 12 months.
Lost revenue is equal to the expected growth rate less actuals. If actuals exceed expected, then set the figure to zero.
Calculator
To aid in this calculation process, two organizations have published helpful calculators. The Government Finance Officers Association's calculator is the most detailed, and can be found here. Additionally, NLC has published a Revenue Loss Calculator, which can be downloaded here and below.
This information and resource has also been published to our Resources and Key Topics page.