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Oct 21

October 21, 2020 TML Coronavirus Update #138

Posted on October 21, 2020 at 4:42 PM by TML Staff

Urgent Updates

Anything new with Coronavirus Relief Fund (CRF) guidance for cities?

Yes, actually. On Monday (October 19), the U.S. Department of Treasury updated their CRF Frequently Asked Questions memo. A footnote in the memo indicates exactly where changes were made to the existing version of the FAQ document: “On October 19, 2020, Questions A.57–59 and B.13 were added and Questions A.42, 49, and 53 were revised.”

Interested city officials are encouraged to read through all the updates to the FAQ. And cities under 500,000 receiving CRF funds through the Texas Division of Emergency Management must continue to keep in mind that they must comply with any additional state restrictions on use of CRF revenue beyond the guidance provided by Treasury.

Among the new questions added to the FAQ, the following two questions and answers might be of particular interest to a number of cities, which are printed verbatim from the FAQ document:

-May payments from the Fund be used for real property acquisition and improvements and to purchase equipment to address the COVID-19 public health emergency?

The expenses of acquiring or improving real property and of acquiring equipment (e.g., vehicles) may be covered with payments from the Fund in certain cases. For example, Treasury’s initial guidance referenced coverage of the costs of establishing temporary public medical facilities and other measures to increase COVID-19 treatment capacity, including related construction costs, as an eligible use of funds. Any such use must be consistent with the requirements of section 601(d) of the Social Security Act as added by the CARES Act.

As with all uses of payments from the Fund, the use of payments to acquire or improve property is limited to that which is necessary due to the COVID-19 public health emergency. In the context of acquisitions of real estate and acquisitions of equipment, this means that the acquisition itself must be necessary. In particular, a government must (i) determine that it is not able to meet the need arising from the public health emergency in a cost-effective manner by leasing property or equipment or by improving property already owned and (ii) maintain documentation to support this determination. Likewise, an improvement, such as the installation of modifications to permit social distancing, would need to be determined to be necessary to address the COVID-19 public health emergency.

Previous guidance regarding the requirement that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020 focused on the acquisition of goods and services and leases of real property and equipment, but the same principles apply to acquisitions and improvements of real property and acquisitions of equipment. Such acquisitions and improvements must be completed and the acquired or improved property or acquisition of equipment be put to use in service of the COVID-19-related use for which it was acquired or improved by December 30. Finally, as with all costs covered with payments from the Fund, such costs must not have been previously accounted for in the budget most recently approved as of March 27, 2020.

- If a small business received a Small Business Administration (SBA) Payment Protection Program (PPP) or Economic Injury Disaster Loan (EIDL) grant or loan due to COVID-19, may the small business also receive a grant from a unit of government using payments from the Fund?

Receiving a PPP or EIDL grant or loan for COVID-19 would not necessarily make a small business ineligible to receive a grant from Fund payments made to a recipient. As discussed in previous Treasury guidance on use of the Fund, a recipient’s small business assistance program should be tailored to assist those businesses in need of such assistance. In assessing the business’ need for assistance, the recipient would need to take into account the business’ receipt of the PPP or EIDL loan or grant. If the business has received a loan from the SBA that may be forgiven, the recipient should assume for purposes of determining the business’ need that the loan will be forgiven. In determining the business’ eligibility for the grant, the recipient should not rely on self-certifications provided to the SBA.

If the grant is being provided to the small business to assist with particular expenditures, the business must not have already used the PPP or EIDL loan or grant for those expenditures. The assistance provided from the Fund would need to satisfy all of the other requirements set forth in section 601(d) of the Social Security Act as discussed in Treasury’s guidance and FAQs, and the business would need to comply with all applicable requirements of the PPP or EIDL program.

Treasury’s Office of Inspector General has provided the following guidance in its FAQ no. 65 on reporting and recordkeeping that would apply to the recipient:

“The prime recipient is responsible for determining the level and detail of documentation needed from the sub-recipient of small business assistance to satisfy [the requirements of section 601(d) of the Social Security Act], however, there would need to be some proof that the small business was impacted by the public health emergency and was thus eligible for the CRF funds.”

In the above OIG FAQ, “sub-recipient” refers to the beneficiary of the assistance, i.e., the small business.

Further Updates

May a city use Coronavirus Relief Fund (CRF) revenue to fund arts organizations impacted by the pandemic?

Yes. According to U.S. Department of Treasury CRF guidance, eligible expenses include “[e]xpenditures related to the provision of grants to small businesses to reimburse the costs of business interruption caused by required closures.” Further, Treasury’s CRF FAQ states that city recipients of CRF revenue have “discretion to determine what payments are necessary” with regard to a small business. Based on all available guidance, there’s no reason to believe that an arts organization is not considered to be a small business for purposes of potentially receiving CRF funding. That being said, for cities under 500,000 population that are located in counties under 500,000 population, the Texas Division of Emergency management limits how much CRF revenue can be used for small business grants to a maximum of 25 percent of the city’s total allocation.

Texans for the Arts has prepared an informational memo for its members regarding CRF funds that might be available locally. Ann Graham, Executive Director of Texans for the Arts, asked that the League distribute this message to city leaders, along with the memo: 

Texans for the Arts, the statewide arts advocacy organization, is wholly supportive of and applauds your efforts, as municipal leaders, to seek CARES funding for your community. Please know that the arts and culture sector is your partner in this effort.
We know that many communities have used CARES funding to benefit individual artists, nonprofit organizations and for-profit arts businesses - all of which have been disproportionately impacted by COVID-19. Our sector has been the first to close and likely the last to open as the pandemic continues to have a dire impact across our state.

We encourage you to reach out to the arts leaders in your community who will be a resource for you in helping make the case for supporting the arts and culture sector. We know that we are a critical part of the recovery process - from social health to economic health - across the state and are eager to work in partnership with you to serve those who need it the most.

Where can I find archived issues of the TML Coronavirus Updates?

TML Coronavirus Updates are archived by date here and by subject here.