As counties determine how to invest their ARPA State and Local Fiscal Recovery Funds to foster a swift and equitable recovery from the COVID-19 pandemic, the National Association of Counties (NACo) has provided the following information for counties to reference when calculating pandemic-related revenue loss.

How Does a County Calculate Revenue Loss?

1. A county must determine its revenue collected in the most recent full fiscal year prior to the pandemic (i.e. last full fiscal year prior to January 27, 2020), also known as the base year.
2. After calculating the base figure, a county must determine its average annual growth rate (i.e. growth adjustment) over the last three fiscal years prior to the COVID-19 public health emergency.
   • If a county’s average growth rate is less than 4.1 percent (based on the national average of state and local revenue growth 2015-18), then the county would use establish its growth rate as 4.1 percent.
   • If their average growth rate is greater than 4.1 percent, then the municipality would use their municipality’s average growth rate over the past three fiscal years prior to the pandemic.
3. Identify actual revenue, which equals revenues collected over the past 12 months.

The Government Finance Officers Association (GFOA), a NACo partner, developed a revenue loss calculator, that uses the formula referenced above to help counties calculate revenue loss.

To view Treasury’s FAQs on revenue loss, click here.

The figure below also provides an overview of how a county can calculate revenue loss, with a minimum of $0:

Important Items to Remember When Calculating Revenue Loss

• When calculating revenue loss, it is important for counties to keep in mind that it can be done for each calendar year. Counties will calculate their revenue loss at four points in time: December 31, 2020, December 31, 2021, December 31, 2022, and December 31, 2023.
• Counties must calculate revenue loss on an entity-wise basis, rather than a source-by-source basis.
• Counties cannot use pre-pandemic projections as a basis to estimate the reduction in revenue.

What Is Excluded From the Revenue Loss Calculation?

• Correction transactions proceeds from the issuance of debt or the sale of investments;
• Agency or private trust transactions;
• Revenue generated by utilities (water supply, electric power, gas supply, and public mass transit systems);
• Federal transfers to local governments, including the CARES Act Coronavirus Relief Fund;
• Liquor store revenue; and
• State transfers to local governments that are financed by federal grants

What Sort of Revenue Is Included in the Calculation?

• Taxes, fees, and other revenue to support public services
• Fees generated by the underlying economy (I.e. enterprise function and component units)
  • Civic centers
  • Zoos
  • Ports
  • Parking
  • Sports stadiums
  • Transportation sector
  • Enterprise funds
  • Mental health facilities

What Can Counties Spend Money On After Calculating Revenue Loss?

• Maintenance or pay-go pay-go funded building of infrastructure, including roads;
• Modernization of cybersecurity, including hardware, software, and protection of critical infrastructure;
• Healthcare services;
• Environmental remediation;
• School or educational services; and
• Provision of police, fire, and other public safety services

Note: Revenue recoupment cannot be used for rainy day funds or debt services.

Other NACo Resources