Coronavirus Local Fiscal Recovery Fund: Nonentitlement Unit of Local Government Definitional and Data Methodology (U.S. Department of the Treasury)

Summary

A U.S. Department of the Treasury paper setting out how Treasury defined and listed nonentitlement units of local government (NEUs) for the Coronavirus Local Fiscal Recovery Fund, under which the American Rescue Plan Act of 2021 allocates $19.53 billion to States for local governments typically serving a population under 50,000. ARPA borrows the definition of 'city' in the Housing and Community Development Act of 1974, and Treasury, after consulting the Census Bureau, reads 'municipality' to include incorporated places and minor civil divisions (MCDs) with active governments. The list covers MCDs in the twelve strong-MCD states and the eight weak-MCD states, but States decide whether a weak-MCD state's MCD, in Illinois, Kansas or Ohio for example, can accept ARPA funds. The list draws on 2020 Census Gazetteer files and 2019 Vintage population estimates and excludes metropolitan cities.

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                       CORONAVIRUS LOCAL FISCAL RECOVERY FUND:
      NONENTITLEMENT UNIT OF LOCAL GOVERNMENT DEFINITIONAL AND DATA METHODOLOGY

                                   U.S. DEPARTMENT OF THE TREASURY

The American Rescue Plan Act of 2021 (ARPA) allocates $19.53 billion to States for distribution to tens of
thousands of nonentitlement units of local government (NEUs), which are local governments typically
serving a population under 50,000. The Department of the Treasury (Treasury) has provided guidance to
assist States with their distribution of these funds to NEUs. This document supplements that guidance in
describing Treasury’s methodology in defining NEUs in accordance with ARPA and publishing the list of
local governments on the Treasury website.

Definitional Methodology

ARPA defines the term “nonentitlement unit of local government” to mean a “city” as that term is defined
in section 102(a)(5) of the Housing and Community Development Act of 1974 (HCDA) that is not a
metropolitan city. Under the HCDA:

        The term “city” means: (A) any unit of general local government which is classified as a
        municipality by the United States Bureau of the Census or (B) any other unit of general local
        government which is a town or township and which, in the determination of the Secretary [of
        Housing and Urban Development], (i) possesses powers and performs functions comparable to
        these associated with municipalities, (ii) is closely settled, and (iii) contains within its boundaries
        no incorporated places as defined by the United States Bureau of the Census which have not
        entered into cooperation agreements with such town or township to undertake or to assist in the
        undertaking of essential community development and housing assistance activities.

The United States Census Bureau (Census Bureau) does not have a singular definition of municipality.
Instead, the Census Bureau generally classifies sub-county local governments as incorporated places or
minor civil divisions (MCDs). Incorporated places include cities, towns (outside the six New England states,
New York, and Wisconsin), boroughs (except the five boroughs of New York City and the boroughs in
Alaska), and villages. MCDs are the primary subdivisions of a county in some states, and include towns (in
New England, New York, and Wisconsin), townships, and districts. There are twenty states with active,
governmentally functioning MCDs.

Since the government services provided by MCDs differ greatly by state, the Census Bureau refers to
twelve states with MCDs that generally provide a wide range of general government services as “strong-
MCD” states. In these states, MCDs are generally are treated as municipalities according to state statutes
and codes. In eight other states, MCDs typically play less of a governmental role and provide more limited
government services, even though they are still active governments (“weak-MCD” states). The twelve
strong-MCD states are Connecticut, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New
Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Wisconsin. The eight weak-MCD states are
Illinois, Indiana, Kansas, Missouri, Nebraska, North Dakota, Ohio, and South Dakota.

After consultation with the Census Bureau, Treasury is interpreting “municipality” under (A) in the HCDA
definition for the purposes of ARPA to generally include both incorporated places and MCDs with active
functioning governments, subject to the State determining, in the case of weak-MCD states, that a weak


                                                      1
MCD has the legal and operational capacity to accept ARPA funds and provides a broad range of services
that would constitute eligible uses under ARPA. This process is detailed further in the guidance.

As detailed below, the list of local governments provided by Treasury includes all active, functioning
incorporated places and MCDs, both in the twelve strong-MCD and the other eight weak-MCD states.1
The guidance outlines a facts-and-circumstances test for the eight weak-MCD states to evaluate whether
their MCDs are eligible for a distribution as a nonentitlement unit of local government.

Data Methodology

To compile the list of local governments, Treasury included local governments listed in the Census
Bureau’s 2020 Place and 2020 County Subdivision Gazetteer files,2 in consultation with the Census
Bureau, and obtained their populations from the Census Bureau’s City and Town Population Subcounty
Resident Population Estimates file from the 2019 Vintage.3 The following modifications were made to the
files to arrive at a list of local governments for use in conjunction with Treasury’s guidance:

    •   The data only includes incorporated places, MCDs, and consolidated cities. No census designated
        places (i.e., unincorporated places), non-functioning MCDs (i.e., election districts, county council
        districts, etc.), and census county divisions (entities defined for statistical purposes only) are
        included.
    •   The data only includes (1) active governments providing primary general-purpose functions, and
        (2) active governments that are partially consolidated with another government but with
        separate officials providing primary general-purpose functions.
    •   In states in which MCDs overlap with incorporated places and/or consolidated cities, the Census
        Bureau’s “MCD Place Part” was used as the population of the respective subcomponents of the
        MCD.
    •   Local governments that are eligible for payments as “metropolitan cities” under ARPA were
        excluded. The list of eligible metropolitan cities can be found here.
             o Only the specific local government that was qualified as a metropolitan city is excluded
                 from the list.
             o In cases where a metropolitan city is geographically encompassed within an NEU, the
                 metropolitan city population is excluded from that NEU’s population.
             o In cases where a metropolitan city contains subsidiary NEUs, the metropolitan city is
                 excluded from the NEU list, but the subsidiary NEUs remain.
             o In cases where a metropolitan city is consolidated with an NEU, the metropolitan city is
                 excluded from the NEU list, but the NEU remains.
    •   Duplicate entries were generally eliminated. These duplicate entries can occur when local
        governments overlap, and the local governments are listed both as a standalone entry and as a
        subcomponent of a larger local government. This was done for ease of use.
    •   Additional formatting changes were made for ease of use.


1
  For ease of use, Treasury also provides a list of local governments without MCDs for the eight weak-MCD states.
2
  Dataset available at http://www.census.gov/geographies/reference-files/time-series/geo/gazetteer-files.html.
3
  Dataset available at https://www2.census.gov/programs-surveys/popest/datasets/2010-2019/cities/totals/sub-
est2019_all.csv.

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