Department of Treasury ARP Local Fiscal Recovery Funds information portal
American Rescue Plan Act funding can be used to replace lost revenue resulting from the COVID-19 pandemic. Specifically, the law and Treasury guidance provide for an eligible expenditure to, "Provide government services affected by a revenue reduction resulting from COVID-19."
For determining what amount of loss revenue occurred, the formula compares its actual to a baseline adjusted for what could have been expected to occur in the absence of the pandemic. Municipalities can presume that any decrease in revenue is due to the public health emergency; recipients don't have to demonstrate impact. Importantly, once a shortfall in revenue is identified, municipalities will have broad latitude to use this funding to support government services, up to this amount of lost revenue.
American Rescue Plan Resources Webpage