Which recipients can access funding sources provided by the Infrastructure Investment and Jobs Act? For example, are specific funding programs available to states, municipalities, etc.?

The Infrastructure Investment and Jobs Act (the “IIJA”), referred to by the White House as the Bipartisan Infrastructure Bill (the “BIL”), was enacted on November 15, 2021.[1] This legislation provides several funding opportunities to which state, local, tribal, and territorial governments will have access. Shortly thereafter, the White House released the first edition of its BIL guidebook, which provides guidance on these funding opportunities, their respective implementation, and how recipients can access funding sources.[2]

The White House announced that it:

created a guidebook for state, local, tribal, and territorial leaders. This guidebook is a roadmap to the funding available under the law, as well as an explanatory document that shows, in as much detail as currently available, program-by-program information.[3]

The White House “has also published an accompanying data file that allows users to quickly sort programs funded under the law by fields like agency, amount, recipient, or program name.”[4] This data file may help to identify specific funding opportunities for recipients in state, local, tribal, or territorial governments.[5]  

The data file also provides pertinent information on the 380 programs that will receive BIL funding. The data file links important information specific to each funding opportunity, such as the issuing federal agency, the administering bureau, the funding amount, and the period of availability.

In addition, recipients should consider reviewing Grants.gov, which centralizes federal grant opportunities and has a Search Grants feature that allows users to conduct advanced searches for grants based on their specific priorities. Recipients can set up appropriate search parameters to alert them to any additional notice of funding opportunities ("NOFA") from the BIL, as indicated within the BIL data file. Grant.gov also offers various training resources found under their Grants Program webpage and their Applicant Training webpage that could prove helpful in finding grant programs related to the BIL.

Furthermore, the BIL guidebook provides information on each and every program listed in its accompanying data file, enabling recipients to review available funding opportunities, identify whether specific funding opportunities align with their jurisdictions, and establish measures to monitor these funding opportunities through Grant.gov, with the goal of pursuing these funds when the government makes them available.

What are the sources from which recipients can gain funding for transportation infrastructure?

The Infrastructure Investment and Jobs Act (the “IIJA”)[1] was signed into law by President Biden on November 15, 2021. The IIJA provides many funding opportunities to municipalities seeking to build new transportation infrastructure or improve preexisting transportation infrastructure. The White House has released the first edition of its Building a Better America guidebook (the “Guidebook”), which provides implementation guidance related to IIJA funding opportunities.[2] The Guidebook describes itself as:

[A] roadmap to the funding available under the law, as well as an explanatory document that shows direct federal spending at the program level. To this end, the White House has also published an accompanying data file that allows users to quickly sort programs funded under the law by fields like agency, amount, recipient, or program name.[3]

Municipalities can use the data file[4] to find all available funding sources and determine which funding opportunities are available and most relevant to them. The data file will also help municipalities identify the 380 programs that will receive IIJA funding, together with key information about each program, such as the federal agency facilitating the program, the recipients of its funds, their eligible uses, etc.

Furthermore, the Guidebook addresses the sources from which recipients can gain funding for their respective transportation infrastructure projects:

This guidebook is another step in our effort to be as transparent as possible, so you know what to apply for, who to contact, and how to get ready to rebuild . . . we have also included upcoming key dates and date ranges for key activities, along with planning activities you can be doing now to prepare for these programs coming across 2022 and 2023. The online version at Build.gov will also host an application to quickly sort and filter programs by agency, issue or eligible recipient to better understand the available funding within the Bipartisan Infrastructure Law. [5]

Municipalities may wish to review the Guidebook,[6] because it is "a one-stop-shop on the law and contains the most comprehensive information to date on the more than 375 programs included in the Bipartisan Infrastructure Law.”[7] Municipalities should designate a point person to continually monitor IIJA guidance for updates.

In addition, municipalities should monitor the websites of the federal funding agency administering the relevant program to verify upcoming program deadlines. For example, the U.S. Department of Transportation has issued a Notice of Funding Opportunity (“NOFO”) for its Multimodal Project Discretionary Grant Opportunity to solicit applications for three IIJA-funded programs: National Infrastructure Project Assistance grants program (“Mega”), the Nationally Significant Multimodal Freight and Highway Projects grants program (“INFRA”), and the Rural Surface Transportation Grant Program.[8] 

Are there good practices for cities to follow when submitting grant applications for transportation infrastructure funding?

In the Infrastructure Investment and Jobs Act (“IIJA”), signed by President Biden on November 15, 2021, there are several competitive and formula-distributed funding opportunities for transportation infrastructure. Applicants can take steps to ensure their application is competitive and meets all the required criteria.

First, applicants can form an infrastructure task force and appoint an infrastructure implementation coordinator. A single point of contact for infrastructure projects will ensure more efficient coordination and communication.[1] The White House Infrastructure Coordinator has recommended President Biden’s Infrastructure Implementation Task Force as a model.[2] This task force is responsible for coordinating the implementation of the IIJA in line with the administration’s six main priorities: investing public dollars efficiently, investing public dollars equitably, buying American products, creating job opportunities, building resilient infrastructure, and effective coordination through all levels of government.[3]

Other steps recommended by the White House for all federal infrastructure funds are listed in the Competitive Infrastructure Funding Opportunities for Local Governments Fact Sheet:

1. Prioritize your community’s capital needs and develop a project pipeline – taking time to think about the projects previously considered impossible due to lack of funding or regional coordination. This is a once-in-a-generation funding opportunity that will require bold, inclusive thinking.
2. Use the forthcoming Bipartisan Infrastructure Law Guidebook to identify federal funding streams to target.
3. Ensure all transit, railway, road, highway, and bridge projects are a part of your [metropolitan planning organization (MPO)]’s Transportation Improvement Plan.
4. Begin mapping sites for electric vehicle and alternative fuel charging stations.
5. Inventory and map the lead pipes in your city. Read through the Biden-Harris Lead Pipe and Paint Action Plan here for additional federal resources for this effort.
6. Work with your state’s broadband agency to ensure your city or region’s needs are appropriately mapped and inventoried.
7. Establish relationships with the regional offices for key federal agencies, who can help direct you to resources and provide technical assistance.[4]

Applicants may also refer to the IIJA Guidebook (the "Guidebook") for assistance in identifying the appropriate program, whether competitive or formula-grant, for the applicants' various infrastructure project types.[5] The Guidebook discusses the funding amount, period of availability, funding mechanism, eligible recipients, program description, eligible uses, and next milestone for each program available. Using this framework, municipalities can determine the most suitable opportunity for their application.

Additionally, applicants may reference the Guidebook Data Set accompanying the Bipartisan Infrastructure Law Guidebook. This data set provides a vast amount of information on all the 380 funding opportunities provided under the Bipartisan Infrastructure Law and may also be helpful for applicants in identifying appropriate programs and opportunities. The White House has explicitly stated in this regard that they “have also published an accompanying data file on Build.gov that allows users to quickly sort programs funded under the law by fields like agency, amount, eligible recipient, or program name.”[6]

While not specific to transportation infrastructure projects, applicants may find it helpful to complete a needs assessment, engage with public stakeholders prior to developing applications, or coordinate with neighboring communities for synergy as good practice when seeking maximum benefits from funding opportunities. Applicants should also determine if the application serves a historically disadvantaged community or area of persistent poverty; many programs guarantee a portion of funding to those identified areas. The U.S. Department of Transportation provides a tool to assist applicants in identifying these areas.[7]

In addition (as with any federal fiscal program), once the government releases a Notice of Funding Opportunity (“NOFO”), applicants should pay close attention to the criteria and submission deadlines as another good practice, as the exact requirements and specifications for success are included. For example, the NOFO for Rebuilding American Infrastructure with Sustainability and Equity (“RAISE”) discretionary grant program was released and subsequently amended on March 22, 2022, with a deadline of 5 p.m. ET on April 14, 2022.[8] Applicants can determine when to expect a NOFO from the “next milestone” information listed in each program of the Guidebook. Each NOFO includes a recommended approach to a benefit-cost analysis (“BCA”) that should be included in the project application if required. Gathering data for a BCA can be time-consuming and laborious. Preparing the BCA prior to NOFO release will increase efficiency when developing the project application.

Is there specific guidance that applies to utility assistance when municipalities cannot secure monthly payment sums from utility companies? For example, are municipalities able to consider payment of a lump-sum utility bill as one month of assistance?

The U.S. Department of the Treasury (“Treasury”) has not provided specific guidance on the use of Emergency Rental Assistance program (“ERA1” and “ERA2”) funds for lump-sum payments in the context of utility assistance. However, ERA1 and ERA2 do provide guidance relating to utility payments, including those addressing utility arrears.

According to the ERA Frequently Asked Questions (“ERA FAQ”) within ERA1, households may receive up to twelve (12) months of financial assistance plus an additional three (3) months to ensure housing stability if necessary and available. If assistance from ERA1 is combined with ERA2, the aggregate amount of financial assistance an eligible household can receive must not exceed eighteen (18) months.[1]

As for circumstances where a household finds itself facing rental or utility arrears where the payment was due at an earlier date, the ERA FAQ states that grantees do not need to make full payments, subject to limits established by the guidance where “[assistance is] (i) subject to the availability of remaining funds currently allocated to the grantee, and (ii) based on a subsequent application for additional assistance.”[2]

Grantees “may structure a program to provide less than full coverage of arrears, [and] are encouraged to consider whether payments of less than the full amount of arrears may result in a significant disincentive for landlord participation in the ERA program.”[3]

The ERA FAQ indicates that grantees who obtain lump sum (rather than monthly) charges from utility providers can establish reasonable procedures for combining the assistance for multiple households into a single lump-sum or “bulk” payment to a utility provider. Any such arrangements should comply with the following guidelines:

(1) comply with applicable privacy requirements; (2) include appropriate safeguards to ensure payments are made only for eligible households; and (3) are documented in records satisfying the grantee’s reporting requirements, including, for example, the amount of assistance paid for each household. [4]

In addition, to ensure the delivery of assistance, grantees may adopt procedures enabling utility providers to receive assistance “based on reasonable estimates of arrears owed by multiple households, before their application and documentation requirements are satisfied.”[5]

A grantee may provide for payments based on estimates following these guidelines:

(1) the landlord or utility provider certifies that its estimate is reasonable based on information available to it at the time, (2) the grantee requires the landlord or utility provider to receive all required documentation within six months, and (3) the landlord or utility provider agrees in writing to return to the grantee any assistance the landlord or utility provider receives that the household was ineligible for or for which the required documentation is not received within six months.[6]

It is a good practice for grantees to limit such payments to limit the risk of providing funds that are used for ineligible purposes.

Nonprofits that receive CSLFRF funds from the local government are required to register on the System for Award Management. Does this require a full SAM registration for the nonprofit, or is having an active Unique Entity Identifier on SAM sufficient?

The U.S. Department of the Treasury ("Treasury") Coronavirus State and Local State Fiscal Recovery Funds ("CSLFRF") Compliance and Reporting Guidance specifies that CSLFRF recipients, together with any subrecipient(s) administering a program on their behalf, “will need to maintain procedures for obtaining information evidencing a given beneficiary, subrecipient, or contractor’s eligibility, including a valid SAM.gov registration.”[1] Recipients are responsible for subrecipients’ compliance with registering and maintaining an updated profile on SAM.gov.[2]

The System for Award Management (“SAM”) database at SAM.gov is the official government-wide database on which participants must register prior to doing business with the U.S. government.[3] All recipients of federal financial assistance must register on SAM.gov and renew their SAM registration annually to maintain an active status in order to be eligible to receive federal financial assistance. Registration on SAM.gov is a four-part process which includes:

• Obtaining a unique entity identifier from Dun & Bradstreet (DUNS number).
• Preparing data to be included with the entity’s registration.
• Obtaining a login.gov account.
• Submitting data and finishing the registration process.[4]

A non-profit entity receiving CSLFRF funds from a local government will be required to maintain a valid SAM registration. While obtaining a Unique Entity Identifier from Dun & Bradstreet is the first step in the registration process, Treasury’s Compliance and Reporting Guidance mandates full SAM registration for federal assistance. Registration is free of charge. If a nonprofit does not have an active registration, the organization may register on SAM.gov to begin the entity registration or renewal process, which may take up to ten business days. Delay in registering on SAM could impact timely payment of funds.

Does the ARP allow for funding of site preparation to lower the cost of development of vacant or abandoned property?

Yes, the ARP allows funding of site preparation for the development of vacant or abandoned property in many circumstances.

On January 6, 2022, the U.S. Department of the Treasury (“Treasury”) released the Final Rule implementing the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund (collectively, the “CSLFRF”).[1] This guidance states that certain services for vacant or abandoned properties are eligible for CSLFRF funding when used to address the public health and negative economic impacts of the pandemic on disproportionately impacted households or communities.[2] The guidance defines vacant or abandoned properties as “generally those that have been unoccupied for an extended period of time or have no active owner.”[3] Specifically, demolition and greening (or other structure or lot remediation) of vacant or abandoned properties, including residential, commercial, or industrial buildings, is an eligible use of funds.[4]

In one section, entitled “Building strong, healthy communities through investments in neighborhoods,”[5] Treasury enumerates several eligible activities relating to services for vacant or abandoned properties. They include the following:

• Rehabilitation, renovation, maintenance, or costs to secure vacant or abandoned properties to reduce their negative impact;
• Costs associated with acquiring and securing legal title of vacant or abandoned properties and other costs to position the property for current or future productive use;
• Removal and remediation of environmental contaminants or hazards from vacant or abandoned properties, when conducted in compliance with applicable environmental laws or regulations;
• Demolition or deconstruction of vacant or abandoned buildings (including residential, commercial, or industrial buildings) paired with greening or other lot improvement as part of a strategy for neighborhood revitalization;
• Greening or cleanup of vacant lots, as well as other efforts to make vacant lots safer for the surrounding community;
• Conversion of vacant or abandoned properties to affordable housing; and
• Inspection fees and other administrative costs incurred to ensure compliance with applicable environmental laws and regulations for demolition, greening, or other remediation activities.

Recipients should also be aware of federal, state, and local laws that apply to these eligible activities, and potential effects on low-income housing. The Final Rule states the following:

Treasury presumes that demolition of vacant or abandoned residential properties that results in a net reduction in occupiable housing units for low- and moderate-income individuals in an area where the availability of such housing is lower than the need for such housing would exacerbate the impacts of the pandemic on disproportionately impacted communities and that use of [C]SLFRF funds for such activities would therefore be ineligible. This includes activities that convert occupiable housing units for low- and moderate-income individuals into housing units unaffordable to current residents in the community. Recipients may assess whether units are “occupiable” and what the housing need is for a given area taking into account vacancy rates… local housing market conditions (including conditions for different types of housing like multi-family or single-family), and applicable law and housing codes as to what units are occupiable. Recipients should also take all reasonable steps to minimize the displacement of persons due to activities under this eligible use category, especially the displacement of low-income households or longtime residents.[6]

Last Updated: February 3, 2022

In the Project & Expenditure Report, where do cities report administrative costs, such as Finance Department costs? Should we create an administration project?

In short, administrative costs should typically be reported under the expenditure category of the associated project. General administrative costs that are not associated with a particular project should be reported under “Expenditure Category 7.1 - Administrative Expenses” as part of its baseline template.

Municipalities should track administrative obligations and expenditures for reporting purposes. In most cases, municipalities need not create a separate administrative project. Typically, municipalities should report administrative expenses that are tied to a specific project as part of the overall project under the appropriate expenditure category for that project.

On January 7, 2022, the U.S. Department of the Treasury (“Treasury”) released the Project and Expenditure Report User Guide (“User Guide”) for the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”).[1] This document provides detailed instructions to help recipients provide the following information:

• project data;
• subrecipient data;
• subaward data;
• expenditure data; and
• project and expenditure bulk upload templates.[2]

The Project and Expenditure Report provides information on projects funded, expenditures, contracts and sub-awards over $50,000, and other information required from recipients.[3] Treasury allows a bulk file upload process.[4] According to section (h) of the User Guide, recipients may use the Expenditure Reporting module to enter data manually or leverage the bulk file upload capability.[5] Recipients who do not use the bulk upload function must follow certain steps, including entering a narrative for administrative costs.[6] For further reference, there are six (6) bulk file upload templates that can be submitted to the CSLFRF Treasury Portal.[7]

Municipalities’ approaches will differ where administrative expenses are not affiliated with a specific project. The Project Baseline Template provided by Treasury applies Expenditure Category 7.1 to administrative costs for general expenditures (as opposed to those tied to specific projects).[8] In other words, municipalities must include administrative costs not associated with individual projects (and which are thus attributable to Expenditure Category 7.1) on the baseline template.

For reference, FAQ #3.2 from the CSLFRF Treasury Portal Recipient Reporting User Guide provides further information on using Expenditure Category 7.1 for a project’s administrative costs:

Administrative costs for a specific project should be reported under the appropriate expenditure category for that project. For example, administrative costs for a small business economic assistance program would be reported under EC 2.9- Small Business Economic Assistance (General). Only general SLFRF administrative costs which are not associated with a particular project and do not fall into another Expenditure Category should be reported under EC 7.1- Administrative Expenses. EC 7.1 may include both direct and indirect costs.[9]

We are planning on using ARP funds for an Owner/Occupied Housing Rehabilitation Program targeting households earning up to 120% of the Area Median Income (“AMI”). Are ARP funds limited by a household’s AMI?

The U.S. Department of the Treasury’s (“Treasury”) Interim Final Rule (the “Rule”) of the American Rescue Plan Act of 2021 (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) lists “home repairs” as an eligible use of funds as a form of “assistance to households.”[1]  

Additionally, the Rule states that:

[I]n considering whether a potential use is eligible under this category, a recipient must consider whether, and the extent to which, the household has experienced a negative economic impact from the pandemic. In assessing whether a household or population experienced economic harm as a result of the pandemic, a recipient may presume that a household or population that experienced unemployment or increased food or housing insecurity or is low- or moderate-income experienced negative economic impacts resulting from the pandemic...Cash transfers must be reasonably proportional to the negative economic impact they are intended to address. Cash transfers grossly in excess of the amount needed to address the negative economic impact identified by the recipient would not be considered to be a response to the COVID-19 public health emergency or its negative impacts.[2]

“Moderate-income” is not a defined term in the Rule, and there is no other specific standard currently described by Treasury on how to support the determination of disproportionate impact. However, the United States Code defines the term “persons of moderate income” as “families and individuals whose incomes exceed 50 percent, but do not exceed 80 percent, of the median income of the area involved, as determined by the Secretary with adjustments for smaller and larger families.”[3]

Generally, the Rule and other current Treasury guidance presents forms of “assistance to households” as grants or cash transfers. There is no explicit guidance indicating whether loans are also potentially eligible forms of assistance to households. However, loans and revolving loan programs are noted as allowable assistance to small businesses and non-profits (among other uses),[4] so the lack of affirmative allowability of loans as forms of assistance to households in the guidance is notable. 

While the Rule does allow for flexibility in determining the most pressing needs of each community, Treasury does encourage recipients to “provide assistance to those households, businesses, and non-profits in communities most disproportionately impacted by the pandemic.”[5] There is no specific requirement for recipients to limit assistance to households based on income, or income relative to an area’s median income.

The municipality should consider documenting its assessments to what extent low- or moderate-income households experienced negative economic impacts resulting from the pandemic and whether cash transfers are reasonably proportional to the negative economic impact they are intended to address. Likewise, if the households receiving aid under this program earn more than the moderate-income threshold, the municipality should document whether, and the extent to which, the household receiving funds experienced negative economic impacts of the pandemic, ensuring that the support provided to the household is proportionate to the economic harm suffered as a result of the COVID-19 pandemic.

Does Treasury Guidance indicate whether municipalities must provide tax documentation to ARP CSLFRF subrecipients (such as persons or businesses receiving rental assistance)?

At the time of this writing, the U.S. Department of the Treasury (“Treasury”) has not issued any guidance mandating local governments to provide tax documentation to subrecipients of funding from the American Rescue Plan Act of 2021 (“ARP”). The United States Internal Revenue Service’s (“IRS”) guidance published on November 17, 2021, address many issues relating to taxes.  However, municipalities should discuss their specific facts and circumstances with tax and financial professionals prior to reaching any final conclusions.

According to IRS Frequently Asked Questions (“FAQs”), some uses of Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) may trigger tax consequences. If feasible, the state or local government providing funding should consider expressly informing subrecipients whether they should include CSLFRF funding as gross taxable income. As noted above, there is currently no express requirement to provide subrecipients with this information or tax documentation.

Generally, individuals must include any payment or accession to wealth from any source as gross income, unless an exclusion applies.[1] However, subrecipients may avail themselves of at least one possible exclusion to this rule. Under Section 139 of the Internal Revenue Code (the “Code”), certain payments made by a state or local government to individuals in connection with the COVID-19 pandemic may qualify as disaster relief payments, which are excluded from the subrecipient’s gross income. A payment by a state or local government generally will be treated as a qualified disaster relief payment under Section 139 if the payment is made to or “for the benefit of” an individual to:

• Reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as the result of a qualified disaster, or
• Promote the general welfare in connection with a qualified disaster.[2]
• Because the COVID-19 pandemic was federally declared a disaster, ARP CSLFRF payments to sub recipients could potentially qualify as disaster relief payments for the purposes of Section 139 of the Code. Qualified disaster relief payments generally do not require additional documentation such as a 1099-MISC, as these payments are not income. 

Municipalities should note that payments are not treated as qualified disaster relief payments if the payments constitute compensation for services performed by an individual. Additionally, payments made to or for the benefit of an individual are not treated as qualified disaster relief payments to the extent that the expense of the individual compensated by such payment is otherwise compensated by insurance or otherwise.[3]

The FAQ further elaborates on specific instances where payments to recipients may be included as taxable income. For example, subrecipients receiving premium pay or bonuses from CSLFRF are required to report those funds as gross income.[4] In contrast, rental payments or utility assistance could in some cases be excluded from gross income because these payments are made by a state or local government to individuals and are intended to pay for personal expenses incurred during the COVID-19 pandemic. As a result, such rental and utility assistance payments are generally classified as qualified disaster relief payments under Section 139 of the Code.[5] However, as noted above, municipalities should consult an appropriate tax professional to address their own specific circumstances. For example, the manner in which rental assistance payments are made could affect whether the payments qualify as gross income (and thus, whether a 1099 or similar documentation is required).[6]

For more information, municipalities may refer to the IRS FAQ and continue to monitor Treasury’s website on CSLFRF for forthcoming information and guidance.

What steps can municipalities that operate on a fiscal year take to accommodate current annual reporting benchmarks (based on the calendar year), and what is the possibility that regulations may change to allow for different year starts and ends?

Reports on the U.S. Department of the Treasury’s (“Treasury”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) are due either annually or on calendar quarters. In particular, the Project and Expenditure Reports require key financial grant reporting information and are due either annually or quarterly based on calendar quarter ends, depending on recipient type.[1] Entities that submit annual Project and Expenditure reports are required to submit by April 30 of each year until 2027. Entities that submit quarterly Project and Expenditure reports are required to submit to Treasury within 30 calendar days after the end of each calendar quarter.

The following table summarizes all quarterly reporting timelines:[2]

Notably, Treasury’s Final Rule on CSLFRF allows recipients to calculate revenue loss based on a fiscal year or a calendar year as long as the recipient takes a consistent approach through the period of performance.[3]

A CSLFRF recipient should consider tracking its expenditures and obligations monthly to accommodate reporting benchmarks that differ from the recipient’s operating fiscal year. Monthly captures of financial and programmatic data allow recipients to generate reports for both their fiscal year and annual reports for Treasury more easily. Further, monthly tracking could provide the added benefit of providing more timely and useful financial information to management, who could use the information to produce financial statements that follow a calendar year or any other fiscal year-end and may prove helpful in completing CSLFRF reports for Treasury.

Can funds for an entitlement city, not resulting from revenue loss, and not in a Qualified Census Tract be used for: 1) improvements to public safety facilities; 2) HVAC replacements in city facilities; 3) renewable energy improvements to city facilities?

The ARP does allow for structural renovations so long as these improvements mitigate and prevent the spread of COVID-19.[1] However, guidance issued by the U.S. Department of the Treasury (“Treasury”) does not specifically address the use of funds from the American Rescue Plan Act of 2021 (“ARP”) for the purchase of renewable energy improvements to city facilities.

Section 603(c)(1)(A) of the ARP authorizes municipalities to use Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to meet public health and economic needs resulting from the COVID-19 public health emergency.[2] The list of eligible uses in the public health section outlined in Treasury’s Final Rule authorizes the use of funds to mitigate and prevent the spread of COVID-19.[3] The non-exclusive list of allowable uses includes “support for prevention, mitigation, or other services in congregate living facilities … ventilation improvements in congregate settings, health care settings, or other key locations … [and] capital investments in public facilities to meet pandemic operational needs.”[4] Inasmuch as public safety facilities may be congregate living facilities or open to the public, certain renovations to implement COVID-19 mitigation tactics in these buildings are likely eligible for CSLFRF funding.[5]

Renovations that improve social distancing, allow better sanitation, and otherwise mitigate and prevent the spread of COVID-19 will also likely be considered authorized uses of CSLFRF. For updates to HVAC systems and other projects not specifically mentioned in the Final Rule, municipalities must identify and document proper justification for the use of CSLFRF on these projects. As stated in the Final Rule, municipalities must “identify an effect of COVID-19 on public health, including either or both of immediate effects or effects that may manifest over months or years, and assess how the use would respond to or address the identified need.”[6]

Moreover, Treasury allows CSLFRF for “[c]osts to improve the design and execution of programs responding to the COVID-19 pandemic and to administer or improve the efficacy of programs addressing the public health emergency or its negative economic impacts.”[7]  But Treasury explains in the Final Rule that capital expenditures “must be reasonably designed to benefit the individual or class that experienced the impact or harm and must be related and reasonably proportional to the extent and type of impact or harm.”[8]

Treasury further requires CSLFRF recipients to provide a written justification for specific capital expenses:

A recipient, other than a Tribal government, must prepare a written justification for certain capital expenditures according to Table [currently displayed but undesignated in Treasury Guidance]. Such written justification must include the following elements:

1. Describe the harm or need to be addressed;
2. Explain why a capital expenditure is appropriate; and
3. Compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior.

[9]

In addition, municipalities are permitted to use CSLFRF to support improvements to city facilities under the physical health and economic impacts section of ARP.[10] Municipalities should prioritize identifying the contributing factors to the spread of COVID-19 among such facilities in determining how to best reduce or eliminate these factors to best adhere to the guidelines established by Treasury in the Final Rule.[11]

Last Revised: February 2, 2022

If a city decides to use Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) for payments to individual residents impacted by the pandemic, is there any documentation that confirms that the funds are non-countable against existing benefits?

The U.S. Department of the Treasury (“Treasury”) guidance does not clearly indicate whether cash assistance provided to households to address the negative economic impacts of the COVID-19 public health emergency would impact recipients’ income eligibility for other federal benefit programs. Municipalities should consult public guidance issued by other federal agencies regarding specific benefit programs. For example, the U.S. Social Security Administration website states: “COVID-19 emergency financial assistance paid from a federal, state, or local government source will not affect your Social Security benefits.”^[1]

Treasury’s Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule allows for the use of funds to address the negative economic impacts of the COVID-19 public health emergency.[2] Such assistance includes direct cash assistance to households or populations.[3] Municipalities can consider cash transfers for those households or populations who experienced disproportionate harms due to the pandemic,[4] noting that such transfers must be reasonably proportional to the negative economic impact they are intended to address.[5] Treasury’s initial approach:

[I]ncluded as an enumerated eligible use cash assistance and provided that cash transfers must be “reasonably proportional” to the negative economic impact they address and may not be “grossly in excess of the amount needed to address” the impact. In assessing whether a transfer is reasonably proportional, recipients may “consider and take guidance from the per person amounts previously provided by the Federal Government in response to the COVID-19 crisis,” and transfers “grossly in excess of such amounts” are not eligible.[6]

Treasury maintains this enumerated eligible use in its CSLFRF Final Rule and states:

Treasury has reiterated in the final rule that responses to negative economic impacts should be reasonably proportional to the impact that they are intended to address. Uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses. Reasonably proportional refers to the scale of the response compared to the scale of the harm. It also refers to the targeting of the response to beneficiaries compared to the amount of harm they experienced; for example, it may not be reasonably proportional for a cash assistance program to provide assistance in a very small amount to a group that experienced severe harm and in a much larger amount to a group that experienced relatively little harm.[7]

Although Treasury refers to existing federal government programs in relation to direct cash assistance under CSLFRF, it appears to do so only to provide guidance on the appropriate size of permissible cash transfers.

Treasury may provide additional information when it issues new Frequently Asked Questions (“FAQs”) associated with the Final Rule.[8]

Last Revised: April 1, 2022