Do the federal procurement provisions in the Uniform Guidance apply to uses funded by interest earned on CSLFRF funds?

The U.S. Department of the Treasury (“Treasury”) administers the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”). According to Treasury’s CSLFRF Frequently Asked Questions document (“FAQ”):

[C]SLFRF payments made by Treasury to states, territories, and the District of Columbia are not subject to the requirement of the Cash Management Improvement Act and Treasury’s implementing regulations at 31 CFR Part 205 to remit interest to Treasury. [C]SLFRF payments made by Treasury to local governments and Tribes are not subject to the requirements of 2 CFR 200.305(b)(8) and (9) to maintain [C]SLFRF award funds in an interest-bearing account and remit interest earned above $500 on such payments to Treasury. Moreover, interest earned on [C]SLFRF award funds is not subject to program restrictions. Finally, states may retain interest on payments made by Treasury to the state for distribution to NEUs that is earned before funds are distributed to NEUs, provided that the state adheres to the statutory requirements and Treasury’s guidance regarding the distribution of funds to NEUs. Such interest is also not subject to program restrictions.[1]

In addition, Treasury’s CSLFRF Compliance and Reporting Guidance states:

[C]SLFRF payments made to recipients are not subject to the requirements of the Cash Management Improvement Act and Treasury’s implementing regulations at 31 CFR Part 205 or 2 CFR 200.305(b)(8)-(9). As such, recipients can place funds in interest-bearing accounts, do not need to remit interest to Treasury, and are not limited to using that interest for eligible uses under the [C]SLFRF award.[2]

However, Treasury has not advised as to whether or not the federal procurement provisions under 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the “Uniform Guidance”) apply to interest earned on CSLFRF award funds.  Furthermore, the federal procurement provisions outlined in the Uniform Guidance at 2 CFR Part 200.317 indicate that “all other non-Federal entities, including subrecipients of a State, must comply with procurement standards in §200.318 to 200.327.”[3]

Accordingly, to ensure compliance with local laws, rules, and regulations, municipalities should consider applying the Uniform Guidance’s federal procurement provisions, as well as their municipal guidelines on procurement requirements, to uses funded by interest earned on CSLFRF.

Last Updated: May 16, 2022

Can cities retroactively shift expenditures from ERA1 to ERA2? How can cities avoid recapture of ERA2 funds moving forward? If cities have been reallocated ERA funds initially allocated to states, may they request an expenditure extension?

The Emergency Rental Assistance Program (“ERA”) provides funding “to assist households that are unable to pay rent or utilities.”[1] There are two separately established ERA programs, each with its own respective award terms and conditions and associated guidance. The U.S. Department of the Treasury’s (“Treasury”) ERA webpage states:

Two separate programs have been established: ERA1 provides up to $25 billion under the Consolidated Appropriations Act, 2021, which was enacted on December 27, 2020, and ERA2 provides up to $21.55 billion under the American Rescue Plan Act of 2021, which was enacted on March 11, 2021.[2]

1. Can municipalities retroactively shift expenditures from ERA1 to ERA2?

Treasury does not provide explicit guidance on shifting expenditures between ERA1 and ERA2. Treasury notes that:

While there are some differences in eligibility between ERA1 and ERA2, the eligibility requirements are very similar, and Treasury is seeking to implement ERA2 consistently with ERA1, to the extent possible, to reduce administrative burdens for grantees.[3]

Municipalities must comply with the respective funding source’s award terms and conditions. The ERA1 award terms and conditions can be found here, whereas the ERA2 award terms and conditions can be found here. Municipalities can reference Treasury’s provided reporting guidance on ERA (located here) for further guidance on expenditures.

There is no guidance from Treasury explicitly restricting retroactive accounting changes. Thus, the shifting of expenditures from ERA1 to ERA2 is likely allowable, assuming the municipality in question ensures it complies with all relevant terms and conditions. If the  municipality were to make such adjustments, the municipality should segregate ERA1 and ERA2 fiscal controls pertaining to ledger and voucher adjustments. Moreover, adjusted expenditures should pertain to the same reporting period and proper supporting documentation, including a memorandum to file explaining the adjustments made and how these adjustments are in compliance with program terms and conditions, is recommended to substantiate any adjustments made.

2. How can municipalities avoid recapture of ERA2 funds moving forward?

Municipalities must abide by Treasury’s “Emergency Rental Assistance Under the American Rescue Plan Act of 2021 (ERA2) Reallocation Guidance” to diminish the possibility of ERA2 fund recapture.[4] Municipalities should submit timely quarterly reports, monitor their expenditure ratio, and draw down funds in a timely manner.[5] Moreover, Treasury’s “Summary of Emergency Rental Assistance (ERA2) Reallocation Guidance”[6] states:

• The grantee can avoid reallocation if, based on data submitted to Treasury reflecting expenditures as of April 30, it has achieved an expenditure ratio [of] at least 20%. Otherwise, excess funds will be calculated based on the difference between its reported expenditures as of March 31 and the amount of expenditure needed to reach the 20% threshold.
• Further, grantees will avoid reallocation if they have made voluntary reallocations of ERA1 funds in at least the amount of 25% of their ERA1 allocation.[7]
• After the first assessment, Treasury will assess each grantee's expenditure ratio on a quarterly basis. The expenditure ratio threshold used to calculate excess funds will rise by 20 percentage points each quarter (for example, the threshold as of June 30 will be 40 percent). As of December 31, 2022, any unpaid funds may be designated as excess funds and be reallocated, helping to ensure that funding does not go unused and is appropriately used in the emergency context. Under the ERA2 statute, funds paid to a grantee (based on the grantee having achieved 75% obligation of funds disbursed to date) may not be reallocated.[8]

For further information on how Treasury calculates the ERA2 expenditure ratio, Treasury states that it:

will periodically determine a Grantee's "ERA2 Expenditure Ratio," which will be calculated as (i) the sum of the Grantee's total expenditure of ERA2 funds on assistance to eligible households and eligible costs for housing stability services (for purposes of the Quarter 3 and Quarter 4 assessments) divided by (ii) an amount equal to 75% (for purposes of the Quarter 1 and 2 Assessments, described below) or 85% (for subsequent assessments) of the Grantee's total ERA2 allocations, including any amounts reallocated to or from the Grantee, as of the date of the assessment. The 75% and 85% allowances both reflect the ERA2 statute's limitation that a maximum of 15% of the total amount of ERA2 funds paid to a Grantee may be used for administrative costs, and the 75% allowance also reflects the ability under the statute for Grantees to use up to 10% of their ERA2 funds to provide housing stability services. Treasury encourages Grantees to use ERA2 funds for such housing stability services.[9]

Additionally, Treasury notes:

For any Grantee that does not draw its first tranche of ERA2 funds, comprising 40% of its initial ERA2 allocation, by April 30, 2022, Treasury may deem all undrawn funds exceeding 40% of the Grantee's initial ERA2 allocation to be excess funds subject to reallocation.[10]

Regarding excess funds, Treasury further clarifies:

As noted above, excess funds are funds that Treasury determines are available for reallocation. For each Grantee whose ERA2 Expenditure Ratio is below the then-applicable minimum threshold at the time of the assessment[.]  Treasury will calculate the Grantee's excess funds as the difference between (i) the amount of expenditures needed for the Grantee to achieve the then-applicable minimum threshold at the time of that assessment and (ii) the Grantee's reported total assistance expenditures (i.e., the numerator of the ERA2 Expenditure Ratio calculation). As a result, the amount subject to reallocation will be less for Grantees whose Expenditure Ratios are closer to the minimum threshold.[11]

Lastly, Treasury indicates that:

Notwithstanding anything in this guidance to the contrary, if a Grantee fails to submit a required quarterly report by the applicable deadline, without having received an extension from Treasury, Treasury may deem all undrawn funds exceeding 40% of the Grantee's initial ERA2 allocation to be excess funds subject to reallocation.[12]

3. If municipalities have been reallocated ERA funds initially allocated to states, may they request an expenditure extension?

Under ERA1, Treasury explicitly provides:

Grantees are prohibited from obligating any funds from their initial allocations after the statutory deadline of September 30, 2022. Grantees may, however, request an extension through December 29, 2022 to continue obligating funds received through reallocation. The funding request form described in Section III.A. will enable such extension requests.

After June 30, 2022, Treasury intends to consider whether additional recapture of unobligated funds is appropriate to help ensure that ERA1 funds are used by the statutory deadline.[13]

The ERA1 “Request for Reallocated Funds”[14] form can be found here.

Treasury has not provided explicit guidance on expenditure extensions with respect to ERA2. But, notably, Treasury has indicated that “[t]he American Rescue Plan Act of 2021 requires Treasury to begin reallocating ERA2 funds not yet paid to eligible Grantees on March 31, 2022.”[15] And Treasury states that it “will begin accepting requests from Grantees for reallocated funds after March 31, 2022 on a form to be published by Treasury.”[16]

Last Updated: May 7, 2022

Would using ARP funds to pay a nonprofit to process County Emergency Rental Assistance ("ERA") applications be considered a contractor providing service or a subrecipient?

The American Rescue Plan Act of 2021’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) and the U.S. Department of the Treasury’s (“Treasury”) CSLFRF Final Rule distinguishes between subrecipients and contractors.[1] Under the Uniform Guidance, a recipient should analyze the substance of its relationship with the individual or entity to which it is providing CSLFRF funding to determine whether the entity is a subrecipient or contractor.[2] For example, if the recipient provides CSLFRF funding to a nonprofit to carry out part of a federal program, the nonprofit may be a subrecipient. If, however, the nonprofit is providing goods or services that are within the normal business operations and ancillary to the operation of the federal program, the nonprofit may be a contractor. 

Definition of a Subrecipient, Contractor, or Beneficiary

Subrecipient: A subrecipient is an entity, typically a non-federal entity, that receives a subaward from a recipient to carry out part of a federal award, and is subject to subrecipient monitoring and reporting requirements.[3] A subrecipient may have one or more of the following characteristics:

1. Determines who may be eligible to receive federal assistance under the program guidelines.
2. Has performance measured on the basis of whether it achieves the objectives of a federal program.
3. Applies its judgment, discretion, or expertise to develop or improve a program.
4. Uses federal funds to carry out a program for a public purpose as opposed to providing goods or services for the benefit of the recipient. 
5. Is responsible for adhering to applicable federal program requirements specified in the federal award.[4]

Contractor: A contractor is an entity or individual that receives funding to provide goods or services in furtherance of an eligible activity. Contractors use vendor agreements or contracts as part of the procurement process. Unlike subrecipients, contractors are not subject to the administrative compliance requirements of the federal program (though similar requirements may apply for other reasons).[5] A contractor may have one or more of the following characteristics:

1. Provides goods and services within normal business operations.
2. Provides similar goods and services to many different purchasers.
3. Provides goods and services in a competitive environment.
4. Provides goods or services that are ancillary to the operation of a federal program, for example: office equipment, supplies, software licenses, chemical reagents, cell phones, body-worn cameras, body armor, website hosting, copying/printing, and/or lodging.[6]

Beneficiary: A beneficiary is an entity or individual that derives an actual benefit from the program or project. Beneficiaries receive CSLFRF funds as end users responding to the negative economic impacts of the COVID-19 public health emergency. Beneficiaries are not subject to the requirements of subrecipient monitoring and reporting.[7]

Last Updated: April 13, 2022

Would the purchase of uniform trash bins for trash collection fall under provision of government services or services to impacted communities for the purposes of ARP fund usage?

The U.S. Department of the Treasury’s (“Treasury”) Final Rule on the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) allows recipients to use CSLFRF to provide government services to the extent of the municipality’s reduction in revenue due to the pandemic.[1] Treasury’s list of services considered “government services” under the Final Rule[2] is neither exclusive nor exhaustive, but municipalities should be aware of restrictions that may apply.[3] Treasury states that, “generally speaking, services provided by the recipient governments are ‘government services’ under the … final rule, unless Treasury has stated otherwise.”[4] Thus, if a municipality provides trash collection services, providing uniform trash bins would comprise an eligible government service; maintaining the government service of trash collection would consequently be eligible for CSLFRF funding “to the extent of the municipality’s reduction in revenue due to the pandemic.”

The Final Rule allows recipients to determine their reduction in revenue due to the pandemic in two ways. First, they may calculate their actual revenue loss due to the pandemic; Treasury provides a methodology for calculating revenue loss, as well as details about general revenue, calculation dates, and presumptions due to tax changes.[5] Second, they may claim a standard allowance of up to $10 million, not to exceed their total award allocation, which they will then be able to use to fund the provision of government services. As noted in the Final Rule, “Treasury’s decision to elect to allow a fixed amount of loss that can be used to fund ‘government services’ allows recipients the flexibility to use minimal administrative capacity on the calculation if desired.”[6] Municipalities should bear in mind that the $10 million allowance applies to the entire period of performance.[7] The period of performance begins on March 3, 2021 and ends on December 31, 2026.[8]

Notably, Treasury may provide additional pertinent information or guidance. Treasury is expected to issue new Frequently Asked Questions ("FAQs") addressing the Final Rule. [9] In addition, Treasury encourages municipalities to consider the guidance issued in the Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule.[10]

What guidelines/standards are applied by various municipalities when determining whether to engage in a competitive process in awarding federal funds to a subrecipient?

The U.S. Department of the Treasury's ("Treasury") Final Rule on the Coronavirus State and Local Fiscal Recovery Funds ("CSLFRF") makes it clear that recipients do not have to competitively bid awards to subrecipients.[1]

However, municipalities could, if so inclined, implement procurement processes that are more stringent than the federal requirements, including the use of a competitive bid process for awards granted to subrecipients. If a municipality chooses to implement a competitive process to award CSLFRF funds to subrecipients, municipalities should design the competitive process and award criteria to ensure the awarded subrecipient is able to implement a program that is responsive to and “reasonably proportional to the extent and type of public health impact or harm experienced.”[2]

To determine whether to engage in a competitive bid process when awarding grant funds to subrecipients, municipalities are generally guided by the:

1. Uniform Guidance Part 200;
2. municipality’s local government procurement rules and regulations; and
3. specific rules of the federal grant program.

Prior to issuing a subaward, it is important for recipients to distinguish between a subrecipient and a procurement contract, because only a procurement contract is subject to the procurement requirements outlined in the Uniform Guidance CFR §200.319.[3] According to the Uniform Guidance CFR §200.331:

(a) Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. [] Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity:

1. Determines who is eligible to receive what Federal assistance;
2. Has its performance measured in relation to whether objectives of a Federal program were met;
3. Has responsibility for programmatic decision-making;
4. is responsible for adherence to applicable Federal program requirements specified in the Federal award; and
5. in accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.

(b) Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity's own use and creates a procurement relationship with the contractor. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor:

1. Provides the goods and services within normal business operations;
2. Provides similar goods or services to many different purchasers;
3. Normally operates in a competitive environment;
4. Provides goods or services that are ancillary to the operation of the Federal program; and
5. Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.

(c) Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract.[4]

The Final Rule also highlights other state and local laws outside of the federal grant program that may be applicable to municipalities:

Recipients should also be cognizant that federal, state, and local laws and regulations, outside of [CSLFRF] program requirements, may apply. [] State and local procurement, contracting, and conflicts-of-interest laws and regulations may include applicable requirements, including, for example, required procurement processes for contractor selection or competitive price setting.[5]

Lastly, a municipality should also ensure its procurement policies and procedures are documented and maintained to reflect any applicable state, tribal, or local laws and regulations.[6]

Notably, the Final Rule states: “[u]ltimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients.”[7]

Last Updated: March 2, 2022

When designating a disproportionately impacted class, how can the class be structured and what data is needed to justify this designation?

The U.S. Department of the Treasury’s (“Treasury”) Final Rule on the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) states that CSLFRF assistance can be used to provide assistance such as:

A program, service, capital expenditure, or other assistance that is provided to a disproportionately impacted household, population, or community, including:

1. Services to address health disparities of the disproportionately impacted household, population, or community;
2. Housing vouchers and relocation assistance;
3. Investments in communities to promote improved health outcomes and public safety such as parks, recreation facilities, and programs that increase access to healthy foods;
4. Capital expenditures and other services to address vacant or abandoned properties;
5. Services to address educational disparities; and
6. Facilities and equipment related to the provision of these services to the disproportionately impacted household, population, or community.[1] 

In addition to this provision of the Final Rule, Treasury’s Supplementary Information discussion that accompanies the Final Rule elaborates generally on disproportionate impact analyses, stating in pertinent part:

With regard to public health impacts, recipients may presume that the general public experienced public health impacts from the pandemic for the purposes of providing services for COVID-19 mitigation and behavioral health. In other words, recipients may provide a wide range of enumerated eligible uses in these categories to the general public without further analysis.[2]

This indicates that recipients can provide CSLFRF assistance to address the public health impacts of the pandemic with the provision of services for COVID-19 mitigation and behavioral health without additional disproportionate impact analyses. 

Treasury also notes in its discussion of the Final Rule:

Many different geographic, income-based, or poverty-based presumptions could be used to designate disproportionately impacted populations. The combination of permitting recipients to use QCTs, low-income households, and services provided by Tribal or territorial governments as presumptions balances these varying methods… However, Treasury recognizes that QCTs do not capture all underserved populations….By allowing recipients to also presume that low-income households were disproportionately impacted, the final rule provides greater flexibility to serve underserved households or communities. Data on household incomes is also readily available at varying levels of geographic granularity (e.g., Census Tracts, counties), again permitting flexibility to adapt to local circumstances and needs. Finally, Treasury notes that, as discussed further below, recipients may also identify other households, populations, and communities disproportionately impacted by the pandemic, in addition to those presumed to be disproportionately impacted.[3]

The Supplementary Information narrative also notes:

Under the interim final rule, presuming eligibility for services in QCTs, for populations living in QCTs, and for Tribal governments was intended to ease administrative burden, providing a simple path for recipients to offer services in underserved communities, and is not an exhaustive list of disproportionately impacted communities. To further clarify, the final rule codifies the interpretive framework discussed above, including presumptions of groups disproportionately impacted, as well as the ability to identify other disproportionately impacted populations, households, or geographies (referred to here as disproportionately impacted classes).[4]

Finally, Treasury’s narrative states:

The interim final rule allowed, and the final rule maintains, the ability for recipients to demonstrate a public health or negative economic impact on a class and to provide assistance to beneficiaries that fall within that class. Consistent with the scope of beneficiaries included in sections 602(c)(1)(A) and 603(c)(1)(A) of the Social Security Act, Treasury is clarifying that a recipient may identify such impacts for a class of households, small businesses, or nonprofits. In such cases, the recipient need only demonstrate that the household, small business, or nonprofit is within the relevant class. For example, a recipient could determine that restaurants in the downtown area had generally experienced a negative economic impact and provide assistance to those small businesses to respond. When providing this assistance, the recipient would only need to demonstrate that the small businesses receiving assistance were restaurants in the downtown area. The recipient would not need to demonstrate that each restaurant served experienced its own negative economic impact….[5]

These Treasury statements demonstrate that recipients can presume that funding for services provided in Qualified Census Tracts (“QCTs”) and for Tribal governments is eligible for CSLFRF assistance and that recipients also have substantial discretion to identify other disproportionately affected populations that are eligible for such funding.

In addition to Treasury’s statements above, Treasury has also identified a number of other federal authorities for which pre-pandemic eligibility dictates categorical eligibility for CSLFRF assistance. Treasury states in this regard:

Treasury agrees that allowing recipients to identify impacted and disproportionately impacted beneficiaries based on their eligibility for other programs with similar income tests would ease administrative burden. To the extent that the other program’s eligibility criteria align with a population or class that experienced a negative economic impact of the pandemic, this approach is also consistent with the process allowed under the final rule for recipients to determine that a class has experienced a negative economic impact, and then document that an individual receiving services is a member of the class.[6]

Treasury recognizes categorical eligibility for several specific programs and populations in the Final Rule.[7]

With respect to the need for recipients to document their disproportionate impact determinations, Treasury notes:

…in identifying other disproportionately impacted classes, recipients should be able to support their determination that the pandemic resulted in disproportionate public health or economic outcomes to the specific populations, households, or geographic areas to be served….The interim final rule then identified QCTs, a common, readily accessible, and geographically granular method of identifying communities with a large proportion of low-income residents, as presumed to be disproportionately impacted by the pandemic. In other words, the interim final rule identified disproportionately impacted populations by assessing the impacts of the pandemic and finding that some populations experienced meaningfully more severe impacts than the general public. Similarly, to identify disproportionately impacted classes, recipients should compare the impacts experienced by that class to the typical or average impacts of the pandemic in their local area, state, or nationally.[8]

Treasury’s narrative also states:

In designing a program or service that responds to a disproportionately impacted class, a recipient must first identify the impact and then identify an appropriate response. To assess disproportionate impact, recipients should rely on data or research that measures the public health or negative economic impact. An assessment of the effects of a response (e.g., survey data on levels of resident support for various potential responses) is not a substitute for an assessment of the impact experienced by a particular class. Data about the appropriateness or desirability of a response may be used to assess the reasonableness of a response, once an impact or disproportionate impact has been identified but should not be the basis for assessing impact.[9]

Recipients may identify classes of households, communities, small businesses, nonprofits, or populations that have experienced a disproportionate impact based on academic research or government research publications, through analysis of their own data, or through analysis of other existing data sources. To augment their analysis, or when quantitative data is not readily available, recipients may also consider qualitative research and sources like resident interviews and applicability of analysis to their determination. or feedback from relevant state and local agencies, such as public health departments or social services departments. In both cases, recipients should consider the quality of the research [and] data…[10]

Can a municipality use CSLFRF funds to improve a park falling within a Qualified Census Tract ("QCT")? How will the municipality need to document and justify such expenditures of CSLFRF?

The U.S. Department of the Treasury’s (“Treasury”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule clarifies that investments to promote improved health outcomes and public safety, such as investments in “parks, green spaces, recreational facilities, sidewalks, and pedestrian safety features,” are enumerated eligible uses of funds in disproportionately impacted communities.[1] Thus, CSLFRF recipients may use funds to improve parks within Qualified Census Tracts (“QCTs”), as well as parks serving other communities presumed to be disproportionately impacted by the pandemic, including:

• low-income communities;
• communities served by Tribal governments; and
• communities served by territorial governments.[2]

CSLFRF recipients do not need to provide further justification of negative economic impacts or disproportionate impacts caused by the pandemic when using funds to provide services to populations presumed to be disproportionately impacted by the pandemic.[3] Recipients providing a service that reaches a general geographic area (e.g., a park) may also measure the median income of that area.[4]

Treasury recognizes that recipients may identify other communities or populations as disproportionately impacted by the pandemic based on academic research or government research publications, through analysis of their own data, or through analysis of other existing data sources.[5] To augment their analysis, or when quantitative data is not readily available, recipients may also consider qualitative research and sources like resident interviews or feedback from relevant state and local agencies, such as public health departments or social services departments. In both cases, recipients should consider the quality of the research, data, and applicability of analysis to their determination.[6]

The Final Rule clarifies that recipients may transfer CSLFRF funds to any entity to carry out, as a subrecipient, an eligible use of funds by the transferor, as long as the subrecipient complies with the Award Terms and Conditions and other applicable requirements, including the Uniform Guidance at 2 C.F.R. §§ 200.331-200.333.[7] Eligible subrecipients include, but are not limited to, “other units of government (including Tribal governments), nonprofits and other civil society organizations, and private entities.”[8] Recipients may also pool CSLFRF funds for a project, if this project qualifies as an eligible use of funds for each of the recipients involved, and these recipients remain able to track the use of funds in line with the reporting and compliance requirements of the CSLFRF.[9] When pooling funds for a project, the Final Rule determines that recipients may expend funds directly on the project or transfer funds to another government or other entity that is undertaking the project on behalf of multiple recipients.[10] Recipients may also fund a project with both CSLFRF funds and other sources of funding (i.e., blending and braiding of funds), provided all funds are used for projects, investments, or services that are eligible for CSLFRF funding and are compliant with all other applicable statutory and regulatory requirements and policies.[11] As an example of this approach, a CSLFRF recipient, such as a city, may collaborate with an entity, such as a local school system, to fund an eligible project (e.g., park improvement project).

Treasury’s Compliance and Reporting Guidance specifies that CSLFRF “recipients that are pass-through entities under 2 CFR 200.1 are required to manage and monitor their subrecipients to ensure compliance with requirements of the [CSLFRF] award pursuant to 2 CFR 200.332 regarding requirements for pass-through entities.”[12] To meet this requirement, recipients must:

Identify to the subrecipient: (1) that the award is a subaward of [C]SLFRF funds; (2) any and all compliance requirements for use of [C]SLFRF funds; and (3) any and all reporting requirements for expenditures of [C]SLFRF funds.[13]

[E]valuate each subrecipient’s risk of noncompliance based on a set of common factors. These risk assessments may include factors such as prior experience in managing Federal funds, previous audits, personnel, and policies or procedures for award execution and oversight. Ongoing monitoring of any given subrecipient should reflect its assessed risk and include monitoring, identification of deficiencies, and follow-up to ensure appropriate remediation.[14]

[D]evelop written policies and procedures for subrecipient monitoring and risk assessment and maintain records of all award agreements identifying or otherwise documenting subrecipients’ compliance obligations.[15]

Treasury also clarifies that:

[S]ubrecipients do not include individuals and organizations that received CSLFRF funds as end users to respond to the negative economic impacts of COVID-19 on these organizations. Such individuals and organizations are beneficiaries and not subject to audit pursuant to the Single Audit Act and 2 C.F.R. Part 200, Subpart F.[16]

A municipality using CSLFRF funds to improve a park falling within a QCT, or in an area identified in the response above, is serving a disproportionately impacted community. As described above, the Final Rule determines that populations living in QCTs and the other enumerated areas are presumed to have been disproportionately impacted by the pandemic; therefore, recipients do not need to provide further justification of negative economic impacts or disproportionate impacts caused by the pandemic for services provided in these enumerated areas.

Per Treasury’s CSLFRF Compliance and Reporting Guidance, for projects funded under the Negative Economic Impacts (EC 2) or Services to Disproportionately Impacted Communities (EC 3) expenditure categories, recipients are required to report in the annual Recovery Plan, using qualitative and quantitative data, how the recipients’ approach achieved or promoted equitable outcomes or progressed equity goals during the performance period.[17] Recipients will also report the dollar amount of the total project spending that is allocated towards evidence-based interventions for projects in the Public Health (EC 1), Negative Economic Impacts (EC 2), and Services to Disproportionately Impacted Communities (EC 3) expenditure categories.

Per Treasury’s Project and Expenditure Report User Guide, there are no additional programmatic data required for projects that develop neighborhood features that promote improved health and safety outcomes, such as parks, in disproportionately impacted communities.[18]

Is housing subject to capital justification elements in the Final Rule? If so, where a city used ARP funding for gap financing for affordable housing, would the capital justification apply to only the city investment or to the total project?

Written Justifications for Affordable Housing

Under the Final Rule, certain affordable housing projects can be considered eligible uses of Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) and are subject to relevant capital expenditure justification requirements.

The development, repair, and operation of affordable housing could be considered eligible for CSLFRF as a form of assistance to households in response to the negative economic impacts of the COVID-19 pandemic.[1] The Final Rule considers affordable housing to be a development that is eligible for funding under the National Housing Trust Fund (“HTF”) or the Home Investment Partnerships Program (“HOME”).[2] The project tied to the capital expenditure must meet the above standards to be considered an affordable housing project under the Final Rule.

The project must meet capital project criteria for proportionality and cost effectiveness. Projects with total expected capital expenditures over $1 million require written justification of their proportionality and cost effectiveness. If the total project cost (and not merely the amount of the capital expenditure using CSLFRF program funds) is at least $1 million but less than $10 million, the written justification should be retained but does not need to be submitted to Treasury as part of regular reporting. However, if the total project cost is greater than $10 million, the written justification should be submitted as part of regular reporting.[3] Such written justification is not required for Tribal recipients,[4] and eligible capital expenditures on projects under $1 million are presumed to be proportional.[5]

The written justification should describe the harm or need to be addressed, including an explanation of how the harm was exacerbated or caused by the public health emergency, and, if appropriate, information on the extent/type of harm (e.g., the number of individuals affected). It should also detail the reasons that a capital expenditure is appropriate to address the harm or need. The explanation of how the expenditure would address the harm or need should include: (i) an independent assessment of how the expenditure would address the issue; (ii) an explanation how existing equipment, property, or facilities are inadequate to meet the need, and (iii) the reasons that additional funding to other programs is not sufficient to address the problem. In addition, the written justification should compare the proposed capital expenditure against two alternative capital expenditures that are potentially effective and reasonably feasible, including the alternative of improving existing owned capital assets or leasing such assets. In taking this last step, recipients should use quantitative data where available and compare both the effectiveness and the cost of the proposed expenditure against the alternatives.[6]

Gap Financing for Affordable Housing

Recipients may use CSLFRF program funds to make loans for uses that are otherwise eligible.[7] The Final Rule states that:

Expenditures from closely related activities directed toward a common purpose are considered part of the scope of one project. These expenditures can include capital expenditures, as well as expenditures on related programs, services, or other interventions. A project includes expenditures that are interdependent (e.g., acquisition of land, construction of the school on the land, and purchase of school equipment), or are of the same or similar type and would be utilized for a common purpose (e.g., acquisition of a fleet of ambulances that would be used for COVID-19 emergency response). Recipients must not segment a larger project into smaller projects in order to evade review.[8]

Providing a gap financing facility (presumably at financially advantageous terms) is directly incentivizing the project. As a result, the project can be considered material with respect to funding a portion of the capital project. That funding can only be provided if CSLFRF eligibility criteria are met, unless funding is being used pursuant to the revenue loss provision. As such, while there is no explicit discussion in the Final Rule of providing debt financing for capital projects, a written justification will likely be required. 

In accounting for loans made using CSLFRF program funds for the purposes of CSLFRF reporting and compliance, the Final Rule states that:

[CSLFRF] funds must be used to cover “costs incurred” by the recipient between March 3, 2021 and December 31, 2024. The interim final rule provided [and the Final Rule affirms] that [CSLFRF] funds must be obligated by December 31, 2024 and expended by December 31, 2026. In using [CSLFRF] funds to make loans, recipients must be able to determine the amount of funds used to make a loan and must comply with restrictions on the timing of the use of funds and with restrictions in the Uniform Guidance.

When [CSLFRF] funds are used as the principal for loans, there is an expectation that a significant share of the loaned funds will be repaid. Thus, recipients may not simply consider the full amount of loaned funds to be permanently expended and must appropriately account for the return of loaned funds.

For loans that mature or are forgiven on or before December 31, 2026, the recipient must account for the use of funds on a cash flow basis, consistent with Treasury’s guidance regarding loans made by recipients using payments from the Coronavirus Relief Fund.  Recipients may use [CSLFRF] funds to fund the principal of the loan and in that case must track repayment of principal and interest (i.e., “program income,” as defined under 2 CFR 200). When the loan is made, recipients must report the principal of the loan as an expense.

Repayment of principal may be re-used only for eligible uses and is subject to restrictions on the timing of the use of funds. Interest payments received prior to the end of the period of performance will be considered an addition to the total award and may be used for any purpose that is an eligible use of funds under the statute and final rule. Recipients are not subject to restrictions under 2 CFR 200.307(e)(1) with respect to such payments.

For loans with maturities longer than December 31, 2026, the recipient must estimate the cost to the recipient of extending the loan over the life of the loan. In other words, at origination, the recipient must measure the projected cost of the loan and may use [CSLFRF] funds for the projected cost of the loan. Recipients have two options for estimating this amount: they may estimate the subsidy cost (i.e., net present value of estimated cash flows) or the discounted cash flow under current expected credit losses (i.e., CECL method).[9]

Some Relevant General Final Rule Capital Expenditure Considerations

The provisions of the Uniform Guidance—2 C.F.R. Part 200—generally apply, and many will be relevant in such a situation. For the purposes of regulations in the Uniform Guidance, including the provisions relating to capital projects or construction in Appendix II of the Uniform Guidance, such as those relating to required contract language from the Contract Work Hours and Safety Standards Act and the Byrd Anti-Lobbying Amendment, the operative project amount is the total amount of the project rather than the amount of federal funding contributed. Cost principles and program income (with the exception of 2 C.F.R. 200.307(e)(1)) regulations would both apply to such capital expenditure projects.

Lastly, certain projects substantially initiated prior to the release of the Final Rule using provisions articulated in the Interim Final Rule may be exempt from the written justification requirements. Treasury has released a Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule, which states:

To the extent that a recipient has taken significant steps toward obligating [CSLFRF] funds in a manner consistent with the interim final rule prior to January 6, 2022, Treasury will generally not take action to enforce provisions contained in the final rule, to the extent that they are more restrictive than those in the interim final rule. Such significant steps include initiation of procurement or grantmaking actions, detailed planning of projects or programs, appropriation of funds, and other significant planning steps…

…The final rule includes a framework for determining whether a capital expenditure would be eligible as a response to the public health emergency or its negative economic impacts, which includes a requirement to prepare a written justification for projects with actual or expected capital expenditures of $1 million or more. A recipient is not required to prepare or submit a written justification as required under the final rule if the recipient (i) has taken significant steps toward obligating [CSLFRF] funds for that project prior to January 6, 2022 or (ii) has obligated funds for such project prior to April 1, 2022.[10]

Can a municipality use CSLFRF to fund affordable housing development through loans with maturities longer than December 31, 2026, with the expectation that these loans will not be repaid and no payments will be made over the course of a 30-year loan term?

American Rescue Plan Act of 2021 (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) may be used to support eligible affordable housing development. However, loans with maturities extending beyond December 31, 2026 may only be funded using CSLFRF to a certain extent (and not for the entirety of the principal of the loan), unless the loans are funded under the revenue loss eligible use category.

The Final Rule Frequently Asked Questions (“FAQs”) states:

[C]SLFRF funds may be used to make loans, provided that the loan supports an activity that is an eligible use of funds, the [C]SLFRF funds used to make the loan are obligated by December 31, 2024 and expended by December 31, 2026, and the cost of the loan is tracked and reported in accordance with the points below. For example, a recipient may, consistent with the requirements of the interim final rule and final rule, use funds to finance the construction of affordable housing.[1]

The FAQs continue:

For loans with maturities longer than December 31, 2026, the recipient may use funds for only the projected cost of the loan.

• Recipients can project the cost of the loan by estimating the subsidy cost. The subsidy cost is the estimated present value of the cash flows from the recipient (excluding administrative expenses) less the estimated present value of the cash flows to the recipient resulting from a loan, discounted at the recipient’s cost of funding and discounted to the time when the loan is disbursed. The cash flows are the contractual cash flows adjusted for expected deviations from the contract terms (delinquencies, defaults, prepayments, and other factors). A recipient’s cost of funding can be determined based on the interest rates of securities with a similar maturity to the cash flow being discounted that were either (i) recently issued by the recipient or (ii) recently issued by a unit of state, local, or Tribal government similar to the recipient.
• Recipients may also treat the cost of the loan as equal to the expected credit losses over the life of the loan based on the Current Expected Credit Loss (CECL) standard. Recipients may measure projected losses either once, at the time the loan is extended, or annually over the period of performance.
• Under either approach for measuring the amount of funds used to make loans with maturities longer than December 31, 2026, recipients would not be subject to restrictions under 2 CFR 200.307(e)(1) and need not separately track repayment of principal or interest.
• Additionally, recipients may use funds for eligible administrative expenses incurred in the period of performance, which include the reasonable administrative expenses associated with a loan made in whole, or in part, with funds. See section IV.E of the final rule [for more information regarding administrative expenses].[2]

Finally, the FAQs address loans funded under the revenue loss eligible use category:

[I]f a recipient uses revenue loss funds to fund a loan, whether or not the maturity of the loan is after December 31, 2026, the loaned funds may be considered to be expended at the point of disbursement to the borrower, and repayments on such loans are not subject to program income rules. Similarly, any contribution of revenue loss funds to a revolving loan fund may also follow the approach of loans funded under the revenue loss eligible use category.[3]

As such, while there are a variety of constraints on the allowability of loans extending beyond December 31, 2026 for most expenditure categories, funds designated under the revenue loss category allow more flexibility for such loans.

Additionally, there are other issues that a recipient should consider based on the nature of the loan. The intent of the project and the stipulations enumerated in the loan must be documented so that failure to obtain repayment does not become an audit issue. The recipient is responsible for maintaining compliance with all CSLFRF guidelines and requirements. Recipients must comply with Uniform Guidance cost principles, such as those relating to efficient and effective program administration, documentation, and cost allocation plans.[4] Recipients must also provide detailed obligation and expenditure information for any loans issued to the U.S. Department of the Treasury (“Treasury”).[5] Subrecipient monitoring requirements may also apply.[6]

More generally, investments in affordable housing development are considered eligible for CSLFRF if the project is eligible for funding under either the National Housing Trust Fund (“HTF”) or the Home Investment Partnerships Program (“HOME”).[7] These capital expenditures also require substantive written justification demonstrating that the project “is a related and reasonably proportional response to the harm identified” if the total project costs will exceed $1 million, and must be submitted to Treasury as part of the CSLFRF reporting process if the project costs exceed $10 million. This written justification must include a description of the specific harm or need to be addressed, an explanation of why a capital expenditure is appropriate and why current facilities are inadequate, and a comparison of the proposed capital project against at least two alternative capital expenditures demonstrating the superiority of the selected project. These requirements for eligibility under HTF or HOME and written justification are not required under the revenue loss eligibility category.[8]

Can a municipality use ARP funds to pay for ARP-eligible expenses in the general budget, creating a general fund surplus that can be used to fund any activity, without regard to ARP eligibility?

The American Rescue Plan Act of 2021 (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule does not explicitly restrict recipients from running a budget surplus while allocating and expending CSLFRF.[1] However, the Final Rule restricts the use of CSLFRF for the purposes of funding or offsetting reductions in tax revenue.[2] Additionally, municipalities should avoid allocating CSLFRF under the revenue loss eligibility category while running a budget surplus.  

The ARP and Final Rule seek to provide recipients with broad flexibility for the allocation of funding and do not generally restrict recipients’ ability to budget local, non-ARP funding as they see fit. It is therefore possible for a recipient to allocate local funds, offset by ARP funding or other grants, for their needs without regard to ARP eligibility.

One exception to this flexibility is noted in the Final Rule, which states that recipients cannot use CSLFRF to offset a net reduction in tax revenue resulting from law, regulation, or administrative interpretation (a tax cut) for the period beginning on March 3, 2021. Recipients are free to implement tax reductions during this period; however, they must demonstrate that CSLFRF was not used to fund or offset the tax reduction. Failure on the part of a recipient to effectively demonstrate that a tax reduction was funded by means other than CSLFRF will result in CSLFRF being returned to the U.S. Department of the Treasury (“Treasury”).[3]

Under CSLFRF, recipients may fund projects under the following eligible use categories:

• Public sector revenue loss replacement;
• Support of the COVID-19 public health and economic response;
• Providing premium pay for workers providing essential work; and
• Investing in water, sewer, and broadband infrastructure.[4]

If running a budget surplus, recipients should avoid allocating CSLFRF usage under the revenue loss eligibility category. Funds allocated under this category must, by definition, replace lost revenue.[5] It may therefore be difficult for a recipient to justify a budget surplus while claiming revenue loss under either the revenue loss calculation formula outlined in the Final Rule or the standard revenue loss allowance of $10 million.

There do not, however, appear to be any restrictions on a recipient’s ability to allocate local, non-ARP surplus funding resulting from the use of CSLFRF expended under the eligible use categories in support of the COVID-19 public health and economic response, providing premium pay, or investing in water, sewer, and broadband, with the exception of funding a tax reduction.

What are the best sources of funding for planning projects aimed at fulfilling NEPA environmental review requirements, outreach, or design? How should cities think about applying for IIJA funding if they will be applying for larger grants in the future?

Overview of IIJA

The Infrastructure Investment and Jobs Act (“IIJA”) introduces over 350 funding programs across more than a dozen federal departments and agencies. [1]

The IIJA authorizes $1.2 trillion in funding and is a combination of: (1) the reauthorization of many existing federal funding programs at the previous year’s funding levels; (2) multi-year funding increases in those existing programs; and (3) new funding programs. The new funding accounts for $550 billion and will be allocated to states, municipalities, and other eligible entities through either formula or competitive grants.[2] The White House Bipartisan Infrastructure Law Guidebook provides information about IIJA funding, eligibility, timelines, and other application considerations.[3]

Under the IIJA, municipalities seeking funding for major infrastructure projects must generally follow the environmental permitting process under the National Environmental Policy Act (“NEPA”).[4] The IIJA defines the NEPA process as:

the assessment and analysis of any impacts, alternatives, and mitigation of a proposed action, and any interagency participation and public involvement required to be carried out before the Secretary undertakes a proposed action.[5]

This process applies to all “major projects”[6] as defined under the NEPA. For further information regarding the NEPA process, award recipients should consult the IIJA as well as applicable federal agencies tasked with conducting the process for eligible major projects. [7] 

Part 1: Funding Sources for Planning Projects – Environmental Review, Outreach, and Design

Municipalities should analyze the various components of their projects to identify what aspects of their program may constitute an eligible use of grant funds. Municipalities can then consult the White House Bipartisan Infrastructure Law Guidebook[8] and the White House Guidebook Data Set,[9] which identifies each grant’s eligible uses, to identify grant opportunities under the IIJA that may fund environmental review, planning, outreach, and design projects. Below are select examples of grant opportunities that identify environmental review, planning, outreach, and design as eligible uses:

Environmental Review, Outreach, and Planning

The Railroad Crossing Elimination Grants, administered by the U.S. Department of Transportation (“USDOT”), is a competitive grant program that provides $3 billion for the funding of highway-rail or pathway-rail grade crossing improvement projects that focus on improving the safety and mobility of people and goods.[10] The planning, environmental review, and design of eligible projects are eligible uses of Railroad Crossing Elimination Grants.

Eligible projects include:

• A grade separation or closure, including through the use of a bridge, embankment, tunnel, or combination thereof;
• Track relocation;
• The improvement or installation of protective devices, signals, signs, or other measures to improve safety, provided that such activities are related to a separation or relocation project described previously;
• Other means to improve the safety and mobility of people and goods at highway-rail grade crossings (including technological solutions); and
• A group of related projects described previously that would collectively improve the mobility of people and goods.[11]

The 2022 Notice of Funding Opportunity for the Railroad Crossing Elimination Grants is anticipated in June 2022.[12] For further information on Railroad Crossing Elimination Grants, municipalities may refer to the USDOT Federal Railroad Commission website.[13]

Design

The Pumped Storage Hydropower Wind and Solar Integration and System Reliability Initiative, administered by the U.S. Department of Energy, is a cooperative agreement program that provides $10 million for financial assistance to eligible entities carrying out project design, transmission studies, power market assessments, and permitting for a pumped storage hydropower project to facilitate the long-duration storage of intermittent renewable electricity. Eligible projects must:

• Be designed to provide not less than 1,000 megawatts of storage capacity;
• Be able to provide energy and capacity for use in more than one organized electricity market;
• Be able to store electricity generated by intermittent renewable electricity projects located on Tribal land; and
• Have received a preliminary permit from the Federal Energy Regulatory Commission.[14]

Although an application date has not been announced as of May 2022, municipalities may refer to the Water Power Technologies Office of the Department of Energy for further information.[15]

Part 2: Application for Funding Under IIJA and Other Grants

Municipalities may have infrastructure needs that could be eligible for funding under both the IIJA and other federal grant programs.

Strategic Planning

Municipalities should conduct strategic planning to identify their specific local infrastructure needs and the corresponding IIJA programs that may provide funding. After identifying these needs and corresponding programs, municipalities should survey eligible uses and federal matching requirements to further narrow applicable programs. After identifying the programs relevant to local infrastructure needs, municipalities may review evaluation criteria and desired outcomes (e.g., social equity and environmental protection) of the IIJA and other grant programs to build a strategic foundation on which to pursue federal funding.

For example, under the American Rescue Plan Act of 2021, Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) may be used to support infrastructure-related initiatives, such as to: (1) train workers needed to build high quality infrastructure; (2) hire back public sector workers needed to help manage potential federal investments; and (3) improve water, sewer, and broadband initiatives.[16]

A recipient could potentially use these CSLFRF funds and other sources of funding (like the IIJA) to fund an infrastructure project, provided that the costs meet each program’s eligibility requirements and any other statutory and regulatory requirements and policies.

Municipalities should also review each funding source’s authorities and program requirements to determine whether they may be subject to any compliance and/or reporting obligations.

Additionally, award recipients should pay particular attention to “duplication of benefits”[17] when assessing grant opportunities for which to apply. Per guidance from the Stafford Act, 

duplication of benefits occurs when federal financial assistance is provided to a person or entity through a program to address losses resulting from a federally declared emergency or disaster, and the person or entity receives or would receive financial assistance for the same costs from any other source, and the total amount received exceeds the total need for those costs. Recipients must establish and maintain adequate procedures to prevent any duplication of benefits.[18]

Discretion

The IIJA does not provide discretion to state, local, and tribal governments to determine the best use of funds. Municipalities should identify grants, like the CSLFRF, that do provide such flexibility for recipients to determine the particular local needs of their communities. If a program cost qualifies for funding under both the IIJA and a discretionary grant like the CSLFRF, the municipality should consider applying for IIJA funding to preserve their discretionary spending capacity.

Last Updated: May 15, 2022

My municipality is using American Rescue Plan Act (“ARP”) funds to demolish abandoned and unoccupied homes in an effort to remove blight. Which expenditure category would this project fall under? Are we required to undertake an environmental review?

Expenditure Category

The U.S. Department of the Treasury’s (“Treasury”) Compliance and Reporting Guidance regarding the American Rescue Plan Act of 2021’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) provides that a municipality’s demolition of abandoned and unoccupied homes may fall under the three following expenditure categories: Public Health, Negative Economic Impacts, or Lost Public Sector Revenue Replacement.[1]  

Public Health or Negative Economic Impacts

Treasury’s Final Rule states that CSLFRF funds are available to municipalities to respond to the public health or negative economic impact of the pandemic. Treasury’s Final Rule further recognizes that “high rates of vacant or abandoned properties in a neighborhood may exacerbate public health disparities,” and states that services for “demolition or deconstruction of vacant or abandoned buildings paired with  greening or other lot improvements as part of a strategy for neighborhood revitalization . . . are eligible to address the public health and negative economic impacts of the pandemic on disproportionately impacted households or communities.”[2] Eligible demolition of abandoned property projects may include projects designed to eliminate public health risks, promote healthier communities, create new opportunities for housing or green space to support long-term stability and community resilience, address crime and homelessness, or provide opportunities for affordable housing.[3]

Lost Public Sector Revenue Replacement

Treasury’s Final Rule states that CSLFRF funds are available to municipalities that have experienced revenue loss due to the COVID-19 public health emergency. CSLFRF funding “may be used to pay for ‘government services’ in an amount equal to the revenue loss experienced by the [municipality] due to the COVID-19 public health emergency.”[4] In determining the amount of revenue lost, a municipality may either: (1) elect a “standard allowance” of up to $10 million; or (2) calculate their actual revenue loss according to the formula articulated in the Final Rule.[5] 

Treasury’s Final Rule acknowledges that the Lost Public Sector Revenue Replacement category is the “most flexible,” and could include “any service traditionally provided by a government, unless Treasury has stated otherwise,” including environmental remediation or health services.[6]

Environmental Review

Treasury does not appear to require that municipalities perform an environmental review before demolishing abandoned single-family homes using CSLFRF funding. However, municipalities should consult their federal, state, and local environment regulations to confirm whether there are applicable laws that require an environmental review. The Final Rule states:

Recipients must also comply with all federal, state, and local public health and environmental laws or regulations that apply to activities under this eligible use category, for example, requirements around the handling and disposal of asbestos containing materials, lead paint, and other harmful materials may apply, as well as environmental standards for any backfill materials used at demolition sites. Treasury encourages recipients to consult and apply best practices from the Environmental Protection Agency as well.[7]

Examples of Municipalities Embarking on Similar ARP-Funded Demolition Projects

1. Dayton, Ohio: Dayton, Ohio plans to expend approximately $15 million in ARP funds over the next three years to demolish approximately 1,000 houses, with an ultimate objective of neighborhood revitalization.[8]
2. Florence, South Carolina: In January 2022, the Florence City Council allocated $500,000 of ARP funds to start the process of demolishing more than 100 homes. Objectives of the project include eliminating crime and revitalizing the area.[9]
3. Baltimore, Maryland: Baltimore, Maryland has allocated $39.7 million in ARP funds to eliminate and prevent housing-related blight. This funding is expected to reduce public health disparities caused by environmental standards and tackle housing instability.[10]