Are upgrades to network fiber and cybersecurity infrastructure eligible uses of ARP funds?

Municipalities may use Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) for upgrades to network fiber and cybersecurity infrastructure that are not directly tied to water or sewer infrastructure projects.

Sections 602(c)(1)(C) and 603(c)(1)(C) of the American Rescue Plan Act of 2021 (“ARP”) provide recipients with broad latitude to use CSLFRF funds for the provision of government services, to the extent of reduction in revenue.[1] Government services can include, but are not limited to: (i) maintenance or pay-go funded building of infrastructure, including roads; (ii) modernization of cybersecurity, including hardware, software, and protection of critical infrastructure; (iii) health services; (iv) environmental remediation; (v) school or educational services; and (vi) the provision of police, fire, and other public safety services.[2]

The CSLFRF Final Rule also significantly broadens eligible broadband infrastructure investments to address challenges with broadband access, affordability, and reliability, and adds eligible water and sewer infrastructure investments, including a broader range of lead remediation and stormwater management projects.[3]

Under the Final Rule, CSLFRF funds can be used for eligible investments in broadband, which are those that are designed to provide services meeting adequate speeds and are provided to unserved and underserved households and businesses. Understanding that recipients have a wide range of broadband infrastructure needs, the Final Rule provides them with “flexibility to identify a need for additional broadband infrastructure investments: examples of need include lack of access to a connection that reliably meets or exceeds symmetrical 100 Mbps download and upload speeds, lack of affordable access to broadband service, or lack of reliable broadband service.”[4] To meet the immediate needs of unserved and underserved households and businesses, recipients are encouraged to focus on projects that deliver a physical broadband connection by prioritizing fiber-optic infrastructure wherever feasible, focusing on projects that achieve “last-mile” connections.[5]

Additionally, the Final Rule requires recipients to address the affordability needs of low-income consumers in accessing broadband networks funded by CSLFRF.[6] To do so, Treasury states that:

Recipients must require the service provider for a completed broadband infrastructure investment project that provides service to households to either participate in the Federal Communications Commission’s (“FCC”) Affordable Connectivity Program (“ACP”), or otherwise provide access to a broad-based affordability program to low income consumers in the proposed service area of the broadband infrastructure that provides benefits to households commensurate with those provided under the ACP.[7]

Treasury also encourages recipients to prioritize support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives’ providers with less pressure to turn profits and with a commitment to serving entire communities.[8]

Treasury allows for modernization of cybersecurity for existing and new broadband infrastructure as an eligible use of CSLFRF funds.[9] Although modernization of cybersecurity is an eligible use of funds, the Final Rule highlights that recipients should carry out investments in broadband infrastructure in ways that comply with applicable federal laws.[10]

Last Revised: February 16, 2022