Can a municipality use ARP funds for sewer infrastructure and maintenance investments that predate the COVID-19 crisis?

According to the American Rescue Plan Act of 2021 (“ARP”), the covered period for the Coronavirus Local Fiscal Recovery Fund (“CLFRF”) began on March 3, 2021.[1] On January 6, 2022, the U.S. Department of the Treasury (“Treasury”) issued specific guidance on the CLFRF and infrastructure investments in the Final Rule, which has made clear that regular investments in infrastructure are not eligible uses of CLFRF if they predate the beginning of the covered period.[2],[3]

Treasury has explicitly stated that:

Under the [CSLFRF] program, funds must be used for costs incurred on or after March 3, 2021. Further, funds must be obligated by December 31, 2024, and expended by December 31, 2026. This time period, during which recipients can expend [CSLFRF] funds, is the “period of performance.”[4]

Additionally, Treasury has explicitly stated that:

payments from the [CSLFRF] are intended to be used prospectively… Use of funds for debt service on indebtedness issued prior to March 3, 2021 necessarily entails using funds for costs incurred during prior time periods, rather than the present response to the public health emergency and its negative economic impacts or to provide government services.[5]

Treasury has also clarified that the revenue replacement eligible use for the provision of government services may permit a municipality to pay for infrastructure and maintenance investments.

Government services, include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure; health services; environmental remediation; school or educational services; and the provision of police, fire, and other public safety services.[6]

However, while the revenue replacement eligible use offers some opportunity for catching up on deferred maintenance, it does not allow for the payment of previously incurred costs.

Last Revised: February 16, 2022