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COVID-19 Federal Assistance e311

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Infrastructure & Maintenance Investments

How can municipalities maximize funding for modernizing their respective water systems, including lead pipe remediation? Are there funding sources to upgrade water systems or otherwise remediate lead services on municipality and customer-owned premises?

I. American Rescue Plan Act of 2021 (“ARP”) funding for “water, sewer, or broadband”:

Subtitle M, Section 9901 of the ARP establishes the Coronavirus State Fiscal Recovery Fund (“CSFRF”) and the Coronavirus Local Fiscal Recovery Fund (“CLFRF”).  The Department of Treasury’s (“Treasury”) May 10, 2021 Interim Final Rule (“The Rule”) addresses the use of funds to be disbursed through the CSFRF and CLFRF. The Rule permits funds to be used to cover costs incurred beginning on March 3, 2021, and must be obligated by December 31, 2024.[1]  The Rule also outlines a “broad range of necessary investments in projects that improve access to clean drinking water, improve wastewater and stormwater infrastructure systems, and provide access to high-quality broadband service.”[2] Additionally, the Rule provides state, local and tribal governments with “wide latitude to identify investments in water and sewer infrastructure that are of the highest priority of their own communities.”[3] This may include projects on “privately-owned infrastructure.”[4]

CLFRF funds may be used for a variety of projects to improve drinking water infrastructure including:

  • building or upgrading facilities and transmission;
  • distributing and repairing storage systems, including the replacement of lead service lines.[5]

CLFRF funds may also be used in support of:

  • consolidating and/or establishing drinking water systems such as Publicly Owned Treatment Works;[6]
  • managing and treating of stormwater or subsurface drainage water;
  • facilitating water reuse; and
  • procuring Publicly Owned Treatment Works.[7]

The Rule also explains that the ARP provides state, local, and tribal governments “with wide latitude to identify investments in water and sewer infrastructure that are of the highest priority for their own communities” by aligning the eligible uses of CLFRF funds with “the wide range of types or categories of projects that would be eligible to receive financial assistance through the EPA’s Clean Water State Revolving Fund (CWSRF) or Drinking Water State Revolving Fund (DWSRF).”[8]

CLFRF may also be used for cybersecurity needs to “protect water or sewer infrastructure, such as developing effective cybersecurity practices and measures at drinking water systems and publicly owned treatment works.”[9]

II. Maximizing Funding Sources and Best Practices

To maximize funding sources, municipalities should consider focusing on identifying the specific and unmet need(s) of a project and conducting a thorough research and analysis of funding sources compared to their specific needs to ensure all they have contemplated all available relevant funding.  Funding sources may include (but are not limited to) federal funds, state funds, private funds, non-profit agency matches, and foundation grants. 

Generally, recipients of federal funds are required to avoid a duplication of benefits (“DOB”) when accepting disaster assistance through federally funded programs. Municipalities should consider conducting a DOB analysis from the earliest stages of the process to determine which costs have not been or will not be paid by another source. Ideally, this DOB analysis would be completed before receiving or disbursing relief funds and might include developing an overall budget that demonstrates the funding needed for the activity and the funding that is reasonably anticipated. This might resemble a “sources and uses” analysis for a housing or economic development project.

III. Potentially Applicable Funding Sources

In addition to the ARP provisions regarding “necessary investments in water, sewer, or broadband infrastructure,” there are a number of potential funding sources for water infrastructure projects and lead remediation.  For reference, several federal sources are outlined below for additional resourcing and information. 

  1. Environmental Production Agency funds, including:[10]  
  • Water Infrastructure Improvements for the Nation Act (“WIIN”) Grants;
  • Public Water System Supervision (“PWSS”) Grant Program;
  • Training and Technical Assistance for Small Systems Grants; and
  • Water Infrastructure Finance and Innovation Act (“WIFIA”) Program.
  1. Department of Agriculture funds, including: [11] 
  1. Department of Housing and Urban Development Community Development Block Grant (“CDBG”):
  • The CDBG Program provides annual grants to states, municipalities, and counties to develop viable urban communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for low- and moderate-income persons. CDBG grants may include “costs associated with project-specific assessment or remediation of known or suspected environmental contamination.”[12]

Last Revised: June 10, 2021

[1] DEPARTMENT OF THE TREASURY, 31 CFR Part 35 RIN 1505-AC77 Coronavirus State and Local Fiscal Recovery Funds, at 85.

[3] DEPARTMENT OF THE TREASURY, 31 CFR Part 35 RIN 1505-AC77 Coronavirus State and Local Fiscal Recovery Funds, at 63

[4] Id.

[5] DEPARTMENT OF THE TREASURY, 31 CFR Part 35 RIN 1505-AC77 Coronavirus State and Local Fiscal Recovery Funds, at 67.

[6] The Clean Water Act defines “treatment works” as the following: “…any devices and systems used in the storage, treatment, recycling, and reclamation of municipal sewage or industrial wastes of a liquid nature to implement section 201 of this act, or necessary to recycle or reuse water at the most economical cost over the estimated life of the works, including intercepting sewers, outfall sewers, sewage collection systems, pumping, power, and other equipment, and their appurtenances; extensions, improvements, remodeling, additions, and alterations thereof; elements essential to provide a reliable recycled supply such as standby treatment units and clear well facilities; and any works, including site acquisition of the land that will be an integral part of the treatment process (including land use for the storage of treated wastewater in land treatment systems prior to land application) or is used for ultimate disposal of residues resulting from such treatment.” See Sec.212 of the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977. https://www3.epa.gov/npdes/pubs/cwatxt.txt

[7] Id.

[8] DEPARTMENT OF THE TREASURY, 31 CFR Part 35 RIN 1505-AC77 Coronavirus State and Local Fiscal Recovery Funds, at pg.63

[9] Id.

[12] 24 CFR § 570.203; see also 24 CFR § 570.209 (a) for an overview of guidelines for these projects. The guidance contains noteworthy instructions, including that CDBG funds should be not substituted for non-federal financial support and that funds should be disbursed on a pro rata basis with other finances provided to the project.