Program
COVID-19 Federal Assistance e311Topics
Infrastructure & Maintenance InvestmentsFunding Source
American Rescue Plan Act, Infrastructure Investments and Jobs ActHow 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”:
The U.S. Department of the Treasury’s (“Treasury”) Final Rule on the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) permits funds to be used to cover costs incurred beginning on March 3, 2021, and requires that the funds be obligated by December 31, 2024, and expended by December 31, 2026.[1] The Final Rule also outlines “eligible water and sewer infrastructure investments, including a broad range of lead remediation and stormwater management projects.”[2]
In the Final Rule, Treasury expanded the list of eligible uses beyond those included in the Environmental Protection Agency’s (“EPA”) Clean Water State Revolving Fund (“CWSRF”) and Drinking Water State Revolving Fund (“DWSRF”) if the planned uses are deemed “necessary.”
Treasury considers a necessary investment in infrastructure to be one that is (1) responsive to an identified need to achieve or maintain an adequate minimum level of service, which may include a reasonable projection of increased need, whether due to population growth or otherwise and (2) a cost-effective means for meeting that need, taking into account available alternatives. In addition, given that drinking water is a resource that is subject to depletion, in the case of investments in infrastructure that supply drinking water in order to meet projected population growth, the project must be projected to be sustainable over its estimated useful life.[3]
CSLFRF funds may be used for a variety of projects to improve drinking water infrastructure under the CWSRF, including:
- Construction of publicly owned treatment works;
- Projects pursuant to the implementation of a nonpoint source pollution management program established under the Clean Water Act (“CWA”);
- Decentralized wastewater treatment systems that treat municipal wastewater or domestic sewage;
- Management and treatment of stormwater or subsurface drainage water;
- Water conservation, efficiency, or reuse measures;
- Development and implementation of a conservation and management plan under the CWA;
- Watershed projects meeting the criteria set forth in the CWA;
- Energy consumption reduction for publicly owned treatment works;
- Reuse or recycling of wastewater, stormwater, or subsurface drainage water; and
- Security of publicly owned treatment works.[4]
CSLFRF funds may also be used under the DWSRF in support of:
- Facilities to improve drinking water quality;
- Transmission and distribution, including improvements of water pressure or prevention of contamination in infrastructure and lead service line replacements;
- New sources to replace contaminated drinking water or increase drought resilience, including aquifer storage and recovery system for water storage;
- Green infrastructure, including green roofs, rainwater harvesting collection, permeable pavement;
- Storage of drinking water, such as to prevent contaminants or equalize water demands;
- Purchase of water systems and interconnection of systems; and
- New community water systems.[5]
The Final Rule also explains that the ARP provides state, local, and tribal governments with a broad range of projects for investments in water and sewer infrastructure that are of the highest priority for their own communities by aligning the eligible uses of CSLFRF funds with the wide range of types or categories of projects that would be eligible to receive financial assistance through the CWSRF or DWSRF.[6] For a full list of eligible projects, municipalities may refer to the EPA handbook.
CSLFRF may also be applied to 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.”[7]
II. Maximizing Funding Sources and Best Practices
To maximize funding sources, municipalities should consider identifying the specific and unmet needs of a project and conducting a thorough research and analysis of funding sources compared to their specific needs to ensure 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 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 several potential funding sources for water infrastructure projects and lead remediation. For reference, several federal sources are outlined below for additional resourcing and information.
- EPA funds, including:
- Water Infrastructure Improvements for the Nation Act (“WIIN”) Grants;
- Public Water System Supervision (“PWSS”) Grant Program;
- Training and Technical Assistance for Small Systems Grants;
- Water Infrastructure Finance and Innovation Act (“WIFIA”) Program; and[8]
- Clean Water and Drinking Water State Revolving Funds, which will administer funds appropriated in the Bipartisan Infrastructure Law.[9]
- Department of Agriculture funds, including:
- Circuit Rider Program;
- Emergency Community Water Assistance Grants;
- Grants for Rural and Native Alaskan Villages;
- Rural Decentralized Water Systems Grant Program;
- Individual Water & Wastewater Grants;
- Revolving Funds for Financing Water and Wastewater Projects (Revolving Fund Program);
- SEARCH - Special Evaluation Assistance for Rural Communities and Households;
- Solid Waste Management Grants;
- Water & Waste Disposal Loans & Grants;
- Water & Waste Disposal Loan Guarantees;
- Water & Waste Disposal Predevelopment Planning Grants; and
- Water & Waste Disposal Technical Assistance & Training Grants.[10]
- 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 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.”[11]
Last Revised: March 18, 2022
[1] Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule (as of January 2022), at 43, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule-Overview.pdf.
[2] Treas. Reg. 31 CFR 35 at 7, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.
[3] Id., at 261–262.
[4] Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule (as of January 2022), at 37, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule-Overview.pdf.
[5] Id.
[6] Treas. Reg. 31 CFR 35 at 271, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.
[7] Id., at 272.
[8] Environmental Protection Agency, “Drinking Water Grants,” available at: https://www.epa.gov/ground-water-and-drinking-water/drinking-water-grants.
[9] Environmental Protection Agency, “Bipartisan Infrastructure Law: State Revolving Funds Implementation Memorandum March 2022,” available at: https://www.epa.gov/system/files/documents/2022-03/bil-srf-memo-fact-sheet-final.pdf.
[10] Department of Agriculture Rural Development, “Water and Environmental Programs,” available at: https://www.rd.usda.gov/programs-services/all-programs/water-environmental-programs.
[11] 24 CFR § 570.203; see also 24 CFR § 570.209 (a), available at: eCFR :: 24 CFR Part 570 -- Community Development Block Grants 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.