How should a municipality document the COVID-19 nexus for infrastructure projects outside of the specified eligibility categories?

The U.S. Department of the Treasury’s (“Treasury”) Final Rule on the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) significantly expands eligibility criteria for infrastructure, broadening eligible broadband infrastructure investments to address challenges with broadband access, affordability, and reliability, as well as adding additional eligible water and sewer infrastructure investments, including a broader range of lead remediation and stormwater management projects.[1]

With broadened eligibility under the Final Rule, CSLFRF funds may be used to fund additional types of projects, such as:

• expanding the scope of the eligible use of funds for water and sewer projects to include culvert repair, dam and reservoir rehabilitation​; and[2]
• enlarging the eligible pool of broadband infrastructure investments to ensure better connectivity to broader populations​.[3]

In addition to changes in infrastructure project eligibility, the Final Rule offers a standard allowance for revenue loss of $10 million, allowing recipients to select between a standard amount of revenue loss or complete a full revenue loss calculation.[4] Recipients that select the standard allowance[5] may use that amount to provide government services. The Final Rule defines “government services” as “any service traditionally provided by a government, including construction of roads and other infrastructure, provision of public safety and other services, and health and educational services.”[6]

Regarding the applicable reporting requirements, it is the recipient’s responsibility to ensure that all CSLFRF award funds are used in compliance with these requirements. Relatedly, recipients should be mindful of any additional compliance obligations that may apply. These may include additional restrictions imposed upon other sources of funds used in conjunction with CSLFRF award funds, or statutes and regulations that may independently apply to water, broadband, and sewer infrastructure projects.[7] Recipients should ensure they maintain proper documentation supporting determinations of costs and applicable compliance requirements, and how they have been satisfied as part of their award management, internal controls, and subrecipient oversight and management.[8]

For all projects listed under the Water, Sewer, and Broadband Expenditure Categories (see all infrastructure projects [Expenditure Category (EC) 5] located in Treasury’s Compliance and Reporting Guidance), more detailed project-level information is required. Each project will be required to report expenditure data as described in the Compliance and Reporting Guidance, but will also report the following information:

• Projected/actual construction start date (month/year)
• Projected/actual initiation of operations date (month/year)
• Location (for broadband, geospatial location data)
• For projects over $10 million (based on expected total cost):
  • A recipient may provide a certification that, for the relevant project, all laborers and mechanics employed by contractors and subcontractors in the performance of such project are paid wages at rates not less than those prevailing, as determined by the U.S. Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code (commonly known as the “Davis-Bacon Act”), for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the civil subdivision of the state (or the District of Columbia) in which the work is to be performed, or by the appropriate state entity pursuant to a corollary state prevailing-wage-in-construction law (commonly known as “baby Davis-Bacon Acts”). If such certification is not provided, a recipient must provide a project employment and local impact report detailing:
    • The number of employees of contractors and sub-contractors working on the project;
    • The number of employees on the project hired directly and hired through a third party;
    • The wages and benefits of workers on the project by classification; and
    • Whether those wages are at rates less than those prevailing.[9]

Recipients must maintain sufficient records to substantiate this information upon request. A recipient may provide a certification that a project includes a project labor agreement, meaning a pre-hire collective bargaining agreement consistent with section 8(f) of the National Labor Relations Act (29 U.S.C. 158(f)). If the recipient does not provide such certification, the recipient must provide a project workforce continuity plan, detailing:

• how the recipient will ensure the project has ready access to a sufficient supply of appropriately skilled and unskilled labor to ensure high-quality construction throughout the life of the project;
• how the recipient will minimize risks of labor disputes and disruptions that would jeopardize timeliness and cost-effectiveness of the project;
• how the recipient will provide a safe and healthy workplace that avoids delays and costs associated with workplace illnesses, injuries, and fatalities;
• whether workers on the project will receive wages and benefits that will secure an appropriately skilled workforce in the context of the local or regional labor market;
• whether the project has completed a project labor agreement;
• whether the project prioritizes local hires; and
• whether the project has a Community Benefit Agreement, with a description of any such agreement.[10]

Regarding revenue replacement funds, Treasury specifies that funds spent to provide government services (including infrastructure spending) are subject to streamlined reporting and compliance requirements.[11] As mentioned above, to ease the burden on recipients and account for anomalous variations in revenue, Treasury has incorporated a “standard allowance” option into the Final Rule. A recipient may choose to use the standard allowance, which under the Final Rule is set at $10 million, as an alternative to calculating revenue loss.[12] For reporting requirements under the revenue loss provision, refer to the Compliance and Reporting Guidance section titled revenue replacement (EC 6.1). [13]  

Last Revised: February 16, 2022