Program

COVID-19 Federal Assistance e311

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Fund Planning & Allocation, Infrastructure & Maintenance Investments, Program Administration

May cities use ARP funds to finance a previous infrastructure project?

The covered period for the Coronavirus Local Fiscal Recovery Funds (“CLFRF”) under the American Rescue Plan Act (“ARP”) begins March 3, 2021,[1] and those funds will remain available through December 31, 2024.[2] While the legislation does not specify whether CLFRF can be used to pay for previous infrastructure investments, the U.S. Department of the Treasury’s May 10, 2021 Interim Final Rule (the “Rule”) addresses this topic and the use of funds for debt service payments.

The Rule states that “this eligible use category [infrastructure investments] would not include payment of interest or principal on outstanding debt instruments, including, for example, short-term revenue or tax anticipation notes, or other debt service costs[.]”[3] The Rule further states, “payments from the Fiscal Recovery Funds are intended to be used prospectively and the Rule precludes use of these funds to cover the costs of debt incurred prior to March 3, 2021.”[4]

As such, CLFRF funds may not be used to pay off a previous infrastructure investment.

The June 8, 2021 update to the Rule Frequently Asked Questions (“FAQ”) clarifies that recipients can apply CLFRF funds to water, sewer and broadband infrastructure projects that were initiated prior to March 3, 2021, but only for specific costs incurred after March 3, 2021.[5]

The cost of debt incurred for these projects prior to March 3, 2021, is ineligible for CLFRF funding.

Last Updated: August 11, 2021

[2] Id. at 603(a)(1).

[4] Id.

[5] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July  19, 2021) – FAQ #4.7, at 20, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.