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Compliance & Reporting

My municipality is using American Rescue Plan Act (“ARP”) funds to demolish abandoned and unoccupied homes in an effort to remove blight. Which expenditure category would this project fall under? Are we required to undertake an environmental review?

Expenditure Category

The U.S. Department of the Treasury’s (“Treasury”) Compliance and Reporting Guidance regarding the American Rescue Plan Act of 2021’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) provides that a municipality’s demolition of abandoned and unoccupied homes may fall under the three following expenditure categories: Public Health, Negative Economic Impacts, or Lost Public Sector Revenue Replacement.[1]  

Public Health or Negative Economic Impacts

Treasury’s Final Rule states that CSLFRF funds are available to municipalities to respond to the public health or negative economic impact of the pandemic. Treasury’s Final Rule further recognizes that “high rates of vacant or abandoned properties in a neighborhood may exacerbate public health disparities,” and states that services for “demolition or deconstruction of vacant or abandoned buildings paired with  greening or other lot improvements as part of a strategy for neighborhood revitalization . . . are eligible to address the public health and negative economic impacts of the pandemic on disproportionately impacted households or communities.”[2] Eligible demolition of abandoned property projects may include projects designed to eliminate public health risks, promote healthier communities, create new opportunities for housing or green space to support long-term stability and community resilience, address crime and homelessness, or provide opportunities for affordable housing.[3]

Lost Public Sector Revenue Replacement

Treasury’s Final Rule states that CSLFRF funds are available to municipalities that have experienced revenue loss due to the COVID-19 public health emergency. CSLFRF funding “may be used to pay for ‘government services’ in an amount equal to the revenue loss experienced by the [municipality] due to the COVID-19 public health emergency.”[4] In determining the amount of revenue lost, a municipality may either: (1) elect a “standard allowance” of up to $10 million; or (2) calculate their actual revenue loss according to the formula articulated in the Final Rule.[5] 

Treasury’s Final Rule acknowledges that the Lost Public Sector Revenue Replacement category is the “most flexible,” and could include “any service traditionally provided by a government, unless Treasury has stated otherwise,” including environmental remediation or health services.[6]

Environmental Review

Treasury does not appear to require that municipalities perform an environmental review before demolishing abandoned single-family homes using CSLFRF funding. However, municipalities should consult their federal, state, and local environment regulations to confirm whether there are applicable laws that require an environmental review. The Final Rule states:

Recipients must also comply with all federal, state, and local public health and environmental laws or regulations that apply to activities under this eligible use category, for example, requirements around the handling and disposal of asbestos containing materials, lead paint, and other harmful materials may apply, as well as environmental standards for any backfill materials used at demolition sites. Treasury encourages recipients to consult and apply best practices from the Environmental Protection Agency as well.[7]

Examples of Municipalities Embarking on Similar ARP-Funded Demolition Projects

  1. Dayton, Ohio: Dayton, Ohio plans to expend approximately $15 million in ARP funds over the next three years to demolish approximately 1,000 houses, with an ultimate objective of neighborhood revitalization.[8]
  2. Florence, South Carolina: In January 2022, the Florence City Council allocated $500,000 of ARP funds to start the process of demolishing more than 100 homes. Objectives of the project include eliminating crime and revitalizing the area.[9]
  3. Baltimore, Maryland: Baltimore, Maryland has allocated $39.7 million in ARP funds to eliminate and prevent housing-related blight. This funding is expected to reduce public health disparities caused by environmental standards and tackle housing instability.[10]

Last Updated: May 13, 2022

[1] U.S. Department of the Treasury, Compliance and Reporting Guidance, at 35-37, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[2] Treas. Reg. 31 CFR Part 35, at 133-134, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[3] U.S. Department of the Treasury, Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule, at 18-20, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule-Overview.pdf.  

[4] Id., at 9.

[5] Id.

[6] Id., at 9, 11.

[7] Treas. Reg. 31 CFR Part 35, at 137, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[8] WHIO News, “City of Dayton investing nearly $1M to tear down abandoned, vacant buildings,” available at: https://www.whio.com/news/city-dayton-investing-nearly-1m-tear-down-abandoned-vacant-buildings/HY5VODDU2FFDLKF2CTWSEWL43I/.

[9] News 13, “Florence City Council votes to use federal money to demolish abandoned homes,” available at: https://www.wbtw.com/news/pee-dee/florence-city-council-votes-to-use-federal-money-to-demolish-abandoned-homes/.

[10] City of Baltimore, “City’s Review of Vacant Properties Complete, Mayor Announces $100 Million ARPA Commitment Towards Housing Equity,” available at: https://mayor.baltimorecity.gov/news/press-releases/2022-03-11-city%E2%80%99s-review-vacant-properties-complete-mayor-announces-100-million.