U.S. Treasury Outlines How States Can Spend $350 Billion State & Local Government COVID-Relief

On May 13, the U.S. Department of Treasury issued an interim final rule (IFR) detailing how the $350 billion in state, local, and territorial government funding provided through the American Rescue Plan Act can be spent.

AGC plans to provide comments on how this guidance can be improved to better allow for infrastructure and building construction investment necessary for pandemic mitigation and recovery.

Transportation Construction Investment

AGC’s call was answered and the IFR clearly states that funding for “government services can include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads,” among other things. The IFR also states that funding can be used to build “green streets,” where vegetation, soil, and engineered systems (e.g., permeable pavements) are combined to direct and filter rainwater from impervious surfaces. AGC is pleased to see that these funds can be used to update our nation’s roadway infrastructure.

That stated, government services—like constructing infrastructure referenced above in a broad manner—are eligible for these funds “to the extent of the reduction in revenue. . .due to the COVID-19 public health emergency relative to revenues collected in the most recent fiscal year for that eligible government.” Arguably, any reduction in revenues that are used to fund any type of public infrastructure construction, operations or maintenance are eligible for these funds. So, if general fund revenues, sales tax revenues, gas tax revenues or any other revenues a government entity uses in whole or part to fund public infrastructure (in a broad sense) saw a year-to year decrease, those lost infrastructure funds could be made whole with these funds.

Utility Construction Investment

The funding could be used for utility infrastructure construction, operations, and maintenance of facilities used for water, wastewater, and broadband services without any upper limit restrictions.

The IFR allows recipients of the funds to invest in water and sewer infrastructure improvements such as building/upgrading facilities, transmission & distribution, and storage systems.

The IFR aligns the types of eligible projects with the wide range of projects that qualify for the EPA’s Clean Water and Drinking Water State Revolving Funds. Recipients of the funding have flexibility in identifying the infrastructure investments that are of highest priority for their own communities.

In addition, because of the need recognized during the pandemic for universal, dependable broadband access, funds are provided for investment in the installation of broadband infrastructure necessary to provide service to areas in need that are currently unserved or underserved.

Public Building Construction Investment

The IFR also contained some information about potential uses of COVID-19 relief funds for building projects, although it should be noted that AGC expects another rule to be issued soon regarding another pot of money specifically allocated to primary and secondary education. Amongst other things, the IFR clarifies that the recovery funds can be used for:

  • Capital investments in public facilities to meet pandemic operational needs, such as physical plant improvements to public hospitals and health clinics or adaptations to public buildings to implement COVID-19 mitigation tactics.
  • Lead paint abatement for commercial and residential property
  • Enhancement to health care capacity, including through alternative care facilities
  • Support for prevention, mitigation, or other services in congregate living facilities (e.g., nursing homes, incarceration settings, homeless shelters, group living facilities) and other key settings like schools ventilation improvements in congregate settings, health care settings, or other key locations
  • Services to address homelessness such as supportive housing, and to improve access to stable, affordable housing among unhoused individuals
  • Affordable housing development to increase supply of affordable and high-quality living units

The IFR also clarifies that certain private sector businesses are eligible for relief funding, including funding for facility upgrades and expansion, for businesses in, for example, the travel, tourism, and hospitality industries. Ultimately, the funding is at the discretion of the state or local government and how it is allocated remains to be seen.

State Unemployment Insurance Funds

The IFR also clarifies that states can use the COVID relief funding to make their state unemployment trust funds whole, compared to the trust funds’ balance at the beginning of the pandemic. This is a positive development for employers because states will often levy a UI surtax on employers to cover the cost of loans that states will take out during recessions to fill their UI trust funds. 

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