The U.S. Department of the Treasury on Wednesday evening added 12 new responses and updated one answer to frequently asked questions about Coronavirus State and Local Fiscal Recovery Funds. The release marks the largest update to the FAQs since Treasury issued the original guidance on May 10.
The funds – established by the American Rescue Plan Act (ARPA) – largely will help local governments respond to the coronavirus public health emergency and its negative economic impacts; invest in water, sewer, and broadband infrastructure; and provide certain government services based on lost revenue. The revenue loss calculation looks at governmental revenue from prior to the pandemic (Fiscal Year 2019) and compares annual revenue thereafter with projected revenue based on growth patterns.
While the interim final rule excludes utility revenue from the revenue loss calculation, a new FAQ response allows cities to include sewer systems as part of “general revenue.” Treasury excludes revenues associated with water supply systems, gas supply systems, electric power systems, and public mass transit systems. In public comments submitted this week, the Kentucky League of Cities urged Treasury to include utility revenues in the city’s revenue loss calculation because the plain language of the Act does not suggest they should be excluded.
Another FAQ response outlines what entities constitute a government for the purpose of calculating revenue loss. This question comes down to state and local statutes and an entity’s autonomy. For an entity to be independent, it must possess corporate powers, have a governmental character, and have substantial independence both fiscally and administratively. If an entity does not meet all of these conditions, a city may include the entity’s revenue if applicable.
Regarding stormwater, Treasury noted that the Environmental Protection Agency’s (EPA) Clean Water State Revolving Fund requires stormwater projects to have a water quality benefit. While culverts likely do not provide a water quality benefit, projects such as rain gardens, infiltration basins, permeable pavement, curb bump-outs, and urban tree canopies would qualify for ARPA funding.
Road repairs and upgrades directly related to an eligible water or sewer project would also qualify. If a water or sewer project required digging up or repaving a street, city officials could use their ARPA money to pay for these transportation-related costs. Although, the recovery funds can only cover transportation costs that interact directly with the water or sewer project. Cities could only pave or maintain other streets if a loss of revenue exists according to the calculation discussed above.
Projects funded solely through the city’s ARPA recovery fund dollars do not need to follow the federal Davis-Bacon Act, which requires paying federal prevailing wage rates to local contractors. Cities may otherwise pay these rates if a construction project uses ARPA money with dollars from other federal programs. In 2017, the Kentucky General Assembly eliminated the state’s prevailing wage law for public construction projects.
Cities can also use these federal funds to supply wireline broadband service to schools, libraries, public safety facilities, and other institutions that serve the public if their service does not reliably deliver at least 25 Mbps download and 3 Mbps upload speeds. KLC has requested Treasury to expand the current definition of unserved and underserved for broadband services to encompass areas without 100/100 Mbps symmetrical service.