January/February 2022 Issue

Also in this issue: Court Upholds Milwaukee's Decision to Terminate Licenses for Gas Station Found to Be a Nuisance     |     Wisconsin Supreme Court: Municipalities Not Entitled to Certiorari Review of Tax Assessments

Final ARPA Rule May Facilitate Infrastructure Projects to Provide Government Services

Anita T. Gallucci , Julia Potter | 01.28.22

In early January, the US Treasury Department released its final rule pertaining to the American Rescue Plan Act (“ARPA”), adopting Treasury’s interim final rule published on May 17, 2021, but with certain amendments. Perhaps the most significant amendment to the interim final rule for many smaller municipalities considering various infrastructure projects is the new provision allowing municipalities to use up to $10,000,000 of ARPA funds for ​“government services.” See 31 C.F.R. § 35.6(d). This provision may provide greater flexibility for the use of ARPA funds for, among other things, infrastructure projects that would not otherwise qualify as eligible uses under the rule.

Subsection 35.6(d) of the rule now allows a municipality to use a ​“standard allowance” of $10,000,000 when determining how much of its ARPA funds may be used to replace ​“lost revenue” for government services. Thus, under the final rule, a municipality may either calculate its lost revenue under the formula set out in the rule or claim the standard allowance and use up to $10,000,000 for government services projects. As used in the rule, ​“government services” is understood to refer to any service that a municipality would typically provide. Treasury has given the following examples of eligible uses within this category: ​“construction of roads and other infrastructure, provision of public safety and other services, and health and educational services.”

There are some restrictions; however, they should not pose a problem for most municipalities:

ARPA funds may not be used for debt service, replenishing financial reserves, or deposits into a pension fund.

ARPA funds may not be used for a program, service, or capital expenditure that conflicts with or contravenes the statutory purpose of ARPA, including a program, service, or capital expenditure that includes a term or condition that undermines efforts to stop the spread of COVID-19.

Use of ARPA funds must comply with applicable state and federal laws and may not be used in violation of the conflict-of-interest requirements contained in the Award Terms and Conditions, including any self-dealing or violation of ethics rules.

Although it may seem counterintuitive, 31 C.F.R. § 35.6(d) (“Providing government services”) would presumably allow a water, sewer, or broadband infrastructure project that might not be an eligible use under 31 C.F.R. § 35.6(e) (“Making necessary investments in water, sewer, and broadband infrastructure”). For example, a municipality wishing to build new broadband infrastructure may not be sure whether the project meets all the requirements of Subsection (e), the broadband specific category. However, the project (up to a maximum of $10,000,000) should nevertheless fall within the scope of Subsection (d), the broad government services category of eligible uses, because providing utility-type services is a typical government service.

Thus, a municipality would be wise to evaluate the projects it may be considered under the ​“government services” category of eligible uses.