CSAC Bulletin Article

U.S. Treasury Releases Interim Regulations Allowing More Flexibility for ARPA Uses

August 24, 2023 Eric Lawyer Jessica Sankus

August 24, 2023

Last week, the U.S. Department of the Treasury (U.S. Treasury) released an interim final rule that provides counties additional flexibility to use American Rescue Plan Act (ARPA) funds for transportation and infrastructure projects, relief from natural disasters that have already occurred, projects to mitigate the risk of natural disasters, and eligible projects under the Community Development Block Grant program.

The rule became effective upon publication, however a public comment will be held and the rule could be amended depending on the comments received.

The Interim Final Rule builds on a separate rulemaking that was completed in early 2022, by establishing additional eligible uses of ARPA funds. Under the new Interim Final Rule, counties can use ARPA funds for:

Emergency relief from natural disasters or their negative economic impacts, including temporary housing, food assistance, evacuation, and a variety of other emergency protective measures;
Mitigation activities to address the threat of future natural disasters, including structure elevation, dry floodproofing, and a variety of retrofitting activities;
26 specified surface transportation programs; or
Certain eligible activities under the Community Development Block Grant, including economic development projects, community centers, housing rehabilitation, public services, microenterprise assistance, code enforcement, and homeowner assistance.

Administration of Funds

The following rules and deadlines apply to the additional eligible uses of ARPA funds:

The interim final rule does not change existing eligible expenditures of ARPA funds as outlined in the 2022 final rule.
Counties may use the funds for the newly authorized eligible uses for costs incurred beginning December 29, 2022.
The deadline for counties to obligate (encumber) ARPA funds, including newly authorized eligible uses, remains December 31, 2024.
The deadline for counties to expend obligated ARPA funds, including most newly authorized eligible uses, remains December 31, 2026 except for specified surface transportation projects and Community Development Block Grant programs, for which funds must be expended by September 30, 2026.
Counties may use ARPA funds as the non-Federal matching fund portion for certain, specified projects.

Background

In 2021, Congress passed, and President Biden signed, the ARPA to provide much needed financial relief to facilitate the country’s recovery from the COVID-19 pandemic. California’s 58 counties directly received $7.6 billion from the fund established under ARPA. At that time, recovery funds could be expended for the following broad categories of eligible projects: COVID-19 response efforts, replacement of lost public sector revenue, supporting immediate economic stabilization, addressing systemic public health and economic challenges, and providing premium pay for essential workers.

In December 2022, Congress passed the final federal budget package for fiscal year 2023, which included provisions for added flexibility for local governments to use ARPA funds, as described above. The recently released Interim Final Rule provides the regulatory requirements and detail necessary to implement the flexibility provisions.

What’s Next?

Once posted to regulations.gov, the U.S. Treasury will hold a public comment period for the new Interim Final Rule. Public comments may be submitted to the U.S. Treasury via the Federal rulemaking portal or by mailing comments to the address provided in the Interim Final Rule. The U.S. Treasury requests that all comments be captioned “Coronavirus State and Local Fiscal Recovery Funds 2023 Interim Final Rule Comments.”

CSAC will notify counties when the public comment period opens, and will continue to track the Interim Final Rule and will keep counties updated as it moves through the federal regulatory process.

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