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Treasury Releases COVID-19 Recovery Fund Info; Includes Guidance on Use of Funds for Water/Sewer Infrastructure

May 12, 2021

The U.S. Treasury released initial guidance for the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) on May 10. The CSLFRF is the $350 Billion pot of funding provided in the COVID-19 American Rescue Plan Act signed into law in March 2021 that includes water and sewer infrastructure as an eligible use.

These funds will flow directly to States, cities, counties and nonentitlement communities. Special-purpose units of local government like a regional sewer system will not receive direct funding allocations; however, a state, territory, local, or Tribal government may transfer funds to a special-purpose unit of government.

Per the authorizing legislation, these funds can be used for several broad categories: to respond to the COVID-19 public health emergency and its economic impacts; to provide premium pay to essential workers; to augment state and local revenues lost as a result of the pandemic relative to revenues collected in the most recent full fiscal year prior to the emergency; and to make necessary infrastructure investments in water, sewer, and broadband. Importantly, water and sewer investments supported by these funds do not have to be tied to COVID-19 costs/impacts.

Treasury’s guidance webpage has further information including the specific funding allocations for each state/local government. These funds are being released in two tranches: one-half will be released by Treasury this month, and the second half will be released in 2022.

NACWA expects that individual utilities will vary significantly with regards to whether they are able to secure a portion of these state/local funds for wastewater/stormwater investment or not, based on local circumstances. To determine if and how best your utility might push to secure some of these funds, we urge all utilities to review Treasury’s guidance for themselves. The Interim Final Rule discusses water and sewer infrastructure eligibility in detail (see pages 62-68):

The Interim Final Rule outlines eligible uses within each category, allowing for a broad range of necessary investments in projects that improve access to clean drinking water, improve wastewater and stormwater infrastructure systems, and provide access to high-quality broadband service. Necessary investments are designed to provide an adequate minimum level of service and are unlikely to be made using private sources of funds. Necessary investments include projects that are required to maintain a level of service that, at least, meets applicable health-based standards, taking into account resilience to climate change, or establishes or improves broadband service to unserved or underserved populations to reach an adequate level to permit a household to work or attend school, and that are unlikely to be met with private sources of funds.

The Interim Final Rule aligns eligible uses of the CSLFRF with the categories of projects eligible for assistance through the Clean and Drinking Water State Revolving Funds (SRFs). Recipients retain substantial flexibility to identify those water and sewer infrastructure investments that are of the highest priority for their own communities.

NACWA will continue tracking further information from Treasury and identifying opportunities for further engagement. Contact Kristina Surfus, NACWA’s Managing Director of Government Affairs, with questions or to discuss this COVID-19 relief funding.

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