Helpful Guidance on the Use of ARPA Funds by Local Governments

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We’ve written earlier about the use of American Rescue Plan Act (ARPA) Funds to pay for broadband infrastructure projects. Besides the cryptic language in the statute (necessary broadband infrastructure) we noted two helpful additional sources published by the U.S. Treasury Department —  the “Interim Final Rule” effective May  17, 2021, and a series of answers to Frequently Asked Questions about the statute and the Interim Final Rule (the FAQs).

But some pointed to the “Interim” label on these rule – cautioning that the guidance was not final and implying that local governments relying on them might find themselves in a box if the “final” guidance that eventually is issued by the Treasury (a new or updated rule) somehow turned out to be materially different from what is in Interim Final Rule. The concern was that the Federal government might attempt to recoup money from the local government based on the theory that it was improperly spent under new “final” rule, even though it appeared to be permitted under the Interim Final Rule.

Undoubtedly, this has led some local governments to reconsider spending ARPA funds it had on hand, because the Treasury Department recently addressed this very concern directly in an undated “explanation” posted on its website.

The Treasury explanation begins by referring to the guidance already given and noting that ARPA funds were provided to local governments with the expectation that they would be spent promptly to remedy issues caused or made evident by the COVID pandemic. The explanation then cautions everyone not to expect to see a new final rule anytime soon, because the Treasury is now considering almost 1000 separate public comments it received to the Interim Final Rule published this spring.

Given this situation, the explanation goes on to state the following:

“Until Treasury adopts a final rule, and the final rule becomes effective, the Interim Final Rule is, and will remain, binding and effective. This means that recipients can and should rely on the Interim Final Rule to determine whether uses of funds are eligible under this program. Treasury encourages recipients to use funds to meet needs in their communities.

Funds used in a manner consistent with the Interim Final Rule while the Interim Final Rule is effective will not be subject to recoupment.”

What about the FAQs? Again, the explanation is helpful:

“Finally, recipients may also consider FAQs issued by Treasury to help assess whether a project or service would be an eligible use of Coronavirus State and Local Fiscal Recovery Funds.”

So where does that leave local county commissions, city councils, and boards of aldermen? Well obviously, they can and should consult with their professional advisors for advice in special cases, but clearly the language used in the explanation leaves little doubt that Treasury wants to encourage state and local governments to use and rely on the guidance it has already provided, and not to delay spending ARPA funds for fear that “final” rules may provide something different.

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Adjunct Professor, UMKC School of Law

Marc McCarty Adjunct Professor, UMKC School of Law University of Missouri System Broadband Initiative Steering Committee 816 235 1006 office 816 304 9808 cell