The U.S. Department of the Treasury published the first Interim Final Rule on May 10, 2021, implementing the use of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) established by the American Rescue Plan Act (ARPA). The 2022 Final Rule (2022 FR) went into effect on April 1, 2022. The Consolidated Appropriations Act, 2023, enacted on December 29, 2022, amended the SLFRF program to provide an expansion to eligible uses of SLFRF funds. These expanded uses are enumerated in the new 2023 Interim Final Rule (2023 IFR) and include using SLFRF funds to provide emergency relief from natural disasters, build critical infrastructure, and support community development. The 2023 IFR became effective upon its publication in August 2023.
Recipients may continue to use SLFRF funds in alignment with the 2022 FR, as there have been no changes to previous eligible uses. SLFRF funds can be used for the new eligible uses for costs incurred on or after December 29, 2022. Consistent with the 2022 FR, SLFRF funds must be obligated for eligible uses by December 31, 2024. Expenditure deadlines for the new eligible uses vary but can be found below in the additional guidance.
Emergency Relief From Natural Disasters
Under the new eligible use, recipients can use SLFRF funds to provide emergency relief from natural disasters or the negative economic impact caused by natural disasters. SLFRF funds used for this purpose must be expended by December 31, 2026. The 2023 IRF defines a 2-step process to determine the standard for providing emergency relief from natural disasters.
Step 1: Identify a natural disaster that has already occurred, is expected to occur imminently, or is threatened to occur in the future. 2023 IRF defines a natural disaster as a disaster attributed to natural causes that cause, or may cause, substantial injury, damage, or immediate threat to property or persons. There must also be an emergency declaration or designation of a natural disaster for the recipient’s location and jurisdiction.
Step 2: Identify emergency relief that responds to the actual physical or negative economic impacts, or the potential physical or negative economic impacts, for the natural disaster identified in Step 1. The 2023 IRF defined emergency relief as assistance required to save lives, protect property, protect public health and safety, or lessen or avert the threat of a catastrophe. All assistance must be related and reasonably proportional to the natural disaster's physical or negative economic impact.
Examples of eligible uses for natural disasters that have already occurred or are expected to occur imminently include temporary housing, food assistance, debris removal, public infrastructure repair, and emergency protective measures such as firefighting.
Examples of eligible uses for the threat of future natural disasters include mitigation reconstruction, structural retrofitting, dry floodproofing, and infrastructure retrofitting. For mitigation activities exceeding $1 million, recipients must complete a written justification.
Build Critical Infrastructure – Surface Transportation Projects
Under this new eligible use, recipients can use SLFRF funds for Surface Transportation projects. SLFRF funds used for these projects cannot exceed the greater of either $10M or 30% of the recipient’s total SLFRF allocation. These funds must only be used to supplement and not supplant other governmental funds. Funds obligated for transportation projects must be expended by September 30, 2026.
There are three pathways in which SLFRF funds can be used for surface transportation projects:
Pathway 1: To supplement surface transportation projects receiving funding from the Department of Transportation (DOT).
SLFRF funds used for projects that are, or will be, receiving funding from the DOT before the obligation deadline are subject to oversight by the DOT during the period in which SLFRF funds are used for such projects. Recipients are required to complete existing DOT reporting requirements and report the required information to the Treasury. Recipients must consult the DOT before using their SLFRF funds under this pathway.
Funds under this pathway can be used to expand an existing DOT-funded project, cover unexpected costs of an existing DOT-funded project, or supplement projects slated to receive DOT funding by the obligation of funds deadline. Additional requirements for Pathway 1 include:
- SLFRF funds cannot be used on operating expenses for projects eligible for Urbanized Formula Grants (UFG), Fixed Guideway Capital Investment Grants (FGCIG), Formula Grants for Rural Areas (FGRA), State of Good Repair Grants, or Grants for Buses and Bus Facilities.
- For programs subject to the requirements of Title 23, there must be demonstrable progress in achieving a state of good repair under 23 U.S. Code (U.S.C.) 119(e) or support the achievement of one or more performance targets under 23 U.S.C. 150.
Pathway 2: To fund surface transportation projects that are not funded by the DOT.
Recipients are eligible to use SLFRF funds for surface transportation projects that do not, and will not, receive DOT funding if the following criteria are met:
- The SLFRF contribution does not exceed $10 million per surface transportation project.
- The project scope is limited to the set of actions and activities deemed by DOT to meet the criteria for categorical exclusion per 23 CFR. 771.116(c)1-22, 771.117(c)1-30, and 771.118(c)1-16.
There are two ways to use SLFRF funds under Pathway 2:
- Streamlined Framework
- Recipients who use this framework are not required to receive Treasury approval before expending funds on surface transportation projects.
- Project requirements:
- Must be eligible under the RAISE grant program.
- Limited to actions that do not cause significant environmental impact.
- Must not involve any unusual circumstances per the 23 CFR 711.
- Non-Streamlined Framework
- Within this framework, recipients must submit a notice of intent to the Treasury by 30 days after November 20, 2023.
- Treasury will evaluate the notices of intent that were submitted for each project and design and implement a framework for approving these types of projects.
- See the 2023 IRF section titled “Pathway Two: Notice of Intent for Projects Outside Streamlined Framework” for further guidance.
- Within this framework, recipients must submit a notice of intent to the Treasury by 30 days after November 20, 2023.
Requirements of titles 23, 40, and 49, as well as associated DOT regulations, apply to projects under this pathway unless stated otherwise by Treasury.
Pathway 3: To repay a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan or to satisfy the non-federal share requirements for projects eligible under the following programs: Infrastructure for Rebuilding America (INFRA) Grants, Mega Grants, Fixed Guideway Capital Investment Grants (FCIG), and projects that are eligible for credit assistance under the TIFIA program.
When using SLFRF funds to satisfy the non-federal share requirements for eligible projects under the above programs, DOT will not treat the SLFRF funds as federal funds and credit SLFRF funds toward the cost share or non-federal match requirements as applicable.
When using SLFRF funds to satisfy a non-federal cost share requirement, recipients are required to consult with DOT to understand further how the SLFRF funds may be used in this manner. For DOT-administered projects, all non-federal cost share requirements continue to apply, unless otherwise noted by DOT.
Support Community Development – Title I Projects
Under this new eligible use, recipients may use SLFRF funds for Title I projects, which include the activities eligible under the Community Development Block Grant (CDBG) and Indian Community Development Block Grant (ICGBD) programs. Eligible activities under CDBG and ICDBG are outlined in Section 105(a) of Title 1 of the Housing and Community Development Act of 1974. SLFRF funds used for these projects cannot exceed the greater of either $10 million or 30% of the recipient’s total SLFRF allocation. These funds must only be used to supplement and not supplant other governmental funds. Funds to be used for Title I projects must be expended by September 30, 2026.
Activities that are not eligible under CDBG or ICDBG are not eligible projects under this SLFRF Title I expansion. It is important to note that even if a project is not eligible under SLFRF funds as a Title I project, it may be eligible under other SLFRF-eligible use categories.
Eligible activities under Title I projects must satisfy the following requirements:
- For all SLFRF recipients:
- SLFRF recipients must direct at least 70% of SLFRF funds used for Title I projects to projects that benefit moderate and low-income persons.
- No more than 15% of SLFRF funds for Title I projects can be spent under “public services.”
- No more than 20% of SLFRF funds for Title I projects can be spent on administrative and planning costs.
- The requirements of Broadband Equity Access and Deployment (BEAD) apply as outlined in Section 60102 of the Infrastructure Investment and Jobs Act for BEAD programs.
- For non-tribal SLFRF recipients only:
- CDBG National Objectives: Title I projects to be funded with SLFRF funds must satisfy at least one CDBG national objective.
The expanded eligible uses of SLFRF funds under the 2023 IFR do not change any existing eligible uses as determined in the 2022 FR. As such, recipients may continue to use their SLFRF funds by the 2022 FR. The 2023 IFR addresses new eligible uses for SLFRF funds added by the Consolidated Appropriations Act, 2023. For further SLFRF and 2023 IFR details and guidance, refer to the SLFRF Overview of the Interim Final Rule and 2023 IFR located at https://home.treasury.gov/policy-issues/coronavirus.
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