"B-sides" ARPA – Congress adds fifth and sixth buckets of eligible use

If you were living your life fully in late December 2022, you can be excused for having missed a big deal in the world of the American Rescue Plan Act.¹ Your “B-sides” authors², however, grew excited at the prospect of new eligible funding categories (i.e., additional buckets of use) for recipients’ ARPA allocations.

As we know, counties, metropolitan cities and non-entitlement units of local government (i.e., non-metro cities and townships in Ohio) may use their ARPA – Local Fiscal Recovery Fund payments under four buckets of use set forth in the statute.³ 

In a little-noticed change to ARPA known as the Cornyn-Padilla Amendment, named after its authors, Sen. John Cornyn (R-Texas) and Alejandro “Alex” Padilla (D-California), which was inserted as an amendment to the federal Fiscal Year 2023 omnibus appropriations bill, we see two new buckets of eligible use of funds.

At base, the Cornyn-Padilla Amendment⁴ increases flexibility with respect to ARPA expenditures for infrastructure, community development and disaster responses.

Technically, the late December 2022 congressional action carefully inserted new language into ARPA’s enabling statute (i.e., Sec. 602’s State Fiscal Recovery Fund provisions and Sec. 603’s Local Fiscal Recovery Fund provisions), setting forth the following new uses:

• “Fifth bucket”: to provide emergency relief from natural disasters or the negative economic impacts of natural disasters, including temporary emergency housing, food assistance, financial assistance or other immediate needs; and,
• “Sixth bucket”: authority to use funds for certain infrastructure projects, which prior to this legislative change were ineligible uses of funds as a response to the COVID-19 pandemic.⁵

Of most interest is the new sixth bucket that allows ARPA recipients to use up to $10 million or 30% of their total allocations, whichever is greater, to deploy funds for projects that are otherwise eligible under a wide array of federal transportation programming. That is, states, counties, metropolitan cities and non-entitlement units of local government can deploy their unencumbered balances of ARPA funds to traffic, safety and roadway improvements – among others – as eligible ARPA expenditures so long as the specific uses of funds are similarly eligible under one or more of a long list of federal transportation and infrastructure programs.

We direct readers to a helpful list compiled by the National Association of Counties as to the federal programs for which ARPA funds may likewise be directed.

By way of example, the RAISE Grant Program provides funds to state and local governments for critical freight and passenger transportation infrastructure projects, with such funding made available for bridge construction and replacement projects, harbor berth construction and snowmelt systems. Such projects – eligible under the RAISE programming – would, in turn, represent eligible uses of those same governmental entities’ unencumbered (i.e., unobligated) ARPA allocations.

This change in the ARPA statute requires the Secretary of the Treasury to have issued guidance or promulgate a rule within 60 days of its enactment on December 29, 2022 (i.e., February 27, 2023) directing recipients how to carry out the fifth and sixth buckets of eligible use. As of this writing, we are unaware of any guidance issued by the Treasury. We continue to watch for the Treasury’s issued guidance in this matter and will provide updates accordingly.