Coronavirus State and Local Fiscal Recovery Funds

Federal RegisterSep 20, 2023

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DEPARTMENT OF THE TREASURY

31 CFR Part 35

RIN 1505-AC81

Coronavirus State and Local Fiscal Recovery Funds

AGENCY:

Department of the Treasury.

ACTION:

Interim final rule.

SUMMARY:

The Secretary of the Treasury is issuing an interim final rule to implement the amendments made by the Consolidated Appropriations Act, 2023 with respect to the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund established under the American Rescue Plan Act.

DATES:

Effective date:

The provisions in this interim final rule are effective September 20, 2023.

Comment date:

Comments must be received on or before November 20, 2023.

ADDRESSES:

Please submit comments electronically through the Federal eRulemaking Portal:

https://www.regulations.gov.

Comments can be mailed to the Office of Recovery Programs, Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220. Because postal mail may be subject to processing delay, it is recommended that comments be submitted electronically. All comments should be captioned with “Coronavirus State and Local Fiscal Recovery Funds 2023 Interim Final Rule Comments.” Please include your name, organization affiliation, address, email address and telephone number in your comment. Where appropriate, a comment should include a short executive summary. In general, comments received will be posted on

https://www.regulations.gov

without change, including any business or personal information provided. Comments received, including attachments and other supporting materials, will be part of the public record and subject to public disclosure. Do not enclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.

FOR FURTHER INFORMATION CONTACT:

Jessica Milano, Acting Chief Recovery Officer, Office of Recovery Programs, Department of the Treasury, (844) 529-9527.

SUPPLEMENTARY INFORMATION:

I. Introduction

Overview

Since the first case of coronavirus disease 2019 (COVID-19) was discovered in the United States in January 2020, the pandemic has caused severe, intertwined public health and economic crises. In March 2021, as these crises continued, the American Rescue Plan Act of 2021 (ARPA)

established the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) to provide state, local, and Tribal governments

with the resources needed to respond to the pandemic and its economic effects and to build a stronger, more equitable economy during the recovery. Upon enactment, the ARPA provided that SLFRF funds

may be used:

Sec. 9901, Public Law 117-2, 135 Stat. 223.

Throughout this

Supplementary Information

, Treasury uses “state, local, and Tribal governments” or “recipients” to refer generally to governments receiving SLFRF funds; this includes states, territories, Tribal governments, counties, metropolitan cities, and nonentitlement units of local government.

The ARPA added section 602 of the Social Security Act, which created the State Fiscal Recovery Fund, and section 603 of the Social Security Act, which created the Local Fiscal Recovery Fund (together, SLFRF). Sections 602 and 603 contain substantially similar eligible uses; the primary difference between the two sections is that section 602 established a fund for states, territories, and Tribal governments and section 603 established a fund for metropolitan cities, nonentitlement units of local government, and counties.

(a) To respond to the public health emergency or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;

(b) To respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers;

(c) For the provision of government services to the extent of the reduction in revenue due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency; and

(d) To make necessary investments in water, sewer, or broadband infrastructure.

The U.S. Department of the Treasury (Treasury) issued an interim final rule implementing the SLFRF program on May 10, 2021 (the 2021 interim final rule).

Treasury received over 1,500 public comments on the 2021 interim final rule.

See

86 FR 26786 (May 17, 2021).

Executive Summary of the 2022 Final Rule

On January 6, 2022, Treasury issued a final rule which responded to public comments and made several clarifications and changes to the provisions of the 2021 interim final rule to provide broader flexibility and greater simplicity in the SLFRF program.

The 2022 final rule provided for the following:

See

87 FR 4338 (Jan. 27, 2022).

•

Public Health and Negative Economic Impacts:

Recipients may use SLFRF funds for a non-exhaustive list of programs, services, and capital expenditures that support an eligible COVID-19 public health or economic response. Recipients must serve “impacted” and “disproportionately impacted” classes of beneficiaries: impacted classes experienced the general, broad-based impacts of the pandemic, while disproportionately impacted classes faced more severe impacts, often due to preexisting disparities.

Public health eligible uses include COVID-19 mitigation and prevention, medical expenses, behavioral healthcare, and preventing and responding to violence. Negative economic impact eligible uses include assistance to households such as job training, rent, mortgage, or utility aid, affordable housing development, childcare; assistance to small businesses or nonprofits such as through loans or grants to mitigate financial hardship; assistance to impacted industries like travel, tourism, and hospitality that faced substantial pandemic impacts; or assistance to address impacts to the public sector, for example by hiring public sector workers to pre-pandemic levels.

•

Premium Pay:

Recipients may provide premium pay to a broad set of essential workers.

•

Revenue Loss:

Recipients may determine revenue loss due to the COVID-19 public health emergency by claiming the standard allowance of up to $10 million or completing the full revenue loss calculation. Recipients may use funds under revenue loss for government services.

•

Water, Sewer, and Broadband Infrastructure:

Recipients may use SLFRF funds for eligible broadband infrastructure investments to improve access, affordability, and reliability; and for eligible water and sewer infrastructure investments, including a broad range of lead remediation and stormwater management projects.

Impact of SLFRF

Since the launch of the SLFRF program, Treasury has disbursed 99.99% of SLFRF funds to approximately 30,000 state, local, and

Tribal governments, and these recipients have moved swiftly to deploy this funding in their communities. According to data reported to Treasury through March 31, 2023,

states and the largest local governments have budgeted nearly 80% of their total available SLFRF funds. Recipients are using SLFRF funds across a wide variety of eligible uses to meet the unique needs of their communities.

Recipients have been using SLFRF funds to shore up state and local finances, helping to avoid a repeat of the Great Recession when state and local government budgets were a drag on the overall economy for 14 quarters of the recovery.

Recipients reported that they budgeted nearly $100 billion for over 53,000 revenue replacement projects to provide fiscal stability through the provision of government services. Recipients have also budgeted over $12 billion across over 5,800 projects to respond to the public health needs of the COVID-19 pandemic including by providing testing, vaccinations, staffing, and outreach to underserved communities; budgeted $17 billion in projects to meet housing needs including through rental assistance, development and preservation of affordable housing, and permanent supportive housing services; budgeted over $11 billion to support workers through job training for populations impacted by the pandemic, to provide premium pay, and to invest in public sector capacity building; and budgeted over $26 billion for water, sewer, and broadband infrastructure projects. Overall, the impact of the SLFRF program is already proving to be transformative for communities across the country as recipients use SLFRF funds to build a more equitable economic recovery and help the country be better prepared for future crises.

U.S. Department of the Treasury, April 2023 Quarterly and Annual Reporting Analysis,

https://home.treasury.gov/system/files/136/April-2023-Reporting-Blog-Post.pdf.

The figures included in this interim final rule include Project and Expenditure reporting data covering the period ending March 31, 2023 from the all SLFRF recipients. It includes quarterly data reported by states, territories, and metropolitan cities and counties with a population over 250,000 or an allocation over $10 million, non-entitlement units of local government allocated more than $10 million, and Tribal governments allocated over $30 million from January 1, 2023-March 31, 2023 and annual data reported by metropolitan cities and counties with populations less than 250,000 and an allocation less than $10 million, Tribal governments with an allocation less than $30 million, and non-entitlement units of local government allocated less than $10 million from April 1, 2022 to March 31, 2023.

Press Release, U.S. Department of the Treasury, Remarks by Secretary of the Treasury Janet L. Yellen at National Association of Counties 2023 Legislative Conference (Feb. 14, 2023).

Overview of the Consolidated Appropriations Act, 2023

On December 29, 2022, the Consolidated Appropriations Act, 2023 (the 2023 CAA) was signed into law by the President,

amending sections 602 and 603 of the Social Security Act to give state, local, and Tribal governments more flexibility to use SLFRF funds to provide emergency relief from natural disasters, build critical infrastructure, and support community development.

Public Law 117-328 (Dec. 29, 2022).

Generally, the 2023 CAA does not alter the existing eligible use categories originally provided by the ARPA. All eligible uses described in the 2022 final rule remain available to recipients. The 2023 CAA codifies the option for recipients to use up to $10 million, which Treasury termed the “standard allowance,” to replace lost revenue and use that funding to provide government services in lieu of calculating revenue loss according to the formula set forth in the 2022 final rule. Otherwise, the 2023 CAA provides for new eligible uses.

The 2023 CAA provides that state, local, and Tribal governments may use SLFRF funds to provide emergency relief from natural disasters or the negative economic impacts of natural disasters, including temporary emergency housing, food assistance, financial assistance for lost wages, or other immediate needs. As described later in this interim final rule, the emergency relief from natural disasters eligible use category is subject to the same program administration requirements as the four existing eligible uses in the SLFRF program, including the obligation deadline of December 31, 2024, and expenditure deadline of December 31, 2026.

The 2023 CAA also grants the authority for recipients to use SLFRF funds for additional infrastructure projects, including projects eligible under certain Department of Transportation programs (Surface Transportation projects) and projects eligible under Title I of the Housing and Community Development Act of 1974 (Title I projects). The 2023 CAA also provides additional requirements that apply to SLFRF funds used for Surface Transportation and Title I projects. These additional requirements provided for in the 2023 CAA are outlined below:

• The total amount of SLFRF funds a recipient may direct toward Surface Transportation and Title I projects is capped at the greater of $10 million and 30% of a recipient's total SLFRF award.

• Except as otherwise determined by the Secretary, the use of SLFRF funds for Surface Transportation and Title I projects is also subject to certain other laws, including the requirements of titles 23, 40, and 49 of the U.S. Code, title I of the Housing and Community Development Act of 1974, and the National Environmental Policy Act of 1969.

• SLFRF funds used for Surface Transportation and Title I projects must supplement, not supplant, other Federal, state, territorial, Tribal, and local government funds (as applicable) that are otherwise available for these projects. This provision does not apply to funds used under the emergency relief from natural disasters eligible use category.

• Recipients must obligate funds used for Surface Transportation projects and Title I projects by December 31, 2024 (the same obligation deadline that applies to the other eligible uses) and must expend funds by September 30, 2026. This expenditure deadline is three months earlier than the expenditure deadline for all other eligible uses.

• Treasury may delegate oversight and administration of the requirements associated with funds used for Surface Transportation projects and Title I projects to the appropriate Federal agency. This interim final rule discusses how the Department of Transportation will oversee funds expended for certain Surface Transportation projects.

Sections 602 and 603 of the Social Security Act specify two restrictions on uses of funds: for recipients other than Tribal governments, funds may not be used for deposits into any pension fund and, in the case of states and territories only, funds may not be used to directly or indirectly offset a reduction in net tax revenue resulting from a change in law, regulation, or administrative interpretation during the covered period. The 2023 CAA did not amend these restrictions.

Thus, sections 602(c)(1) and 603(c)(1) of the Social Security Act, as amended by the 2023 CAA, provide that SLFRF funds may be used:

(b) To respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers;

(i) The amount of the reduction in revenue due to the COVID-19 public health emergency relative to revenue collected in the most recent full fiscal year prior to the emergency; or

(ii) $10,000,000

(d) To make necessary investments in water, sewer, or broadband infrastructure; or

(e) To provide emergency relief from natural disasters or the negative economic impacts of natural disasters, including temporary emergency housing, food assistance, financial assistance for lost wages, or other immediate needs.

Sections 602(c)(4) and 603(c)(5) of the Social Security Act, as amended by the Infrastructure Investment and Jobs Act, provide that SLFRF funds may be used for an authorized Bureau of Reclamation project for purposes of satisfying any non-Federal matching requirement required for the project.

See

section 40909 of Public Law 117-58, 135 Stat. 429, 1126 (Nov. 15, 2021).

Sections 602(c)(5) and 603(c)(6) of the Social Security Act, as added by the 2023 CAA, provide that SLFRF funds may be used for Surface Transportation projects and Title I projects, including in some cases to satisfy a non-Federal share requirement applicable to certain projects or to repay a loan provided under one of the Surface Transportation programs.

Structure of the Supplementary Information

Following this Introduction, this

Supplementary Information

is organized into four sections: (1) Eligible Uses, (2) Discussion of Revenue Loss and Program Administration Provisions, (3) Comments and Effective Date, and (4) Regulatory Analyses. Recipients seeking information regarding the original four eligible uses in the SLFRF program generally may reference the 2022 final rule and other SLFRF program guidance.

The Eligible Uses section describes the standards for determining eligible uses of funds in each of the eligible use categories provided in the 2023 CAA:

(1) Emergency Relief from Natural Disasters

(2) Surface Transportation Projects and Title I Projects

a. Surface Transportation Projects

b. Title I Projects

As with the 2022 final rule, each eligible use category has separate and distinct standards for assessing whether a use of funds is eligible. Standards, restrictions, or other provisions in one eligible use category do not apply to other categories. Therefore, recipients should first determine which eligible use category a potential use of funds fits within, then assess whether the potential use of funds meets the eligibility standard or criteria for that category. Recipients using funds for Surface Transportation projects receiving funding from the Department of Transportation must consult with the Department of Transportation before using SLFRF funds for these projects.

In the Emergency Relief from Natural Disasters section of this interim final rule, Treasury identifies a non-exhaustive list of specific uses of funds that are eligible, called “enumerated eligible uses,” that provide emergency relief from the physical or negative economic impacts of natural disasters. The sections discussing Surface Transportation projects and Title I projects specifically describe the eligible projects articulated by the statute.

The Discussion of Revenue Loss and Program Administration Provisions section provides additional information, where relevant, to clarify the availability of the standard allowance, discuss program requirements applicable to the new eligible uses, and describe relevant distinctions between the requirements of the 2022 final rule and this interim final rule. This section includes:

(1) Revenue Loss

(2) Timeline for Use of SLFRF Funds

(3) Use of Funds for Match or Cost-Share Requirements

(4) Reporting

(5) Uniform Guidance

Next, the Comments and Effective Date section discusses the effective date and comment period for this interim final rule. Finally, the Regulatory Analyses section provides Treasury's analysis of the impacts of this rulemaking, as required by several laws, regulations, and Executive Orders. This section discusses the impact of the amendments in the 2023 CAA, where relevant. Please reference the 2022 final rule for the regulatory analyses of the impacts of the 2022 final rule.

Throughout this

SUPPLEMENTARY INFORMATION

, statements using the terms “should” or “must” refer to requirements. Statements using the term “encourage” or “advise” refer to recommendations, not requirements.

This

SUPPLEMENTARY INFORMATION

references three rule-making documents. Statements referencing “the 2021 interim final rule” refer to the rule released May 10, 2021, and published May 17, 2021. Statements referencing “the 2022 final rule” refer to the rule released January 6, 2022 and published January 27, 2022. Statements referencing “this interim final rule” reference this rule, released August 4, 2023, and published September 20, 2023.

Uses of Funds Not Specifically Identified as Eligible in This Interim Final Rule

Even if a use of funds is not specifically identified as eligible in this interim final rule, recipients may still be able to direct SLFRF funds toward that purpose as described further below.

First, the eligible uses described in the 2022 final rule remain available to recipients, and recipients may continue to pursue eligible projects under the 2022 final rule. For example, under the revenue loss eligible use category, recipients have broad latitude to use funds for government services up to their amount of revenue loss due to the pandemic, provided that other restrictions on use do not apply. A potential use of funds that does not fit within the other eligible use categories in this interim final rule or in the 2022 final rule may be permissible as a government service. Please reference the 2022 final rule for further information.

Second, the eligible use category for providing emergency relief from natural disasters provides a non-exhaustive list of enumerated eligible uses, which means that the listed eligible uses include some, but not all, of the uses of funds that could be eligible under this eligible use category. This interim final rule outlines a standard for determining other eligible forms of emergency relief, beyond those specifically enumerated. If a recipient would like to pursue a use of funds to provide emergency relief that is not specifically enumerated, the recipient should use the standards and associated guidance to assess whether the use of funds is eligible.

Third, as described further below, many of the uses in the Title I projects eligible use category are also eligible in the public health and negative economic impacts eligible use category, discussed in the 2022 final rule, where there is no cap on the amount of SLFRF funds that may be directed toward an eligible use. Furthermore, the public health and negative economic impacts eligible use category also offers a standard for determining if other uses of funds, beyond those specifically enumerated, are eligible. Recipients seeking to use SLFRF funds for Title I projects may consider the relevant eligible uses and available funding levels to determine which eligible use category best supports their community's needs. As noted above, this interim final rule did

not alter the public health and negative economic impacts eligible use category. Please see the 2022 final rule for more information.

Request for Comments

Treasury seeks comment on sections addressing the new eligible uses, Emergency Relief from Natural Disasters, Surface Transportation projects, and Title I projects. To better facilitate public comment, Treasury has included specific questions in the relevant sections of this

SUPPLEMENTARY INFORMATION

. Treasury encourages state, local, and Tribal governments in particular to provide feedback and to engage with Treasury regarding issues that may arise regarding the new eligible uses.

II. Eligible Uses

A. Emergency Relief From Natural Disasters

Background

The 2023 CAA amended sections 602 and 603 of the Social Security Act to permit recipients to use SLFRF funds to “provide emergency relief from natural disasters or the negative economic impacts of natural disasters, including temporary emergency housing, food assistance, financial assistance for lost wages, or other immediate needs.” As state, local, and Tribal governments spend billions of dollars a year to respond to the impacts of natural disasters that are growing in size, scale, and frequency, often as a result of climate change,

this new eligible use supports recipients in responding to the varied and evolving needs of their communities with SLFRF funds already on hand.

Billion-dollar disaster events account for the majority (>80%) of the damage from all recorded U.S. weather and climate events per NCEI and Munich Re. NOAA National Centers for Environmental Information (NCEI), U.S. Billion-Dollar Weather and Climate Disasters (2023),

https://www.ncei.noaa.gov/access/billions/,

DOI: 10.25921/stkw-7w73.

Since 1980, there have been 341 natural disasters in the United States that reached or exceeded damages valued at $1 billion, causing 15,821 deaths and resulting in nearly $2.5 trillion in damages.

In recent years, costly U.S. natural disasters have become even more frequent, in part due to the impacts of climate change, which are known to create more frequent and intense droughts and storms,

lengthen wildfire seasons in the Western States,

and increase heavy rainfall events in the contiguous 48 states.

In 2020, 2021, and 2022, there were an average of 20 weather and climate disasters each year that reached or exceeded damages valued at $1 billion, compared to an average of 12.8 weather and climate disasters annually from 2010 to 2019.

From 2020 to 2022 alone, these billion-dollar natural disasters caused 1,460 deaths and resulted in damages valued at $434.6 billion.

See id.

U.S. Department of the Interior, US Geological Survey, Climate FAQ: How can climate change affect natural disasters? (2023),

https://www.usgs.gov/faqs/how-can-climate-change-affect-natural-disasters#:~:text=With%20increasing%20global%20surface%20temperatures,more%20powerful%20storms%20to%20develop.

NOAA NCEI, U.S. Billion-Dollar Weather and Climate Disasters (2023),

https://www.ncei.noaa.gov/access/billions/,

DOI: 10.25921/stkw-7w73.

In recent years, a larger percentage of precipitation has come in the form of intense single-day events. Environmental Protection Agency, “Climate Change Indicators: Heavy Precipitation,” Figure 1: Extreme One-Day Precipitation Events in the Contiguous 48 states, 1910-2020 (Aug. 1, 2022).

https://www.epa.gov/climate-indicators/climate-change-indicators-heavy-precipitation.

NOAA NCEI, U.S. Billion-Dollar Weather and Climate Disasters (2023),

https://www.ncei.noaa.gov/access/billions/,

DOI: 10.25921/stkw-7w73.

See id.

The impacts of natural disasters range from loss of life and other consequences for health and safety to destruction of property and infrastructure and disruption of economic activity. The increasing prevalence of natural disasters and corresponding increased costs of responding to and recovering from natural disasters places additional burden on state, local, and Tribal governments.

This burden is experienced throughout communities, including through strains placed on public infrastructure and on households, ranging from impacts to housing, food, water, wages, and other needs.

See id.

The U.S. Census Bureau found that approximately 3.3 million people were displaced from their homes by natural disasters in 2022.

Even when individuals and families in an impacted area are not displaced after a natural disaster, they may face significant costs to repair homes to become livable again.

Natural disasters also can disrupt regular access to food and water, causing food insecurity and reliance on support from disaster relief organizations.

Furthermore, the damage caused by natural disasters can cause short-term earnings losses, as it may physically prevent individuals from working, whether due to housing displacement, physical barriers in accessing their place of employment or business, sustained damage to their place of employment or business, or injuries sustained as a result of the natural disaster.

Natural disasters also can generate a significant volume of debris

and damage buildings and infrastructure that provide critical or essential services to the general public, such as educational, utility, emergency, medical, and other services, creating strains on local governments and other responders.

U.S. Census Bureau. Household Pulse Survey: Displaced in Last Year by Natural Disaster (2023).

https://www.census.gov/data-tools/demo/hhp/#/?measures=DISPLACED.

Harvard University's Joint Center for Housing Studies estimates that disaster-related home repairs and improvements cost $300 million in annual spending for every $10 billion in disaster losses incurred in the three years prior. Kermit. Baker & Alexander Hermann, Joint Center for Housing Studies of Harvard University.

Rebuilding from 2017's Natural Disasters: When, For What, and How Much?, https://www.jchs.harvard.edu/blog/rebuilding-from-2017s-natural-disasters-when-for-what-and-how-much.

Centers for Disease Control and Prevention, Natural Disaster and Severe Weather,

Food and Water Needs: Preparing for a Disaster or Emergency

(Jan. 29, 2019).

Jeffrey A. Groen, et al, Census Bureau, Center for Economic Studies.

Storms and Jobs: The Effect of Hurricanes on Individuals' Employment and Earnings over the Long Term, https://www2.census.gov/ces/wp/2015/CES-WP-15-21.pdf.

Linda Luther, Congressional Research Service, R44941, Disaster Debris Management: Requirements, Challenges, and Federal Agency Roles (2017).

While the impacts of a natural disaster can be widespread, communities that are historically underserved often experience heightened impacts as a result of underlying disparities and ability to prepare for disasters,

resiliency of homes to natural disasters,

risk of food insecurity,

ability to recover financially after a natural disaster,

and ultimately their ability to quickly return to social and economic life after a natural disaster.

Tribal governments, for example, are the first and sometimes the only responders to natural disasters that impact their communities.

Despite this responsibility, Tribal emergency management capacity has been underfunded over the years,

limiting Tribal governments' access to disaster resources before, during, or after the disaster strikes.

Federal Emergency Management Agency (FEMA), 2022-2026 FEMA Strategic Plan (2023).

Substance Abuse and Mental Health Services Administration, Disaster Technical Assistance Center Supplemental Research Bulleting,

Greater Impacts: How Disasters Affect People of Low Socioeconomic Status

(2017).

Kevin M. Fitzpatrick, et al.,

Food Insecurity in the Post-Hurricane Harvey Setting: Risks and Resources in the Midst of Uncertainty,

17(22), Int. J. Environ. Res.Public Health 8424, (2020).

Caroline Ratcliffe, et al., Urban Institute, Insult to Injury Natural Disasters and Residents' Financial Health 7 (2019).

FEMA, 2022-2026 FEMA Strategic Plan (2023).

National Congress of American Indians, Indian Country FY 2022 Budget Request (2023), 47-54.

https://www.ncai.org/resources/ncai-publications/NCAI_IndianCountry_FY2022_BudgetRequest.pdf.

See Id.

This interim final rule provides significant flexibility for recipients to use SLFRF funds to provide emergency relief from the widespread physical and negative economic impacts of natural disasters. Recognizing that communities that have been historically underserved often experience deeper impacts of natural disasters due in part to differences that exist prior to the occurrence of a natural disaster, Treasury encourages recipients to consider how the emergency relief they provide supports all communities in resuming their lives after a natural disaster and building resiliency to future natural disasters.

In the section that follows, this interim final rule discusses how recipients may use SLFRF funds to provide emergency relief from the physical or negative economic impacts of natural disasters, including the standards for identifying a natural disaster and responsive emergency relief.

1. Standards for Providing Emergency Relief From Natural Disasters

This section of the interim final rule discusses the standards for providing emergency relief from the physical or negative economic impacts of natural disasters. Generally, a recipient should undertake the following two-step process:

1. Identify a natural disaster that has occurred or is expected to occur imminently, or a natural disaster that is threatened to occur in the future.

2. Identify emergency relief that responds to the physical or negative economic impacts, or potential physical or negative economic impacts, of the identified natural disaster. The emergency relief must be related and reasonably proportional to the impact identified.

This interim final rule implements the framework described above by defining natural disaster, defining emergency relief, and providing a non-exhaustive list of examples of emergency relief that may be provided. In addition to this non-exhaustive list, recipients may use the two-step framework above to identify and provide additional types of emergency relief in response to the physical or negative economic impacts, or the potential for such impacts, of an identified natural disaster.

The eligible uses set forth in this interim final rule provide flexibility to recipients to respond to the widespread physical and economic impacts of natural disasters in their communities. Treasury encourages recipients to consider how the provision of emergency relief can support communities that have been historically underserved and are more at risk of the impacts of natural disasters.

2. Identifying Natural Disasters

This interim final rule explains that for the purposes of the SLFRF program, a natural disaster is defined as a hurricane, tornado, storm, flood, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, drought, or fire, in each case attributable to natural causes, that causes or may cause substantial damage, injury, or imminent threat to civilian property or persons. A natural disaster may also include another type of natural catastrophe, attributable to natural causes, that causes, or may cause substantial damage, injury, or imminent threat to civilian property or persons. This definition provides recipients the flexibility to determine an event to be a natural disaster even if it is not of a type specifically listed in the definition. This definition is based on the definition of natural disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121

et seq.

) (the Stafford Act), which provides the statutory authority for most Federal disaster response activities, including as they pertain to Federal Emergency Management Agency (FEMA) assistance and programs.

The Stafford Act provides the framework for an orderly means of assistance by the Federal government to state, local, and Tribal governments in carrying out their responsibilities to alleviate the suffering and damage that result from such disasters.

See

42 U.S.C. 5195a(a)(2).

FEMA, Stafford Act, as

Amended,

P-592 vol. 1 (2021).

3. Identifying Emergency Relief

This interim final rule defines emergency relief as assistance that is needed to save lives and to protect property and public health and safety, or to lessen or avert the threat of catastrophe. This definition of emergency relief is based on the Stafford Act's definition of “emergency.”

See

42 U.S.C. 5122(1) (“'Emergency' means any occasion or instance for which, in the determination of the President, Federal assistance is needed to supplement State and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States.”)

Emergency relief must be related and reasonably proportional to the physical or negative economic impacts of a natural disaster that has occurred or is expected to occur imminently, or to the potential physical or negative economic impacts of a natural disaster that is threatened to occur in the future. Emergency relief that bears no relation or is grossly disproportionate to the type or extent of the impacts of the natural disaster would not be an eligible use.

In the case of a response to a natural disaster that has occurred or is expected to occur imminently, communities, individuals, or areas that did not or are not expected to experience the natural disaster or its negative economic impacts would not be eligible to receive emergency relief in response to the natural disaster. In evaluating whether a use is reasonably proportional, recipients should consider relevant factors about the natural disaster's actual or imminent physical or negative economic impacts and the emergency relief to be provided, including the availability of other assistance such as insurance or other Federal assistance. For more information, recipients should reference the section titled Duplication of Benefits below. Recipients should also consider the efficacy, cost, cost effectiveness, and time to delivery of the response.

When providing emergency relief from a natural disaster that is threatened to occur in the future, mitigation activities to address the potential physical or economic impacts of the natural disaster in a community where the natural disaster is unlikely to occur would not be considered a related and reasonably proportional response because there would not be an established need to provide emergency relief from that natural disaster, for example.

Available emergency relief based on the immediacy of the natural disaster.

This section discusses how recipients may distinguish between a natural disaster that has already occurred or is expected to occur imminently, and the threat of a future occurrence of a natural disaster. As discussed, recipients may provide emergency relief from natural disasters in the form of assistance that is needed to save lives and to protect property and public health and safety or to lessen or avert the threat of catastrophe.

To provide emergency relief before, during, or after a natural disaster that has already occurred or is expected to occur imminently, the recipient should first identify how the disaster meets the definition of natural disaster as described above. The natural disaster

that has occurred or is imminent must be, or have been, the subject of an emergency declaration or designation applicable to the recipient's geography and jurisdiction in the form of (1) an emergency declaration pursuant to the Stafford Act; (2) an emergency declaration by the Governor of a state pursuant to state law; or (3) an emergency declaration made by a Tribal government. If one of the declarations listed in (1)-(3) is not available, recipients may satisfy this requirement through the designation of an event as a natural disaster by the chief executive (or equivalent) of the recipient government, provided that the chief executive documents that the event meets the definition of natural disaster provided above. Recipients should maintain documentation consistent with the terms and conditions of the award agreement. Note that if the governor of a state declares an emergency for the entire state, the local governments within that state are not also required to declare an emergency in order to use SLFRF funds to provide emergency relief. A recipient government does not need to submit to Treasury for approval of the designation of a natural disaster; Treasury will defer to the reasonable determination of the recipient's chief executive (or equivalent) in making such a designation. For information about duplication of benefits requirements when responding to natural disasters with Stafford Act declarations, please reference the section titled Duplication of Benefits below.

As discussed above, Treasury's definition of emergency relief includes assistance to lessen or avert the threat of a future natural disaster, based on the Stafford Act definition of “emergency,” which enables recipients to provide mitigation activities. By providing mitigation activities that would reduce the threat of a future natural disaster's potential impacts, the recipient will have reduced the severity of threats to life, risks of loss of economic activity, and costs to private and public entities to respond and recover, because less damage will be incurred.

To provide emergency relief in the form of mitigation activities, to lessen or avert the threat of a future natural disaster, a recipient should document evidence of historical patterns or predictions of natural disasters (as defined above) that would reasonably demonstrate the likelihood of the future occurrence of a natural disaster in its community. A recipient should use this evidence to support its determination that mitigation activities would be related and reasonably proportional to the threat of a natural disaster that it is addressing. For example, a recipient could utilize FEMA's National Risk Index

to represent the community's relative risk for hurricanes to establish the likelihood of a future hurricane, or a Tribal government could cite Indigenous Traditional Ecological Knowledge to determine future risks.

See

FEMA's National Risk Index available at

https://hazards.fema.gov/nri/hurricane.

Memorandum from the White House Office of Science and Technology Policy & the White House Council on Environmental Quality on Indigenous Traditional Ecological Knowledge and Federal Decision Making (Nov. 15, 2021). For example, a Tribe may be able to rely on Indigenous Traditional Ecological Knowledge in considering the threat of wildfires on Tribal lands.

4. Eligible Types of Emergency Relief

Sections 602 and 603 of the Social Security Act, as amended by the 2023 CAA, provide a non-exhaustive list of four types of emergency relief from natural disasters or their negative economic impacts that may be provided using SLFRF funds: temporary emergency housing, food assistance, financial assistance from lost wages, and other immediate needs. This interim final rule discusses and expands on this list, to enable recipients both to complement existing disaster relief funding and to address gaps in assistance.

To facilitate implementation, this interim final rule identifies a non-exhaustive list of eligible emergency relief, which means that the listed eligible uses include some, but not all, of the uses of funds that could be eligible. This non-exhaustive list of eligible emergency relief does not distinguish between emergency relief from the physical impacts of natural disasters and emergency relief from the negative economic impacts of natural disasters. However, the list does distinguish between emergency relief provided from a declared or designated natural disaster that has occurred or is expected to occur imminently, and emergency relief provided from the threat of a future natural disaster. To assess whether additional types of emergency relief would be eligible under this category beyond the non-exhaustive list provided below, recipients should first identify a natural disaster and then identify emergency relief that responds to the natural disaster's physical or negative economic impacts according to the standards discussed in the prior section.

Treasury has included references to programs currently administered by FEMA in the discussion of the eligible uses below. These references do not impose any of the associated requirements of these FEMA-administered programs. Furthermore, recipients are not required to receive pre-approval from FEMA or Treasury to use SLFRF funds for these eligible uses.

Duplication of Benefits.

As a general matter, recipients may not claim use of Federal financial assistance to cover a cost that the recipient is covering with another Federal award, by insurance, or from another source,

and subrecipients are bound by the same requirements as recipients.

Specific requirements apply when recipients use Federal funds to provide assistance with respect to losses suffered as a result of a major disaster or emergency declared under the Stafford Act (disaster losses). Under the emergency relief from natural disasters eligible use category, certain duplication of benefits requirements under the Stafford Act, in addition to all relevant Uniform Guidance cost principles requirements, would apply to recipients using funds for events that both a) satisfy this interim final rule's definition of natural disaster and b) form the basis for a Stafford Act declaration of an emergency or major disaster. Accordingly, if a recipient uses SLFRF funds to cover disaster losses under the emergency relief from natural disasters eligible use category, it must abide by the Stafford Act's prohibition on duplication of benefits: Recipients may not provide financial assistance to a person, business concern, or other entity with respect to disaster losses for which such beneficiary will receive financial assistance under any other program or from insurance or any other source.

A recipient may provide assistance with respect to disaster losses to a person, business concern, or other entity that is or may be entitled to receive assistance for those losses from another source, if such person, business concern, or other entity has not received the other benefits by the time of application for SLFRF funds and the person, business concern, or other entity agrees to repay any duplicative

assistance to the SLFRF recipient.

Recipients may also use SLFRF funds to provide assistance for any portion of disaster losses not covered by other benefits.

See, e.g.,

2 CFR 200.1

Definitions

(defining “improper payment” to include “duplicate payments”); 2 CFR 200.403

Factors affecting allowability of costs

(providing that “in order to be allowable under Federal awards” costs must “[b]e necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles” and “[n]ot be included as a cost . . . of any other federally-financed program in either the current or a prior period”).

2 CFR 200.101(b)(2) (“The terms and conditions of Federal awards (including this part [2 CFR part 200, the Uniform Guidance]) flow down to subawards to subrecipients unless a particular section of this part or the terms and conditions of the Federal award specifically indicate otherwise.”).

See

5 U.S.C. 5155(a).

See

5 U.S.C. 5155(b)(1).

See

5 U.S.C. 5155(b)(3).

To ensure compliance with the Stafford Act's prohibition on duplication of benefits, SLFRF recipients are advised to review FEMA's guidance codified at 44 CFR 206.191.

FEMA's guidance sets forth a “delivery sequence” for assistance with disaster losses, providing that sources of assistance later in the sequence are considered “duplicative” if paid despite the availability of other sources of assistance earlier in the sequence.

That is, if two sources provide assistance for the same disaster losses, the assistance provided later in the delivery sequence is considered duplicative and must not be paid or if paid must be repaid when the duplication of benefits occurs. While not listed in section 206.191's delivery sequence, recipients should treat SLFRF funds as last in the delivery sequence, unless the recipient, in consultation with the appropriate FEMA Regional Administrator or state disaster-assistance administrator, determines that another sequence is appropriate.

For example, assistance with disaster losses would generally be duplicative of insurance covering those same losses because insurance comes first in the delivery sequence. In that case, SLFRF funds should not be used to cover any portion of the disaster losses for which insurance benefits are received. The recipient is responsible for preventing and rectifying duplication of benefits with respect to disaster losses and should coordinate with the relevant FEMA Regional Administrator and state disaster assistance administrator, or other relevant agencies providing disaster assistance, as described in FEMA's guidance.

44 CFR 206.191(d).

As provided in FEMA's guidance, “If following the delivery sequence concept would adversely affect the timely receipt of essential assistance by a disaster victim, an agency may offer assistance which is the primary responsibility of another agency.” 44 CFR 206.191(d)(4).

To facilitate compliance with the Stafford Act's prohibition on duplication of benefits, Treasury intends to require recipients to report their use of SLFRF funds to provide assistance with respect to disaster losses. Recipients are further required to notify subrecipients and contractors that, when providing assistance in response to a Stafford Act Declaration, they are responsible for ensuring that beneficiaries disclose any other assistance received for the same disaster losses prior to receiving assistance with SLFRF funds. Treasury further intends to make the reported information available to FEMA, the relevant FEMA Regional Administrator, and other agencies providing assistance with respect to disaster losses, as appropriate.

Non-Federal Matching Requirements.

The emergency relief enumerated eligible uses do not add any new authority for recipients to use SLFRF funds to satisfy non-Federal matching requirements of other Federal programs. Instead, as described in the 2022 final rule, recipients may use SLFRF funds under the revenue loss eligible use category to satisfy non-Federal matching requirements. The newly eligible Surface Transportation projects and Title I projects, discussed later in this interim final rule, also provide recipients the ability to use funds to satisfy non-Federal cost share requirements in certain instances. Recipients seeking to use SLFRF funds for non-Federal matching requirements should reference the section titled Use of Funds for Match or Cost-Share Requirements in this interim final rule and the 2022 final rule for additional information.

a. Declared or Designated Natural Disasters

Below, Treasury is providing a non-exhaustive list of eligible uses that recipients may provide as emergency relief from the physical or negative economic impacts of a natural disaster that has a declaration or designation, as described above.

Temporary emergency housing.

Recipients may provide emergency relief from the physical or negative economic impacts of a natural disaster in the form of temporary emergency housing to individuals and households including by providing funds for temporary housing for households who are unable to live in their home following a natural disaster. Examples of temporary emergency housing could include rental assistance or reimbursement for hotel costs; providing a temporary housing unit when individuals are facing challenges finding permanent housing due to shortages caused by a natural disaster; establishing other temporary emergency housing, including congregate and non-congregate shelter (

i.e.,

sheltering individuals in motels, hotels, dorms, etc.) before, during, or after a natural disaster; or providing shelter following an evacuation due to a natural disaster. Given the varying potential impacts of a natural disaster, recipients have flexibility to determine the length of time to provide temporary emergency housing based on the impact of the natural disaster and the housing conditions in their jurisdiction.

Food assistance.

Recipients may provide emergency relief from the physical or negative economic impacts of a natural disaster in the form of food assistance. As is the case across the SLFRF program, recipients may administer programs through a range of other entities, including nonprofit and for-profit entities, to carry out eligible uses on behalf of the recipient government, including to provide emergency relief in the form of food assistance.

Financial assistance for lost wages.

Recipients may provide emergency relief from the physical or negative economic impacts of a natural disaster in the form of financial assistance for lost wages. As with all forms of emergency relief under this eligible use category, financial assistance for lost wages must be related and reasonably proportional to the impact identified. In making this determination, recipients should consider all sources of available relief and other resources available to the potential beneficiaries of financial assistance.

Generally, Federal financial assistance programs directed toward individuals are designed to target individuals with a specific set of circumstances or to provide those who earn up to a specific income threshold with a specified amount of assistance. For example, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. 281 (March 27, 2020) provided an eligible individual a refundable tax credit of up to $1,200 ($2,400 for eligible individuals filing a joint tax return), plus $500 per qualifying child of the eligible individual. The credit was reduced for taxpayers with adjusted gross income that exceeded a threshold. The threshold was $150,000 in the case of a joint return, $112,500 in the case of a head of household, and $75,000 otherwise. An advance refund of this credit, referred to by the IRS as an Economic Impact Payment, was made during 2020.

For more information on Treasury's Economic Impact Payments provided in response to the COVID-19 public health emergency,

see https://home.treasury.gov/policy-issues/coronavirus/assistance-for-american-families-and-workers/economic-impact-payments.

Recipients may provide financial assistance for lost wages by providing supplemental benefits to individuals who are participating in state unemployment insurance programs or

the Department of Labor's Disaster Unemployment Assistance (DUA) program at the time the natural disaster occurred or following the natural disaster. Supplemental benefits can be provided to any person who is impacted by the natural disaster and receiving state unemployment insurance program benefits or DUA program benefits.

The amount of financial assistance for lost wages paid as a supplemental benefit to participants in the programs discussed above must not exceed $400 a week for the duration of the need for emergency relief. This limit was determined to be reasonably proportional through the review of other assistance for lost wages, such as the FEMA COVID-19 Assistance Program for Lost Wages,

which offered participants the option to provide claimants a lost wages supplement of up to $400, providing additional financial assistance for individuals who were participants in other Federal financial assistance programs during the height of the COVID-19 emergency. To provide other types of direct financial assistance to individuals impacted by natural disasters, please refer to the section titled Cash Assistance below.

Memorandum from President Trump on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019 (Aug. 8, 2020).

Other immediate needs.

As discussed above, natural disasters cause varied damage to persons, property, and infrastructure. Recipients may provide emergency relief from the physical or negative economic impacts of natural disasters for other immediate needs not discussed above. Below, this interim final rule discusses examples of eligible uses available to state, local, and Tribal governments using SLFRF funds to address other immediate needs.

Emergency Protective Measures.

Recipients may use SLFRF funds to provide emergency protective measures, such as those described in Category B of FEMA's Public Assistance program to respond before, during, or after a natural disaster.

By referencing Category B eligible uses as an illustrative list of the types of emergency protective measure recipients may pursue with SLFRF funds, Treasury is seeking to simplify the administrability of this eligible use through a framework that may already be familiar to recipients. As noted above, recipients are not required to comply with the requirements associated with FEMA's Public Assistance program and are not required to receive pre-approval from FEMA or Treasury to use SLFRF funds for this purpose. Category B of FEMA's Public Assistance program includes assistance like emergency access, medical care and transport, emergency operations center related costs and other activities traditionally undertaken as part of emergency response. In considering what “other activities” are eligible under this category, recipients are encouraged to refer to Chapter 7 Section II of FEMA's Public Assistance Program and Policy Guide, which discusses Category B Emergency Protection Measures.

For Category B Emergency Protection Measures that are only eligible under FEMA's Public Assistance program as direct Federal assistance, recipients may use SLFRF funds to provide these services directly, such as emergency communications or public transportation.

FEMA, FP 104-009-02, Public Assistance Program and Policy Guide Version 4 (2020).

See id.

Other examples of emergency protective measures include: transporting and pre-positioning equipment and resources; flood fighting; firefighting; purchasing and distributing supplies and commodities; provision of medical care and transport; evacuation and sheltering; provision of childcare; demolition of structures; search and rescue to locate survivors, household pets, and service animals requiring assistance; use or lease of temporary generators for facilities that provide essential community services; dissemination of information to the public to provide warnings and guidance about health and safety hazards; searching to locate and recover human remains; storage and interment of unidentified human remains; mass mortuary services; construction of emergency berms or temporary levees to provide protection from floodwaters or landslides; emergency repairs necessary to prevent further damage, such as covering a damaged roof to prevent infiltration of rainwater; buttressing, shoring, or bracing facilities to stabilize them or prevent collapse; emergency slope stabilization; mold remediation; extracting water and clearing mud, silt, or other accumulated debris from eligible facilities; taking actions to save the lives of animals; and snow removal.

Debris Removal.

Recipients may use SLFRF funds for debris removal activities. Generally, this includes the clearance, removal, and disposal of vegetative debris (including tree limbs, branches, stumps, or trees), construction and demolition debris, sand, mud, silt, gravel, rocks, boulders, white goods, and vehicle and vessel wreckage. These eligible uses are described further in Category A of FEMA's Public Assistance program.

As noted above, recipients are not required to receive pre-approval from FEMA or Treasury to use SLFRF funds for these eligible uses. Recipients are also not required to comply with the requirements associated with FEMA's Public Assistance program.

See id.

Public Infrastructure Repair.

Recipients may use SLFRF funds to restore public infrastructure damaged by a natural disaster, including roads, bridges, and utilities. Recipients may restore public infrastructure to its pre-disaster size, capacity, and function in accordance with applicable laws, codes, and standards. As part of restoring public infrastructure damaged by a natural disaster, recipients also may undertake activities that make this restored infrastructure more resilient to future natural disasters, helping to mitigate the impacts of future natural disasters. For more information on how to incorporate mitigation activities into a public infrastructure project, please see the section titled Threat of Future Natural Disaster: Mitigation Activities below.

Increased operational and payroll costs.

When providing emergency relief from the physical or negative economic impacts of natural disasters, recipients may need to increase government services due to suddenly lacking or limited resources or may need to leverage existing government services or government facilities to be responsive as quickly and effectively as possible. Recipients may use SLFRF funds for increased operating costs, including payroll costs and costs for government facilities and government services used before, during, or after a natural disaster. This may include social services that are directly responsive to an impact from the disaster, representing an increased cost of providing those services due to the disaster.

Cash Assistance.

Recipients may use SLFRF funds to provide cash assistance for uninsured or underinsured expenses caused by the disaster such as repair or replacement of personal property and vehicles, or funds for moving and storage, medical, dental, childcare, funeral expenses, behavioral health services, and other miscellaneous items. The eligible uses are generally modeled on FEMA's Individuals and Households program, which provides money and services to individuals who have experienced a disaster whose property has been damaged or destroyed and whose losses are not covered by

insurance.

Consistent with the provision of emergency relief discussed throughout this section, recipients are not required to comply with the requirements associated with FEMA's Individuals and Households program to use SLFRF funds for these eligible uses. Furthermore, recipients are not required to receive pre-approval from FEMA or Treasury to use SLFRF funds for these eligible uses.

FEMA, A guide to the Disaster Declaration process and Federal Disaster Assistance,

https://www.fema.gov/pdf/rrr/dec_proc.pdf.

Recognizing that low-income households often experience deeper challenges recovering financially from a natural disaster,

recipients may also design cash assistance programs that serve low-income households that have been impacted by a natural disaster. Consistent with Treasury's definition of low-income household in the public health and negative economic impacts eligible use category in the 2022 final rule, for this purpose a low-income household is one with (i) income at or below 185 percent of the Federal Poverty Guidelines for the size of its household based on the most recently published poverty guidelines by the Department of Health and Human Services or (ii) income at or below 40 percent of area median income for its county and size of household based on the most recently published data by the Department of Housing and Urban Development. Treasury will presume that cash assistance provided to low-income households impacted by a natural disaster is related and reasonably proportional emergency relief to address the negative economic impacts of natural disasters.

Caroline Ratcliffe et al., Urban Institute, Insult to Injury Natural Disasters and Residents' Financial Health 7 (2019).

In designing a cash assistance program targeted to low-income households impacted by a natural disaster, recipients are not required to apply a specific dollar threshold for permissible payments and instead, recipients have flexibility in determining the appropriate level of cash assistance. This approach enables recipients to respond to the particularized natural disaster impacts for their low-income community members.

Home Repairs for Uninhabitable Primary Residences.

Recipients may use SLFRF funds to rebuild homes or provide home repairs not covered by insurance to make residences that meet the criteria below habitable again. The residence must be a primary residence and be uninhabitable as a result of a natural disaster. As part of making home repairs, recipients may undertake activities that make restored homes more resilient to future natural disasters, helping to mitigate the impacts of future natural disasters. For more information on how to incorporate mitigation activities into home repair projects, please see the section titled Threat of Future Natural Disaster: Mitigation Activities below. This eligible use is generally modeled off of FEMA's Individuals and Households program, which provides money and services to individuals who have experienced a disaster whose property has been damaged or destroyed and whose losses are not covered by insurance.

Uses of funds that are eligible under FEMA's Individuals and Households program are eligible under the SLFRF, but recipients are not required to comply with the requirements associated with FEMA's Individuals and Households program and are not required to receive pre-approval from FEMA or Treasury to use SLFRF funds for these eligible uses.

FEMA, A Guide to the Disaster Declaration Process and Federal Disaster Assistance,

https://www.fema.gov/pdf/rrr/dec_proc.pdf.

b. Threat of Future Natural Disaster: Mitigation Activities

In addition to the emergency relief described above, recipients also may provide emergency relief to lessen or avert the threat of a natural disaster and its potential physical or negative economic impacts through mitigation activities. Some examples of eligible mitigation activities include the eligible project types described in FEMA's Hazard Mitigation Assistance Guidance, such as structure elevation, mitigation reconstruction, dry flood proofing, structural retrofitting, non-structure retrofitting, wind retrofit, and infrastructure retrofit.

Recipients are not required to receive pre-approval from FEMA or Treasury to use SLFRF funds for these eligible uses. Recipients are also not required to comply with the other requirements associated with FEMA's Hazard Mitigation Assistance programs.

FEMA, Hazard Mitigation Assistance Guide Hazard Mitigation Grant Program, Pre-Disaster Mitigation Program, and Flood Mitigation Assistance Program (2015),

https://www.fema.gov/sites/default/files/2020-07/fy15_HMA_Guidance.pdf.

Mitigation activities may be stand-alone projects that reduce or eliminate the potential impacts of the threat of a natural disaster or may be incorporated into repair or reconstruction projects that address the impacts of a natural disaster. For example, if a recipient is repairing the roof of a home damaged by a wildfire, the roof can be strengthened or fireproofed to make it more resilient to future wildfires as well. Similarly, recipients repairing roads damaged by flooding can incorporate drainage or pervious pavement that would result in a reduced or eliminated impact of flooding in the future, thereby decreasing future costs of repair and impact to the community. As discussed above, when identifying the threat of a natural disaster, a recipient must have documented evidence that historical patterns or predictions that reasonably demonstrate the likelihood of future occurrence of a natural disaster in the community.

Mitigation Activities with Capital Expenditures Exceeding $1 Million.

In the case of mitigation activities with total expected capital expenditures of $1 million or greater, recipients other than Tribal governments must complete and meet the substantive requirements of a Written Justification for the capital expenditures in their project. Recipients will submit this Written Justification to Treasury as part of the Project & Expenditure report. Treasury will amend the Compliance and Reporting Guidance to describe how recipients will submit this information.

As discussed in Timeline for Use of SLFRF Funds section, SLFRF funds for this eligible use must be obligated by December 31, 2024, and expended by December 31, 2026. Capital expenditures may involve long lead-times, and the Written Justification may support recipients in analyzing proposed capital expenditures to confirm that they conform to the obligation and expenditure timing requirements. Further, such large projects may be less likely to be reasonably proportional to the potential impacts identified. Treasury is adopting the Written Justification requirement in recognition of this and the need for consistent documentation and reporting to support monitoring and compliance with the ARPA and this interim final rule. For projects with capital expenditures that only repair or restore infrastructure to pre-disaster conditions and do not include mitigation activities, recipients are not required to complete a Written Justification.

As noted above, Tribal governments are not required to complete the Written Justification for mitigation activities with total capital expenditures of $1 million or greater. Tribal governments generally have limited administrative capacity due to their small size and corresponding limited ability to supplement staffing for short-term programs. In addition, Tribal governments are already subject to

unique considerations that require additional administrative processes and administrative burden for Tribal government decision making, including capital expenditures. Tribal governments generally are subject to a jurisdictionally complex set of rules and regulations in the case of improvements to land for which the title is held in trust by the United States for a Tribe (Tribal Trust Lands). This includes the requirement in certain circumstances to seek the input or approval of one or more Federal agencies such as the Department of the Interior, which holds fee title of Tribal Trust Lands.

As a result of their limited administrative capacity and the unique and complex rules and regulations applicable to Tribal governments operating on Tribal Trust Lands, Tribal governments would experience significant and redundant administrative burden by also being required to complete a Written Justification for applicable capital expenditures. While Tribal governments are not required to complete the Written Justification, associated substantive requirements continue to apply, including the requirement that a capital expenditure must be related and reasonably proportional to the extent and type of the threat or impact being addressed. Note that, as a general matter, Treasury may also request further information on SLFRF expenditures and projects, including capital expenditures, as part of the regular SLFRF reporting and compliance process, including to assess their eligibility under this interim final rule.

Written Justification Requirements for Mitigation Capital Expenditures.

For non-Tribal government recipients pursuing mitigation activities where a Written Justification is required, the Written Justification must (1) describe the emergency relief provided by the mitigation activity; (2) explain why a capital expenditure is appropriate to address the need for emergency relief; and (3) compare the proposed mitigation activity capital expenditure against alternative capital expenditures that could be made. The information required by the Written Justification reflects the framework applicable to all uses under the emergency relief from natural disasters eligible use category, providing justification for the relatedness and reasonable proportionality of the capital expenditure in response to the potential impact identified.

Description of emergency relief to be provided and potential impact to be addressed:

Recipients should provide a description of the specific mitigation activities that provide emergency relief and explain why emergency relief is needed to lessen or avert the potential impacts of the natural disaster that is threatened to occur in the future. When appropriate, recipients may provide quantitative information on the extent and type of assistance needed to provide emergency relief, such as the number of individuals or entities that may be affected. As discussed above, when recipients identify a natural disaster that is threatened to occur in the future, recipients must document evidence of historical patterns or predictions of natural disasters that would reasonably demonstrate the likelihood of future occurrence of a natural disaster in their communities. In the Written Justification, recipients should use this evidence, along with considerations of efficacy, cost, cost effectiveness, and time to delivery, to support their determinations that mitigation activities would be related and reasonably proportional.

Explanation of why a mitigation capital expenditure is appropriate:

Recipients should provide an assessment demonstrating why a mitigation activity capital expenditure is appropriate to address the specified potential impact identified. This should include an explanation of why existing capital equipment, property, or facilities would be inadequate to addressing the potential impact of the threat of a natural disaster and why policy changes or additional funding to pertinent programs or services would be insufficient without the corresponding capital expenditures. Recipients are not required to demonstrate that the potential impacts would be irremediable but for the additional capital expenditure; rather, they may show that other interventions would be inefficient, costly, or otherwise not reasonably designed to remedy the need for emergency relief without additional capital expenditure.

Comparison of the proposed capital expenditure against alternative capital expenditures:

Recipients should provide an objective comparison of the proposed mitigation capital expenditure against at least two alternative capital expenditures and demonstrate why their proposed capital expenditure is superior to alternative capital expenditures that could be made. Specifically, recipients should assess the proposed capital expenditure against at least two alternative types or sizes of capital expenditures that are potentially effective and reasonably feasible. Where relevant, recipients should compare the proposal against the alternative of improving existing capital assets already owned or leasing other capital assets. Recipients should use quantitative data when available, although they are encouraged to supplement with qualitative information and narrative description. Recipients that complete analyses with minimal or no quantitative data should provide an explanation for doing so.

In determining whether their proposed mitigation activity capital expenditure is superior to alternative capital expenditures, recipients should consider the following factors against each selected alternative.

a. A comparison of the effectiveness of the capital expenditures in addressing the need for mitigation identified.

Recipients should generally consider the effectiveness of the mitigation capital expenditures in addressing the potential impacts of the threatened natural disasters over the useful life of the capital asset and may consider metrics such as the number of individuals or entities served, when such individuals or entities are estimated to be served, the relative time horizons of the project, and consideration of any uncertainties or risks involved with the capital expenditure.

b. A comparison of the expected total cost of the capital expenditures.

Recipients should consider the expected total cost of the mitigation capital expenditure required to construct, purchase, install, or improve the capital assets intended to address the need for emergency relief from the threat of the natural disaster identified. Recipients should include pre-development costs in their calculation and may choose to include information on ongoing operational costs, although this information is not required. Recipients should balance the effectiveness and costs of the proposed capital expenditure against alternatives and demonstrate that their proposed capital expenditure is superior. Further, recipients should choose the most cost-effective option unless it substantively reduces the effectiveness of the capital investment in addressing the need for emergency relief from the threat of the natural disaster identified.

Because, in all cases, uses of SLFRF funds to provide emergency relief from natural disasters must be related and reasonably proportional to actual or potential physical or negative economic impacts of a natural disaster, some capital expenditures may not be eligible.

In selecting the $1 million threshold, Treasury recognized that mitigation activity capital expenditures vary widely in size and therefore would

benefit from tiered treatment to implement eligibility standards while minimizing administrative burden. The $1 million threshold for whether a recipient needs to complete a Written Justification will allow recipients a simplified pathway to complete smaller projects.

Expenditures from closely related activities directed toward a common purpose are considered part of the scope of one project. These expenditures can include capital expenditures, as well as expenditures on related programs, services, or other interventions. A project includes expenditures that are interdependent (

e.g.,

acquisition of land, construction of the facility on the land, and purchase of equipment), or are of the same or similar type and would be utilized for a common purpose (

e.g.,

acquisition of barricades that would be used to provide emergency relief from natural disasters). Recipients must not segment a larger project into smaller projects in order to evade review. A recipient undertaking a set of identical or similar projects may complete one Written Justification comprehensively addressing the entire set of projects.

Treasury employs a risk-based approach to overall program management and monitoring, which may result in heightened scrutiny on larger projects. Accordingly, recipients pursuing projects with larger mitigation capital expenditures should complete more detailed analyses for their Written Justification, commensurate with the scale of the project.

Strong Labor Standards in Construction.

As discussed in the 2022 final rule, Treasury continues to encourage recipients to carry out public infrastructure and mitigation activities in ways that produce high-quality work, avert disruptive and costly delays, and promote efficiency. Treasury encourages recipients to use strong labor standards, including project labor agreements and community benefits agreements that offer wages at or above the prevailing rate and include local hire provisions. Treasury also recommends that recipients prioritize in their procurement decisions employers that can demonstrate that their workforce meets high safety and training standards (

e.g.,

professional certification, licensure, and/or robust in-house training), that hire local workers and/or workers from historically underserved communities, and that directly employ their workforce or have policies and practices in place to ensure contractors and subcontractors meet high labor standards. Treasury further encourages recipients to prioritize employers (including contractors and subcontractors) without recent violations of Federal and state labor and employment laws.

Treasury believes that such practices will promote effective and efficient delivery of high-quality projects and support the economic recovery through strong employment opportunities for workers. Such practices will reduce likelihood of potential project challenges like work stoppages or safety accidents, while ensuring a reliable supply of skilled labor and minimizing disruptions, such as those associated with labor disputes or workplace injuries. That will, in turn, promote on-time and on-budget delivery.

Furthermore, among other requirements contained in 2 CFR part 200, Appendix II, all contracts made by a recipient or subrecipient in excess of $100,000 with respect to projects that involve employment of mechanics or laborers must include a provision for compliance with certain provisions of the Contract Work Hours and Safety Standards Act, 40 U.S.C. 3702 and 3704, as supplemented by Department of Labor regulations (29 CFR part 5). Treasury will continue to seek information from recipients on their workforce plans and public infrastructure and mitigation activities undertaken with SLFRF funds.

5. Administration

As discussed above, generally, the emergency relief from natural disasters eligible use category is subject to the same program administration requirements as the existing eligible uses in the SLFRF program, as discussed in the 2022 final rule, including the obligation deadline of December 31, 2024 and expenditure deadline of December 31, 2026. As discussed in this interim final rule, recipients may use SLFRF funds under this eligible use category for costs incurred beginning December 29, 2022, regardless of the date of the declared disaster. As with all other eligible uses in the SLFRF program, the general restrictions on use outlined in the 2022 final rule apply to funds expended under the emergency relief from natural disasters eligible use category. Additionally, recipients may reference the section titled Distinguishing Subrecipients versus Beneficiaries of the 2022 final rule for clarification of the distinction between subrecipients and beneficiaries.

Recipients are not required to obtain project pre-approval from Treasury or any other Federal agency when using SLFRF funds for natural disaster projects unless otherwise required by Federal law. While reference to FEMA, the Department of Labor, or other Federal emergency assistance programs is provided to assist recipients in understanding the types of emergency relief projects eligible to be funded with SLFRF funds, recipients do not need to apply for funding from the applicable state programs or through any Federal programs. Similarly, this interim final rule generally does not incorporate program requirements or guidance that attach to other Federal emergency programs. However, as noted above, recipients should be aware of other Federal or state laws or regulations that may apply to projects, independent of SLFRF funding conditions, that may require approval from another Federal or state agency.

Question 1: Are there other types of services or costs that Treasury should consider as enumerated eligible uses to provide emergency relief from the physical or negative economic impacts of natural disasters? Describe how these provide emergency relief from natural disasters.

Question 2: What, if any, additional criteria should Treasury consider to ensure that emergency relief responds to the physical or negative economic impacts of natural disasters?

Question 3: What additional clarity or guidance would benefit recipients in identifying eligible mitigation activities?

B. Using Funds for Surface Transportation and Title I Projects

To support SLFRF recipients in meeting the infrastructure needs of their communities, the 2023 CAA also provided the authority for recipients to use SLFRF funds for certain infrastructure projects, including projects eligible under certain programs administered by the Department of Transportation (Surface Transportation projects) and projects eligible under Title I of the Housing and Community Development Act of 1974 (Title I projects).

The 2023 CAA imposes requirements on SLFRF funds used for Surface Transportation projects and Title I projects beyond those requirements that apply to all other SLFRF eligible use categories. In the sections separately discussing Surface Transportation projects and Title I projects below, this interim final rule summarizes the types of eligible projects within each category, provides references to relevant guidance for the projects, and discusses how the requirements imposed by the 2023 CAA apply to each category.

See

42 U.S.C. 802(c)(5) and 803(c)(6).

The 2023 CAA provides that the total amount of SLFRF funds that a recipient

may use for Surface Transportation projects and Title I projects together shall not exceed the greater of $10 million and 30% of a recipient's SLFRF allocation. This limitation does not apply to SLFRF funds used for the other eligible uses in the SLFRF program, including funds used for the provision of government services under the revenue loss eligible use category.

This limitation applies to the total amount of SLFRF funds that a recipient may use for Surface Transportation projects and Title I projects taken together. For example, an SLFRF recipient with an allocation of $20 million would have $10 million (as $10 million is greater than 30% of the recipient's allocation—$6 million) to direct to Surface Transportation projects and Title I projects. This recipient could direct, for example, $5 million toward Surface Transportation projects and $5 million toward Title I projects, or $3 million toward Surface Transportation projects and $7 million toward Title I projects. This same recipient may choose to spend additional funding over and above this $10 million on projects that might otherwise be eligible as Surface Transportation or Title I projects under a different eligible use category, such as the revenue loss eligible use category, under which recipients may use SLFRF funds for the provision of government services.

The 2023 CAA provides that, except as otherwise determined by the Secretary or the head of a Federal agency to whom oversight and administration of the requirements have been delegated, the requirements of other laws, including titles 23, 40, and 49 of the U.S. Code, title I of the Housing and Community Development Act of 1974 (HCDA), and the National Environmental Policy Act of 1969 (NEPA), apply to recipients' use of SLFRF funds for Surface Transportation projects and Title I projects. These requirements include the project approval and certification requirements of titles 23, 40, and 49 of the U.S. Code and title I of the HCDA and the regulations adopted thereunder.

The application of the Surface Transportation project approval requirements to the SLFRF program means that recipients must obtain the approval of the Secretary or the head of the Federal agency to whom authority has been delegated by the Secretary prior to obligating and expending funds on Surface Transportation projects. Title I of the HCDA provides for project-level approval only in the case of project environmental review. The application of this requirement to the SLFRF program means that recipients must comply with the environmental review requirements set forth in the HUD statute and regulations, submit a certification to Treasury, and receive approval prior to obligating and expending funds on Title I projects, as discussed below.

The application of these approval and certification requirements to SLFRF for these projects is indicated by the statute's specific reference to NEPA. NEPA only applies to federal actions such as a federal agency approval. Without application of the approval requirements of the cross-referenced statutes, there would be no generally applicable federal action associated with the use of SLFRF funds for Surface Transportation projects and Title I projects.

The provisions of the 2023 CAA reflect an intent that the usual requirements that apply to Surface Transportation projects funded by DOT should generally also apply to such projects as funded by Treasury under the SLFRF program but also a recognition that the DOT regulatory requirements would need to be harmonized with the particular structure of the SLFRF program. Treasury interprets the “except as otherwise determined” clause referenced above to permit Treasury to determine not to apply certain requirements of the cross-referenced statutes when such requirements would conflict with the existing SLFRF framework or otherwise would be likely to preclude recipients from exercising the additional authorities provided by the 2023 CAA.

As a general matter, DOT must approve recipients' use of funds for projects funded by DOT. However, under the existing SLFRF framework, Treasury provided funds to recipients either in full or in two tranches rather than disbursing funds to recipients after approving the use of funds for particular projects, and recipients must obligate and expend such funds by set deadlines. If the SLFRF program did not have obligation and expenditure deadlines, recipients might have time to go through a process of receiving Treasury approval under Pathway Two prior to using the funds that they had already received on Surface Transportation projects. But it is possible that recipients will seek to use funds under Pathway Two for hundreds of Surface Transportation projects in total, and application of the statutory and regulatory approval requirements to such a large volume of projects likely would preclude recipients from carrying out such projects while meeting the statutory deadlines for obligation and expenditure of funds. To ensure that recipients are able to exercise the additional authorities provided by the 2023 CAA prior to the December 31, 2024 obligation deadline, Treasury has determined not to require recipients to obtain the approval of the Secretary prior to obligating and expending funds on Surface Transportation projects that present less risk, as described under the streamlined framework of Pathway Two in the section that follows. Treasury expects far fewer recipients to seek to use SLFRF funds for higher-risk projects involving greater complexity. By not applying the approval requirements to the more numerous but less risky types of projects, Treasury will avoid the likelihood that most recipients would effectively be unable to engage in any Surface Transportation projects other than those qualifying for Pathway One.

The approval requirements will apply to Surface Transportation projects that do not meet the streamlined framework criteria, and as discussed further below, Treasury will design a process, based in part on the comments to this interim final rule, for recipients seeking to fund these larger, more complex projects. Similarly, as discussed further below, project-level certification requirements related to environmental review contemplated by title I of the HCDA will apply to the use of SLFRF funds for the Title I projects eligible use category. Treasury provides more information regarding approval and certification requirements applicable to Surface Transportation projects and Title I projects, respectively, in the sections titled Pathway Two: Surface Transportation Projects Not Receiving Funding from DOT and Applicable Requirements for Title I Projects below.

Recipients using funds for Surface Transportation projects that are subject to approval requirements must satisfy NEPA environmental review requirements. Recipients using funds for Surface Transportation projects that are not subject to approval requirements (pursuant to the streamlined approach described under Pathway Two in the section that follows) are not required to conduct NEPA environmental reviews. Recipients using funds for Title I projects must satisfy NEPA environmental review requirements based on the procedures set forth in title I of the HCDA, the associated regulations, and as implemented by Treasury. For more information about how the requirements of NEPA apply to Surface Transportation projects and Title I projects, respectively, refer to the sections titled Pathway Two: Applicable Requirements and Applicable Requirements for Title I Projects below. As discussed in Treasury's guidance to date, NEPA does not apply to the other eligible uses in the SLFRF program as described in the 2022 final rule, though recipients that blend SLFRF funds with

other Federal funds may be subject to additional requirements associated with the other Federal funds.

For additional information about blending and braiding SLFRF funds with other funding sources, refer to SLFRF Final Rule FAQ 4.8, available at

https://home.treasury.gov/system/files/136/SLFRF-Final-Rule-FAQ.pdf.

As is the case with all projects using SLFRF funds, projects must comply with applicable Federal statutes, regulations, and executive orders, including environmental laws and Federal civil rights and nondiscrimination requirements,

which include prohibitions on discrimination on the basis of race, color, national origin, sex (including sexual orientation and gender identity), religion, disability, age, or familial status (having children under the age of 18).

State, Tribal, and local procurement, contracting, and conflicts-of-interest laws and regulations, including, for example, required procurement processes for contractor selection or competitive price setting, also may apply to recipients' use of SLFRF funds.

Applicable federal civil rights and non-discrimination laws include Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d; Title VIII of the Civil Rights Act of 1968 (the Fair Housing Act), as amended by the Fair Housing Amendments Act of 1988, 42 U.S.C. 3602, et seq; Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794; Title IX of the Education Amendments Act of 1972, 20 U.S.C. 1681; and the Age Discrimination Act of 1975, 42 U.S.C. 6101 et. seq.

As described in SLFRF Final Rule FAQ 12.1, award terms and conditions for Treasury's pandemic recovery programs, including SLFRF, do not impose antidiscrimination requirements on Tribal governments beyond what would otherwise apply under Federal law.

The 2023 CAA provides that SLFRF funds used for Surface Transportation projects and Title I projects must supplement, not supplant other Federal, state, territorial, Tribal, and local government funds (as applicable) that are otherwise available for these projects. This interim final rule discusses below how the supplement, not supplant provision applies to uses of funds for Surface Transportation projects and Title I projects. The non-supplant requirement does not apply to the other SLFRF eligible use categories, including the emergency relief from natural disasters eligible use category.

The 2023 CAA provides that funds used for Surface Transportation projects and Title I projects must be obligated by December 31, 2024 and expended by September 30, 2026. The expenditure deadline for these eligible uses provided by the 2023 CAA is earlier than the December 31, 2026 expenditure deadline associated with the other eligible uses in the program, including emergency relief from natural disasters.

The 2023 CAA provides that Treasury may delegate to the appropriate Federal agency oversight and administration of the requirements associated with the use of funds for Surface Transportation projects and Title I projects. As discussed below, Treasury is delegating oversight and administration of Surface Transportation projects under Pathway One (described below) to the Department of Transportation (DOT). Recipients that direct SLFRF funds toward Surface Transportation projects under Pathway One will be required to complete the existing DOT reporting requirements that already apply to projects funded by DOT and to report certain information to Treasury. See the sections titled Pathway One: Delegation of Authority and Discussion of Revenue Loss and Program Administration Provisions for further information.

Below, this interim final rule discusses how recipients may use SLFRF funds for Surface Transportation projects and Title I projects, respectively.

1. Surface Transportation Projects

Background

As added by the 2023 CAA, sections 602(c)(5) and 603(c)(6) of the Social Security Act provide that state, local, and Tribal governments may use SLFRF funds, subject to limitations, for surface transportation infrastructure projects (Surface Transportation projects) eligible under certain programs administered by DOT. As described above, recipients may only use the greater of 30% of their SLFRF award and $10 million, not to exceed a recipient's allocation, for all Surface Transportation projects (described in this section) and Title I projects (described in the section that follows) taken together.

Under the Surface Transportation projects eligible use category, SLFRF funds may be used for a project eligible under any of sections 117, 119, 124, 133, 148, 149, 151(f), 165, 167, 173, 175, 176, 202, 203, and 204 of title 23 of the U.S. Code; an activity to carry out section 134 of title 23 of the U.S. Code; a project eligible under the Rebuilding American Infrastructure with Sustainability and Equity (RAISE) grant program; a project eligible for credit assistance under the Transportation Infrastructure Finance and Innovation Act (TIFIA) program under chapter 6 of title 23 of the U.S. Code; a project that furthers the completion of a designated route of the Appalachian Development Highway System under section 14501 of title 40 of the U.S. Code; a project eligible under any of sections 5307, 5309, 5311, 5337, 5339, and 6703 of title 49 of the U.S. Code; or a project eligible under the bridge replacement, rehabilitation, preservation, protection, and construction program under paragraph (1) under the heading “HIGHWAY INFRASTRUCTURE PROGRAM” under the heading “FEDERAL HIGHWAY ADMINISTRATION” under the heading “DEPARTMENT OF TRANSPORTATION” under title VIII of division J of the Infrastructure Investment and Jobs Act.

The statute also provides that, to the extent consistent with guidance or rules issued by the Secretary or the head of a Federal agency to which the Secretary has delegated authority, recipients may use SLFRF funds to satisfy a non-Federal share requirement applicable to a project eligible under section 117 of title 23, sections 5309 or 6701 of title 49, or a project eligible for credit assistance under the TIFIA program under chapter 6 of title 23. Additionally, in the case of a project eligible for credit assistance under the TIFIA program, recipients may use SLFRF funds to repay a loan provided under such program.

The 2023 CAA provides that the requirements of the relevant titles of the U.S. Code and the National Environmental Policy Act of 1969 apply to the use of the SLFRF for Surface Transportation projects, except as otherwise determined by the Secretary or the head of a Federal agency to whom oversight and administration of the requirements have been delegated. Additionally, SLFRF funds may only be used to supplement, and not supplant, other Federal, state, territorial, Tribal, and local government funds (as applicable) that are otherwise available for the eligible project.

Overview

There are different ways in which recipients may use SLFRF funds for Surface Transportation projects under the new authority provided by the 2023 CAA. In this interim final rule, Treasury has organized discussion of the Surface Transportation projects eligible use category in terms of three “pathways.”

First, recipients may use SLFRF funds (i) in the case of existing eligible projects that receive funding from DOT, to expand the project or to cover additional unexpected costs associated with the project and (ii) in the case of eligible projects that have not yet received but will receive funding from DOT prior to December 31, 2024, the obligation deadline for the SLFRF program, to contribute SLFRF funds to expand the scope of the project, to cover additional unexpected costs, or in other

ways that supplement DOT funding, as described in the section titled Prohibition on Supplanting Other Funds. In each case, the Surface Transportation project must be subject to DOT's oversight during the period that SLFRF funds are used for the project. Recipients pursuing Surface Transportation projects that are receiving or will receive funding from DOT should be prepared to work with DOT to determine whether the use of SLFRF funds for a particular project meets the relevant requirements. In addition, the project must meet the requirements and restrictions that apply to Surface Transportation projects funded through the SLFRF program described further below. Furthermore, in the case of projects funded under certain DOT programs like INFRA and RAISE, the addition of Federal funds—including SLFRF funds—to an existing project is subject to approval from DOT. Throughout this interim final rule, Treasury refers to this eligible use as “Pathway One.”

Second, this interim final rule lays out a pathway for all SLFRF recipients, including those that may not typically or currently be a direct recipient of DOT funding, to use SLFRF funds to finance Surface Transportation projects that will be overseen and administered by Treasury. Within this pathway, Treasury is articulating a streamlined framework for recipients to use up to $10 million in SLFRF funds per project on Surface Transportation projects that do not include DOT funding but meet certain parameters. Though these projects do not include DOT funding, recipients may choose to blend SLFRF funds with other sources of funds to carry out the projects. Recipients using SLFRF funds for these projects are not required to consult with DOT and instead these projects will be administered and overseen by Treasury. Throughout this interim final rule, Treasury refers to this eligible use as “Pathway Two.” For additional information, refer to the section titled Pathway Two: Surface Transportation Projects not Receiving Funding from DOT.

Recipients interested in financing Surface Transportation projects outside of the parameters of the streamlined framework in Pathway Two may submit a notice of intent to Treasury, as described further below in the section titled Pathway Two: Surface Transportation Projects not Receiving Funding from DOT. Based on these notices of intent and comments to this interim final rule, Treasury will provide instructions as to how recipients may apply for approval to carry out their proposed projects and guidance as to any additional requirements associated with such projects.

Third, recipients may use SLFRF funds to repay a TIFIA loan or to satisfy a non-Federal share requirement for projects under four Surface Transportation programs: INFRA Grants, Fixed Guideway Capital Investment Grants, Mega Grants, and projects eligible for credit assistance under the TIFIA program. Recipients should consult with DOT before pursuing projects under this third pathway. Throughout this interim final rule, Treasury refers to this eligible use as “Pathway Three.” For more information, refer to the section titled Pathway Three: Non-Federal Share Requirements for Certain Surface Transportation Requirements.

In the following sections, this interim final rule discusses the specific types of Surface Transportation projects that are eligible uses of SLFRF funds and the applicable requirements and limitations.

Prohibition on Supplanting Other Funds

For all three pathways for Surface Transportation projects, recipients must comply with the requirement provided in the 2023 CAA that funds used for Surface Transportation projects shall “supplement, and not supplant, other Federal, State, territorial, Tribal, and local government funds (as applicable) otherwise available for such uses.” The phrase “other . . . funds available for such uses” refers to (i) in the case of non-Federal funds, non-SLFRF funds that have been obligated for specific uses that are eligible under the Surface Transportation projects eligible use category or (ii) in the case of Federal funds, funds that a Federal agency has committed to a particular project pursuant to an award agreement or otherwise, including funds identified in an awarded DOT grant agreement for use on Surface Transportation projects.

Under prong (i), for the purpose of identifying non-Federal funds that have been obligated for specific uses, the definition of “obligation” used in the 2022 final rule applies, which is “an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment.”

As such, a recipient may not de-obligate funds that were obligated for specific uses that are eligible under this section (

e.g.,

by cancelling, amending, renegotiating, or otherwise revising or abrogating a contract, subaward, or similar transaction that requires payment) and replace those previously obligated funds with SLFRF funds under this eligible use category.

See Final Rule FAQ 13.17 for additional information about obligations. This approach applies a concrete standard that is known to SLFRF recipients and administrable by Treasury.

The restriction in prong (ii) on replacing funds that a Federal agency has committed to a particular project pursuant to an award agreement or otherwise applies to all funding sources covered by the commitment. For example, for DOT-funded projects subject to a grant agreement, the restriction extends to DOT funds, other Federal funds, and any other funds identified by the recipient for the purpose of satisfying cost-share requirements of the project.

Thus, a recipient may not de-obligate funds and replace those previously obligated funds with SLFRF funds under this eligible use category. Nor may a recipient use SLFRF to replace Federal or non-Federal funds identified in a Federal commitment, such as an award agreement. However, a recipient may use SLFRF funds under this eligible use category:

(1) to provide additional funding to a project without reducing the amount of other funds obligated to such project, thereby funding additional activities or expanding the scope of projects; or

(2) to undertake a project for which funds have not been previously obligated or identified in a Federal commitment, such as an award agreement.

For example, consider a municipal road project. The recipient has not yet entered into an award agreement with DOT but is expecting that Federal funds from DOT will make up a certain amount of the project funds and is planning on using local funds to satisfy cost-share requirements. Because the recipient has not yet entered into an award agreement with DOT, even if the project is included in the transportation improvement program (TIP) or a statewide transportation improvement program (STIP), the recipient may choose to alter the funding mixture to include SLFRF funding, after consulting with DOT. However, if in that same scenario, the recipient had entered into an award agreement with DOT that included a certain amount of DOT funding and a remaining amount of funds from local sources, then the funds for the project may not be replaced with SLFRF funds. The recipient could not supplant Federal or non-Federal funds identified to DOT as part of the grant award or terminate or renegotiate an existing contract for the construction of the project and use SLFRF funds to replace the funds previously identified or obligated for that purpose. In this scenario, recipients would be able to use

SLFRF funds to expand the scope of a project or cover unexpected costs, after consulting with DOT.

In the case of projects previously included within a TIP or STIP that have received funding from DOT, recipients should reflect increased overall project funding resulting from the addition of SLFRF funds within the STIP or TIP, even when the sources of project funding may have changed prior to identification in the DOT grant award or obligation.

a. Pathway One: Surface Transportation Projects Receiving Funding From DOT

This section of the interim final rule describes how recipients may use SLFRF funds under Pathway One (i) in the case of existing eligible projects that are receiving funding from DOT to expand the project or to cover additional unexpected costs associated with the project and (ii) in the case of eligible projects that have not yet but will receive funding from DOT prior to December 31, 2024, the obligation deadline for the SLFRF program, to contribute SLFRF funds to the project, to expand the project, to cover additional unexpected costs, or in other ways that supplement DOT funding. In each case, the Surface Transportation project must be subject to DOT's oversight during the period that SLFRF funds are used for the project. Recipients seeking to use SLFRF funds for Surface Transportation projects under Pathway One should consult with DOT and refer to the requirements discussed in the following subsection. Generally, and as discussed further below, when using SLFRF funds under Pathway One, the statutory requirements that normally apply when carrying out Surface Transportation projects funded by DOT continue to apply. In the case of some DOT-funded programs like INFRA and RAISE, the addition of other Federal funds—including SLFRF funds—to an existing project is subject to approval from DOT. This interim final rule describes how recipients may use SLFRF funds under Pathway One, summarizes the programs under which recipients may direct SLFRF funds toward eligible projects, and outlines the requirements associated with this pathway. Recipients using SLFRF funds under Pathway One must comply with the requirement that SLFRF funds supplement and not supplant other funds, described above.

In the case of existing projects currently receiving funding from DOT, recipients may use SLFRF funds to expand the project and to cover additional unexpected costs associated with the project. Using SLFRF funds for these purposes is a way for recipients to supplement but not supplant funds in existing projects receiving funding from DOT. In each case, the project must meet the requirements and restrictions that apply to Surface Transportation projects funded through the SLFRF program.

For eligible projects that have not yet but will receive funding from DOT prior to the SLFRF program's December 31, 2024, obligation deadline, recipients also may contribute SLFRF funds to the project, as long as the project meets the requirements and restrictions that apply to Surface Transportation projects funded through the SLFRF program, including the non-supplant requirements. For these projects that have not yet been funded, recipients may have more flexibility to contribute SLFRF funds for purposes beyond expanding the scope of the project and covering additional unexpected costs, because there may be more ways to supplement DOT funding without supplanting other funds. For example, in addition to using SLFRF funds to expand project scope or to cover additional unexpected costs that may arise, recipients may also be able to commit SLFRF funds in the initial planning phase of the project as part of the recipient's cost-share obligation, to the extent that DOT rules permit Federal funds to constitute a portion of the project's cost sharing or matching requirement. Recipients should note that planned contributions of SLFRF funds to a project that has not yet received funding from DOT will affect the determination of total Federal funds that would support the project and may affect calculations of the non-Federal funds cost-share contribution required in order to be in compliance with DOT requirements.

Under Pathway One, recipients may use SLFRF funds for projects eligible under the programs described below. This interim final rule briefly summarizes each program and references existing implementation guidance, where available. Recipients should refer to the relevant program guidance for DOT programs of interest for further information and detail about the types of projects eligible under those programs.

•

INFRA Grants

—602(c)(5)(B)(i) of the Social Security Act—Also known as Nationally Significant Multimodal Freight & Highway Projects, INFRA awards are competitive grants for multimodal freight and highway projects of national or regional significance to improve the safety, efficiency, and reliability of the movement of freight and people in and across rural and urban areas. For additional information about INFRA Grants, see

USDOT INFRA Grant Program.

See

23 U.S.C. 117.

See

the U.S. Department of Transportation's INFRA Grants Program website at

https://www.transportation.gov/grants/infra-grants-program.

•

National Highway Performance Program (NHPP)

—602(c)(5)(B)(ii) of the Social Security Act—The NHPP provides formula funding with the purposes of providing support for the condition and performance of the National Highway System (NHS) or for the construction of new facilities on the NHS; ensuring that investments of Federal-aid funds in highway construction are directed to support progress toward the achievement of performance targets established in an asset management plan of a state for the NHS; and providing support for activities to increase the resiliency of the NHS to mitigate the cost of damages from sea level rise, extreme weather events, flooding, wildfires, or other natural disasters. For additional information about NHPP, see

Implementation Guidance for the National Highway Performance Program (NHPP) as Revised by the Bipartisan Infrastructure Law.

See

23 U.S.C. 119.

U.S. Department of Transportation, Federal Highway Administration, Implementation Guidance for the National Highway Performance Program (NHPP) as Revised by the Bipartisan Infrastructure Law (Jun. 1, 2022),

https://www.fhwa.dot.gov/specialfunding/nhpp/bil_nhpp_implementation_guidance-05_25_22.pdf.

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Bridge Investment Program (BIP)

—602(c)(5)(B)(iii) of the Social Security Act—The BIP awards competitive discretionary grants to improve the safety, efficiency, and reliability of the movement of people and freight by funding projects to replace, rehabilitate, preserve, or protect bridges in the National Bridge Inventory, including projects to replace or rehabilitate bridge-sized culverts for the purpose of improving flood control and improved habitat connectivity. It has a focus on improving the condition of bridges in poor condition and supporting activities to prevent bridges in fair condition from dropping to poor condition. For additional information on the BIP, see

Bridge Investment Program (BIP) Questions and Answers (Q&As).

See

23 U.S.C. 124.

U.S. Department of Transportation, Federal Highway Administration, Bridge Investment Program (BIP) Questions and Answers (Q&As) (Aug. 18, 2022),

https://www.fhwa.dot.gov/bridge/bip/qa.cfm.

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Surface Transportation Block Grant Program (STBG)

—602(c)(5)(B)(iv) of the Social Security Act—The STBG provides flexible funding that may be used for projects to preserve and improve the conditions and performance on any Federal-aid highway, bridge and tunnel projects on any public road, pedestrian and bicycle infrastructure, and transit capital projects, including intercity bus terminals. For additional information on the STBG, see

Implementation Guidance for the Surface Transportation Block Grant Program (STBG) as Revised by the Bipartisan Infrastructure Law.

See

23 U.S.C. 133.

U.S. Department of Transportation, Federal Highway Administration, Implementation Guidance for the Surface Transportation Block Grant Program (STBG) as Revised by the Bipartisan Infrastructure Law (Jun. 1, 2022),

https://www.fhwa.dot.gov/specialfunding/stp/bil_stbg_implementation_guidance-05_25_22.pdf.

•

Highway Safety Improvement Program (HSIP)

—602(c)(5)(B)(vi) of the Social Security Act—The HSIP provides formula funding with the purpose of helping to achieve a significant reduction in traffic fatalities and serious injuries on all public roads, including non-state-owned public roads and roads on Tribal land. HSIP funds are typically available for defined highway safety improvement projects, as well as “specified safety projects.” For additional information on the HSIP, see the

Highway Safety Improvement Program (HSIP) Eligibility Guidance.

See

23 U.S.C. 148.

U.S. Department of Transportation, Federal Highway Administration, Highway Safety Improvement Program (HSIP) Eligibility Guidance (Feb. 2, 2022),

https://safety.fhwa.dot.gov/hsip/rulemaking/docs/BIL_HSIP_Eligibility_Guidance.pdf.

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Congestion Mitigation and Air Quality Improvement Program (CMAQ)

—602(c)(5)(B)(vii) of the Social Security Act—The CMAQ provides a flexible funding source for transportation projects and programs to help meet the requirements of the Clean Air Act. Funding is available to reduce congestion and improve air quality for areas that do not meet the National Ambient Air Quality Standards for ozone, carbon monoxide, or particulate matter (nonattainment areas) and for former nonattainment areas that are now in compliance (maintenance areas). A wide range of transportation projects leading to reduction in emissions are eligible for support under the CMAQ, including projects involving new transit, alternative fuels, shared micro-mobility, traffic flow improvements, and demand management. For additional information on CMAQ, see the

Congestion Mitigation and Air Quality (CMAQ) Improvement Program Fact Sheet.

See

23 U.S.C. 149.

U.S. Department of Transportation, Federal Highway Administration, Congestion Mitigation and Air Quality (CMAQ) Improvement Program Fact Sheet (Feb. 8, 2022),

https://www.fhwa.dot.gov/bipartisan-infrastructure-law/cmaq.cfm.

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Charging and Fueling Infrastructure Discretionary Grant Program (CFI Program)

—602(c)(5)(B)(viii) of the Social Security Act—Established in the Bipartisan Infrastructure Law, the CFI Program provides competitive grants to strategically deploy publicly accessible electric vehicle charging and alternative fueling infrastructure in the places people live and work—urban and rural areas alike—in addition to along designated Alternative Fuel Corridors. For additional information about the CFI Program, see

Charging and Fueling Infrastructure Grant Program.

See

23 U.S.C. 151(f).

U.S. Department of Transportation, Federal Highway Administration, Charging and Fueling Infrastructure Grant Program (Mar. 30, 2023),

https://www.fhwa.dot.gov/environment/cfi/.

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Territorial and Puerto Rico Highway Program

—602(c)(5)(B)(ix) of the Social Security Act—The Territorial and Puerto Rico highway program allocates funds to the Commonwealth of Puerto Rico for a highway program, as well as to American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, and the U.S. Virgin Islands to assist in constructing and improving a system of arterial and collector highways and necessary inter-island connectors. For additional information on the Territorial and Puerto Rico Highway program, see the

Territorial and Puerto Rico Highway Program Fact Sheet.

See

23 U.S.C. 165

U.S. Department of Transportation, Federal Highway Administration, Territorial and Puerto Rico Highway Program Fact Sheet (Feb. 24. 2022),

https://www.fhwa.dot.gov/bipartisan-infrastructure-law/territorial_puerto_rico_hp_fact_sheet.cfm.

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National Highway Freight Program (NHFP)

—602(c)(5)(B)(x) of the Social Security Act—The NHFP provides funding intended to improve the condition and performance of the National Highway Freight Network (NHFN) and support several goals, including:

See

23 U.S.C. 167.

○ investing in infrastructure and operational improvements that strengthen economic competitiveness, reduce congestion, reduce the cost of freight transportation, improve reliability, and increase productivity;

○ improving the safety, security, efficiency, and resiliency of freight transportation in rural and urban areas;

○ improving the state of good repair of the NHFN;

○ using innovation and advanced technology to improve NHFN safety, efficiency, and reliability;

○ improving the efficiency and productivity of the NHFN;

○ improving State flexibility to support multi-State corridor planning and address highway freight connectivity; and

○ reducing the environmental impacts of freight movement on the NHFN.

For additional information on the NHFP, see

Implementation Guidance for the National Highway Freight Program as Revised by the Bipartisan Infrastructure Law.

U.S. Department of Transportation, Federal Highway Administration, Implementation Guidance for the National Highway Freight Program as Revised by the Bipartisan Infrastructure Law (Dec. 14, 2022),

https://ops.fhwa.dot.gov/freight/documents/NHFP_Implementation_Guidance.pdf.

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Rural Surface Transportation Grant Program

—602(c)(5)(B)(xi) of the Social Security Act—The Rural Surface Transportation Grant Program provides competitive grants to support projects to improve and expand the surface transportation infrastructure in rural areas to increase connectivity, improve the safety and reliability of the movement of people and freight, and generate regional economic growth and improve quality of life. Grant funds typically support highway, bridge, or tunnel projects eligible under the NHPP, the STBG program, or the Tribal Transportation Program; highway freight projects eligible under the NHFP; highway safety improvement projects; projects on a publicly-owned highway or bridge improving access to certain facilities that support the economy of a rural area; integrated mobility management systems, transportation demand management systems, or on-demand mobility services. For additional information about the Rural Surface Transportation Grant Program, see

the Rural Surface Transportation Grant website.

See

23 U.S.C. 173.

See

the U.S. Department of Transportation's Rural Surface Transportation Grant website at

https://www.transportation.gov/grants/rural-surface-transportation-grant.

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Carbon Reduction Program (CRP)

—602(c)(5)(B)(xii) of the Social Security Act—Established in the Bipartisan Infrastructure Law,

CRP provides funds by formula for a wide-range of projects designed to reduce transportation emissions, defined as carbon dioxide emissions from on-road highway sources. For additional

information on eligible projects under CRP, see the

Carbon Reduction Program (CRP) Implementation Guidance.

See

23 U.S.C. 175.

Public Law 117-58.

U.S. Department of Transportation, Federal Highway Administration, Carbon Reduction Program (CRP) Implementation Guidance (Apr. 21, 2022),

https://www.fhwa.dot.gov/environment/sustainability/energy/policy/crp_guidance.pdf.

•

Promoting Resilient Operations for Transformative, Efficient, and Cost-Saving Transportation (PROTECT)

—602(c)(5)(B)(xiii) of the Social Security Act—Established in the Bipartisan Infrastructure Law, the PROTECT Program provides both formula funding and competitive funding for projects that, among other activities, provide resilience improvements; strengthen and protect evacuation routes; and protect at-risk coastal infrastructure. For additional information on the PROTECT Formula Program, see

Promoting Resilient Operations for Transformative, Efficient, and Cost-Saving Transportation (PROTECT) Formula Program Implementation Guidance.

See

23 U.S.C. 176.

U.S. Department of Transportation, Federal Highway Administration, Promoting Resilient Operations for Transformative, Efficient, and Cost-Saving Transportation (PROTECT) Formula Program Implementation Guidance (Jul. 29, 2022),

https://www.fhwa.dot.gov/environment/sustainability/resilience/policy_and_guidance/protect_formula.pdf.

•

Tribal Transportation Program (TTP)

—602(c)(5)(B)(xiv) of the Social Security Act—TTP provides formula funding to Tribal governments to aid in providing safe and adequate transportation and public road access to and within Indian reservations, Indian lands, and Alaska Native Village communities, contributing to the economic development, self-determination, and employment of Indians and Native Americans. TTP funds a wide range of eligible transportation activities including the construction and maintenance of roads and bridges. For additional information about TTP, see

Tribal Transportation Program Fact Sheet.

See

23 U.S.C. 202.

U.S. Department of Transportation, Federal Highway Administration, Tribal Transportation Program Fact Sheet (Oct. 26, 2022),

https://www.fhwa.dot.gov/bipartisan-infrastructure-law/ttp.cfm.

•

Federal Lands Transportation Program (FLTP)

—602(c)(5)(B)(xv) of the Social Security Act—FLTP provides funds to improve the transportation infrastructure owned and maintained by Federal agencies with land and natural resource management responsibilities. Eligible projects under FLTP include construction and maintenance of transit facilities and transportation projects eligible under Title 23 that are on a public network that provides access to, adjacent to, or through Federal lands. For additional information on FLTP, see

Implementation Guidance for the Federal Lands Transportation Program.

See

23 U.S.C. 203.

U.S. Department of Transportation, Federal Highway Administration, Implementation Guidance for the Federal Lands Transportation Program (Jun. 29, 2022),

https://highways.dot.gov/sites/fhwa.dot.gov/files/docs/federal-lands/programs/federal-lands-transportation-program/8186/fltp-guidance-cleared.pdf.

•

Federal Lands Access Program (FLAP)

—602(c)(5)(B)(xvi) of the Social Security Act—FLAP provides formula funding to improve transportation facilities that provide access to, are adjacent to, or are located within Federal lands. FLAP supplements state and local resources for public roads, transit systems, and other transportation facilities, with an emphasis on high-use recreation sites and economic generators. For additional information on FLAP, see the

Implementation Guidance for the Federal Lands Access Program.

See

23 U.S.C. 204.

U.S. Department of Transportation, Federal Highway Administration, Implementation Guidance for the Federal Lands Access Program (Aug. 6, 2018),

https://highways.dot.gov/sites/fhwa.dot.gov/files/docs/federal-lands/programs/federal-lands-access-program/6971/flap-implem-guidance.pdf.

•

Rebuilding American Infrastructure with Sustainability and Equity (RAISE) Grant Program

—602(c)(5)(B)(xvii) of the Social Security Act—The RAISE Grant Program helps communities build transportation projects that have significant local or regional impact and improve safety and equity. RAISE provides funds through competitive grants to state, local, Tribal, and territorial governments, among others, for surface transportation capital projects, including highway, bridge, or other road projects eligible under title 23 of the U.S. Code; public transportation projects eligible under chapter 53 of title 49 of the U.S. Code; passenger and freight rail transportation projects; port infrastructure investments; the surface transportation components of an airport project eligible for assistance under part B of subtitle VII of title 49 of the U.S. Code; intermodal projects; projects to replace or rehabilitate a culvert or prevent stormwater runoff; projects investing in surface transportation facilities that are located on Tribal land; and other surface transportation infrastructure projects that the Secretary of Transportation considers to be necessary to advance the goals of the program—including public road and non-motorized projects that are not otherwise eligible under title 23 of the U.S. Code, transit-oriented development projects, mobility on-demand projects that expand access and reduce transportation cost burden, and intermodal projects. The addition of Federal funds, including SLFRF funds, to an existing RAISE project is subject to the Department of Transportation's approval. For more information on RAISE grants, see

Notice of Funding Opportunity for the Department of Transportation's National Infrastructure Investments (i.e., the Rebuilding American Infrastructure with Sustainability and Equity (RAISE) Grant Program) under the Infrastructure Investment and Jobs Act (“Bipartisan Infrastructure Law”), Amendment No. 2.

U.S. Department of Transportation, Notice of Funding Opportunity for the Department of Transportation's National Infrastructure Investments (

i.e.,

the Rebuilding American Infrastructure with Sustainability and Equity (RAISE) Grant Program) under the Infrastructure Investment and Jobs Act (“Bipartisan Infrastructure Law”), Amendment No. 2 (Jan. 3, 2023),

https://www.transportation.gov/sites/dot.gov/files/2023-02/RAISE%202023%20NOFO%20Amendment2.pdf.

•

Transportation Infrastructure Finance and Innovation Act (TIFIA)

—602(c)(5)(B)(xviii) of the Social Security Act—The TIFIA Program provides Federal credit assistance in the form of direct loans, loan guarantees, and standby lines of credit to finance surface transportation projects of national and regional significance. Eligible projects typically include highways and bridges; intelligent transportation systems; intermodal connectors; transit vehicles and facilities; intercity buses and facilities; freight transfer facilities; pedestrian bicycle infrastructure networks; transit-oriented development; rural infrastructure projects; passenger rail vehicles and facilities; surface transportation elements of port projects; and airports that meet certain standards of credit worthiness and readiness. For additional information about TIFIA, see

TIFIA Program Overview.

See

23 U.S.C. Chapter 6.

See

the U.S. Department of Transportation's TIFIA Program Overview website at

https://www.transportation.gov/buildamerica/financing/tifia.

•

Urbanized Formula Grants

—602(c)(5)(B)(xx) of the Social Security Act—The Urbanized Area Formula Funding Program makes Federal resources available for transit capital assistance in urbanized areas and for transportation-related planning.

Eligible activities under the Urbanized Formula grants typically include: planning, engineering, design, and evaluation of transit projects and other technical transportation-related studies; capital investments in bus and bus-related activities such as replacement, overhaul, and rebuilding of buses, crime prevention and security equipment and construction of maintenance and passenger facilities; and capital investments in new and existing fixed guideway systems including rolling stock, overhaul and rebuilding of vehicles, track, signals, communications, and computer hardware and software. In addition, associated transit improvements and certain expenses associated with mobility management programs are eligible under the program. For additional information about Urbanized Formula Grants, see

Urbanized Area Formula Program Guidance.

See

49 U.S.C. 5307.

While Urbanized Area Formula Grants typically may be used to support operating expenses, operating expenses are not an eligible use of SLFRF spending for projects eligible under section 602(c)(5)(B)(xx) of the Social Security Act. See operating expenses within the Pathway One applicable requirements section for more information.

U.S. Department of Transportation, Federal Transit Administration, Urbanized Area Formula Program Guidance, 79 FR 2930 (Feb. 27, 2020),

https://www.transit.dot.gov/regulations-and-guidance/fta-circulars/urbanized-area-formula-program-program-guidance-and.

•

Fixed Guideway Capital Investment Grants

—602(c)(5)(B)(xxi) of the Social Security Act—The Fixed Guideway Capital Investment Grants Program is a discretionary grant program that funds transit capital investments, including heavy rail, commuter rail, light rail, streetcars, and bus rapid transit. More details are available in the Federal Transit Administration's

Capital Investment Grants Policy Guidance.

See

49 U.S.C. 5309.

U.S. Department of Transportation, Federal Transit Administration, Capital Investment Grants Policy Guidance (Jan. 12, 2023),

https://www.transit.dot.gov/sites/fta.dot.gov/files/2023-01/CIG-Policy-Guidance-January-2023.pdf.

•

Formula Grants for Rural Areas

—602(c)(5)(B)(xxii) of the Social Security Act—The Formula Grants for Rural Areas Program provides capital and planning assistance to support public transportation in rural areas with populations of less than 50,000, where many residents often rely on public transit to reach their destinations.

The program also provides funding for training and technical assistance through the Rural Transportation Assistance Program. Eligible activities typically include planning, capital, job access and reverse commute projects, and the acquisition of public transportation services. For additional information about Formula Grants for Rural Areas, see

Formula Grants Rural Areas Program Guidance.

See

49 U.S.C. 5311.

While Rural Area Formula Grants typically may be used to support operating expenses, operating expenses are not an eligible use of SLFRF spending for projects eligible under section 602(c)(5)(B)(xxii) of the Social Security Act. See operating expenses within the Pathway One applicable requirements section for more information.

U.S. Department of Transportation, Federal Transit Administration, Formula Grants Rural Areas Program Guidance and Application Instructions, 79 FR 63663 (Feb. 27, 2020),

https://www.transit.dot.gov/regulations-and-guidance/fta-circulars/formula-grants-rural-areas-program-guidance-and-application.

•

State of Good Repair Grants

100

—602(c)(5)(B)(xxiii) of the Social Security Act—The State of Good Repair Grants Program provides capital assistance for maintenance, replacement, and rehabilitation projects of high-intensity fixed guideway and bus systems to help transit agencies maintain assets in a state of good repair. Capital projects eligible for State of Good Repair Grants funds typically include projects to replace and rehabilitate rolling stock; track; line equipment and structures; signals and communications; power equipment and substations; passenger stations and terminals; security equipment and systems; maintenance facilities and equipment; and operational support equipment computer hardware and software. For additional information about State of Good Repair Grants, see

State of Good Repair Grant Program Guidance.

101

100

See

49 U.S.C. 5337.

101

U.S. Department of Transportation, Federal Transit Administration, State of Good Repair Grant Program Guidance and Application Instructions (May 29, 2020),

https://www.transit.dot.gov/regulations-and-guidance/fta-circulars/state-good-repair-grant-program-guidance-and-application.

•

Grants for Buses and Bus Facilities

102

—602(c)(5)(B)(xxiv) of the Social Security Act—The Grants for Buses and Bus Facilities Program provides funding to help support capital projects to replace, rehabilitate, and purchase buses, vans, and related equipment, and to construct bus-related facilities, including technological changes or innovations to modify low or no emission vehicles or facilities. For additional information about Grants for Buses and Bus Facilities, see

Buses and Bus Facilities Program Guidance.

103

102

See

49 U.S.C. 5339.

103

U.S. Department of Transportation, Federal Transit Administration, Buses and Bus Facilities Program Guidance and Application Instructions (Feb. 27, 2020),

https://www.transit.dot.gov/regulations-and-guidance/fta-circulars/bus-and-bus-facilities-program-guidance-and-application.

•

National culvert removal, replacement, and restoration grant program (Culvert AOP Program)

104

—602(c)(5)(B)(xxv) of the Social Security Act—Established by the Bipartisan Infrastructure Law, the Culvert AOP Program awards grants for projects for the replacement, removal, and repair of culverts or weirs that meaningfully improve or restore fish passage for anadromous fish. Anadromous fish species are born in freshwater such as streams and rivers, spend most of their lives in the marine environment, and migrate back to freshwater to spawn. For additional information on the Culvert AOP Program, see the

National Culvert Removal, Replacement, and Restoration Grants (Culvert AOP Program)

website.

105

104

See

49 U.S.C. 6703.

105

U.S. Department of Transportation, Federal Highway Administration, National Culvert Removal, Replacement, & Restoration Grants (Culvert Hydraulics Aquatic Organisms Passage Program) website Program Overview (Jan. 31, 2023),

https://www.fhwa.dot.gov/engineering/hydraulics/culverthyd/aquatic/culvertaop.cfm.

•

Bridge Replacement, Rehabilitation, Preservation, Protection, and Construction Program (Bridge Formula Program or BFP)

106

—602(c)(5)(B)(xxvii) of the Social Security Act—Established by the Bipartisan Infrastructure Law, BFP provides formula funds for highway bridge replacement, rehabilitation, preservation, protection, and construction projects on public roads. For additional information of BFP, see

Bridge Formula Program (BFP) Implementation Guidance.

107

106

See

title VIII of division J of Public Law 117-58.

107

U.S. Department of Transportation, Federal Highway Administration, Bridge Formula Program (BFP) Implementation Guidance (Jan. 14, 2022),

https://www.fhwa.dot.gov/bridge/bfp/20220114.cfm.

• Additionally, as provided by section 602(c)(5) of the Social Security Act, Surface Transportation projects also include activities to carry out metropolitan transportation planning

108

and projects that further the completion of a designated route of the Appalachian Development Highway System (ADHS)

109

—a system of designated corridors and roadways within the 13 States that make up the Appalachian Region. With regard to metropolitan transportation planning, requirements leading to the development of transportation improvement plans are described in section 134 of title 23 of the U.S. Code and section 5303 of title 49 of the U.S. Code.

108

See section

602(c)(5)(B)(v) of the Social Security Act.