ARPA SLFRF Update: Interim Final Rule Expands Eligible Uses

This blog provides an update on a new Interim Final Rule for the American Rescue Plan Act State and Local Fiscal Recovery Fund (ARPA SLFRF). For background on ARPA SLFRF, please visit the U.S. Department of the Treasury’s Resource Portal.

In December 2022, Congress passed an appropriations package that included statutory provisions allowing for additional eligible uses for the American Rescue Plan Act State and Local Fiscal Recovery Fund (ARPA SLFRF).

On September 20, 2023, the Federal Register published Treasury’s new Interim Final Rule to flesh out these expanded uses. Treasury also released an abbreviated Overview of the Interim Final Rule document for easier reference.

This Interim Final Rule is in effect immediately, and Treasury will issue a new Final Rule following the public comment period.

Does the new Interim Final Rule make changes to any previous eligible uses?

No. To quote Treasury directly, “(T)he existing eligible uses, as discussed in the 2022 final rule, remain unchanged. Recipients may continue to use SLFRF funds in alignment with the 2022 final rule.”¹

What are the new eligible uses?

The Interim Final Rule amends the existing ARPA SLFRF program to provide additional flexibility for recipients to use their allocated funds to:

• Respond to (and mitigate) natural disasters that have occurred, or are threatened to occur in the future, or the negative economic effects of natural disasters
• Surface Transportation Projects²
• Certain Title I, or Community Development Block Grant (CDBG) and Indian CDBG (ICDBG), Projects

How can the expanded eligible uses help address vacant, abandoned, and deteriorated properties?

The expanded eligible uses allow the funds to be deployed to help address vacant, abandoned, and deteriorated properties in a variety of new ways. These include:

Repair, retrofit, demolish, or reuse properties to mitigate or respond to natural disasters.

The Interim Final Rule calls out a range of natural disasters, including water, flooding, and tornados. If communities have experienced or are likely to experience these conditions in the future, they can use ARPA SLFRF for certain activities to help reduce and prevent vacant and deteriorated properties. These activities include but are not limited to:

• Property demolition
• Cleanup of construction/demolition debris or vegetative debris
• Green stormwater infrastructure on vacant lots to reduce surface water
• Home repair for owner-occupied structures not covered by insurance
• Improvement of properties to reduce future natural disaster impacts

Communities looking to use ARPA SLFRF for these purposes will need to:

1. Identify the natural disaster that has occurred, will occur imminently, or is expected to occur in the future.
2. Articulate how the emergency relief or mitigation activity using ARPA SLFRF is reasonably related to and proportional to the physical or negative economic impacts of the identified natural disaster.

The Interim Rule provides other guidance for communities to follow, including requiring a Written Justification for mitigation activities that exceed $1 million³ and prohibiting the duplication of benefits.⁴

Acquire, rehabilitate, and sell or reuse properties; develop plans; and other CDBG-eligible activities.

Recipients may now use ARPA SLFRF for any projects that are currently eligible activities, programs, and projects under CDBG and ICDBG. With this usage expansion, communities can use ARPA SLFRF for activities that could help reduce and prevent vacant properties. Some of these activities include:⁵[5]

• Property acquisition
• Property clearance and remediation activities
• Rehabilitation and reconstruction of housing or conversion of structures to housing
• Homeownership assistance
• Technical assistance to entities to increase capacity to carry out CDBG-eligible projects
• Planning activities including the development of plans and studies, policy planning, and management and capacity-building activities

Many of these activities were already eligible uses under the 2022 Final Rule. It will likely be more efficient for communities to pursue these activities under that Rule’s “public health and negative economic impacts” eligible use category, rather than trying to pursue them under the CDBG-eligible projects category.⁶

The CDBG program is complex and there are many additional requirements that communities must adhere to if they pursue these activities under the CDBG-eligible use category.⁷ We encourage communities to consider Treasury’s advice to categorize any projects eligible under the pre-existing ARPA SLFRF public health and negative economic impacts eligible use category as such.  

If your community plans to engage in activities under the expanded CDBG-eligible use category, work closely with your local CDBG compliance officer.

What are the expenditure limits?  

Natural Disaster Response and Mitigation: No expenditure limits. Capital expenditures exceeding $1 million are required to submit a Written Justification. 

Surface Transportation and CDBG: Combined expenditure limits. Activities under these categories cannot exceed the greater of 30 percent of a recipient’s total ARPA SLFRF allocation, or $10 million.

Additionally, ARPA SLFRF used for Surface Transportation and Title I projects must supplement, not supplant, other federal, state, territorial, Tribal, and local government funds that are otherwise available for these projects.⁸

What are the obligation and expenditure deadlines?

Obligation: All ARPA SLFRF allocations, including for activities under these new eligible uses, must be obligated by December 31, 2024.

Expenditure: For funds obligated to provide emergency relief from natural disasters, the expenditure deadline is December 31, 2026. For funds obligated for Surface Transportation projects and CDBG-eligible projects, the expenditure deadline is September 30, 2026.

To learn more about the Interim Final Rule and the ARPA SLFRF, we recommend the following documents and resources:

• Treasury’s Coronavirus State and Local Fiscal Recovery Fund resource portal
• Community Progress ARPA SLFRF resource center which also includes our interactive map
• Community Progress Blog on the ARPA SLFRF Final Rule (January 12, 2022)
• Community Progress Blog on the ARPA SLFRF Interim Final Rule (May 18, 2021)
• ARPA SLFRF vacant property topic-area one-pagers

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1. Overview of the Interim Final Rule, p. 2 ↩︎
2. Community Progress does not focus on these uses in this blog. Interested communities should review the full details on pages 64996-65011 of the Interim Final Rule and seek appropriate guidance. ↩︎
3. Details about the Written Justification are included in the Interim Final Rule and will be included in forthcoming amendments to the ARPA SLFRF Compliance and Reporting guidance. (Interim Final Rule, pp. 64994-5) ↩︎
4. Recipients may not provide financial assistance to a person, business, or other entity for disaster losses that are covered by insurance, or for which a beneficiary will receive financial assistance under any other program. (Interim Final Rule p. 64991) ARPA SLFRF may, however, be used to help with any portion of disaster losses not covered by other benefits. (Interim Final Rule, p. 64992) ↩︎
5. For a full list, see Interim Final Rule, p. 65013. ↩︎
6. For more information, see Interim Final Rule, p. 65012. ↩︎
7. Some examples include adherence to the National Environmental Protection Act, the Primary Objective that 70% of funds allocated for CDBG-eligible uses principally benefit low- and moderate-income populations, and adherence to federal wage, labor, and procurement requirements. See Interim Final Rule, p. 65016. ↩︎
8. For more information, see Interim Final Rule, p. 64987. ↩︎