must be submitted quarterly, in arrears, along with quarterly reports with enforcement and inspection data.
FISCAL IMPACT
If the grant is accepted, the City is eligible to receive reimbursements of up to $310,586 for authorized expenses for each of the following fiscal years: 2024-25, 2025-26, and 2026-27, up to a maximum of $931,758.
ENVIRONMENTAL REVIEW
This action is exempt from the California Environmental Quality Act (CEQA) because it is a project which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, pursuant to CEQA Guidelines section 15378.
ATTACHMENTS
1. Resolution Accepting DOJ Tobacco Grant _CAO Stamp
2. Exhibit A - Memorandum of Understanding
3. Vallejo City Attorney_ Summary of Award 24-25
4. Grantee Handbook 2024-25
5. DOJ Grant Budget Detail
6. Vallejo City Attorney_ Award Letter 24-25
CONTACT
Veronica A. F. Nebb, City Attorney (707) 648-4456
[email protected]
RESOLUTION NO. 24-________
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VALLEJO ACCEPTING TOBACCO GRANT PROGRAM GRANT FUNDS IN THE AMOUNT OF $931,758 FROM THE
STATE OF CALIFORNIA DEPARTMENT OF JUSTICE, OFFICE OF THE ATTORNEY
GENERAL, AUTHORIZING THE CITY OF VALLEJO TO ENTER INTO A MEMORANDUM OF
UNDERSTANDING AND ANY ADDITIONAL DOCUMENTS NECESSARY TO EFFECTUATE SAME, AND PROVIDING NOTICE OF INTENT TO AMEND THE FISCAL YEAR 2024-25 CAPITAL GRANTS AND CONTRIBUTION FUND #221 BUDGET TO RECEIVE AND EXPEND THE GRANT REVENUE (STEP 1)
WHEREAS, the Tobacco Grant Program is made available through the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 (Prop 56) and administered by the California Department of Justice (DOJ); and
WHEREAS, on June 28, 2024, the City of Vallejo submitted a grant application for the fiscal year 2024-2025 grant cycle, prioritizing local tobacco retailer enforcement, and on October 16, 2024, received notification that the City was awarded a grant in the amount of $931,758 for the period beginning November 1, 2024, and ending June 30, 2028; and WHEREAS, the grant funds must be used for the tobacco retailer enforcement activities, which include tobacco retailer education and outreach; targeting retailers for illegal sales and marketing of tobacco products; retail inspections, minor decoy operations, Code Enforcement Officer education; and if necessary, civil prosecution by the City Attorney; and WHEREAS, the grant funds are not authorized for community or school patrols, enforcement actions related to tobacco use and possession, or school or community education efforts; and WHEREAS, the proposed Memorandum of Understanding provides that the Department of Justice will reimburse the City in arrears only for authorized grant expenditures, in accordance with the award budget, as follows:
Award Amount
Category of Expenditure Budget
FY 2024-2025
Budget
FY 2025-2026
Budget
FY 2026-2027
Budget
FY 2027-
2028
Personal Services $290,297 $290,297 $290,297 $
Operating Expenses and Equipment $5,500 $5,500 $5,500 $ Administrative Costs (Not to Exceed
5%) $14,789 $14,789 $14,789 $
TOTAL AWARD AMOUNT $931,758
WHEREAS, the City must submit a resolution of the City Council to the California Department of Justice in order to formally accept the grant and avoid funding delays.
NOW THEREFORE BE IT RESOLVED by the City Council that the City Attorney is hereby authorized and directed to enter into and to execute, on behalf of the City of Vallejo, the Memorandum of Understanding (MOU) with the California Department of Justice attached hereto as Exhibit A to accept a grant from the Tobacco Grant Program in the amount of $931,758.
BE IT FURTHER RESOLVED by the City Council that the City Attorney is authorized to execute future amendments to the MOU for the purpose of increasing the original amount of the grant funding and any additional documents including, without limitation, contracts, amendments, extensions, and payment requests as appropriate to accept the funds and comply with the conditions of the grant.
BE IT FURTHER RESOLVED that the City is authorized to incur grant-related expenses for authorized activities and to receive reimbursements for those expenses.
Adopted by the Council of the City of Vallejo at a regular meeting held on November 19, 2024, with the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
_________________________________________
ROBERT H. MCCONNELL, MAYOR
ATTEST: _________________________________________
DAWN G. ABRAHAMSON, CITY CLERK
Tobacco Grant Program
Grant Services Branch – Local Assistance
Division of Operations
Vallejo Office of the City Attorney DOJ-PROP56-2024-25-1-072
MEMORANDUM OF UNDERSTANDING
PURPOSE
This Memorandum of Understanding (“MOU”) is entered into by the Department of Justice (“DOJ”) and the Vallejo Office of the City Attorney (“Grantee”), for the purpose of disbursing grant funds to Grantee for reimbursement of expenditures in compliance with the California Code of Regulations and the Fiscal Year 2024-25 Grantee Handbook.
Commencing January 1, 2023, the California Code of Regulations, Title 11, Division 1, Chapter 5:
Department of Justice Tobacco Grant Program (“TGP Regulations”) shall govern the policies and procedures of the Tobacco Grant Program.
The TGP Regulations, Request for Proposals, Grantee Handbook (dated April 2024), and Summary of Award document are hereby incorporated by reference into this MOU. Grantee will expend funds for the purposes identified in the approved Summary of Award document. Reimbursements are to be funded under the California Healthcare, Research and Prevention Tobacco Tax Act of 2016, approved by the voters as Proposition 56.
COST REIMBURSEMENT
DOJ agrees to reimburse Grantee in arrears, for Grantee’s actual expenditures in performing the project or scope of work included in the approved Summary of Award document. Reimbursements for line items in the approved Budget Detail will be made upon receipt of invoices from Grantee and approval of the invoices by DOJ, in accordance with the reimbursement procedures set forth in the TGP Regulations and Grantee Handbook.
BUDGET CONTINGENCY CLAUSE
It is mutually agreed, if the Budget Act of the current fiscal year and/or any subsequent years covered under the MOU does not appropriate sufficient funds, the MOU shall be of no further force and effect.
In the event this situation occurs, DOJ shall have no liability to reimburse/pay any funds to Grantee, or to furnish any other considerations under this MOU. As well, Grantee shall not be obligated to continue performing the provisions of this MOU, for which the Grantee would have been reimbursed.
If funding for any fiscal year is reduced or deleted in the Budget Act for purposes of this MOU, DOJ shall have the option to either cancel this MOU with no liability occurring to DOJ or offer an addendum to the Grantee to reflect the reduced amount.
Vallejo Office of the City Attorney DOJ-PROP56-2024-25-1-072
PROJECT BREACH-TERMINATION
Failure of a Grantee to comply with this MOU or the TGP Regulations shall be treated by DOJ as a breach of contract. If an act of noncompliance occurs, DOJ may take actions described within the TGP Regulations, including termination. DOJ may terminate this MOU and be relieved of any obligation to disburse grant funds to Grantee should Grantee fail to perform the scope of work at the time and in the manner provided in this MOU.
MISCELLANEOUS PROVISIONS
Addendum – No addendum or variation of the terms of this MOU is valid unless made in writing and signed by the duly authorized representatives of the parties.
Assignment – This MOU is not assignable by Grantee in whole or in part.
Indemnification – Grantee agrees to indemnify and hold harmless DOJ, its officers, agents and employees from all claims, liabilities, or losses in connection with the performance of this MOU.
Certifications – Grantee certifies that it does not receive funding from a manufacturer, distributor, or advertiser of Cigarettes or Tobacco Products. Grantee further certifies that grant funds will not supplant existing state or local funds dedicated for the same purpose.
TERMS
Grant Duration: 11/1/2024 – 6/30/2028
Award Amount
Category of Expenditure Budget
FY 2024-2025
Budget
FY 2025-2026
Budget
FY 2026-2027
Budget
FY 2027-2028
Personal Services $290,297 $290,297 $290,297 $
Operating Expenses and
Equipment $5,500 $5,500 $5,500 $
Administrative Costs (Not to
Exceed 5%) $14,789 $14,789 $14,789 $
TOTAL AWARD AMOUNT $931,758
The time limit for reimbursements against this award ends 6/30/2028. Requests for reimbursement received after 7/15/2028 cannot be considered by DOJ.
GRANTEE CONTACT INFORMATION
Veronica A. F. Nebb, City Attorney
Vallejo Office of the City Attorney
555 Santa Clara Street
Vallejo, CA 94590
(707) 648-4456
[email protected]
Vallejo Office of the City Attorney DOJ-PROP56-2024-25-1-072
AUTHORIZATION
DOJ and Grantee, by their duly authorized officials, have executed this MOU on the respective dates indicated below. This MOU and any future addendums shall be e-mailed to [email protected], care of the Division of Operations, Local Assistance Unit, Tobacco Grant Program, and will become fully executed upon completion of signatures from all parties. ___________________________________ ___________________ VERONICA A. F. NEBB, City AttorneyDate
Office of the City Attorney
City of Vallejo
___________________________________ ___________________ GILLIAN HAEN, Assistant City ManagerDate
Office of the City Manager
City of Vallejo
___________________________________ ___________________ KRISTIN POLLOT, Director Date
Planning and Development Services
City of Vallejo
______________________________ ___________________
JENNIFER IVERY JOHNSON, Grant ManagerDate
Division of Operations
California Department of Justice
___________________________________ ___________________ NICOLE LEARNED, Administrative ManagerDate
Division of Operations
California Department of Justice
__________________________________ ___________________
CHRIS RYAN, ChiefDate
Division of Operations
California Department of Justice
Tobacco Grant Program
GRANT SERVICES BRANCH – LOCAL ASSISTANCE
DIVISION OF OPERATIONS
10/16/2024 Page 1 of 3
TOBACCO GRANT SUMMARY OF AWARD
DOJ-PROP56-2024-25-1-072
VALLEJO OFFICE OF THE CITY ATTORNEY
This Summary of Award document will be used by the Tobacco Grant Program when determining whether an activity or expense claimed was approved for funding and is reimbursable. Activities other than those presented here may not be reimbursable. A Grant Modification may be necessary for material deviations. Please consult with your Grant Program Officer before engaging in any activity beyond this scope.
By signing the Memorandum of Understanding, your agency agrees to the commitments outlined below and this document becomes part of the Grant Agreement.
AWARD SUMMARY
Award Amount: $931,758 Requested Amount: $949,715
Removed from Award: Training
Reduced Line Items: N/A
Other Changes or Stipulations: N/A
IMPORTANT PROVISIONS FOR ALL GRANTEES
I. Enforcement Activities
a. Authorized - If enforcement activities were proposed, only activities that target retailers for illegal sales/marketing of tobacco products were approved. It is expected that the flavor ban will be enforced within one or more enforcement activities. b. U nauthorized - Community or school patrols, or other enforcement actions related to tobacco use and possession, are not permitted.
II. Educational Activities
a. Authorized – Retailer and/or officer educational activities on tobacco laws and ordinances, if included, are authorized as noted below. b. Unauthorized – School or community education efforts, including media campaigns, are not permitted as part of this award. All educational efforts should be directed to retailers and/or officers.
III. Removed Personnel or Other Items
10/16/2024 Page 2 of 3
a. If specific personnel or other items were removed and not funded, they cannot be reinstated during the grant term.
IV. Reduced Line Items
a. If a specific line item was reduced, the intention was to not fully fund it or the activities it represents.
V. Mileage/Fuel
a. Budgets that include mileage or fuel were amended to include both together in one line item for flexibility and the type of backup documentation available. Mileage is limited to the state rate in effect at the time of travel.
VI. Equipment
a. All equipment items must be purchased during the first year of the grant as noted on the Budget Detail. Their awarding is intended to support project goals and be used to support grant activities throughout the grant term.
Please reference the Tobacco Grant Program Grantee Handbook for more information regarding allowable costs.
GOALS AND ACTIVITIES
Retail Inspections
• Per year, 96 retailers will be inspected.
• Additional details regarding these inspections:
o Minimum of one inspection per year per retailer, with follow up inspections if violations are found. At the time of the grant application submission, there are 96 retailers. Once the TRL Ordinance is adopted that number may decrease.
Minor Decoy Operations
• Per year, 12 minor decoy operations will be conducted. • Per year, 24 retailers will be targeted through these operations. • Additional details regarding these operations:
o The City Attorney's Office will evaluate all violations and file cases against tobacco retailers where warranted
Shoulder Tap Operations
N/A
Undercover Buys
N/A
Retailer Education
• Per year, 96 retailers will receive educational materials. • Per year, 96 retailers will receive on-site education. • Per year, 1 retailer will participate in grantee-provided educational classes. 10/16/2024 Page 3 of 3
• Classes ARE NOT part of a diversion program.
• Additional details regarding these retailer education activities:
o The City will conduct tobacco retailer educational meetings to increase knowledge of new TRLO, federal & state law compliance, facts surrounding health impacts of e- cigarettes & flavored tobacco products, with emphasis on deterrence & limiting access to minors, including proper display & advertising to attract purchases from under-age groups.
o The City will prepare educational outreach materials to distribute to tobacco retailers.
The materials will include appropriate languages used to ensure retailers are informed about the new TRL Ordinance in accordance with DOJ, CDTFA, CDPH OYCE. The City will base the education on the new TRL Ordinance, explaining the new goals and objectives of the new regulations to gain compliance voluntarily.
Enforcement Officer Education
• Per year, 3 enforcement officers will receive education about tobacco laws and ordinances. • Additional details regarding these officer education activities:
o The City will train and educate its Code Enforcement officers regarding the new TRL Ordinance and associated requirements.
Prosecution
Grantee will conduct the following activities related to prosecution of violations for sales or marketing of tobacco products to minors:
• Officers shall comply with protocols for compliance check developed in conjunction with the City Attorney's Office, TRL Ordinance, and Prop 56 evidence-based practices. • Prosecutions will be conducted in one of the following ways: suspension or revocation of the license; issuance of administrative citations; initiation of civil action; or referrals to the district attorney for criminal prosecution.
Task Force
N/A
Other Activities
N/A
PARTNERING AGENCIES
Based upon the proposal submitted and any subsequent modifications approved by DOJ, the following agencies are expected to partner with and support the activities and fulfillment of goals referenced above:
• Solano County Health and Human Services, Public Health Division Please notify your Grant Program Officer of any proposed changes to partnering agencies, particularly if they are included within your budget.
TOBACCO GRANT PROGRAM
GRANTEE HANDBOOK
APRIL 2024
ROB BONTA
Attorney General
OFFICE OF THE ATTORNEY GENERAL
HANDBOOK FOR GRANTS MADE BY THE CALIFORNIA DEPARTMENT OF JUSTICE (DOJ) TO LOCAL AGENCIES UNDER PROPOSITION 56, THE HEALTHCARE, RESEARCH AND PREVENTION TOBACCO TAX ACT OF 2016 (ACT)
All items contained in this Handbook are subject to change. 1 TABLE OF CONTENTS
GRANT TERMS AND CONDITIONS ....................................................................... 3 Award Acceptance ............................................................................................................. 3 Required Opening Documents .............................................................................................................. 3 Grant Agreement .................................................................................................................................. 4 Start of Grant Activities ......................................................................................................................... 4 Declination of Award ............................................................................................................................ 4 Performance Compliance, Audit, and Responsibility ........................................................... 4 Reviews of Performance and Compliance ............................................................................................ 4 Non-Assignment .................................................................................................................................... 4 Procurement of Goods or Services ....................................................................................................... 4 Supplanting ........................................................................................................................................... 5 Overpayment of Funds ......................................................................................................................... 5 Project Income ...................................................................................................................................... 5 Non-Use of Funds .................................................................................................................................. 5 Non-Compliance ................................................................................................................................... 6 Withholding of 10% Pending Closeout ................................................................................................. 6 Audits .................................................................................................................................................... 6 DOJ Grant Management ..................................................................................................... 7 Access .................................................................................................................................................... 7 Funding .............................................................................................................................. 7 Cost Criteria ....................................................................................................................... 7 Allowable .............................................................................................................................................. 7 Reasonable ............................................................................................................................................ 8 Allocable ................................................................................................................................................ 8 Project Costs ...................................................................................................................... 8 Personal Services (Personnel) ............................................................................................................... 8 Operating Expenses and Equipment ..................................................................................................... 8 Administrative Costs ........................................................................................................................... 10 Restricted Items ............................................................................................................... 10 Record and Materials Maintenance .................................................................................. 11 2 Records Retention Period ................................................................................................................... 11 Records to Maintain ............................................................................................................................ 11 Tobacco Products ................................................................................................................................ 11 Equipment ........................................................................................................................................... 11 Use of Submitted Data ..................................................................................................... 11 Public Records Act Notice ................................................................................................. 12 GRANT MANAGEMENT ..................................................................................... 13 Invoicing .......................................................................................................................... 13 Invoice Packages ................................................................................................................................. 13 Other Requirements ........................................................................................................................... 13 Invoicing Frequency and Deadlines .................................................................................................... 13 Reporting Requirements .................................................................................................. 14 Quarterly Progress Reports ................................................................................................................. 14 Enforcement Data Requirement ......................................................................................................... 14 Reporting Frequency and Deadlines ................................................................................................... 14 Modifications ................................................................................................................... 14 Budget Modifications .......................................................................................................................... 14 Grant Modifications ............................................................................................................................ 15 Extensions ........................................................................................................................................... 15 Closeout .......................................................................................................................... 15 DEFINITIONS ..................................................................................................... 16
3 GRANT TERMS AND CONDITIONS
By accepting these funds, your agency agrees to comply with, and be bound by, the conditions set forth in the Memorandum of Understanding (MOU) and documents incorporated by reference including the Request for Proposals (RFP), Program Regulations, Summary of Award, and this Handbook.
AWARD ACCEPTANCE
REQUIRED OPENING DOCUMENTS
Agencies must complete and submit each of the following documents in order to receive reimbursement from DOJ. Documents should be sent via email to [email protected].
Letter of Intent
Your award is not final upon initial notification. A Letter of Intent (LOI) to accept the award will be attached to the award notification. An awarded agency must affirm that either (1) it will seek a resolution to accept the award, if your agency has a governing body, or (2) no governing body exists and no resolution is required.
In order to officially accept the award, an awarded agency must return the completed, signed LOI within 15 calendar days of the date of the award letter.
Governing Body Resolution
If the awarded agency has a governing body from which it requires approval, the agency must submit a resolution from this governing body to DOJ in order to formally accept the grant. Once notified of selection, the awarded agency should promptly request the resolution to avoid funding delays.
The resolution must authorize the applicant to enter into agreement with DOJ, incur grant-related expenses, and receive reimbursement for those expenses. Also, the resolution should expressly authorize future amendments, if any, for the purpose of increasing funding provided in the original Grant Agreement, without an additional resolution from the governing body.
Government Taxpayer ID Form
The Governmental Taxpayer ID form is required in order for DOJ to reimburse your agency for grant expenses.
Summary of Award
The Summary of Award must be completed to reflect any reductions, restrictions, or requested revisions communicated by DOJ.
Memorandum of Understanding (MOU)
In order to be eligible for reimbursement of expenditures under the grant and start grant activities, an MOU between DOJ and the awarded agency is required. The MOU must be approved by a duly authorized representative of your agency or your agency’s governing body.
The MOU and other accompanying documents must be returned to DOJ via email to [email protected]
within 90 calendar days of receipt.
4 GRANT AGREEMENT
The Grant Agreement represents the final agreement between DOJ and a Grantee that sets forth the terms and conditions of the Grant. The Grant Agreement includes the executed MOU, Request for Proposals (RFP) and associated documents, Summary of Award, Budget Detail, and this Handbook.
START OF GRANT ACTIVITIES
As noted above, prompt action to obtain the Governing Body Resolution (if the agency has a governing body) is imperative to start activities in a timely manner.
Once DOJ has signed the fully-executed MOU and verified that all required opening documents have been completed, the Grantee may begin funded activities and be eligible for reimbursement of expenditures.
DECLINATION OF AWARD
DOJ will consider an award declined in one the following instances:
• Failure to return the LOI within 15 calendar days of the date of the Award Letter; • Failure to execute the MOU and any other required documents within 90 calendar days of the date sent by DOJ; or
• Written notification from the awarded agency that they do not wish to accept the grant award.
PERFORMANCE COMPLIANCE, AUDIT, AND RESPONSIBILITY
REVIEWS OF PERFORMANCE AND COMPLIANCE
Grants and funding are subject to performance compliance reviews by DOJ and/or its designee in the form of site visits and other meetings, interviews with Grantees, contractors and other stakeholders, and review of relevant documents.
NON-ASSIGNMENT
The Grantee is the responsible agency and may not transfer or assign the grant to another entity.
PROCUREMENT OF GOODS OR SERVICES
The Grantee shall follow its own written procurement policies and procedures when procuring goods or services for activities relating to performance of the grant. All documents related to the procurement of goods or services shall be maintained by the Grantee for the records retention period of five years and
copies shall be provided to DOJ when requesting reimbursement.
Use of Contractors
Grantees may contract for services under the following conditions:
• Contractor services must be clearly included within the Grantee’s approved Summary of Award and limited to the purpose of achieving the grant objectives specified. 5 • Grantees shall have a written agreement with each contractor and, prior to execution, shall submit a copy of the agreement to DOJ for review of alignment with the Summary of Award and provisions of the Grant Agreement as applicable.
• Grantees are responsible for ensuring that each contractor complies with the Grant Agreement, including, if applicable, collecting and reporting of progress and inspection data and disallowance of supplanting and restricted items.
• Contracting shall not affect the Grantee’s overall responsibility for the management of a Project, and the Grantee shall reserve sufficient rights and control to enable it to fulfill its responsibilities for the grant.
SUPPLANTING
Supplanting is prohibited. Supplanting is defined as using grant funds to pay for costs that are already funded within your agency’s budget, or for which other funding has already been received, in order to reallocate existing funding to other purposes. The effect of supplanting would be to reduce the total amount that would have been available for the purpose stated in the application or grant agreement.
If DOJ or the California State Auditor identifies that supplanting has occurred, DOJ may pursue remedies for non-compliance.
OVERPAYMENT OF FUNDS
If an agency is inadvertently reimbursed for more than the amount expended, the overpayment of funds must be returned to DOJ. If the grant for which the funds are being returned is still active (within the term of the MOU), then the returned funds can be shown as a credit on the next claim submitted for reimbursement. If the grant term has ended, the agency must return the funds within 90 days of notice of overpayment. Checks should be made payable to the California Department of Justice and mailed to:
California Department of Justice
Division of Operations
Tobacco Grant Program – 8th floor
P.O. Box 160187
Sacramento, CA 95816
PROJECT INCOME
Income generated from a project, if any, may be reinvested by the Grantee into the project for which the grant was awarded, returned to DOJ, or DOJ may approve other uses by the Grantee in accordance with the general purposes of the grant. Project income does not include fines, penalties, legal costs, attorney’s fees, or other property collected as a result of enforcement actions by the Grantee.
NON-USE OF FUNDS
Grantees are expected to start operations within six months of the execution date of the MOU, or approved start date, and are responsible for advising DOJ if they are unable to do so.
Grantees who have not started their project and expended any funds within the first year of the beginning of the grant term
shall forfeit their award.
6 NON-COMPLIANCE
In the event a Grantee fails to comply with any of the terms and conditions of the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund or Grant Agreement, DOJ will notify the Grantee in writing.
In the event DOJ and a Grantee are unable to resolve a Grantee’s non-compliance with the terms and conditions of the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund or Grant Agreement w ithin 30 calendar days of the written notice, DOJ may take one or more of the following actions:
• Withhold payments
• Recover funds paid to the Grantee
• Impose additional conditions on the Grantee
• Terminate the Grant Agreement
• Disqualify the Grantee from consideration for future grants WITHHOLDING OF 10% PENDING CLOSEOUT
DOJ may withhold the final reimbursement claim(s) or 10% of the grant amount, whichever is more, pending approval by DOJ of the final Quarterly Progress Report (QPR).
AUDITS
Grantees and sub-recipients are subject to audit by both the California State Auditor and DOJ (Rev. & Tax. Code, § 30130.56, subdiv. (a)). In addition to formal audits, DOJ may conduct site visits and request other meetings with reasonable notice. Grantees are expected to be available for these meetings. All documentation related to the receipt and use of grant funds shall be made open to inspection upon request by the California State Auditor and/or DOJ.
Grantees are subject to a financial compliance review in the form of an audit, an agreed-upon- procedure, and/or both. A review will be conducted in accordance with the Generally Accepted Government Auditing Standards and Revenue and Tax Code, sections 30130.56 and 30130.57, subdivisions (e)(1), (f) & (g), designed to accomplish any one or more of the following: to monitor compliance with the requirements of the grant program and the terms and conditions of the grant agreement; to assess the quantity, quality, timeliness and cost of services the Grantee produces and delivers under the terms and conditions of the grant agreement; and to assess the performance of any contract entered into by a Grantee relating to a grant.
Grounds for Audit Exception
One or more of the following shall be grounds for an audit exception, which may require the refund of amounts paid with grant funds:
(1) Failure to fully complete the work or services described in the Summary of Award document; (2) Failure to assess the performance of any contract entered into by a Grantee; or 7 (3) Failure to maintain documents, records, receipts, and financial accounts supporting the expenditures reimbursed with grant funds.
DOJ GRANT MANAGEMENT
Each agency will be assigned a Grant Program Officer from DOJ for assistance with implementation and oversight of the agency’s specific grant program throughout the life cycle of the grant. Grant Program Officers will maintain regular communications with their agencies and will provide administrative direction and guidance.
ACCESS
Upon reasonable notice, Grantees shall allow DOJ access to the records of the project, the project sites (if applicable), and any employees or contractors who may reasonably have information related to the project. Also, upon reasonable notice, Grantees shall allow DOJ to accompany the Grantee on project- related activities.
FUNDING
All expenses claimed for reimbursement, including contracted services, must already be paid by the Grantee. Expenses incurred by subcontractors as part of the project must be invoiced to and paid by the Grantee for reimbursement. DOJ will not reimburse any amount greater than the actual cost of the expenses to the Grantee.
Goods and services must be received, invoiced, and paid by the Grantee during the Grant Term in order to be eligible for reimbursement. Any funds spent after the expiration of the Grant Agreement cannot be reimbursed, regardless of when they were obligated or problems with vendor fulfillment.
COST CRITERIA
ALLOWABLE
In general, costs must meet all of the following general criteria to be allowable. An allowable cost must:
• Be reasonable for the performance of the grant, and allocable to the grant • Be accorded consistent treatment
• In the event a cost is assigned in one way and another cost incurred for the same purpose in like circumstances was previously allocated in the agency’s budget in another way, the Grantee shall provide a description of both the current and the prior assignments. The description shall be sufficient for DOJ to ascertain whether or not funds have been supplanted. • Be adequately documented
• Comply with the California Healthcare, Research and Prevention Act and terms and conditions of
the Grant Agreement
• Not be disallowed under the terms of the Grant Agreement 8 • Comply with applicable laws and regulations
REASONABLE
A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.
In determining the reasonableness of a given cost, consideration will be given to:
• Whether the cost is generally recognized as ordinary and necessary for the proper and efficient performance of the grant
• The requirements of the grant program and the terms and conditions of the grant agreement • Market prices for comparable goods or services for the geographic area • Whether the Grantee deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase a cost
ALLOCABLE
A cost is allocable to the grant if the cost is incurred for grant-related activities.
Unless otherwise provided for in the grant agreement, if a cost is incurred for the performance of grant- related activities and also for other non-grant-related activities, and benefits both grant and non-grant activities, the proportion that is incurred for the performance of grant-related activities may be approximated using reasonable and properly documented methods and assigned to the grant.
PROJECT COSTS
Project costs may include the reasonable and necessary cost of tobacco-enforcement related items required to conduct grant-related operations. Specific costs that may be supported by funds awarded under the Tobacco Grant Program are as follows:
PERSONAL SERVICES (PERSONNEL)
Salaries, overtime, and benefits are allowable expenses as approved within the Grantee’s budget.
Amounts claimed must be based on actual wages and supported by payroll and attendance records kept by the agency and must be made available to DOJ upon request.
OPERATING EXPENSES AND EQUIPMENT
Equipment
Equipment that directly supports the applicant’s project proposal may be purchased using grant funds if approved within the Grantee’s budget. Equipment should be purchased within the first year of the project in order to maximize its utility during the grant term. Acceptable documentation for equipment purchases include copies of receipts and proof of payment (copies of checks or credit card statements).
Maintenance of property records related to equipment is required.
Travel
Travel by Grantees for tobacco-related grant activities (if approved within the Grantee’s budget) shall be in accordance with the State of California’s written travel policies, and subject to any further 9 requirement in the grant agreement. Travel that directly supports the applicant’s project may be reimbursed using grant funds subject to limitations indicated below.
Out-of-state travel requires prior approval and may be subject to additional restrictions.
Travel Cost and Reimbursement Limitations
Travel may be billed and reimbursed only as allowed by the State of California’s established travel reimbursement rates i n effect as of the date(s) of travel and must be inc luded in the approved budget.
Travel expenditures that exceed the State's allowable rates will be reimbursed only up to the amount allowed and the Grantee will be responsible for the balance.
Travel costs may only consist of the reasonable and necessary charges for commercial fares, public transportation, private vehicle, overnight and day parking of private or rental vehicles, bridge and road tolls, meals, lodging, and incidentals, incurred for travel necessary for the performance of the grant.
Documentation of Travel Expenses
Travel costs shall be substantiated by receipts made available to DOJ upon request for reimbursement.
Acceptable documentation of travel expenses includes copies of receipts for meals, lodging, etc., and if applicable, completed agency mileage forms. All receipts must show ‘paid’.
Training
Each grant recipient should send at least one representative to a workshop offered by the Tobacco Grant Program during the first year of each grant award.
All trainings must be Tobacco Grant-related. If the training is not offered by DOJ and specifically related to the Grant Agreement
, then prior approval must be sought. To obtain prior approval for training, the Grantee must submit specific training information (e.g., flyer, agenda, registration notification, etc.) to confirm it covers tobacco-related content. No portion of training covering non-tobacco topics (e.g. alcohol, cannabis, or other drugs) will be reimbursable. Acceptable documentation for reimbursement of training expenses includes copies of receipts, proof of payment, and training information and approval notification from DOJ as noted above. Any travel associated with the training must comply with travel requirements noted above.
Other Expenses
Supplies and Materials
Supplies and materials that directly support the applicant’s project and are not restricted items may be purchased using grant funds. Items in this category must not meet the definition of Equipment and may be consumable.
All items which include artwork and/or anti-tobacco messaging require pre-approval from DOJ. As a guideline, the anti-tobacco logo/message must be the prominent feature and should be at least 25% larger than any other logo/message in the design. If there is a front and back to an item, the anti- tobacco logo/message must be placed on the front.
Examples of allowable supplies/materials (if approved in the budget) include but are not limited to:
• Education materials (pamphlets, brochures, flyers).
• Community outreach items (e.g., pop-up tent, table, tablecloth, prize wheel). 10 • Promotional materials with an anti-tobacco message (e.g., hats, t-shirts, pencils/pens, water bottles, draw string/reusable bags, lanyards). The anti-tobacco messaging should be predominant and can be an image and/or text. Approval of logo/messaging is required from DOJ prior to purchase of the items.
Operating Costs
Examples of allowable operating costs (if approved in the budget) include, but are not limited to:
• Contracts and inter-agency agreements.
• Cell phone, including monthly service costs, allocable to grant project activities. • Media campaigns (prior approval of logos, language/statements to be used, pictures/graphics, etc., must be obtained from DOJ prior to expenditure of funds). • Office equipment (e.g., laptop/PC/printer) allocable to the grant project activities. • Video/Audio recording devices (for enforcement operations). • “Buy Money” used in the course of enforcement operations.
ADMINISTRATIVE COSTS
Administrative costs, if included in the Grantee’s budget, are limited to no more than 5% of direct project expenses (See Rev. & Tax. Code, § 30130.57, subd. (f) and (g)).
RESTRICTED ITEMS
Grant funds shall not be used to purchase items that are considered restricted and/or intended for personal use. Examples include but are not limited to:
• Ammunition
• Awards
• Award certificates
• Balloons
• Briefcases
• Calendars (decorative)
• Cleaning supplies
• Coffee pots and supplies
• Drones
• Facilities lease/rent
• Facilities renovations
• Firearms and related accessories (scopes, holsters, racks, etc.) • Food, beverages, and any other consumables (including for meetings/conferences) • Gift Cards
• Hand sanitizers
• K9
• Kleenex/tissue papers
• Luggage
11 • Luggage carriers
• Pepper spray
• Personalized products used to advertise an agency and/or programs (e.g., pens, magnets) that are not specific to an anti-smoking/anti-tobacco campaign • Picture frames
• Plastic eating utensils
• Portable fans
• Portable heaters
• Refrigerators
• Ribbons
• Uniforms and standard complement items (battle dress uniforms, vests, boots, etc.) • Vehicles and/or vehicle trailer purchases (vehicle usage, leases, fees, and mileage reimbursement are allowable)
If there is a question about whether an item will be approved for reimbursement, then prior approval from the Tobacco Grant Program should be sought.
RECORD AND MATERIALS MAINTENANCE
RECORDS RETENTION PERIOD
Your agency must maintain grant records for the retention period established by your agency for those types of records OR for five years after a grant is closed out by DOJ, whichever is longer.
RECORDS TO MAINTAIN
Your agency must maintain records relating to the application, grant agreement, budget, and performance of projects. These records include, but are not limited to, reports of enforcement activities, educational programs, policy programs; personnel activity records; payroll records; travel claims; receipts; documents showing the calculation or methodology for determining whether funds were supplanted; and documents showing the calculation or methodology for determining administrative costs.
TOBACCO PRODUCTS
Grantees shall retain and preserve the tobacco products purchased or otherwise obtained during the course of performing a project, and the purchase records for such tobacco products, in accordance with the Grantee’s written policies regarding retention, destruction or forfeiture of such items.
EQUIPMENT
Grantees shall maintain property records for the records retention period for each item of tangible property considered as equipment.
USE OF SUBMITTED DATA
Data submitted pursuant to the Grant Agreement may be compiled for DOJ use. 12 PUBLIC RECORDS ACT NOTICE
Grant documents, including correspondence, are considered public records and subject to the disclosure requirements of the California Public Records Act (CPRA) as solely determined by DOJ.
13 GRANT MANAGEMENT
INVOICING
INVOICE PACKAGES
Submit invoices using DOJ-provided forms with all required attachments via email to [email protected].
A complete invoice package must include:
• The invoice cover page signed by the agency representative; • The invoice detail pages; and
• Documentation of costs incurred and their subsequent payment for all Operating Expenses and Equipment (Section B) claimed. Goods and services received must be shown to have been paid in full.
Grantee must be in possession of supporting documentation for all claimed expenses prior to requesting reimbursement.
OTHER REQUIREMENTS
Prior to authorizing reimbursement on invoices submitted, DOJ will compare expenses claimed against all required reporting.
INVOICING FREQUENCY AND DEADLINES
Invoices, or requests for reimbursement, must be submitted quarterly (in arrears) by the deadlines listed below. If the date falls on a weekend or holiday, the reimbursement package will be due on the next business day:
Table 1. Invoicing Timeline
Quarter Date Range Covered
(based on payment dates)
Due Date
Summer July 1 – September 30 October 15
Fall October 1 – December 31 January 15
Winter January 1 – March 31 April 15
Spring April 1 – June 30 July 15
14 REPORTING REQUIREMENTS
QUARTERLY PROGRESS REPORTS
Quarterly progress reports (QPRs) must be submitted electronically using a unique link and instructions sent by DOJ via email prior to each report due date. Grantees are expected to describe grant activities undertaken pursuant to the grant during the reporting period.
ENFORCEMENT DATA REQUIREMENT
Grantees performing tobacco retail enforcement or inspections must provide supplemental data regarding these activities on the same schedule as QPRs. This data must be submitted separately to [email protected] using the DOJ-provided form.
REPORTING FREQUENCY AND DEADLINES
Reports referenced below must be submitted quarterly by the deadlines listed below. If the date falls on a weekend or holiday, the report will be due on the next business day.
Table 2. Reporting Timeline
Quarter Date Range Covered
(based on activity dates)
Due Date
Summer July 1 – September 30 October 15
Fall October 1 – December 31 January 15
Winter January 1 – March 31 April 15
Spring April 1 – June 30 July 15
MODIFICATIONS
Grantees seeking to modify any aspect of their grant should first contact their Grant Program Officer by emailing [email protected] for assistance. Specific cut-off dates and limitations may apply.
BUDGET MODIFICATIONS
A Budget Modification is limited to moving funds from one fiscal year to another and/or realigning funds between existing line items up to a 10% increase of the original amount awarded for any single line item across all fiscal years. Budget Modification requests require the submission of the Modification Request form and a revised Budget Detail.
Up to three Budget Modifications are allowed per fiscal year during the Grant Term. 15 GRANT MODIFICATIONS
A Grant Modification involves change to the Grant Agreement that exceeds the scope of a Budget Modification. Requests for a Grant Modification may p ropose changes to the use of grant funds, project description, project timeline, or other changes related to the project or budget. Grant Modification requests require submission of the Modification Request form including written justification of the need for changes and description of how the proposed changes align with the grant award. Requests modifying the budget require submission of a revised Budget Detail. Requests modifying goals and activities require submission of a revised Summary of Award.
Only one Grant Modification is allowed during the Grant Term.
EXTENSIONS
DOJ cannot reimburse for any expenses paid after the end date of the Grant Term as specified in the MOU. Flexibility to expend funds across four fiscal years is built into the MOUs. DOJ will not consider requests to extend the Grant Term unless received by DOJ at least six months prior to the end date of the MOU.
CLOSEOUT
DOJ shall conduct closeout review activities prior to closing out each grant to ensure that all necessary administrative actions and projects have been completed by the Grantee. Closeout review activities include, but are not limited to, review of required reporting, verification that any performance issues are resolved, and verification that any audit or agreed-upon-procedure findings are resolved.
16 DEFINITIONS
The following definitions apply to the Tobacco Grant Program:
Administrative Costs
The necessary and reasonable indirect expenses as allowed under the terms and conditions of the grant agreement.
Application
An application is a request by an eligible agency to receive a grant from DOJ pursuant to Revenue and Taxation Code section 30130.57, subdivision(e)(1).
Contractor
An entity or person, including a consultant, that enters into a contract with a Grantee to perform an approved grant-related activity. May also be referred to as a “Partner.” DOJ
The California Department of Justice.
Equipment
An item that has a per-unit acquisition cost of $5,000 or more and a useful life of at least one year.
Equipment should be purchased within the first year of the project in order to maximize its utility during the grant term.
Grant
An award of financial assistance made to a Grantee, the principal purpose of which is the transfer of funds to carry out a project of public benefit authorized and intended by Revenue and Taxation Code section 30130.57, subdivision (e)(1), a Proposal, and the Gran t Agreement between the Grantee and DOJ.
Grant Agreement
The final agreement entered into between DOJ and a Grantee, which sets forth the terms and conditions of the Grant. The grant agreement includes the executed MOU, Request for Proposals and associated documents, Summary of Award document, Budget Detail, and this Handbook.
Grant Program Officer
A DOJ staff member assigned as the primary point-of-contact for Grantees with regards to the implementation and administration of the grant. Formerly titled “Grant Administrator.” Grant Term
The period of time provided for in the Grant Agreement. Previously referred to as “Grant Duration.” Grantee
A local agency to which a Grant is awarded.
17 Inspection Data
Information regarding retailer inspection or enforcement activity by a Grantee under the terms of the grant agreement, including, but not limited to, information about retailer location, retailer violations, retailer inspections, and retail-related citations, licensing actions, administrative proceedings, diversion proceedings, and prosecutions. Inspection data includes information regarding such activities whether or not a violation was found or a citation was issued. A grant agreement may contain further information about what constitutes inspection data, how it is to be gathered and retained by a Grantee, and how and when it is to be reported to DOJ.
Letter of Intent (LOI)
A document affirming an awarded agency’s intent to accept the grant award.
Local Law Enforcement Agency
A local government entity, such as a county, city, district, public authority, public agency, and any other political subdivision or public corporation that can support and hire law enforcement peace officers (as defined in Penal Code section 830
) and is authorized to:
(1) Investigate or conduct an official inquiry into enforcement of state and local laws, ordinances, regulation, and policies related to the illegal sales and marketing of tobacco products to minors and youth, or
(2) Prosecute or otherwise conduct a criminal or civil proceeding arising from the illegal sales of tobacco products to minors and youth.
Project
An undertaking that is planned to conduct activities and achieve stated goals and objectives for which funds were awarded by DOJ to a Grantee from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund.
Quarterly Progress Reports (QPRs)
Reports of grant-related activity performed in accordance with the approved project. Submission of these reports is required on a quarterly basis.
Records Retention Period
The period of time after the grant is closed out that a Grantee must maintain records related to the grant, which is at least five years from the date the grant is closed by DOJ.
Request for Proposals (RFP)
A solicitation for project proposals from eligible Local Law Enforcement Agencies.
Summary of Award
Document that contains the Grantee’s approved goals/objectives and budget narrative reflective of any reductions and/or revisions.
Supplant
Using grant funds to pay for costs that are already funded within your agency’s budget, or for which other funding has already been received, in order to reallocate existing funding to other purposes. The 18 effect of supplanting would be to reduce the total amount that would have been available for the purpose stated in the application or grant agreement.
Tobacco Products
The same meaning as in Revenue and Taxation Code section 30121.
BUDGET DETAIL INSTRUCTIONS
Understanding Your Budget
Your agency's initial Award Budget specifies the line items funded and the amounts for each. Please be sure to reference this each time you plan your grant activities, submit for reimbursement, or seek changes. When Budget Modifications are approved by DOJ, the Budget Detail for that modification supercedes all prior budgets.
You may submit up to 3 Budget Modifications per fiscal year. Budget modifications are limited to moving funds from one fiscal year to another or realigning funds to increase a line item (may be subject to limits).
You may submit only ONE Grant Amendment for the grant term. A Grant Amendment adds items or changes the use of Grant funds, the Project description, or the duration of the Grant award, or other changes related to the Project or Budget under the Grant Agreement. An increase to any line item of more than 10% is considered a Grant Amendment.
Budget Sections
The Budget is composed of three sections:
(A) Personal Services (salaries, overtime, and benefits), (B) Operating Expenses and Equipment (Equipment, Other Expenses, Travel Expenses / Registration Fees), and
(C) Administrative Costs (if included, limited to 5% of Section A + B costs) When you Need Changes to the Budget
A common time a budget modification will be needed is after a fiscal year closes. Funds that remain in a closed fiscal year can be rolled over, however this must be requested and is NOT automatic.
All Budget or Grant Amendments must be submitted at least 6 months before the end of the Grant term (found on your MOU).
In the event of a surplus/deficit in line items, you may seek a budget modification to transfer within existing line items (may be subject to limits).
Finally, adding line items to the budget would be considered a Grant Amendment with specific restrictions as explained below.
Steps to Modifying your Budget Detail:
When completing a request to modify your budget, you must submit all of the following: Revised Budget Detail, Budget Modification Form, and any additional documentation to serve as justification for the request. Please consult with your Grant Administrator to ensure you are using the latest forms when submitting.
STEP 1: REVIEW SPENDING/BUDGET
Before revising, carefully review claims submitted to-date, note any cuts made by DOJ during reimbursement, and consider projected spending.
STEP 2: REVISE BUDGET DETAIL
Adjust the Budget Detail worksheet to reflect how you would like to allocate your grant funds. Use whole dollars only. Please update the header as appropriate to indicate the date of the budget and the # of the Budget Modification (ex. Budget Mod 1 - 8/5/22) Be sure to leave sufficient funds in each line item to cover expenses claimed or pending. Round UP to at least the next whole dollar.
Creation of New Line Items:
Adding new line items to the grant is considered a Grant Amendment and only ONE may be submitted for the term of the grant.
STEP 3: COMPLETE MODIFICATION REQUEST FORM
In order to complete the changes, a formal request to modify the budget must accompany the revised Budget Detail. Instructions for completing the Budget Modification Request form are contained in that Excel document.
STEP 4: SUBMITTING YOUR REQUEST FOR BUDGET MODIFICATION When you have reviewed your Budget Detail, Budget Modification Request and these instructions carefully, please send your request by email to: [email protected]. Use the Subject line:
“Budget Modification Request” followed by your agency name.
COMMON MISTAKES TO AVOID
• Insufficient funds left in line items previously claimed (remember to round UP). • Not including all FYs of the budget.
• Total budget does not match award.
• Items placed in the wrong sections.
QUESTIONS? NEED ASSISTANCE?
Your assigned Grant Program Officer (reached at [email protected]) can provide further guidance with regards to your budget.
Your Grant Program Officer is available to discuss this with you individually and can use screen- share by video conference to demonstrate how to use this and other Tobacco Grant workbooks. We also offer periodic trainings each year for grantees and you are welcome to sign up for a refresher.
TOBACCO GRANT BUDGET DETAIL
Vallejo Office of the City Attorney
24/25 AWARD BUDGET
DOJ-PROP56-2024-25-1-072
Costs Per Fiscal Year (July 1 - June 30)
A. Personal Services
Salaries
Classification/Positions Computation FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 TOTALS Code Enforcement Officers (2) $ 111,130 $ 111,130 $ 111,130 $ - $ 333,390 Code Enforcement Manager $ 53,610 $ 53,610 $ 53,610 $ - $ 160,830 Code Enforcement Analyst $ 43,110 $ 43,110 $ 43,110 $ - $ 129,330 Code Enforcement Secretary $ 22,109 $ 22,109 $ 22,109 $ - $ 66,327 Economic Development Director $ 10,859 $ 10,859 $ 10,859 $ - $ 32,577 Assistant to the City Attorney (2) $ 44,328 $ 44,328 $ 44,328 $ - $ 132,984 City Attorney $ 5,151 $ 5,151 $ 5,151 $ - $ 15,453
SUBTOTAL $ 290,297 $ 290,297 $ 290,297 $ - $ 870,891
Overtime
Classification/Positions Computation FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 TOTALS $ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
SUBTOTAL $ - $ - $ - $ - $ -
Benefits
Classification/Positions Computation FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 TOTALS $ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
SUBTOTAL $ - $ - $ - $ - $ -
TOTAL PERSONAL SERVICES $ 290,297 $ 290,297 $ 290,297 $ - $ 870,891
TOBACCO GRANT BUDGET DETAIL
Vallejo Office of the City Attorney
24/25 AWARD BUDGET
DOJ-PROP56-2024-25-1-072
B. Operating Expenses and Equipment
Equipment (Tangible items with a PER-UNIT cost of $5,000 or more) Description Computation FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 TOTALS $ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
SUBTOTAL $ - $ - $ - $ - $ -
Other Expenses
Description Computation FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 TOTALS Retailer Educational Materials May require pre-approval; may not include food $ 5,500 $ 5,500 $ 5,500 $ - $ 16,500 $ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
SUBTOTAL $ 5,500 $ 5,500 $ 5,500 $ - $ 16,500
Travel Expenses/Registration Fees*
Description and Destination Computation FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 TOTALS $ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
$ - $ - $ - $ - $ -
*For approved tobacco related training and travel only. Travel cannot exceed current state rates.
SUBTOTAL $ - $ - $ - $ - $ -
TOTAL OPERATING EXPENSES AND EQUIPMENT $ 5,500 $ 5,500 $ 5,500 $ - $ 16,500 C. Administrative Costs*
Description Computation FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 TOTAL Admin 5% $ 14,789 $ 14,789 $ 14,789 $ - $ 44,367
*Administrative costs must not exceed 5% of the total budget. TOTAL $ 14,789 $ 14,789 $ 14,789 $ - $ 44,367
TOBACCO GRANT BUDGET DETAIL
Vallejo Office of the City Attorney
24/25 AWARD BUDGET
DOJ-PROP56-2024-25-1-072
SUMMARY
Budget Category FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 Total Request A. Personal Services $ 290,297 $ 290,297 $ 290,297 $ - $ 870,891 B. Operating Expenses and Equipment $ 5,500 $ 5,500 $ 5,500 $ - $ 16,500 C. Administrative Costs $ 14,789 $ 14,789 $ 14,789 $ - $ 44,367 TOTAL PROJECT COSTS $ 310,586 $ 310,586 $ 310,586 $ - $ 931,758
Rob Bonta
At torney General
DI VISION OF OPERATIONS
OFFICE OF THE CHIEF
GRANT SERVICES BRANCH
TOBACCO GRANT PROGRAM
P.O. Box 160187
Sacramento, CA 95816-0187
Telephone: (916) 210-6422
E-Mail Address: [email protected]
October 16, 2024
Gillian Haen, Assistant City Manager
Vallejo Office of the City Attorney
555 Santa Clara St
Vallejo, CA 94590
Re: Toba cco Grant Award Notification Fiscal Year 2024-25 (RFP: DOJ-PROP56-2024-25-1) Dear: Assistant City Manager Gillian Haen
Congratulations! On behalf of the California Department of Justice (DOJ), Tobacco Grant Program, I am pleased to inform you that your agency’s grant application for the fiscal year 2024-25 grant cycle has been approved for grant funds authorized under the California Healthcare, Research and Prevention Tobacco Tax Act of 2016. The total amount of your agency’s grant award is $931,758.
The Tobacco Grant Program award process is highly competitive, and for the 2024-25 grant cycle, the Department received over $50 million in requests. As noted in the application materials, grant funding prioritized support for local retailer enforcement, including enforcement of flavored tobacco bans. Consequently, some awards were approved with modifications to align with these funding priorities. Attached is a Summary of the Award and Budget Detail outlining the funding provided along with any modifications applied.
To accept the 2024-25 grant award, please complete and return a signed copy of your Letter of Intent (see template and instructions attached) by email within 15 calendar days of the date of this letter. This letter will affirm either:
1. Your agency will seek a resolution from the governing body to accept the award (if your agency has a governing body); OR
2. No governing body exists and no resolution is required.
Please email the signed Letter of Intent as noted above to [email protected] with the subject line including the name of your agency: “FY 24-25_Letter of Intent_Vallejo Office of the City Attorney.” Upon receipt of this information, DOJ will provide your agency with additional documents for execution/use (e.g., Memorandum of Understanding, Governing Body Resolution template, Grantee Handbook, etc.). These documents will contain more information October 16, 2024
about the process for reimbursement and other important details. Activities for reimbursement under this grant may commence on or after November 1, 2024 depending upon your selected start date.
Should you have any questions regarding this letter or the required follow up information, please email [email protected].
Since
rely,
JENNIFER IVERY JOHNSON
Manager, Grant Services Branch
For ROB BONTA
Attorney General
Attachments:
Letter of Intent
Summary of Award
Budget Detail
ACTION ITEM 9.A.
DATE: November 19, 2024
TO: Mayor and Members of the City Council
FROM: Melissa Tigbao, P.E., Public Works Director
SUBJECT: ADOPT A RESOLUTION APPROVING A FIRST AMENDMENT TO THE SUPPLY OF
FUEL AND PETROLEUM PRODUCTS AGREEMENT WITH HUNT OIL OF CALIFORNIA (FORMERLY HUNTS & SONS, INC.) TO INCREASE THE CONTRACT AMOUNT TO $4,900,000 AND AUTHORIZING THE CITY MANAGER TO EXECUTE SAME
RECOMMENDATION
Adopt a resolution approving a First Amendment to the Supply of Fuel and Petroleum Products Agreement with Hunt Oil of California (formerly Hunt & Sons, Inc.) to increase the contract amount to $4,900,000 and authorizing the City Manager to execute same.
REASONS FOR RECOMMENDATION
There is a continued need for fuel purchases used by the City of Vallejo Fleet. The existing Supply of Fuel and Petroleum Products Agreement is nearing its not to exceed contract amount. To continue these needed fuel purchases until a new RFP process is completed, staff recommends amending the contract to increase the not-to-exceed amount to $4,900,000.
BACKGROUND AND DISCUSSION
The Public Works Department, Fleet Section purchases fuel that is used by all City fleet. Additionally, fuel is sold to boating customers at the Vallejo Municipal Marina and to Greater Vallejo Recreation District (GVRD) for the equipment and vehicles they use in their operations.
A Request for Proposals (RFP) was issued in April 2020 soliciting companies for the supply of fuel and petroleum products at various City locations. Proposals from seven companies were received by the submission deadline of May 15, 2020. On June 23, 2020, the City Council authorized the Agreement for the Supply of Fuel and Petroleum Products with Hunts & Sons, Inc., (now Hunt Oil of California) for the amount of $4,250,000.
As of September 30, 2024, approximately $4,155,000 has been spent or is encumbered in relation to this contract (21PW003) which has an expiration date of June 30, 2025. Fleet staff have reviewed expenses and determined the contract needs to be increased by $650,000 to cover projected expenses through the end of the fiscal year.
Staff recommends executing the first amendment to contract number 21PW003 to increase the contract amount to $4,900,000 for the remainder of the contract.
A new RFP will be advertised soon, and a recommendation will be brought to Council in the coming months for the award of a new contract to take effect in Fiscal Year 2025-26.
FISCAL IMPACT
Date: November 19, 2024
Subject: ADOPT A RESOLUTION APPROVING A FIRST AMENDMENT TO THE SUPPLY OF
FUEL AND PETROLEUM PRODUCTS AGREEMENT WITH HUNT OIL OF
CALIFORNIA (FORMERLY HUNTS & SONS, INC.) TO INCREASE THE CONTRACT AMOUNT TO $4,900,000 AND AUTHORIZING THE CITY MANAGER TO EXECUTE SAME
Funding for these costs is included in the adopted budget. All future payments for this agreement are subject to City Council approval of annual appropriations.
ENVIRONMENTAL REVIEW
This action is exempt from the California Environmental Quality Act (CEQA) because it is not a project which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, pursuant to CEQA Guidelines section 15378.
ATTACHMENTS
1. RESO First Amendment 21PW003 - Hunt Oil of CA (Hunt & Sons)_CAO Stamp
2. First Amendment to 21PW003 Hunt Oil of CA ( Hunt & Sons)_CAO Stamp
3. 21-PW003 HUNT & SONS INC Suppy of Fuel and Petroleum Products Agreement
4. Hunt Sons - CA Certified Amendment to Articles of Incorporation Name Change
CONTACT
Melissa Tigbao, P.E., Public Work Director, 707-648-4433 [email protected]
RESOLUTION NO. 24-______
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VALLEJO APPROVING A FIRST
AMENDMENT TO THE SUPPLY OF FUEL AND PETROLEUM PRODUCTS AGREEMENT WITH HUNT OIL OF CALIFORNIA (FORMERLY HUNTS & SONS, INC.) TO INCREASE THE CONTRACT AMOUNT TO $4,900,000 AND AUTHORIZING THE CITY MANAGER TO EXECUTE SAME
WHEREAS, the City of Vallejo Fleet Division purchases fuel that is used by all City fleet and sold to boating customers at the Vallejo Municipal Marina as well as to Greater Vallejo Recreation District (GVRD) for the equipment and vehicles they use in its operations; and WHEREAS, in April of 2020, a Request for Proposals (RFP) was issued for the supply of fuel and petroleum products at various City locations and the City received seven responses, including one from Hunt & Sons, Inc.; and
WHEREAS. on June 23, 2020, the City Council approved a Supply of Fuel and Petroleum Products Agreement with Hunts & Sons, Inc. (now Hunt Oil of California) in the amount of $4,250,000 (Agreement); and
WHEREAS, the Agreement is close to reaching its not to exceed limit with approximately $4,154,977 spent or encumbered as of September 30, 2024; and WHEREAS, Fleet staff have reviewed expenses and determined that an additional $650,000 is needed to cover projected expenses through the expiration date of the contract of June 30, 2925; and
WHEREAS, in order to continue the pertinent purchase of fuel, staff is seeking authorization for a first amendment to increase the total amount of the Contract by an amount not to exceed $4,900,000.
NOW, THEREFORE BE IT RESOLVED that the City Council hereby approves the First Amendment to the Supply of Fuel and Petroleum Products Agreement by and between the City of Vallejo and Hunt Oil of California (formerly Hunts & Sons, Inc.) to increase the total not to exceed amount of the contract to $4,900,000.
BE IT FURTHER RESOLVED that the City Council hereby authorizes the City Manager to execute same, with any modifications recommended by the City Attorney and the City Clerk to attest the signing of that Agreement.
ADOPTED BY THE CITY COUNCIL OF THE CITY OF VALLEJO at a regular meeting held on November 19, 2024, with the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN
ATTEST
ROBERT H. MCCONNELL, MAYOR
DAWN G. ABRAHAMSON, CITY CLERK
First Amendment to Agreement #21PW003 – Hunt Oil of CA (Hunt & Sons) Page 1 of 2
FIRST AMENDMENT TO THE SUPPLY OF FUEL AND PETROLEUM PRODUCTS
AGREEMENT BETWEEN CITY OF VALLEJO
AND
HUNT OIL OF CALIFORNIA (FORMERLY HUNT & SONS, INC.)
This First Amendment to the Supply of Fuel and Petroleum Products Agreement made and entered into on June 24, 2020, hereafter referred to as “Agreement”, between Hunt Oil of California, a California corporation (formerly Hunt & Sons, Inc.), therein referred to as “Contractor”, and the City of Vallejo, a municipal corporation, therein referred to as “City”, is made and entered into on this 20th day of November 2024.
Contractor and City do mutually agree as follows:
1. Amendment to Section 1 of Exhibit B “Compensation.” Section 1 of Exhibit B shall be modified to read in its entirety as follows:
“ Compensation. City agrees to pay Contractor for the materials and services set forth in Exhibit A of this Agreement, for a total amount not to exceed four million nine hundred thousand and zero cents ($4,900,000.00). Said Amount shall include all costs chargeable to the City.”
2. Integration. This First Amendment contains the entire agreement between the parties with respect to its subject matter and supersedes whatever oral or written understanding they may have had prior to the execution of this First Amendment. This First Amendment shall not be amended or modified except by a written agreement executed by each of the parties. Except as specifically revised herein, all terms and conditions of the Agreement shall remain in full force and effect, and Contractor shall perform all duties, obligations and conditions required under the Agreement.
3. Inconsistencies. In the event of any conflict or inconsistency between the provisions of this First Amendment and the Agreement, the provisions of this First Amendment shall control in all respects.
4. Ambiguities. The parties have each carefully reviewed this First Amendment and have agreed to each term of this First Amendment. No ambiguity shall be presumed to be construed against either party.
5. Counterparts. This First Amendment may be executed by the parties in one or more counterparts all of which collectively shall constitute one document and agreement.
6. Authority. The person signing this First Amendment for Contractor hereby represents and warrants that he or she is fully authorized to sign this First Amendment on behalf of Contractor.
(Signatures on the following page)
First Amendment to Agreement #21PW003 – Hunt Oil of CA (Hunt & Sons) Page 2 of 2 IN WITNESS WHEREOF, the parties have entered into this First Amendment on the day and year first hereinabove appearing.
Hunt Oil of California,
a California corporation
BY:
Chris Jones
Bay Area Operations Manager
DATE:
(City Seal)
City of Vallejo,
a municipal corporation
BY:
Andrew Murray
City Manager
DATE:
ATTEST:
Dawn G. Abrahamson
City Clerk
APPROVED AS TO CONTENT:
Melissa Tigbao, P.E.
Public Works Director
APPROVED AS TO FORM:
Veronica A. F. Nebb
City Attorney
APPROVED AS TO INSURANCE:
Armond Sarkis
Risk Manager
DocuSign Envelope ID : 94809831 -C671 -4202 -AD36 -BACDA3304875 Jul 1, 2020 11:09 AM, 630869438 Contract and Routing Form
Requisition Number: 629934936
Citv Oí
VALLEJO 2-1 - I» l)03
Date Originated : Jul 01 , 2020 --C hlifornia
Finance Department · 555 Santa Clara Street · Vallejo · CA · 94590 ' 707.648.4592 Department: Public Works Departments, Maintenance
Staff Contact: Brisa Long, [email protected] Contract Type: Professional Services Agreement
Vendor : Hunts & Sons Vendor Number :101974
Business License Number: 1234
Contract Not to Exceed Amount : 4250000.00
Contract Start Date: Jul 01, 2020 End Date: Jun 30, 2022 Option to Extend: extend Agreement up to three times in intervals of one year for a max agreement term of five years
Authority to Contract : City Council Date to Council: Jun 23, 2020 Other Comments :
Their business license expired 6/30 and we have heard from multiple vendors that they have been told there will be a delay in renewed licences being sent out.
Attachments are uploaded for review here : https ://bit .lyh,Contracts Approved Pre-Requisition Form
Insurance
I have uploaded additional files.No
DocuSign Envelope ID: 948D9831-C671-4202-AD36-BACDA3304B75 Contract and Routing Form
Signature Page
Department Initial Date Comment
Originating Department /Division <
11 7/ 6/ 2020
- DS
Risk Manager
Finance Director
City Attorney's Office
City Manager's Office
City Clerk
7/ 16/ 2020
8-K
<--- DS 7/ 16/ 2020
7/ 21/ 2020
L 88
,.,Mull 7/21/2020
- DS
7/ 21/ 2020
I Va
Return executed contract to : Debbie Martir
DocuSign Envelope ID: 94809831-C671-4202-AD36-BACDA3304875
SUPPLY OF FUEL AND PETROLEUM PRODUCTS AGREEMENT
This Supply of Fuel and Petroleum Products Agreement ("Agreement") is made at Vallejo, California, dated for reference this 24'h day of June, 2020, by and between the City of Vallejo, a municipal corporation ("City"), and Hunt & Sons, Inc., a California corporation, hereinafter referred to as "Contractor", who agree as follows:
1. Products. Subject to the terms and conditions set forth ín this Agreement, Contractor shall provide the City materials as specified in Exhibit A, entitled "Specifications."
2. Payment. City shall pay Contractor for materials rendered pursuant to this Agreement at the times and in the manner set forth in Exhibit B, entitled "Compensation."
3. Indemnification. Contractor shall índemnify, hold harmless, and defend City, its officers, officials, directors, employees, agents, volunteers and affiliates and each of them from any and all claims, demands, causes of action, damages, costs, expenses, actual attorney's fees, Contractor's fees, expert fees, losses or liability, in law or in equity, of every kind and nature whatsoever arising out of or in connection with Contractor's operations, or any subcontractor's operations, to be performed under this agreement for Contractor's tort negligence including active or passive, or strict negligence, including but not limited to personal injury including, but not limited to bodily injury, emotional injury, sickness or disease, or death to persons and/or damage to property of anyone, including loss of use thereof, caused or alleged to be caused by any act or omission of Contractor, or any subcontractor, or anyone directly or indirectly employed by any of them or anyone for the full period of time allowed by the law, regardless to any limitation by insurance, with the exception of the sole negligence or willful misconduct of the City, The provisions of this section shall survive the expiration or termination of this Agreement.
4. Insurance Requirements. Contractor agrees to comply with all of the Insurance Requirements set forth in Exhibit C. entitled "Insurance Requirements: Failure to maintain required insurance at all times shall constitute a default and material breach.
5. Accident Reports. Contractor shall immediately report (as soon as feasible, but not more than 24 hours) to the City Risk Manager any accident or other occurrence causing injury to persons or property during the performance of this Agreement. The report shall be made in writing and shall include, at a minimums (a) the names, addresses, and telephone numbers of the persons involved, (b) the names, addresses, and telephone numbers of any known witnesses, (c) the date, time, and description of the accident or other occurrence.
Approved as to form.
By: for
Randy j. Risner
Interim City Attorney
DocuSign Envelope ID: 948D9831-(:671-4202-AD36-BACDA3304875
6. Conflict of Interest. Contractor warrants and represents that to the best of its knowledge, there exists no actual or potential conflict between Contractor's family, business, real propedy or financial interests and the materials to be provided under this Agreement. Contractor shall comply with the City of Vallejo Conflict of Interest Code and not enter into any contract or agreement during the performance of this Agreement which will create a conflict of interest with its duties to City under this Agreement. In the event of a change in Contractor's family, business, real property, or financial interests occurs during the term of this Agreement that creates an actual or potential conflict of interest, then Contractor shall disclose such conflict in writing to City.
7. Licences, Permits, Etc. Contractor represents and warrants to City that all Contractor materials shall be provided by a person or persons duly licensed by the State of California to provide the type of materials to be performed under this Agreement.
8. Business License. Contractor, and its subcontractors, has obtained or agrees to apply prior to performing any materials under this Agreement to City's Finance Department for a business license, pay the applicable business license tax and maintain said business license during the term of this Agreement. The failure to obtain such license shall be a material breach of this Agreement and grounds for termination by City. No payments shall be made to Contractor until such business license(s) has been obtained.
9. Standard of Performance. Contractor shall provide all materials required pursuant to this Agreement in accordance with generally accepted practices and principles and in a manner consistent with the level of care and skill ordinarily exercised under similar conditions by a member of Contractofs profession currently practicing in California.
Contractor is responsible for making an independent evaluation and judgment of all conditions affecting performance of the work, including without limitation applicable federal, state, and local laws and regulations, and all other contingencies or considerations.
Contractor's responsibilities under this section shall not be delegated. Contractor shall be responsible to City for acts, errors, or omissions of Contractors subcontractors.
10. Force Majeure. Neither party shall be considered in default of this Agreement to the extent performances are prevented or delayed by causes or circumstances beyond either party's reasonable control, such as war, riots, strikes, lockouts, work slowdown or stoppage, acts of God, such as floods or earthquakes, and electrical blackouts or brownouts. In the event that the Contractor is unable to meet the completion date or schedule of materials, Contractor shall immediately inform the City Representative of this in writing. If additional time is required to perform the work, the City Representative may adjust the schedule.
11. Time is of the Essence. Time is of the essence in this Agreement. Any reference to days means calendar days, unless otherwise specifically stated.
12. Term. The term of this Agreement shall commence on July 1, 2020 and shall continue in full force and effect until June 30, 2022. Upon expiration of original Agreement, the City may, at its discretion and upon written notice to Contractor, extend Agreement up to three (3) times in intervals of one (1) year for a maximum Agreement term of five (5) years.
DocuSign Envelope ID: 948D9831-0671-4202-AD36-BACDA3304875
13. Termination or Abandonment by City. The City has the right, at any time and in its sole discretion, to immediately terminate this Agreement by giving notice to Contractor. Upon receipt of a notice of termination, Contractor shall not provide materials except as specified in the notice. Before the date of termination, Contractor shall deliver to City all City records and documents, all work product, whether completed or not, as of the date of termination and nototherwise previously delivered.
The City shall pay Contractor for services performed and/or supplies provided in accordance with this Agreement before the date of termination. If this contract provides for payment of a lump sum for all materials or by task and termination occurs before completion of the work orany defined task which according to the performance schedule was commenced before the notice of termination, the fee for materials performed shall be based on an amount mutually agreed to by City and Contractor for the portion of work completed in conformance with this Agreement before the date of termination. In addition, the City will reimburse Contractor for authorized expenses incurred and not previously reimbursed. The City shall not be liable for any fees or costs associated for the termination or abandonment except for the fees, andreimbursement of authorized expenses, payable pursuant to this section.
14. Assignment and Subcontracting. Contractor shall not subcontract, assign or transfer voluntarily or involuntarily any of its rights, duties or obligation under this Agreement without the express written consent of the City Manager or his or her designee in each instance. Any attempted or purported assignment of any right, duty or obligation under this Agreement without said consent shall be void and of no effect.
15. Successors and Assigns. All terms, conditions, and provisions of this Agreement shall apply to and bind the respective heirs, executors, administrators, successors, and assigns of the parties. Nothing in this section is intended to affect the limitation on assignment.
16. Non-Discrimination/Fair Employment Practices. Contractor shall not, because ofrace, religious creed, color, sex, national original, ancestry, disability, medical condition, age, marital status or sexual orientation of any person, refuse to hire or employ, or to bar ordischarge from employment, or to discriminate in compensation, or in terms, conditions orprivileges any person, and every employee will receive equal opportunity for employment andshall be granted equal treatment with respect to compensation, terms, conditions or other privileges of employment, without regard to his race, religious creed, color, sex, nationalorigin, ancestry, or disability, medical condition, age, marital status or sexual orientation.
Contractor warrants and represents it is an equal opportunity employer and agrees ít shall notdiscriminate on the basis of race, religious creed, color, sex, national origin, ancestry, disability, medical condition, age, marital status or sexual orientation in the selection and retention ofemployees, subcontractors or procurement of materials or equipment.
17. Notices. All notices or instruments required to be given or delivered by law shall be inwriting and shall be effective upon receipt thereof and shall be by personal service or delivered by depositing the same in any United States Post Office, registered or certified mail,postage prepaid, addressed to:
DocuSign Envelope ID: 94809831-C671-4202-AD36-BACDA3304875 If to City:
Terrance Davis
Public Works Director
555 Santa Clara Street
Vallejo, CA 94590
If to Contractor:
Chris Jones, Bay Area Operations Manager
5750 South Watt Avenue
Sacramento, CA 95827
Any party may change its address for receiving notices by giving written notice of such change to the other party in accordance with this section. Routine administrative communications shall be made pursuant to section 1 of Exhibit A.
18. Integration Clause. This Agreement, including all Exhibits, contains the entire agreement between the parties and supersedes whatever oral or written understanding they may have had prior to the execution of this Agreement. This Agreement shall not be amended or modified except by a written agreement executed by each of the parties hereto.
19. Severabllity Clause. Should any provision of this Agreement ever be deemed to be legally void or unenforceable, all remaining provisions shall survive and be enforceable.
20. Law Governing. This Agreement shall in all respects be governed by the law of the State of California without regard to its conflicts of law rules. Litigation arising out of or connected with this Agreement shall be instituted and maintained in the courts of Solano County in the State of California or in the United States District Court, Eastern District of California, Sacramento, California, and the parties consent to jurisdiction over their personand over the subject matter of any such litigation in such courts, and consent to service ofprocess issued by such courts.
21. Waiver. Waiver by either party of any default, breach or condition precedent shall not be construed as a waiver of any other default, breach or condition precedent or any other right hereunder.
22. Ambiguity. The parties acknowledge that this is a negotiated agreement, that they havehad the opportunity to have this Agreement reviewed by their respective legal counsel, and that the terms and conditions of this Agreement are not to be construed against any party on the basis of such party's draftsmanship thereof.
23. Gender. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identifications of the person or persons,firm or nrms, corporation or corporations may require.
24. Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
DocuSign Envelope ID: 948D9831-C671-4202-AD36-BACDA3304B75
25. Compliance with Laws. Contractor will comply with all statutes, regulations and ordinances in the performance of all materials under this Agreement.
26. News and Information Release. Contractor agrees that it will not issue any news releases in connection with either the award of this Agreement, or any subsequent amendment of or efforts under this Agreement, without first obtaining review and approval of said news releases from City through the City Representative.
27. City Representative. The City Representative specified in Exhibit A, or the representative's designee, shall administer this Agreement for the City.
28. Counterparts. The parties may execute this Agreement in one or more counterparts, each of which shall be deemed an original, but all of which together shall be deemed one andthe same instrument.
29. Facsimile Signature; Electronic Signature. This Agreement shall be binding upon the receipt of facsimile signatures or e-mailed by PDF or otherwise. Any person transmitting his or her signature by facsimile or electronically shall promptly send an onginal signature to the other party pursuant to the notice provision of this Agreement. The failure to send an original shall not affect the binding nature of this Agreement.
30. Authority. The person signing this Agreement for Contractor hereby represents and warrants that he/she is fully authorized to sign this Agreement on behalf of Contractor.
31. Exhibits. The following exhibits are attached hereto and incorporated herein by reference:
Exhibit A, entitled "Specifications,° including any attachments Exhibit B, entitled "Compensation," induding any attachments Exhibit C, entitled "Insurance Requirements," including attachments [SIGNATURES ON FOLLOWING PAGE]
DocuSign Envelope ID : 94809831 -C671 -4202 -AD36- BACDA3304875 IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year shown below the name of each of the parties.
HUNT & SONS, INC.,
a California 06*ration
Chás Joned
Bay Area Operations Manager
DATE: (Trn 34*h DODD
CITY OF VALLEJO,
a municipal corporation
- DocuSigned by :
2:kgí HL'jøko#
By._ C4FDBDE22392481.
Greg Nyhoff
City Manager
7/ 21/ 2020
DATE:
<20-00011 Sês
Vallejo Business License No.
ATTEST:
DocuSigned by:
By faa/M. 65. àl,raíutbß.
- 1489007 \00. 0, 420 ...
Dawn Abranamson
City Clerk
(City Seal)
APPROVED AS TO CONTENT
Signed by:
- WJ-*fp
Ü - 657AD0D81416407.
-
Terrance Davis
Public Works Director
4 . -
2 I * _-/- -
APPROVED AS TO FORM
--
- DocuSigned by :
-·+RÇOF ' 711.1.199 ,102
A. 7... 373- 4-- 9 22
Randy Risner-- c -rAÛ -=..7-- Interim City Attorney
APPROVED AS TO INSURANCE:
-- DocuSigned by:
I 6,6 leu.¿1
Heaìñè?'Núlý
4CD41- E
Human Resources Director / Interim Risk Manager
I '
·6 Cíì ï _
:C.-: / t:/634.:3'ki '--./-'.
'
'
r<. 4 ..
. e
X.' * /> k · 'e« 7
.
1 ' Ý©.>
P
,1 :Tý-r'U ' r-2 - .- r' JA i G r- 1 21:
DocuSign Envelope ID: 94809831 -0671-4202-A[)36-BACDA3304875
EXHIBIT B
SPECIFICATIONS
1. Representatives. The City Representatives for this Agreement are:
Travis Thompson
Fleet Manager
Public Works Maintenance Division
111 Amador Street Vallejo, CA 94590
(707) 648-4558
The Contractor's Representative for this Agreement is:
Chris Jones
Bay Area Operations Manager
5750 South Watt Avenue
Sacramento, CA 95827
All routine administrative communications between the parties will be between the above named representatives and may be by personal delivery, mail, facsimile transmission, or electronic mail as agreed between the Contractor Representative and City's Representative.
2. Products to be Provided. The products provided shall be asset forth herein.
A. Diesel Fuel
B. Unleaded Fuel
C. DEF Fluid
D. Lubricant
3. Product Specifications. All products furnished shall be in accordance with ASTM International and SAE International specifications for gasoline, diesel fuel, motor oil, gear oil, and engine coolants, which have been adopted by reference by the State of California.
4. Minimum Quantities. The City shall not be bound to purchase minimum quantities of any product. No additional charge shall be assessed for short loads.
5. Delivery Requirements.
A. Delivery Locations. Contractor shall be required to deliver products to any or all of the locations listed here:
City of Vallejo Public Works Corporation Yard, 111 Amador Street City of Vallejo Municipal Marina, 42 Harbor Way
City of Vallejo Fire Station #21, 1220 Marin Street
City of Vallejo Fire Station #22,700 Fifth Street
City of Vallejo Fire Station #23, 900 Redwood Street
City of Vallejo Fire Station #25, 595 Mini Drive
City of Vallejo Fire Station #27, 1585 Ascot Court
Exhibit 8 - Compensation Page 7 of 13
DocuSign Envelope ID: 948D9831-C671-4202-AD36-BACDA3304B75
EXHIBIT B
B. Delve,y Schedu/e. Contractor shall provide delivery on demand. Trip charge (extra charge for delivery) shall not be assessed nor added to the cost of the product.
C. Timing of Deliveries. Delivery shall be provided with two days of order being placed. Emergency orders shall be delivered within the same day as ordered.
No extra charge shall be assessed for emergency deliveries.
D. Trucking Requirements. Contractor shall use their own trucks and employee drivers. Subcontractors shall not be used. Demurrage fees shall not be assessed.
6. Inspection. All products furnished are subject to random testing at the discretion of the City of Vallejo Fleet Manager. Samples may be tested in a laboratory using standardized procedures developed by ASTM International. The following tests may be performed:
Gasoline - octane number, distillation, water and sediment Diesel Fuel - cetane number, distillation, flash point water and sediment Motor Oil - viscosity
7. Rejected Materials. The Contractor shall immediately remove any rejected or condemned material provided by the Contractor at his or her own expense.
Rejected materials shall never again be offered to the City. Additionally, as a remedy, the City may deduct and retain the cost to replace the work from any sums due or to become due to the Contractor.
8. Removal of Rejected Materials. All materials which have been rejected shall be removed and replaced by the Contractor in a manner acceptable to the City, and no compensation will be paid to the Contractor for the removal and replacement.
Alternatively, the City in its sole discretion may cause rejected materials to be removed and replaced, and to deduct the costs from any moneys due or to become due the Contractor.
9. Delivery Tickets. A delivery ticket shall be provided at the time of delivery, and the ticket number will be referenced on invoices to verify the material charges.
Delivery tickets shall indicate the "ship to" address, description of materials being delivered, and quantity.
10. Safety Requirements. All merchandise must comply with current safety orders of the California Department of Industrial Relations and CAL/OSHA (California/Occupational Safety and Health Administration).
11. Material Data Safety Sheet. It is required by law that all hazardous materials must be identified and be accompanied with a °Material Safety Data Sheet' (MSDS) at time of delivery.
Exhibit B - Compensation Page 8 of 13
DocuSign Envelope ID: 94809831-C671-4202-A[)36-BACDA3304875
EXHIBIT B
COMPENSATION
1. Compensation. City agrees to pay Contractor for the materials and services set forth in Exhibit A of this Agreement, for a total amount not to exceed Four Million Two Hundred and Fifty Thousand Dollars ($4,250,000). Amount shall include all costs chargeable to the City.
2. Price.
A. Ace F/uctuations: As the price of fuel and petroleum products are affected by the cost of crude oil, compensation payable for these products shall be determined according to industry pricing standards in conformance with oil price fluctuations.
B. Termination of Performance: W at any time the City determines the same item can be obtained at a lower price from a different source without violating any state law, the City may then purchase the item from the lower price source without any obligation to Contractor.
3. Invoicing. In order to expedite payment all invoices must be itemized as to quantity, unit price, description, grand total and applicable discount (if any) in the same order and form as in the City of Vallejo Purchase Order. Variations will only delay payment. In addition, invoices must show the name of the department, division, or section to which the material was delivered, and the City of Vallejo Purchase Order Number.
All delivery tickets must have a description of the commodity delivered and shall include the receiving employee signature and printed name. Mail invoices to the accounts payable section of the department and to the address, as noted on individual purchase orders. Delivery tickets will contain the same information as the invoice.
4. Payment. Payment is due thirty (30) days after the City has approved the invoice or after the City has accepted the goods, whichever occurs later.
Request for payment shall be sent to:
City of Vallejo, Public Works Department
Travis Thompson, Fleet Manager
111 Amador Street
Vallejo, CA 94590
(707) 648-4558
5. Accounting Records of Contractor. Contractor shall maintain for three (3) years after completion of all materials hereunder, all records under this Agreement, including, but not limited to, records of Contractor's direct salary costs for all Materials and Additional Materials performed under this Agreement and records of Contractor's Reimbursable Expenses, in accordance with generally accepted accounting practices. Contractor shall keep such records available for audit, inspection and copying by representatives of the City's Finance Department or other government agencies during regular business hours upon twenty four (24) hours' notice.
Exhibit B - Compensation
DocuSign Envelope ID: 94809831-C671-4202-AD36-BACDA3304875
EXHIBIT B
The obligations of Contractor under this section shall survive this Agreement.
6. Taxes. Contractor shall pay, when and as due, any and all taxes incurred as a result of Contractor's compensation hereunder, including estimated taxes, and shall provide City with proof of such payments upon request.
7. Taxpayer Identification Number. Contractor shall provide City with Contractor's complete Request for Taxpayer Identification Number and Certification, Form W-9, as issued by the Internal Revenue Service, and any other State or local tax identification number requested by City.
Exhibit B - Compensation Page 10 of 13
DocuSign Envelope ID: 94809831-C671-4202-A[)36-BACDA3304875
EXHIBIT C
EXHIBIT C - INSURANCE REQUIREMENTS
Contractor shall procure and maintain for the duration of this Agreement, including any extensions thereto, insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of materials hereunder by the Contractor, their agents, representatives, or employees or subcontractors.
1. Minimum Scope of Insurance. Coverage shall be at least as broad as:
A. Insurance shall be at least as broad as:
1. Personal injury
2. Contractual liability
3. Contractor's broad form pollution liability
4. Product liability
B. Insurance Services Office form covering Automobile Liability, code 1 (any auto) C. Worker's Compensation insurance as required by the State of California and Employefs Liability Insurance.
2. Minimum Limits of Insurance. Contractor shall maintain limits no less than:
A. General Liability: $1,000,000 per occurrence for bodily injury, personal injury, and property damage. If Commercial General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this projecVIocation or the general aggregate limit shall be twice the required occurrence limit.
B. Automobile Liability: $3,000,000 per accident for bodily injury and property damage.
C. Workers' Compensation and Employer's Liability: $1,000,000 per accident for bodily injury or disease. If Contractor is not subject to California Workers' Compensation requirements, Contractor shall file a completed certificate of exemption form which may be obtained from the City prior to commencing any activity authorized hereunder.
D. Pollution Legal Liability insurance in the amount of $1,000,000 per claim and in the aggregate
Exhibit C - Insurance Requirements Page 11 of 1 3
DccuSign Envelope ID: 948D9831-C671-4202-AD36-BACDA3304B75 TYPE OF.INSURANCE
Standard Workers'
Compensation & Employets
Liability Including
Occupations Disease
Coverage
Comprehensive General
Liability Insuran
Umbrella/Excess Uability
Coverage
Broad Form Contractors
Pollution Liability Insurance
EXHIBIT C
MINIMUM LIMITS OF LIABILITY
Statutory limits as required by the State of California including $1 million Employers' Liability per accident, per employee for bodily injury or disease. If Bidder is self-insured, provide a certificate of Permission to Self-Insure, signed by the California Department of Industrial Relations and Self-Insurance.
$1,000,000 per occurrence for bodily injury, personal injury, property damage and products and completed operations; product liability, contractor's pollution liability. If Commercial General Liability Insurance or other form with a general aggregate liability is used, either the general aggregate limit shall apply separately to this product or the minimum required aggregate limit or be twice the required occurrence limit. Policy shall be endorsed to name the Agency as an additional insured per the conditions detailed below.
ISO Form CG 20 10 (1/85) or its equivalent is required, Tile endorsement must not exclude products and completed operations coverage. If it does, then CG 20 37 CIO/01) is also required.
If an Umbrella or Excess Liability Policy is used to meet the liability limits, coverage shall be as broad as specified for underlying coverages and cover those insured in the underlying policies.
Same limits as Commercial General Liability insurance.
Time Element Sudden and Accidental coverage ancl/or any Blended Pollution Endorsements cn General Uability and Auto Liability policies and/or Pollution Uability policies will not be accepted.
3. Deductible and Self-Insured Retention. Any deductibles or self-insured retention must be declared to and approved by the City. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self-insured retention as respects the City of Vallejo, its officers, officials, employees and volunteers; or the Contractor shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses.
4. Other Insurance Provisions. The general liability and automobile liability policies, as can be provided, are to contain, or be endorsed to contain, the following provisions:
A. The City of Vallejo, its officers, officials, employees, agents and volunteers are to be covered as additional insureds as respects; liability, including defense costs, arising out of activities performed by or on behalf of the Contractor; products and completed operations of the Contractor; premises owned, occupied or used by the Contractor; or automobiles owned, leased hired or borrowed by the Contractor.
The coverage shall contain no special limitations on the scope of protection afforded to the City of Vallejo, its officers, officials, employees, agents or volunteers. The insurance is to be issued by companies licensed to do business in the State of California.
Exhibit C - Insurance Requirements Page 12 of 13
DocuSign Envelope ID: 948D9831-C671-4202-AD36-BACDA3304875
EXHIBIT C
B. For any claims related to this project, the Contractor's insurance coverage shall be primary insurance as respects the City of Vallejo, its officers, officials, employees, agents, and volunteers. Any insurance or self-insurance maintained by the City of Vallejo, its officers, officials, employees, agents, or volunteers shall be excess of the Contractor's insurance and shall not contribute with it.
C. Any failure to comply with reporting or other provisions of the policies including breaches of warranties shall not affect coverage provided to the City, its officers, officials, employees, agents, or volunteers.
D. The Contractor's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability.
E. Each insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or in limits except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the City.
F. The workers' compensation and employer's liability policy required hereunder shall be endorsed to state that the workers' compensation carrier waives its right of subrogation against City, its off£ers, officials, employees, agents and volunteers, which might arise by reason of payment under such policy in connection with Contractor's performance under this Agreement.
5. Aeeeplabmy of Insurers. Insurance is to be placed with insurers with a current A.M.
Best's rating of no less than A:VII.
6. Verification of Coverage. Contractor shall furnish the City with certificates of insurance and original endorsements effecting general liability insurance coverage required by this clause. The certificates and endorsements are to be signed by a person authorized by that insurer to bind coverage on its behalf. All endorsements are to be received and approved by the City before work commences.
7. Subcontractors. Contractor shall include all subcontractors as insureds under its policies or shall furnish separate certificates and endorsements for each subcontractor. All coverages for subcontractors shall be subject to all of the requirements stated herein.
8. Payment Withhold. City will withhold payments to Contractor if the certificates of insurance and endorsements required in Paragraph F, above, are canceled or Contractor otherwise ceases to be insured as required herein.
Exhibít C - Insurance Requirements Page 13 of 13
DocuSign Envelope ID: 94809831-C671-4202-AD36-BACDA3304875
IBUSINESS LICENSE CITY OF VALLEJO
TAX COLLECTOR'å OFFICE, City Hall, 555 Santa Clara St., Vallejo, CA. This certificate 18 evidence that theperson(o), firm, or corporation named hefeon haa paid the tax required by Chapter 5.04 of 00 CIty of ValleloMunk#al Code tof the type of business, the business address and for the period Indicated hereon. This certificate Is 1 .h .. logued without verlhcalíon that the taxpayoris subløot IO or ecempted Iron, licensing by kical, state, Federal or otherVALL agencies. Issuance 01 tha cerliticate is not an endorsement, nor a cønificate of compliance wilh other ordlnances C.,liíurl,l, oF laws, nor an agsurance that the proposed use is In conformance with the City'8 Building/FiraZonIng rogulations.
THE PAYMENT OF THIS BUSINESS LICENSE TAX AND ITS ACCEPTANCE BY THE C TY SHALL NOT ENTITLE ANY PERSON TO CARRY ON ANYUNLAWFUL BUSINESS, NOR DOES IT AUTHORIZE THE CONDUCT OR CONTINUANCE OF ANY ILLEGAL OA UNLAWFUL BUSINESS, OR ANYBUSINESS IN VIOLATION OF ANY ORDINANCE OF THE CITY.
BUSINESS NAME.
BUSINESS LOCATION:
OWNERNAME:
HUNT & SONS INC
OUTSIDE CITY LIMITS . ..
HUNT & SONS INC
BUS[NESS LICENSES NUMBER: 2040011525
HUNT & SONS INC
PO BOX 277670
SACRAMENTO CA 95827
EXPIRATION DATE: June 30, 2020
TO BE POSTED IN A CONSPICUOUS PLACE NOT TRANSFERABLE
ORIGNAL DOCUMENT - 00 NOT 0E8TROY
ORIGINAL DOCUMENT
.m'E19Zi/ARk91i
ACTION ITEM 9.B.
DATE: November 19, 2024
TO: Mayor and Members of the City Council
FROM: Andrew Murray, City Manager
Rekha Nayar, Finance Director
SUBJECT: RECEIVE A PRESENTATION, CONSIDER STAFF RECOMMENDATIONS, AND
PROVIDE DIRECTION TO STAFF REGARDING THE REALLOCATION OF UNSPENT
AMERICAN RESCUE PLAN ACT (ARPA) STATE AND LOCAL FISCAL RECOVERY FUNDS AND PROVIDE NOTICE OF INTENT TO AMEND THE FY 2024-25 BUDGET (STEP 1)
RECOMMENDATION
Receive a presentation, consider staff recommendations, and provide direction to staff regarding the reallocation of unspent American Rescue Plan Act (ARPA) State and Local Fiscal Recovery Funds and provide notice of intent to amend the FY 2024-25 budget (Step 1).
REASONS FOR RECOMMENDATION
After taking inventory of the City's approved ARPA funded projects, there remains $2,122,443 in available funding. To reallocate the funding, Charter Section 703 requires the City Council to give formal notice, and then the budget must be amended to recognize and appropriate the funds. Staff is requesting the Council to provide guidance regarding how the allocation should be expended following the guidelines issued by the Treasury Department.
BACKGROUND AND DISCUSSION
On March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA) into law, delivering $1.9 trillion of aid towards addressing the COVID-19 pandemic and corresponding economic crisis. The City of Vallejo received these funds in the amount of $25,727,736. These funds must be obligated by December 31, 2024, and expended by December 31, 2026.
Eligible uses of these funds include:
• Supporting public health expenditures by, for example, funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and specific public health and safety staff • Responding to the far-reaching public health and negative economic impacts of the pandemic, by supporting the health of communities, and helping households, small businesses, impacted industries, nonprofits, and the public sector recover from economic impacts • Replacing lost public sector revenue, using this funding to provide government services to the extent of the revenue lost due to the pandemic
• Providing premium pay for essential workers, offering additional support to those who have and will bear the most significant health risks because of their service in critical infrastructure sectors • Investing in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, supporting vital wastewater and stormwater infrastructure, and expanding access to broadband internet
• Providing emergency relief from the physical and economic impacts of natural disasters • Investments in surface transportation projects; and
Date: November 19, 2024
Subject: RECEIVE A PRESENTATION, CONSIDER STAFF RECOMMENDATIONS, AND
PROVIDE DIRECTION TO STAFF REGARDING THE REALLOCATION OF
UNSPENT AMERICAN RESCUE PLAN ACT (ARPA) STATE AND LOCAL FISCAL RECOVERY FUNDS AND PROVIDE NOTICE OF INTENT TO AMEND THE FY 2024- 25 BUDGET (STEP 1)
• Development, repair, and operation of affordable housing and services or programs to increase long-term housing security
Ineligible uses include the following:
• Contribution towards federal matching requirements, pension liability, financial reserves, legal settlements, and debt service
• General economic development – activities that do not respond to the negative economic impacts of the pandemic but rather seek to more generally enhance the jurisdiction’s business climate • Infrastructure not directly addressed in the Rescue Plan • Changes that reduce net tax revenue
Discussion
Staff evaluated the status of all of the projects to which the City Council allocated the $25,727,736 of ARPA funding and determined that $2,122,443 would not be obligated by the deadline of December 31, 2024. Staff recommends that the City Council reallocate the $2,122,443 to a number of high priority projects that can be obligated by the deadline.
Recommendation:
Staff recommends unallocating funds from the following projects because the funds for these projects cannot be obligated by the December 31, 2024 deadline:
Project # Project Allocation Reason
9 Planning Support $3,919 Project completed/remaining
funds
21 Mural Program & Downtown
Clean-up
$340,000 Timing and Staff Constraints
24 Arts Grants $100,000 Timing and Staff Constraints.
28 Retention Program $105,000 Project completed/remaining funds.
30 Sacramento Street Apartments $1,054,058 Funding is no longer required. 31 Parking revenue loss $437,287 Project completed/remaining funds.
32 Costar Software Subscription $17,330 Project completed/remaining funds.
33 Vallejo Naval & Historic
Museum
$64,849 Project completed/remaining
funds
Total $2,122,443
Staff recommends allocating funds to the following projects, which can be obligated by the deadline:
Item # Project Allocation Expenditure Category
40 Information Technology: Firewall $391,000 6.1 Revenue loss 13 Fire: Type 1 / Type VI shortfall $352,990 6.1 Revenue loss Date: November 19, 2024
Subject: RECEIVE A PRESENTATION, CONSIDER STAFF RECOMMENDATIONS, AND
PROVIDE DIRECTION TO STAFF REGARDING THE REALLOCATION OF
UNSPENT AMERICAN RESCUE PLAN ACT (ARPA) STATE AND LOCAL FISCAL RECOVERY FUNDS AND PROVIDE NOTICE OF INTENT TO AMEND THE FY 2024- 25 BUDGET (STEP 1)
41 Citywide Asset Management $205,000 6.1 Revenue loss
5 Extending term Police Assistant positions $682,885 3.2 Public sector capacity
42. PD Recruitment cost $100,000 3.2 Public sector capacity 43 PD building design $390,568 6.1 Revenue loss
TOTAL $2,122,443
Recommendations for Reallocation:
1. Information Technology: Firewall
Firewalls are the first essential protection point between the city’s internal protected network and the outside world. With increased cybercrime activities, the city deploys state-of-the-art hardware to mitigate these threats. The existing firewalls are reaching their end of life, and an upgrade will fill a necessary gap in protecting our network for the next five years.
2. Fire / Fleet: Type I & Type VI Fire Apparatus
On December 20, 2022, the City Council adopted Resolution No. 22-214, approving the purchase of two apparatus for the Fire Department, a Type I Fire Truck and a Type VI Brush Truck, using American Rescue Plan Act (ARPA) funding. The City Council was informed that the Type I Fire Truck would cost approximately $875,000 and the Type VI approximately $250,000. Due to procurement delays and escalating prices of parts and equipment, the actual price for a Type I Fire Truck is $1,218,990, and for a Type VI, it is 259,000.
Per the requirements of ARPA, the city must be in possession of the apparatus by December 2026. Due to the extended production time of the Type I Fire Truck, the unit is not expected to be delivered to the City by the December 2026 deadline. Therefore, in order to meet ARPA expenditure timelines, staff is recommending ARPA funding be used to purchase the vehicles and equipment previously approved to be bought with the General Fund budget, which are sure to be delivered before December 2026. The General Fund budget should be used to purchase the Type I Fire Truck so that the city does not risk losing funding due to manufacturing delays.
3. Citywide Asset Management
The city is in need of installing a robust enterprise asset management system for Public Works, Corp Yard, Fleet, IT, Police, and the Fire Department. Enterprise asset management software is necessary for the operation of the city as, in addition to obtaining accurate inventory, the depreciation schedule of the assets needs to be communicated to the Finance Department for accurate accounting purposes. Currently, these tasks are accomplished using spreadsheets, which are cumbersome and inaccurate. The new enterprise asset management software will be tied to the city's new financial software, Finance Enterprise. This included the implementation and first-year SAAS fees.
4. Extending Police Assistant Positions
On Sept 28, 2021, the council authorized three limited-term ARPA-funded Police Assistants. The allocation of additional funds will retain these much-needed positions until Dec 2026. These positions are currently filled Date: November 19, 2024
Subject: RECEIVE A PRESENTATION, CONSIDER STAFF RECOMMENDATIONS, AND
PROVIDE DIRECTION TO STAFF REGARDING THE REALLOCATION OF
UNSPENT AMERICAN RESCUE PLAN ACT (ARPA) STATE AND LOCAL FISCAL RECOVERY FUNDS AND PROVIDE NOTICE OF INTENT TO AMEND THE FY 2024- 25 BUDGET (STEP 1)
and supplement the City’s Police Department.
5. PD Recruitment Cost
The (much-needed and appreciated) increased recruitment efforts in VPD mean we are putting more applicants through pre-recruitment steps to ensure we retain and hire the best candidates. The steps can include background checks, Livescans, physical exams, polygraph exams, psych evaluations, and more. The average estimated cost of an applicant going through the steps is around $2,300 per person.
Secondly, more applicants mean a more active Police Academy rotation. Last fiscal year, we put about 12 recruits through the Academy. We've already put 11 people through the Academy this year, and it is only October. At this rate, we will need additional funds to keep up with the flow of recruits.
6. PD Building Design
The design of the new PD building started in 2020 with 400 Mare Island Way and alternative sites for $1million dollars. On September 13, 2023, Indigo Hammond + Playle Architects LLP was approved for a contract of $4.6 mil to design the project at the current PD building site. The project is divided into three phases: Phase A to achieve a 35% level of design completion, Phase B for developing construction documents through permitting, and Phase C for bidding and construction completion. Additional directions were given to Indigo Hammond + Playle to add two building renovations at the Corporation Yard, add a preliminary Leadership in Energy and Environmental Design (LEED) assessment, re-siting the dispatch modular building, and prepare related modular design plans and site design plans, which increased costs by an additional $700,000. Partial funding was approved from the General Fund, including Measure P.
Public Works will require an allocation of $865,709.44 to complete this work. The current balance available for PD design after the ARPA scrub is $390,568.
FISCAL IMPACT
The City of Vallejo has $2,122,443 available of the State and Local Fiscal Recovery Funds to be reassigned to projects.
Item # Project Allocation Expenditure Category
1. Information Technology: Firewall $391,000 6.1 Revenue loss
2. Fire: Type 1 / Type VI shortfall $352,990 6.1 Revenue loss
3. Citywide Asset Management $205,000 6.1 Revenue loss
4. Extending Police Assistant positions $682,885 3.2 Public sector capacity
5. Recruitment cost $100,000 3.2 Public sector capacity
6. PD building design $390,568 6.1 Revenue loss
TOTAL $2,122,443
Staff is providing a notice of intent to amend the FY 2024-25 Budget (Step1) to reallocate these funds received through the American Rescue Plan Act.
Date: November 19, 2024
Subject: RECEIVE A PRESENTATION, CONSIDER STAFF RECOMMENDATIONS, AND
PROVIDE DIRECTION TO STAFF REGARDING THE REALLOCATION OF
UNSPENT AMERICAN RESCUE PLAN ACT (ARPA) STATE AND LOCAL FISCAL RECOVERY FUNDS AND PROVIDE NOTICE OF INTENT TO AMEND THE FY 2024- 25 BUDGET (STEP 1)
ENVIRONMENTAL REVIEW
This action is exempt from the California Environmental Quality Act (CEQA) because it is not a project which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, pursuant to CEQA Guidelines section 15378.
ATTACHMENTS
1. SLFRF-Final-Rule
2. Obligation_Interim_Final_Rule_2023
3. Council Approved ARPA Projects - As of 2024.10.30
4. ARPA Scrub & Available Funds as of 2024.10.23
CONTACT
Andrew Murray, City Manager, (707) 645-2630
[email protected]
Rekha Nayar, CPA, Finance Director, (707) 648-5433
[email protected]
This document has been submitted to the Office of the Federal Register (OFR) for publication and is currently pending placement on public display at the OFR and publication in the Federal Register. The document may vary slightly from the published document if minor editorial changes have been made during the OFR review process. Upon publication in the Federal Register, the regulation can be found at www.federalregister.gov, www.regulations.gov, and at www.treasury.gov. The document published in the Federal Register is the official document.
1 DEPARTMENT OF THE TREASURY
[31 CFR Part 35
RIN 1505-AC77]
Coronavirus State and Local Fiscal Recovery Funds
AGENCY: Department of the Treasury
ACTION: Final Rule
SUMMARY: The Secretary of the Treasury (Treasury) is adopting as final the interim final rule published on May 17, 2021, with amendments. This rule implements 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 final rule are effective April 1, 2022.
FOR FURTHER INFORMATION CONTACT:
Katharine Richards, Senior Advisor, Office of Recovery Programs, Department of the Treasury, (844) 529– 9527
SUPPLEMENTARY INFORMATION:
2 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)1 established the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) to provide state, local, and Tribal governments2 with the resources needed to respond to the pandemic and its economic effects and to build a stronger, more equitable economy during the recovery. The U.S. Department of the Treasury (Treasury) issued an interim final rule implementing the SLFRF program on May 10, 20213 and has since disbursed over $240 billion to state, local, and Tribal governments and received over 1,500 public comments on the interim final rule. Treasury is now issuing this final rule which responds to public comments, implements the ARPA statutory provisions on eligible and ineligible uses of SLFRF funds, and makes several changes to the provisions of the interim final rule, summarized below in the section Executive Summary of Major Changes.
Since Treasury issued the interim final rule in May 2021, both the public health and economic situations facing the country have evolved. On the public health front, the United States has made tremendous progress in the fight against COVID-19, including a historic vaccination campaign that has reached over 80 percent of adults with at least one dose and is
1 Pub. L. 117–2. https://www.congress.gov/117/plaws/publ2/PLAW-117publ2.pdf. 2 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. 3 86 Fed. Reg. 26786 (May 17, 2021).
3 reaching millions of children as well.4 However, the disease continues to present an imminent threat to public health, especially among unvaccinated individuals. As the Delta variant spread across the country this summer and fall, the United States faced another severe wave of cases, deaths, and strain on the healthcare system, with the risk of hospitalization and mortality exponentially greater to unvaccinated Americans. COVID-19 has now infected over 50 million and killed over 800,000 Americans since January 2020; tens of thousands of Americans continue to be infected each day.5 Even as the nation recovers, new and emerging COVID-19 variants may continue to pose threats to both public health and the economy. Moving forward, state, local, and Tribal governments will continue to play a major role in responding through vaccination campaigns, testing, and other services.
The economic recovery similarly has made tremendous progress but faces continued risks from the disease and the disruptions it has caused. In the early months of the pandemic, the United States experienced the sharpest economic downturn on record, with unemployment spiking to 14.8 percent in April 2020.6 The economy has gradually added back jobs, with growth accelerating in the first half of 2021.7 However, as the Delta variant spread, the intensified health risks and renewed disruptions slowed growth, demonstrating the continued risks from the virus.
By fall 2021, the economy had exceeded its pre-pandemic size8 and unemployment had fallen below 5 percent,9 but despite this progress, too many Americans remain unemployed, out of the
4 Centers for Disease Control and Prevention, COVID Data Tracker: COVID -19 Vaccinations in the United States, https://covid.cdc.gov/covid-data-tracker/#vaccinations (last visited December 31, 2021). 5 Centers for Disease Control and Prevention, COVID Data Tracker, http://www.covid.cdc.gov/covid -data- tracker/#datatracker-home (last visited December 7, 2021). 6 U.S. Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieve d from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UNRATE (last visited December 7, 2021). 7 Id.
8 U.S. Bureau of Economic Analysis, Real Gross Domestic Product [GDPC1], retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/GDPC1 (last visited December 7, 2021). 9 U.S. Bureau of Labor Statistics, supra note 5.
4 labor force, or unable to pay their bills, with this pain particularly acute among lower-income Americans and communities of color. Again, moving forward, state, local, and Tribal governments will remain on the frontlines of the economic response and rebuilding a stronger economy in the aftermath of the pandemic.
However, as state, local, and Tribal governments continue to face substantial needs to respond to public health and economic conditions, they have also experienced severe impacts from the pandemic and resulting recession. State, local, and Tribal governments cut over 1.5 million jobs in the early months of the pandemic amid sharp declines in revenue and remain over 950,000 jobs below their pre-pandemic levels.10 As the Great Recession demonstrated, austerity among state, local, and Tribal governments can hamper overall economic growth and severely curtail the ability of governments to serve their constituents.
Recognizing these imperatives, the SLFRF program provides vital resources for state, local, and Tribal governments to respond to the pandemic and its economic effects and to replace revenue lost due to the public health emergency, preventing cuts to government services.
Specifically, the ARPA provides that SLFRF funds11 may be used:
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;
10 U.S. Bureau of Labor Statistics, All Employees, State Government [CES9092000001] and All Employees, Local Government [CES9093000001], retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/CES9092000001 and https://fred.stlouisfed.org/series/CES9093000001 (last visited December 7, 2021).
11 The ARPA adds section 602 of the Social Security Act, which creates the State Fiscal Recovery Fund, and section 603 of the Social Security Act, which creates 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 establishes a fund for states, territories, and Tribal governments and section 603 establishes a fund for metropolitan cities, nonentitlement units of local government, and counties. 5 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.
In addition, Congress specified two types of ineligible uses of funds: funds may not be used for deposit into any pension fund or, for states and territories only, to directly or indirectly offset a reduction in net tax revenue resulting from a change in law, regulation, or administrative interpretation.
Issued May 10, 2021, Treasury’s interim final rule provided further detail on eligible uses of funds within the four statutory categories, ineligible uses of funds, and administration of the program. The interim final rule provided state, local, and Tribal governments substantial flexibility to determine how best to use payments from the SLFRF program to meet the needs of their communities. The interim final rule aimed to facilitate swift and effective implementation by establishing a framework for determining the types of programs and services that are eligible under the ARPA along with examples of eligible uses of funds that state, local, and Tribal governments may consider.
State, local, and Tribal governments are already deploying SLFRF funds to make an impact in their communities. The SLFRF program ensures that state, local, and Tribal governments have the resources needed to fight the pandemic, sustain and strengthen the economic recovery, maintain vital public services, and make investments that support long-term growth, opportunity, and equity. Treasury looks forward to supporting and engaging with state, 6 local, and Tribal governments as they use these funds to make transformative investments in their communities. Finally, with so many pressing and effective ways to use SLFRF funds, there is no excuse for waste, fraud, or abuse of these funds.
Treasury received over 1,500 comments spanning nearly all aspects of the interim final rule. The final rule considers and responds to comments, provides clarification to many aspects of the interim final rule, and makes several changes to eligible uses under the program, summarized immediately below.
Executive Summary of Major Changes and Clarifications
The final rule provides broader flexibility and greater simplicity in the program, in response to public comments. Among other clarifications and changes, the final rule provides for the following:
• Public Health and Negative Economic Impacts: In addition to programs and services, the final rule clarifies that recipients may use funds for capital expenditures that support an eligible COVID-19 public health or economic response. For example, recipients may build certain affordable housing, childcare facilities, schools, hospitals, and other projects consistent with the requirements in this final rule and the Supplementary Information.
In addition, the final rule presumes that an expanded set of households and communities are “impacted” or “disproportionately impacted” by the pandemic, thereby allowing recipients to provide responses to a broad set of households and entities without requiring additional analysis. Further, the final rule provides a broader set of enumerated eligible uses available for these communities as part of COVID-19 public health and economic response, including making affordable housing, childcare, and early learning 7 services eligible in all impacted communities and making certain community development and neighborhood revitalization activities eligible for disproportionately impacted communities.
Further, the final rule allows for a broader set of uses to restore and support government employment, including hiring above a recipient’s pre-pandemic baseline, providing funds to employees that experienced pay cuts or furloughs, avoiding layoffs, and providing retention incentives.
• Premium Pay: The final rule offers more streamlined options to provide premium pay, by broadening the share of essential workers who can receive premium pay without a written justification while maintaining a focus on lower-income and frontline essential workers. • Revenue Loss: The final rule offers a standard allowance for revenue loss of $10 million, allowing recipients to select between a standard amount of revenue loss or complete a full revenue loss calculation. Recipients that select the standard allowance may use that amount for government services.
• Water, Sewer, and Broadband Infrastructure: The final rule significantly broadens eligible broadband infrastructure investments to address challenges with broadband access, affordability, and reliability, and adds additional eligible water and sewer infrastructure investments, including a broad range of lead remediation and stormwater management projects.
8 Structure of the Supplementary Information
In addition to this Introduction, this Supplementary Information is organized into four sections: 1) Eligible Uses, 2) Restrictions on Use, 3) Program Administration Provisions, and 4) Regulatory Analyses.
The Eligible Uses section describes the standards to determine eligible uses of funds in each of the four eligible use categories:
1) Responding to the public health and negative economic impacts of the pandemic (which includes several sub-categories)
2) Providing premium pay to essential workers
3) Providing government services to the extent of revenue loss due to the pandemic, and 4) Making necessary investments in water, sewer, and broadband infrastructure.
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 the others. 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. In the case of uses to respond to the public health and negative economic impacts of the pandemic, recipients should also determine which sub- category the eligible use fits within (i.e., public health, assistance to households, assistance to small businesses, assistance to nonprofits, aid to impacted industries, or public sector capacity and workforce), then assess whether the potential use of funds meets the eligibility standard for that sub-category. Treasury does not pre-approve uses of funds; recipients are advised to review the final rule and may pursue eligible projects under it. 9 In some sections of the rule, Treasury identifies specific uses of funds that are eligible, called “enumerated eligible uses”; for example, Treasury provides many enumerated eligible uses of funds to respond to the public health and negative economic impacts of the pandemic.
Uses of funds that are not specifically named as eligible in this final rule may still be eligible in two ways. First, 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. A potential use of funds that does not fit within the other three eligible use categories may be permissible as a government service, which recipients can fund up to their amount of revenue loss. For example, transportation infrastructure projects are generally ineligible as a response to the public health and negative economic impacts of the pandemic; however, a recipient could fund these projects as a government service up to its amount of revenue loss, provided that other restrictions on use do not apply. See sections Revenue Loss and Restrictions on Use for further information. Second, the eligible use category for responding to the public health and negative economic impacts of the pandemic 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. The Eligible Uses section provides a standard for determining if other uses of funds, beyond those specifically enumerated, are eligible. If a recipient would like to pursue a use of funds that is not specifically enumerated, the recipient should use the standard and other guidance provided in the section Public Health and Negative Economic Impacts to assess whether the use of funds is eligible.
Next, the Restrictions on Use section describes limitations on how funds may be used.
Treasury has divided the Restriction on Use section into (A) statutory restrictions under the ARPA, which include 1) offsetting a reduction in net tax revenue, and 2) deposits into pension 10 funds, and (B) other restrictions on use, which include 1) debt service and replenishing reserves, 2) settlements and judgments, and 3) general restrictions. These restrictions apply to all eligible use categories; however, some restrictions apply only to certain types of recipient governments, and recipients are advised to review the final rule to determine which restrictions apply to their type of government (e.g., state, territory, Tribal government, county, metropolitan city, or nonentitlement unit of government). To reiterate, for recipient governments covered by a specific restriction, that restriction applies to all eligible use categories and any use of funds under the SLFRF program. Specifically:
• For states and territories only, funds may not be used to offset directly or indirectly a reduction in net tax revenue resulting from a change in state or territory law. • For all recipients except Tribal governments, funds may not be used for deposits into a pension fund.
• For all recipients, funds may not be used for debt service or replenishing financial reserves.
• All recipients must also comply with three general restrictions. First, a recipient may not use SLFRF funds for a program, service, or capital expenditure that conflicts with or contravenes the statutory purpose of ARPA, including a program, service, or capital expenditure that includes a term or condition that undermines efforts to stop the spread of COVID-19. Second, recipients may not use SLFRF funds in violation of the conflict-of- interest requirements contained in the Award Terms and Conditions, including any self- dealing or violation of ethics rules. Lastly, recipients should be aware that federal, state, and local laws and regulations, outside of SLFRF program requirements, also apply, including for example, environmental laws and federal civil rights and nondiscrimination 11 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).
The Program Administration Provisions section describes the processes and requirements for administering the program on an ongoing basis, specifically as relates to the following:
distribution of funds, timeline for using funds, transfer of funds from a recipient to different organizations, use of funds for program administration, reporting on use of funds, and remediation and recoupment of funds used for ineligible purposes. Of note, SLFRF funds may only be used for costs incurred within a specific time period, beginning March 3, 2021, with all funds obligated by December 31, 2024 and all funds spent by December 31, 2026. Recipients are advised to also consult Treasury’s Reporting and Compliance Guidance for additional information on program administration processes and requirements, including applicability of the Uniform Guidance.
Finally, the section Regulatory Analyses provides Treasury’s analysis of the impacts of this rulemaking, as required by several laws, regulations, and Executive Orders.
Throughout this Supplementary Information, statements using the terms “should” or “must” refer to requirements, except when used in summarizing opinions expressed in public comments. Statements using the term “encourage” refer to recommendations, not requirements.
12 II. ELIGIBLE USES
A. PUBLIC HEALTH AND NEGATIVE ECONOMIC IMPACTS
Background
Since the first case of COVID-19 was discovered in the United States in January 2020, the disease has infected over 50 million and killed over 800,000 Americans.12 The disease – and necessary measures to respond – have had an immense public health and economic impact on millions of Americans across many areas of life, as detailed below in the respective sections on Public Health and Negative Economic Impacts. Since the release of the interim final rule in May 2021, the country has made major progress in fighting the disease and rebuilding the economy but faces continued risks, as illustrated by the spread of the Delta variant and the resulting slowdown in the economic recovery. The SLFRF program, and Treasury’s interim final rule, provide substantial flexibility to recipients to respond to pandemic impacts in their local community; this flexibility is designed to help state, local, and Tribal governments adapt to the evolving public health emergency and tailor their response as needs evolve and to the particular local needs of their communities.
Indeed, state, local, and Tribal governments face continued needs to respond at scale to the public health emergency. This includes continued public health efforts to slow the spread of the disease, to increase vaccination rates and provide vaccinations to new populations as they become eligible, to protect individuals living in congregate facilities, and to address the broader impacts of the pandemic on public health. Similarly, while a strong economic recovery is underway, the economy remains 3.9 million jobs below its pre-pandemic level, pointing to the
12 Centers for Disease Control and Prevention, COVID Data Tracker, http://www.covid.cdc.gov/covid -data- tracker/#datatracker-home (last visited December 31, 2021). 13 continued need for response efforts, with low-income workers and communities of color facing elevated rates of unemployment and economic hardship.13 Long-standing disparities in health and economic outcomes in underserved14 communities, that amplified and exacerbated the impacts of the pandemic, also present continued barriers to full and equitable recovery.
As state, local, and Tribal governments work to meet the public health and economic needs of their communities, these governments are also confronting the need to rebuild their own capacity. Facing severe budget challenges during the pandemic, many state, local, and Tribal governments have been forced to make cuts to services or their workforces, including cutting over 1.5 million jobs from February to May 2020, or delay critical investments. As of fall 2021, state, local, and Tribal government employment remained over 950,000 jobs below pre- pandemic levels.15 In the recovery from the Great Recession, cuts to state, local, and Tribal governments became a meaningful drag on economic growth for several years, and the SLFRF program provides the resources needed to re-invest in vital public services and workers to avoid this outcome.16
13 U.S. Bureau of Labor Statistics, All Employees, Total Nonfarm [PAYEMS] https://fred.stlouisfed.org/series/PAYEMS (last visited December 7, 2021). 14 Treasury uses “underserved” to refer to populations sharing a particular characteristic, as well as geograp hic communities, that have been systematically denied a full opportunity to participate in aspects of economic, social, and civic life. In the interim final rule, Treasury generally used the term “disadvantaged” to refer to these same populations and communities.
15 U.S. Bureau of Labor Statistics, All Employees, State Government [CES9092000001] and All Employees, Local Government [CES9093000001], retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/CES9092000001 and https://fred.stlouisfed.org/series/CES9093000001 (last visited December 7, 2021).
16 Tracy Gordon, State and Local Budgets and the Great Recession, Brookings Institution (Dec. 31, 2012), http://www.brookings.edu/articles/state-and-local-budgets-and-the-great-recession. 14 1. GENERAL PROVISIONS: STRUCTURE AND STANDARDS
Background: Sections 602(c)(1)(A) and 603(c)(1)(A) of the Social Security Act establish that recipients may use funds “to respond to the public health emergency with respect to COVID-19 or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality.” The interim final rule established three categories within this eligible use: 1) public health responses for those impacted by the pandemic, including the general public; 2) responses to the negative economic impacts that were experienced by those impacted as a result of the pandemic; and 3) additional services, either as a public health response or a response to the negative economic impacts of the pandemic, for disproportionately impacted communities.
The interim final rule established the method to determine which specific programs or services may be eligible to respond to the public health emergency or to respond to the negative economic impacts of the public health emergency within this framework. The interim final rule included multiple enumerated uses that are eligible within each of these categories when provided to eligible populations, including populations that the interim final rule presumed to have been impacted (in the case of public health responses and responses to negative economic impacts) or disproportionately impacted (in the case of disproportionately impacted communities). Finally, the interim final rule also allowed recipients to designate additional individuals or classes as impacted or disproportionately impacted. The standards for each of these criteria under the interim final rule are discussed below.
To assess whether a program or service would be eligible to respond to the public health emergency or its negative economic impacts, the interim final rule stated that, “the recipient [is required] to, first, identify a need or negative impact of the COVID–19 public health emergency 15 and, second, identify how the program, service, or other intervention addresses the identified need or impact [.…] [E]ligible uses under this category must be in response to the disease itself or the harmful consequences of the economic disruptions resulting from or exacerbated by the COVID–19 public health emergency.” The enumerated eligible uses were presumed to meet this criterion.
With respect to uses not specifically enumerated in the interim final rule as eligible public health responses, the interim final rule stated that, “[t]o assess whether additional uses would be eligible under this category, recipients should identify an effect of COVID–19 on public health, including either or both of immediate effects or effects that may manifest over months or years, and assess how the use would respond to or address the identified need.” With respect to uses not specifically enumerated in the interim final rule as eligible responses to a negative economic impact of the public health emergency, the interim final rule stated that “[e]ligible uses that respond to the negative economic impacts of the public health emergency must be designed to address an economic harm resulting from or exacerbated by the public health emergency. In considering whether a program or service would be eligible under this category, the recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID–19 public health emergency and whether, and the extent to which, the use would respond to or address this harm.17 A recipient should first consider whether an economic harm exists and whether this harm was caused or made worse by the COVID–19 public health emergency.” The interim final rule went on to say that: “In addition, the eligible use must ‘respond to’ the identified negative economic impact. Responses must be related and reasonably proportional to the extent and type
17 In some cases, a use may be permissible under another eligible use category even if it falls outside the scope of section (c)(1)(A) of section 602 and 603 of the Social Security Act. 16 of harm experienced; uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses.” Throughout this final rule, Treasury refers to households, communities, small businesses, nonprofits, and industries that experienced public health or negative economic impacts of the pandemic as “impacted.” The first section in the interim final rule under this eligible use category included public health responses for these impacted classes. The second category in the interim final rule under this eligible use category included responses to the negative economic impacts that were experienced by these impacted classes as a result of the pandemic.
The interim final rule further recognized that certain populations have experienced disproportionate health or negative economic impacts during the pandemic, as pre-existing disparities in these communities amplified the impacts of the pandemic. For example, the interim final rule recognized that the negative economic effects of the pandemic were particularly pronounced among lower-income families, who were more likely to experience income loss and more likely to have a job that required in-person work. The interim final rule recognized the role of pre-existing social vulnerabilities and disparities in driving the disparate health and economic outcomes and presumed that programs designed to address these health or economic disparities are responsive to the public health or negative economic impacts of the COVID-19 public health emergency, when provided in disproportionately impacted communities. In addition to identifying certain populations and communities presumed to be disproportionately impacted, it also empowered recipients to identify other disproportionately impacted households, populations, communities, or small businesses. The interim final rule provided that, in identifying these disproportionately impacted communities, recipients should be able to support 17 their determination that the pandemic resulted in disproportionate public health or economic outcomes to the specific populations, households, or geographic areas to be served.
Throughout this final rule, Treasury refers to those households, communities, small businesses, and nonprofits that experienced disproportionate public health or negative economic impacts of the pandemic as “disproportionately impacted.” The third category in the interim final rule under this eligible use included public health responses and responses to the negative economic impacts for these disproportionately impacted classes.
The interim final rule provided significant flexibility for recipients to determine which households, populations, communities, or small businesses have been impacted and/or disproportionately impacted by the pandemic and to identify appropriate responses. The interim final rule included several provisions to provide simple methods for recipients to identify impacts and design programs to address those impacts. First, the interim final rule allowed recipients to demonstrate a negative economic impact on a population or class and provide assistance to households or small businesses that fall within that population or class. In such cases, the recipient need only demonstrate that an individual household or business is within the class that experienced a negative economic impact, rather than requiring a recipient to demonstrate that each individual household or small business experienced a negative economic impact, because the impact was already identified for the class.
Second, in the interim final rule, Treasury presumed that certain populations have been impacted or disproportionately impacted and are thus eligible for services that respond to these impacts or disproportionate impacts. Specifically, the interim final rule permitted recipients to presume that households that experienced unemployment, increased food or housing insecurity, or are low- or moderate-income experienced a negative economic impact from the pandemic. 18 The interim final rule also permitted recipients to presume that certain services provided in Qualified Census Tracts (QCTs), to individuals living in QCTs, or by Tribal governments are responsive to disproportionate impacts of the pandemic. In addition to the populations presumed to be impacted or disproportionately impacted, under the interim final rule, recipients could identify other impacted households or classes, as described above, as well as other populations, households, or geographic areas that are disproportionately impacted by the pandemic.
Third, as mentioned previously, the interim final rule included a non-exhaustive list of uses of funds that Treasury identified as responsive to the impacts or disproportionate impacts of the pandemic. Treasury refers to these as “enumerated eligible uses.” To summarize, the interim final rule identified certain populations that are presumed to be impacted by the pandemic (and specific enumerated uses of funds that are responsive to that impact) and populations that are presumed to be disproportionately impacted by the pandemic (and specific enumerated uses of funds that are responsive to those disproportionate impacts). In addition, the interim final rule provided standards for recipients to assess whether additional uses of funds, beyond the enumerated eligible uses, are eligible for impacted and disproportionately impacted populations and permitted recipients to identify other households or classes that experienced impacts of the pandemic or disproportionate impacts of the pandemic.
Rule Structure
Public Comment: Many commenters expressed concern regarding the structure of the eligible uses, indicating they found the structure of the public health and negative economic impacts section of the interim final rule to be confusing or difficult to navigate. Other commenters indicated that they understood the enumerated uses to be the only eligible uses 19 and/or the presumed eligible populations to be the only eligible populations. Several commenters expressed frustration about the number of eligible uses specifically enumerated in the interim final rule, which they considered too few, and commenters proposed a wide range of additional enumerated eligible uses (for further discussion, see the section Public Health and section Negative Economic Impacts). Commenters expressed concern with pursuing uses of funds not explicitly enumerated in the eligible use section or uncertainty regarding the broad flexibility provided under the interim final rule to pursue additional programs that respond to the public health or negative economic impacts of the pandemic or the process for doing so.
Treasury Response: Treasury recognizes that many commenters felt the structure of the interim final rule could be clarified. These comments are consistent with many of the questions that Treasury has received from recipients, which requested clarification regarding the category their desired response fits into. Treasury observes that these comments and questions generally fall into four categories: 1) how to identify the correct public health or negative economic impact category for a particular response, 2) how to identify whether a particular use is eligible, 3) how to identify an impacted or disproportionately impacted class, and 4) whether an enumerated use can be provided to a class other than those presumed impacted or disproportionately impacted. In response to comments, Treasury is adjusting the structure of the public health and negative economic impacts eligible use section of the final rule to improve clarity and make it easier for recipients to interpret and apply the final rule.
Specifically, Treasury is restructuring the rule to aid recipients in determining whether a particular response is eligible and how the particular response might be eligible under a particular category. This restructuring reinforces the fundamental criteria that a use of funds is eligible based on its responsiveness to a public health or negative economic impact experienced 20 by individuals, households, small businesses, nonprofits, or impacted industries (together “beneficiaries”).18 This restructuring is intended to make the rule easier to navigate and to implement, including any criteria or conditions on particular uses of funds.
The reorganization of the public health and negative economic impacts section of the final rule is also intended to clarify the enumerated eligible uses described in the interim final rule. The reorganization itself is not intended to change the scope of the enumerated uses that were included in the interim final rule or that were allowable under the interim final rule. In some cases, specific enumerated uses are being altered, and those changes are discussed as changes within the section on that enumerated use.
The final rule streamlines and aligns services and standards that are generally applicable or are provided for public health purposes. Under this approach, eligible uses to respond to the public health emergency are organized based on the type of public health problem: 1) COVID-19 mitigation and prevention, 2) medical expenses, 3) behavioral health care, and 4) preventing and responding to violence. Under this approach, eligible uses to respond to the negative economic impacts of the public health emergency are organized based on the type of beneficiary: 1) assistance to households, 2) assistance to small businesses, and 3) assistance to nonprofits, alongside a fourth standalone eligibility category for aid to travel, tourism, hospitality, and other impacted industries. The first three categories, assistance to households, small businesses, and nonprofits, include enumerated eligible uses for impacted and disproportionately impacted beneficiaries. This change in structure is intended to provide a framework that clearly identifies the intended beneficiaries of uses of funds and provides clarity about what types of assistance are “responsive to the pandemic or its negative economic impacts” for these beneficiaries.
18 Note that small businesses, nonprofits, and industries may also function as subrecipients. For additional information on these distinctions see section Distinguishing Subrecipients versus Beneficiaries. 21 a. STANDARDS FOR IDENTIFYING A PUBLIC HEALTH OR NEGATIVE ECONOMIC IMPACT
Standards: Designating a Public Health Impact
Public Comment: Many commenters expressed uncertainty about how to determine whether a use of funds, beyond those specifically enumerated as eligible, might be an eligible public health response. For example, many commenters submitted questions asking whether specific uses of funds would be eligible. Others described what they considered to be impacts of the pandemic and argued that uses of funds to respond to these issues should be eligible. Some commenters requested that Treasury provide additional detail to guide their assessments of eligible uses of funds. For example, a commenter requested more clarification around exactly what and whose medical expenses can be covered. These comments ranged in their specificity and covered the full range of the enumerated eligible uses.
Treasury Response: Treasury is clarifying that when assessing whether a program or service is an eligible use to respond to the public health impacts of the COVID–19 public health emergency, the Department will consider the two eligibility requirements discussed below.
These standards apply to all proposed public health uses.
First, there must be a negative public health impact or harm experienced by an individual or a class. For ease of administration, the interim final rule allowed, and the final rule maintains the ability for, recipients to identify a public health impact on a population or group of individuals, referred to as a “class,” and to provide assistance to that class. In determining whether an individual is eligible for a program designed to address a harm experienced by a class, the recipient need only document that the individual is within the class that experienced a public health impact, see section Standards: Designating Other Impacted Classes. In the case of 22 some impacts, for example impacts of COVID-19 itself that are addressed by providing prevention and mitigation services, such a class could reasonably include the general public.
Second, the program, service, or other intervention must address or respond to the identified impact or harm. The final rule maintains the interim final rule requirement that eligible uses under this category must be in response to the disease itself or other public health harms that it caused.19
Responses must be reasonably designed to benefit the individual or class that experienced the public health impact or harm. Uses of funds should be assessed based on their responsiveness to their intended beneficiaries and the ability of the response to address the impact or harm experienced by those beneficiaries.
Responses must also be related and reasonably proportional to the extent and type of public health impact or harm experienced. Uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses.
Reasonably proportional refers to the scale of the response compared to the scale of the harm. It also refers to the targeting of the response to beneficiaries compared to the amount of harm they experienced. In evaluating whether a use is reasonably proportional, recipients should consider relevant factors about the harm identified and the response. For example, recipients may consider the size of the population impacted and the severity, type, and duration of the impact. Recipients may also consider the efficacy, cost, cost-effectiveness, and time to delivery of the response.
19 In designing an intervention to mitigate COVID-19, the recipient should consider guidance from public health authorities, particularly the Centers for Disease Control and Prevention (CDC), in assessing appropriate COVID -19 mitigation and prevention strategies (see Centers for Disease Control and Prevention, COVID-19, https://www.cdc.gov/coronavirus/2019-ncov/index.html). A program or service that imposes conditions on participation in or acceptance of the service that would undermine efforts to stop the spread of COVID -19 or discourage compliance with practices in line with CDC guidance for stopping the spread of COVID-19 is not a permissible use of funds.
23 If a recipient intends to fund capital expenditures in response to the public health impacts of the pandemic, recipients should refer to the section Capital Expenditures for details about the eligibility of capital expenditures.
Standards: Designating a Negative Economic Impact
Public Comment: Many commenters expressed uncertainty about how to determine whether uses of funds, beyond those specifically enumerated as eligible, might be eligible responses to negative economic impacts. For example, many commenters submitted questions asking whether specific uses of funds would be eligible. Others described what they considered to be impacts of the pandemic and argued that uses of funds to respond to these issues should be eligible. Some commenters requested that Treasury provide additional detail to guide their assessments of eligible uses of funds. These comments ranged in their specificity and covered the full range of eligible uses to respond to negative economic impacts. Several commenters asked for clarification about what types of food assistance would be considered eligible. Another commenter requested that the establishment of outdoor dining be eligible. Many commenters inquired about homeless shelters as an eligible use of SLFRF funds.
Commenters also expressed uncertainty about the ability to establish classes, including geographic areas, that experienced a negative economic impact or disagreed with the requirement that an individual entity be impacted by the pandemic in order to receive assistance.
For example, a commenter argued that interventions should not be limited to individuals or businesses that experienced an economic impact and should instead be used broadly to support economic growth. These commenters argued that an expenditure that supports a more robust economy may help combat the pandemic’s negative economic impacts, and it can do so even if 24 funding is provided to individuals or entities that did not themselves experience a negative economic impact during the pandemic.
Treasury Response: The final rule maintains the standard articulated in the interim final rule. For clarity, the final rule re-articulates that when assessing whether a program or service is an eligible use to respond to the negative economic impacts of the COVID–19 public health emergency, Treasury will consider the two eligibility requirements discussed below.
First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class. The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID–19 public health emergency. A recipient should first consider whether an economic harm exists and then whether this harm was caused or made worse by the COVID–19 public health emergency. This approach is consistent with the text of the statute, which provides that funds in this category must be used to “respond to the public health emergency with respect to… its negative economic impacts.”
While economic impacts may either be immediate or delayed, individuals or classes that did not experience a negative economic impact from the public health emergency would not be eligible beneficiaries under this category. As noted above, the interim final rule permitted recipients to presume that households that experienced unemployment, increased food or housing insecurity, or are low- or moderate-income experienced a negative economic impact from the pandemic. For discussion of the final rule’s approach to this presumption, see section Populations Presumed Eligible.
The final rule also maintains several provisions included in the interim final rule and subsequent guidance that are intended to ease administration of identifying that the beneficiary 25 experienced a negative economic impact or harm. For example, the interim final rule allowed, and the final rule maintains the ability for, recipients to demonstrate a negative economic impact on a population or group, referred to as a “class,” and to provide assistance to households, small businesses, or nonprofits that fall within that class. In such cases, the recipient need only demonstrate that the household, small business, or nonprofit is within the class that experienced a negative economic impact, see section Standards: Designating Other Impacted Classes. This would allow, for example, an internet access assistance program for all households with children to support those households’ ability to participate in healthcare, work, and educational activities like extending learning opportunities, among other critical activities. In that case, the recipient would only need to identify a negative economic impact to the class of “households with children” and would not need to document or otherwise demonstrate that each individual household served experienced a negative economic impact.
Second, the response must be designed to address the identified economic harm or impact resulting from or exacerbated by the public health emergency. In selecting responses, the recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact. This approach is consistent with the text of the statute, which provides that funds may be used to “respond to” the “negative economic impacts” of the public health emergency “including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality.” The list of potential responses (“assistance” or “aid”) suggests that responses should address the “negative economic impacts” of particular types of beneficiaries (e.g., households or small businesses).
Responses must be reasonably designed to benefit the individual or class that experienced the negative economic impact or harm. Uses of funds should be assessed based on their 26 responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary.20
Responses must also be related and reasonably proportional to the extent and type of harm experienced; uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses.21 Reasonably proportional refers to the scale of the response compared to the scale of the harm. It also refers to the targeting of the response to beneficiaries compared to the amount of harm they experienced; for example, it may not be reasonably proportional for a cash assistance program to provide assistance in a very small amount to a group that experienced severe harm and in a much larger amount to a group that experienced relatively little harm. In evaluating whether a use is reasonably proportional, recipients should consider relevant factors about the harm identified and the response. For example, recipients may consider the size of the population impacted and the severity, type, and duration of the impact. Recipients may also consider the efficacy, cost, cost-effectiveness, and time to delivery of the response.
Finally, recipients should be aware of the distinction between beneficiaries of funds and subrecipients; a recipient may provide services to beneficiaries through subrecipients that did not experience a negative economic impact, see section Distinguishing Subrecipients versus Beneficiaries. That is, a recipient may award SLFRF funds to an entity that did not experience a negative economic impact in order to implement a program or provide a service to beneficiaries on its behalf. Such transfers, when implementing a public health or negative economic impact
20 For example, expenses such as excessive compensation to employees or expenses which have already been reimbursed through another federal program, are not reasonably designed to address a negative economic impa ct to a beneficiary.
21 For example, a program or service that imposes conditions on participation in or acceptance of the service that would undermine efforts to stop the spread of COVID-19 or discourage compliance with practices in line with CDC guidance for stopping the spread of COVID-19 is not a permissible use of funds.
27 response, should be responsive to and designed to benefit individuals, households, small businesses, nonprofits, or impacted industries that did experience a public health or negative economic impact.
Determining the Appropriate Eligible Use Category
Public Comment: Some commenters expressed uncertainty about how to analyze negative economic impacts to different entities (e.g., households, small businesses, nonprofits).
For example, commenters asked whether a nonprofit, which did not experience a negative economic impact itself, could be granted funds to provide services to individuals experiencing homelessness, who did experience negative economic impacts. Other commenters proposed providing assistance to support the expansion of small businesses, under the theory that this would create more job opportunities for unemployed workers who experienced negative economic impacts.
Treasury Response: In the final rule, Treasury is clarifying that recipients should assess a potential use of funds based on which beneficiary experienced the negative economic impact, in other words, the households, small businesses, nonprofits, or impacted industries that experienced the negative economic impact.
Treasury notes that recipients may award SLFRF funds to many different types of organizations to carry out eligible uses of funds and serve beneficiaries on behalf of a recipient.
When a recipient provides funds to another entity to carry out eligible uses of funds and serve beneficiaries the entity becomes a subrecipient (see section Distinguishing a Subrecipient versus a Beneficiary). For example, a recipient may grant funds to a nonprofit organization to provide food assistance (an eligible use) to low-income households (the beneficiaries). Recipients only 28 need to assess whether the beneficiaries experienced a negative economic impact and whether the eligible use responds to that impact, consistent with the two-part framework described above; the organization carrying out the eligible use does not need to have experienced a negative economic impact if it is serving as the vehicle for reaching the beneficiaries. When making determinations about how to implement a program, recipients should consider whether that method of program implementation is an effective and efficient method to implement the program and do so in accordance with the Uniform Guidance provisions that govern procurements and sub-granting of federal funds, as applicable.
As noted above, recipients should analyze eligible uses based on the beneficiary of the assistance or the entity that experienced a negative economic impact. Assistance to a small business or to an impacted industry must respond to a negative economic impact experienced by that small business or industry. Recipients may not provide assistance to small businesses or impacted industries that did not experience a negative economic impact, although recipients can identify negative economic impacts for classes, rather than individual businesses, and may also presume that small businesses in certain areas experienced impacts; see section General Provisions: Structure and Standards and section Assistance to Small Businesses for details.
Several examples illustrate the application of these concepts. For example, a recipient could provide assistance to households via a contract with a business to create subsidized jobs for the long-term unemployed; in this case the business is a subrecipient and need not have experienced a negative economic impact, but the recipient would need to identify a specific connection between the assistance provided and addressing the negative economic impact experienced by the unemployed households. The recipient could, for instance, document the subsidized jobs created under the contract and their reservation for long-term unemployed 29 individuals. Similarly, a recipient might provide assistance to a small business that experienced a pandemic-related loss of revenue. This small business is a beneficiary and may use those funds in many ways, potentially including hiring or retaining staff. However, general assistance to a business that did not experience a negative economic impact under the theory that this assistance generally grows the economy and therefore enhances opportunities for unemployed workers would not be an eligible use, because such assistance is not reasonably designed to impact the individuals or classes that experienced a negative economic impact. In other words, there is not a reasonable connection between the assistance provided and an impact on the beneficiaries. Such an activity would be attenuated from and thus not reasonably designed to benefit the households that experienced the negative economic impact.
b. POPULATIONS PRESUMED ELIGIBLE
Presumed Eligibility: Impacted and Disproportionately Impacted Households and Communities
Background: As noted above, the interim final rule allowed recipients to presume that certain households were impacted or disproportionately impacted by the pandemic and thus eligible for responsive programs or services. Specifically, under the interim final rule, recipients could presume that a household or population that experienced unemployment, experienced increased food or housing insecurity, or is low- or moderate-income experienced negative economic impacts resulting from the pandemic, and recipients may provide services that respond to these impacts.
The interim final rule also recognized that pre-existing health, economic, and social disparities contributed to disproportionate pandemic impacts in certain communities and allowed for a broader list of enumerated eligible uses to respond to the pandemic in disproportionately 30 impacted communities. Under the interim final rule, recipients were allowed to presume that families residing in QCTs or receiving services provided by Tribal governments were disproportionately impacted by the pandemic.
Definition of Low- and Moderate-Income
Public Comment: As noted earlier, many commenters sought a definition for “low- and moderate-income” to provide recipients greater clarity on which specific households could be presumed to be impacted by the pandemic.
Treasury Response: The final rule maintains the presumptions identified in the interim final rule and defines low- and moderate-income for the purposes of determining which households and populations recipients may presume to have been impacted. To simplify the administration of this presumption, the final rule adopts a definition of low- and moderate- income based on thresholds established and used in other federal programs.
Definitions. The final rule defines a household as low income if it has (i) income at or below 185 percent of the Federal Poverty Guidelines (FPG) for the size of its household based on the most recently published poverty guidelines by the Department of Health and Human Services (HHS) or (ii) income at or below 40 percent of the Area Median Income (AMI) for its county and size of household based on the most recently published data by the Department of Housing and Urban Development (HUD).22
The final rule defines a household as moderate income if it has (i) income at or below 300 percent of the FPG for the size of its household based on the most recently published
22 AMI is also often referred to as median family income for the area. Since AMI is synonymous with this term and used more generally, the final rule refers to AMI.
31 poverty guidelines by HHS or (ii) income at or below 65 percent of the AMI for its county and size of household based on the most recently published data by HUD.23 Recipients may determine whether to measure income levels for specific households or for a geographic area based on the type of service to be provided. For example, recipients developing a program that serves specific households (e.g., a subsidy for internet access, a childcare program) may measure income at the household level. Recipients providing a service that reaches a general geographic area (e.g., a park) may measure median income of that area.
Further, recipients should generally use the income threshold for the size of the household to be served (e.g., when providing childcare to a household of five, recipients should reference the income threshold for a household of five); however, recipients may use the income threshold for a default household size of three if providing services that reach a general geographic area or if doing so would simplify administration of the program to be provided (e.g., when developing a park, recipients should use the income threshold for a household size of three and compare it to median income of the geographic area to be served).
Note that recipients can also identify and serve other classes of households that experienced negative economic impacts or disproportionate impacts from the pandemic; recipients can identify these classes based on their income levels, including above the levels defined as low- and moderate-income in the final rule. For example, a recipient may identify that households in their community with incomes above the final rule threshold for low-income nevertheless experienced disproportionate impacts from the pandemic and provide responsive
23 For the six New England states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont, HUD provides AMI for towns rather than counties. Recipients in these states should use the AMI corresponding to their town when determining thresholds for both low and moderate income. 32 services. See section General Provisions: Standards for Identifying Other Eligible Populations for details on applicable standards.
Applicable levels. For reference, the FPG is commonly referred to as the federal poverty level (FPL) and is related to—although distinct from—the U.S. Census Bureau’s poverty threshold. The final rule uses the FPG when referring specifically to the HHS guidelines, as these are the quantitative metrics used for determining low- and moderate-income households.
The FPG by household size for 2021 is included in the table below. Recipients should refer to HHS Poverty Guidelines for this information, which is updated annually and available on the HHS website.24 For calculating the thresholds of 40 percent and 65 percent of AMI, recipients should refer to the annual HUD Section 8 50 percent income limits by county and household size published by HUD and available on the HUD website; in particular, recipients should calculate the 40 percent threshold as 0.8 times the 50 percent income limit, and recipients should calculate the 65 percent threshold as 1.3 times the 50 percent income limit.25 Finally, for median income of Census Tracts and other geographic areas, recipients should refer to the most recent American Community Survey 5-year estimates available through the Census website.26
24 U.S. Department of Health and Human Service, HHS Poverty Guidelines for 2021, available at https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines. 25 U.S. Department of Housing and Urban Development, FY 2021 Section 8 Income Limits, available athttps://www.huduser.gov/portal/datasets/il/il21/Section8-FY21.xlsx. Recipients may refer to the list of counties (and New England towns) identified by state and metropolitan area for identifying the appropriate area. U.S.
Department of Housing and Urban Development, FY 2021 List of Counties (and New England Towns) Identified by State and Metropolitan Area, available at https://www.huduser.gov/portal/datasets/il/il21/area-definitions-FY21.pdf. 26 The U.S. Census Bureau provides an interactive map: U.S. Census Bureau, Median Household Income State Selection Map, available at
https://data.census.gov/cedsci/map?q=Median%20Household%20Income&g=0100000US%2404000%24001&tid= ACSST5Y2019.S1901&cid=S1901_C01_012E&vintage=2019. The U.S. Ce nsus Bureau also provides an interactive table: U.S. Census Bureau, Median Household Income In The Past 12 Months (In 2019 Inflation - Adjusted Dollars), available at
https://data.census.gov/cedsci/table?q=b19013&tid=ACSDT5Y2019.B19013&hidePreview=true. 33 2021 Federal Poverty Guidelines
Household size 48 Contiguous States
and the District of
Columbia
Alaska Hawaii
1 $12,880 $16,090 $14,820
2 $17,420 $21,770 $20,040
3 $21,960 $27,450 $25,260
4 $26,500 $33,130 $30,480
5 $31,040 $38,810 $35,700
6 $35,580 $44,490 $40.920
7 $40,120 $50,170 $46,140
8 $44,660 $55,850 $51,360
For families/households with more than 8 persons, add the following amounts for each additional person:
48 Contiguous States and the District of Columbia: $4,540 Alaska: $5,680
Hawaii: $5,220
Source: “HHS Poverty Guidelines for 2021,” available at https://aspe.hhs.gov/topics/poverty- economic-mobility/poverty-guidelines.
Rationale. In defining low income, the final rule uses both the FPG and AMI to account for national trends and regional differences. The metric of 185 percent of FPG aligns with some other programs; for instance, under the National School Lunch Program, students with household incomes under 185 percent of FPG qualify for free or reduced-price lunch, and schools often use eligibility for free or reduced-price lunch as an indicator of low-income status under Title 1-A of the Elementary and Secondary Education Act. Eligibility for other programs, such as the Federal Communications Commission’s e-Rate program and the Special Supplemental Nutrition Program for Women, Infants and Children employ this metric as well. In addition, 185 percent of the FPG for a family of four is $49,025, which is approximately the wage earnings for a two- earner household in which both earners receive the median wage in occupations, such as waiters 34 and waitresses and hotel clerks, that were heavily impacted by COVID-19.27 This measure is targeted toward those at the bottom of the income distribution and thus helps to promote use of SLFRF funds towards populations with the greatest needs. At the same time, with approximately one-quarter of Americans below 185 percent of the poverty threshold, this approach is broad enough to facilitate use of SLFRF funds across many jurisdictions.28 Because regions have different cost and income levels, this definition also allows for upward adjustment based on AMI for those regions where 40 percent of AMI exceeds 185 percent of FPG. The metric of 40 percent of AMI is based on the midpoint of values often used to designate certain categories of low-income households; specifically, it is the midpoint of the 30 percent income limit and the 50 percent income limit used in programs such as the Community Development Block Grant (CDBG) Program.
In defining moderate income, the final rule uses both the FPG and AMI to account for national trends and regional differences. While there are different definitions of moderate income, 300 percent of FPG falls within the range commonly used by researchers.29 Analysis of median wages among a sample of occupations likely impacted by the pandemic also suggests that an income cutoff of 300 percent of FPG would include many households with workers in such occupations.30 Moreover, the metric of 300 percent of FPG covers households that, while
27 See U.S. Bureau of Labor Statistics, Occupational Employment and Wage Estimates, https://www.bls.gov/oes/current/oes_nat.htm (last visited December 7, 2021). 28 U.S. Census Bureau, Poverty Status by State, https://www.census.gov/data/tables/time -series/demo/income- poverty/cps-pov/pov-46.html (last visited December 7, 2021). 29 For instance, Melissa Kearney et al. (2013) cap the “struggling lower middle -income class” at 250 percent of the federal poverty level, while Isabel Sawhill and Edward Rodrigue (2015) de fine the “middle class” as those with incomes of at least 300 percent of the poverty line. Melissa Kearney et al., “A Dozen Facts about America’s Struggling Lower-Middle Class,” The Hamilton Project (December 2013), https://www.hamiltonproject.org/assets/legacy/files/downloads_and_links/THP_12LowIncomeFacts_Final.pdf; Isabel Sawhill and Edward Rodrigue, “An Agenda for Reducing Poverty and Improving Opportunity,” Brookings Institution, https://www.brookings.edu/wp-content/uploads/2016/07/Sawhill_FINAL.pdf. 30 Data on median annual wages from: U.S. Bureau of Labor and Statistics, Occupational Employment and Wage Statistics, available at https://www.bls.gov/oes/current/oes_nat.htm (last visited December 7, 2021). 35 above the poverty line, often lack economic security.31 Treasury determined the AMI threshold for moderate income by maintaining the same ratio of FPG multiplier to AMI multiplier as in the definition of low income. This anchors the threshold to the existing definitions of moderate income from the literature while taking into account geographical variation in income and expenses in the same manner as the definition of low income.
Eligibility Presumptions
Public Comment: Many commenters believed that a broader range of groups should be considered presumptively impacted and disproportionately impacted, arguing that many households had been affected by the pandemic and that broader presumed eligibility would help recipients provide assistance quickly and effectively.
Treasury also received many comments on the presumption that families living in QCTs or receiving services from Tribal governments were disproportionately impacted by the pandemic. While many commenters supported the interim final rule's recognition of disproportionate impacts of the pandemic on low-income communities, many commenters disagreed with treating QCTs as the only presumed eligible group of disproportionately impacted households, apart from households served by Tribal governments. While acknowledging a potential increase in administrative burden, commenters recommended that Treasury presume other households or geographic areas, in addition to QCTs, were disproportionately impacted; suggestions included all low- and moderate-income households, geographic areas designated as
31 For instance, households earning between 200 and 300 percent of the FPG have significantly higher rates of food and housing insecurity than those earning above 300 percent of the FPG. Table 1, Kyle J. Caswell and Stephen Zuckerman, Food Insecurity, Housing Hardship, and Medical Care Utilization, Urban Institute (June 2018), https://www.urban.org/sites/default/files/publication/98701/2001896_foodinsecurity_housinghardship_medicalcareu tilization_finalized.pdf.
36 Opportunity Zones, Difficult Development Areas (DDAs), areas with a certain amount of Real Estate Advantage Program (REAP) recipients, or use of eligibility criteria from the Community Reinvestment Act. One commenter generally recommended that a clearer definition of “disproportionately impacted” should be provided and that any definition should include communities of color and people of limited means. Another recommended specific eligibility for people that had recently interacted with the criminal justice system. Many commenters representing Tribal governments and groups recommended a presumption of eligibility for all Tribal uses of funds, clarification that off reservation members remained eligible, and broad flexibility on use of funds.
Additionally, commenters noted that some areas are technically eligible to be QCTs but fall short because of the aggregate population of eligible tracts. One commenter noted that these areas should be considered the same as QCTs for the purpose of SLFRF funds. Some commenters argued that rural counties typically have few QCTs despite high levels of poverty and disruption caused by the COVID-19 pandemic. Other rural commenters recommended that the designation be by county rather than at a more granular level, arguing that the QCT designation is biased towards urban areas and understates the harm done to rural America. Many commenters representing Tribal governments supported the presumption that services provided by Tribal governments respond to disproportionate impacts.
Treasury Response:
Summary: While households residing in QCTs or served by Tribal governments were presumed to be disproportionately impacted, Treasury emphasizes that under the interim final rule recipients could also identify other households, populations, or geographic areas that were disproportionately impacted by the pandemic and provide services to respond. 37 The final rule maintains the presumptions identified in the interim final rule, as well as recipients’ ability to identify other impacted or disproportionately impacted classes. The final rule also allows recipients to presume that low-income households were disproportionately impacted, and as discussed above, defines low- and moderate-income. Finally, under the final rule recipients may also presume that households residing in the U.S. territories or receiving services from territorial governments were disproportionately impacted.
Households presumed to be impacted: Impacted households are those that experienced a public health or negative economic impact from the pandemic.
With regard to public health impacts, recipients may presume that the general public experienced public health impacts from the pandemic for the purposes of providing services for COVID-19 mitigation and behavioral health. In other words, recipients may provide a wide range of enumerated eligible uses in these categories to the general public without further analysis. As discussed in the introduction, COVID-19 as a disease has directly affected the health of tens of millions of Americans, and efforts to prevent and mitigate the spread of the disease are needed and in use across the country. Further, the stress of the pandemic and resulting recession have affected nearly all Americans. Accordingly, the final rule presumes that the general public are impacted by and eligible for services to respond to COVID-19 mitigation and prevention needs, as well as behavioral health needs.
With regard to negative economic impacts, as with the interim final rule, under the final rule recipients may presume that a household or population that experienced unemployment, experienced increased food or housing insecurity, or is low- or moderate-income experienced negative economic impacts resulting from the pandemic. The final rule’s definition of low- and 38 moderate-income, by providing standard metrics based on widely available data, is intended to simplify administration for recipients.
Households presumed to be disproportionately impacted: Disproportionately impacted households are those that experienced a disproportionate, or meaningfully more severe, impact from the pandemic. As discussed in the interim final rule, pre-existing disparities in health and economic outcomes magnified the impact of the COVID-19 public health emergency on certain households and communities. As with the interim final rule, under the final rule recipients may presume that households residing in QCTs or receiving services provided by Tribal governments were disproportionately impacted by the pandemic. In addition, under the final rule recipients may presume that low-income households were disproportionately impacted by the pandemic.
Finally, under the final rule recipients may also presume that households residing in the U.S. territories or receiving services from territorial governments were disproportionately impacted.
Treasury notes that households presumed to be disproportionately impacted would also be presumptively impacted, as these households have not only experienced pandemic impacts but have experienced disproportionate pandemic impacts; as a result, these households are presumptively eligible for responsive services for both impacted and disproportionately impacted households.
Many different geographic, income-based, or poverty-based presumptions could be used to designate disproportionately impacted populations. The combination of permitting recipients to use QCTs, low-income households, and services provided by Tribal or territorial governments as presumptions balances these varying methods. Specifically, QCTs are a commonly used designation of geographic areas based on low incomes or high poverty rates of households in the community; for recipients providing geographically targeted services, QCTs may provide a 39 simple metric with readily available maps for use. However, Treasury recognizes that QCTs do not capture all underserved populations, including for reasons noted by commenters. By allowing recipients to also presume that low-income households were disproportionately impacted, the final rule provides greater flexibility to serve underserved households or communities. Data on household incomes is also readily available at varying levels of geographic granularity (e.g., Census Tracts, counties), again permitting flexibility to adapt to local circumstances and needs.
Finally, Treasury notes that, as discussed further below, recipients may also identify other households, populations, and communities disproportionately impacted by the pandemic, in addition to those presumed to be disproportionately impacted.
Additionally, Tribal and territorial governments may face both disproportionate impacts of the pandemic and administrability challenges with operationalizing the income-based standard; therefore, Treasury has presumed that services provided by these governments respond to disproportionate pandemic impacts. Given a lack of regularly published data on household incomes in most territories,32 as well as a lack of poverty guidelines developed for these jurisdictions,33 it may be highly challenging to assess disproportionate impact in these communities according to an income- or poverty-based standard. Similarly, data on incomes in Tribal communities are not readily available.34 Finally, as described in the sections on Public Health and Negative Economic Impacts, Tribal communities have faced particularly severe health and economic impacts of the pandemic. Similarly, available research suggests that
32 For instance, the American Community Survey does not include all territories. U.S. Census Bur eau, Areas Published, https://www.census.gov/programs-surveys/acs/geography-acs/areas-published.html (last visited November 9, 2021).
33 U.S. Department of Health and Human Services, supra note 19. 34 For instance, data from the American Community Survey is based on geographical location rather than Tribal membership. U.S. Census Bureau, My Tribal Area, https://www.census.gov/Tribal/Tribal_glossary.php. 40 preexisting health and economic disparities in the territories amplified the impact of the pandemic on these communities.35
Categorical Eligibility
Public Comment: Several commenters suggested that the final rule permit recipients to rely on a beneficiary’s eligibility for other federal benefits programs as an easily administrable proxy for identifying a group or population that experienced a negative economic impact as a result of the COVID-19 public health emergency (i.e., categorical eligibility). In other words, a recipient would determine that individuals or households are eligible for an SLFRF-funded program based on the individual or household’s eligibility in another program, typically another federal benefit program. Commenters noted that categorical eligibility is a common policy in program administration that can significantly ease administrative burden on both program administrators and beneficiaries.
Treasury Response: Treasury agrees that allowing recipients to identify impacted and disproportionately impacted beneficiaries based on their eligibility for other programs with similar income tests would ease administrative burden. To the extent that the other program’s eligibility criteria align with a population or class that experienced a negative economic impact of the pandemic, this approach is also consistent with the process allowed under the final rule for recipients to determine that a class has experienced a negative economic impact, and then document that an individual receiving services is a member of the class. For these reasons, the final rule recognizes categorical eligibility for the following programs and populations:
35 Lina Stoylar et. al., Challenges in the U.S. Territories: COVID-19 and the Medicaid Financing Cliff, Kaiser Family Foundation (May 18, 2021), https://www.kff.org/coronavirus-covid-19/issue-brief/challenges-in-the-u-s- territories-covid-19-and-the-medicaid-financing-cliff/. 41 • Impacted households. Treasury will recognize a household as impacted if it otherwise qualifies for any of the following programs:
o Children’s Health Insurance Program (CHIP)
o Childcare Subsidies through the Child Care and Development Fund (CCDF) Program
o Medicaid
o National Housing Trust Fund (HTF), for affordable housing programs only o Home Investment Partnerships Program (HOME), for affordable housing programs only
• Disproportionately impacted households. Treasury will recognize a household as disproportionately impacted if it otherwise qualifies for any of the following programs:
o Temporary Assistance for Needy Families (TANF)
o Supplemental Nutrition Assistance Program (SNAP)
o Free and Reduced-Price Lunch (NSLP) and/or School Breakfast (SBP) programs o Medicare Part D Low-income Subsidies
o Supplemental Security Income (SSI)
o Head Start and/or Early Head Start
o Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) o Section 8 Vouchers
o Low-Income Home Energy Assistance Program (LIHEAP)
o Pell Grants
42 o For services to address educational disparities, Treasury will recognize Title I eligible schools36 as disproportionately impacted and responsive services that support the school generally or support the whole school as eligible
c. STANDARDS FOR IDENTIFYING OTHER ELIGIBLE POPULATIONS
Standards: Designating Other Impacted Classes
Public Comment: Treasury received multiple comments requesting additional clarification about how classes of impacted individuals may be designated, as well as questions asking whether recipients must demonstrate a specific public health or negative economic impact to each entity served (e.g., each household receiving assistance under a program). There were several comments requesting that specific geographic designations, like a county or Impact Zone, be eligible to use as a determining boundary.
Treasury Response: The interim final rule allowed, and the final rule maintains, the ability for recipients to demonstrate a public health or negative economic impact on a class and to provide assistance to beneficiaries that fall within that class. Consistent with the scope of beneficiaries included in sections 602(c)(1)(A) and 603(c)(1)(A) of the Social Security Act, Treasury is clarifying that a recipient may identify such impacts for a class of households, small businesses, or nonprofits. In such cases, the recipient need only demonstrate that the household, small business, or nonprofit is within the relevant class. For example, a recipient could determine that restaurants in the downtown area had generally experienced a negative economic impact and provide assistance to those small businesses to respond. When providing this assistance, the
36 Title I eligible schools means schools eligible to receive services under section 1113 of Title I, Part A of the Elementary and Secondary Education Act of 1965, as amended (20 U.S.C. 6313), including schools served under section 1113(b)(1)(C) of that Act.
43 recipient would only need to demonstrate that the small businesses receiving assistance were restaurants in the downtown area. The recipient would not need to demonstrate that each restaurant served experienced its own negative economic impact.
In identifying an impacted class and responsive program, service, or capital expenditure, recipients should consider the relationship between the definition of the class and proposed response. Larger and less-specific classes are less likely to have experienced similar harms and thus the responses are less likely to be responsive to the harms identified. That is, as the group of entities being served by a program has a wider set of fact patterns, or the type of entities, their circumstances, or their pandemic experiences differ more substantially, it may be more difficult to determine that the class has actually experienced the same or similar negative economic impact and that the response is appropriately tailored to address that impact.
Standard: Designating Other Disproportionately Impacted Classes Summary of Interim Final Rule: As noted above, the interim final rule provided a broad set of enumerated eligible uses of funds in disproportionately impacted communities, including to address pre-existing disparities that contributed to more severe pandemic impacts in these communities. The interim final rule presumed that these services are eligible uses when provided in a QCT, to families and individuals living in QCTs, or when these services are provided by Tribal governments. Recipients may also provide these services to “other populations, households, or geographic areas disproportionately impacted by the pandemic” and, in identifying these disproportionately impacted communities, should be able to support their determination that the pandemic resulted in disproportionate public health or economic outcomes to the group identified.
44 Public Comment: A significant number of commenters expressed uncertainty regarding the process for determining eligibility for disproportionately impacted communities beyond QCTs. A commenter noted that a clearer definition of “disproportionately impacted” should be delineated and that any definition should include communities of color and people of limited means. Some commenters suggested a template or checklist to see if an area meets the standard for disproportionately impacted communities outside of QCTs. Some commenters stated that QCT and non-QCT beneficiaries should be treated the same.
Treasury Response: Under the interim final rule, presuming eligibility for services in QCTs, for populations living in QCTs, and for Tribal governments was intended to ease administrative burden, providing a simple path for recipients to offer services in underserved communities, and is not an exhaustive list of disproportionately impacted communities. To further clarify, the final rule codifies the interpretive framework discussed above, including presumptions of groups disproportionately impacted, as well as the ability to identify other disproportionately impacted populations, households, or geographies (referred to here as disproportionately impacted classes).
As discussed in the interim final rule, in identifying other disproportionately impacted classes, recipients should be able to support their determination that the pandemic resulted in disproportionate public health or economic outcomes to the specific populations, households, or geographic areas to be served. For example, the interim final rule considered data regarding the rate of COVID-19 infections and deaths in low-income and socially vulnerable communities, noting that these communities have experienced the most severe health impacts, compared to national averages. Similarly, the interim final rule considered the high concentration of low- income workers performing essential work, the reduced ability to socially distance, and other 45 pre-existing public health challenges, all of which correlate with more severe COVID-19 outcomes. The interim final rule also considered the disproportionate economic impacts of the pandemic, citing, for example, the rate of job losses among low-income persons as compared to the general population. The interim final rule then identified QCTs, a common, readily accessible, and geographically granular method of identifying communities with a large proportion of low-income residents, as presumed to be disproportionately impacted by the pandemic.
In other words, the interim final rule identified disproportionately impacted populations by assessing the impacts of the pandemic and finding that some populations experienced meaningfully more severe impacts than the general public. Similarly, to identify disproportionately impacted classes, recipients should compare the impacts experienced by that class to the typical or average impacts of the pandemic in their local area, state, or nationally.
Recipients may identify classes of households, communities, small businesses, nonprofits, or populations that have experienced a disproportionate impact based on academic research or government research publications, through analysis of their own data, or through analysis of other existing data sources. To augment their analysis, or when quantitative data is not readily available, recipients may also consider qualitative research and sources like resident interviews or feedback from relevant state and local agencies, such as public health departments or social services departments. In both cases, recipients should consider the quality of the research, data, and applicability of analysis to their determination.
In designing a program or service that responds to a disproportionately impacted class, a recipient must first identify the impact and then identify an appropriate response. To assess disproportionate impact, recipients should rely on data or research that measures the public 46 health or negative economic impact. An assessment of the effects of a response (e.g., survey data on levels of resident support for various potential responses) is not a substitute for an assessment of the impact experienced by a particular class. Data about the appropriateness or desirability of a response may be used to assess the reasonableness of a response, once an impact or disproportionate impact has been identified but should not be the basis for assessing impact.
2. PUBLIC HEALTH
Background
On January 21, 2020, the Centers for Disease Control and Prevention (CDC) identified the first case of novel coronavirus in the United States.37 Since that time, and through present day, the United States has faced numerous waves of the virus that have brought acute strain on health care and public health systems. At various points in the pandemic, hospitals and emergency medical services have seen significant influxes of patients; response personnel have faced shortages of personal protective equipment; testing for the virus has been scarce; and congregate living facilities like nursing homes have seen rapid spread.
Since the initial wave of the COVID-19 pandemic, the United States has faced several additional major waves that continued to impact communities and stretch public health services.
The summer 2020 wave impacted communities in the south and southwest. As the weather turned colder and people spent more time indoors, a wave throughout fall and winter 2020
37 Press Release, Centers for Disease Control and Prevention, First Travel-related Case of 2019 Novel Coronavirus Detected in United States (Jan. 21, 2020), https://www.cdc.gov/media/releases/2020/p0121 -novel-coronavirus- travel-case.html.
47 impacted communities in almost every region of the country as the virus reached a point of uncontrolled spread and over 3,000 people died per day due to COVID-19.38 In December 2020, the Food and Drug Administration (FDA) authorized COVID-19 vaccines for emergency use, and soon thereafter, mass vaccination in the United States began. At the time of the interim final rule publication in May 2021, the number of daily new infections was steeply declining as rapid vaccination campaigns progressed across the country. By summer 2021, COVID-19 cases had fallen to their lowest level since early months of the pandemic, when testing was scarce. However, throughout late summer and early fall, the Delta variant, a more infectious and transmittable variant of the SARS-CoV-2 virus, sparked yet another surge. From June to early September, the seven-day moving average of reported cases rose from 12,000 to 165,000.39
As of December 2021, COVID-19 in total has infected over 50 million and killed over 800,000 Americans.40 Preventing and mitigating the spread of COVID-19 continues to require a major public health response from federal, state, local, and Tribal governments.
First, state, local, and Tribal governments across the country have mobilized to support the national vaccination campaign. As of December 2021, more than 80 percent of adults have received at least one dose, with more than 470 million total doses administered.41 Additionally, more than 15 million children over the age of 12 have received at least one dose of the vaccine and over 47 million people have received a booster dose.42 Vaccines for younger children, ages 5
38 Centers for Disease Control and Prevention, COVID Data Tracker: Trends in Number of COVID -19 Cases and Deaths in the US Reported to CDC, by State/Territory, https://covid.cdc.gov/covid -data- tracker/#trends_dailytrendscases (last visited December 7, 2021). 39 Id.
40 Centers for Disease Control and Prevention, COVID Data Tracker, http://www.covid.cdc.gov/covid -data- tracker/#datatracker-home (last visited December 31, 2021). 41 Centers for Disease Control and Prevention, COVID Data Tracker: COVID -19 Vaccinations in the United States, https://covid.cdc.gov/covid-data-tracker/#vaccinations (last visited December 7, 2021). 42 Id.
48 through 11, have been approved and are reaching communities and families across the country.
As new variants continue to emerge globally, the national effort to administer vaccinations and other COVID-19 mitigation strategies will be a critical component of the public health response.
In early reporting on uses of SLFRF funds, recipients have indicated that they plan to put funds to immediate use to support continued vaccination campaigns. For example, one recipient has indicated that it plans to use SLFRF funds to support a vaccine incentive program, providing $100 gift cards to residents at community vaccination clinics. The program aimed to target communities with high public health needs.43 Another recipient reported that it is partnering with multiple agencies, organizations, and providers to distribute COVID-19 vaccinations to homebound residents in assisted living facilities.44
State, local, and Tribal governments have also continued to execute other aspects of a wide-ranging public health response, including increasing access to COVID-19 testing and rapid at-home tests, contact tracing, support for individuals in isolation or quarantine, enforcement of public health orders, new public communication efforts, public health surveillance (e.g., monitoring case trends and genomic sequencing for variants), enhancement to health care capacity through alternative care facilities, and enhancement of public health data systems to meet new demands or scaling needs.
State, local, and Tribal governments have also supported major efforts to prevent COVID-19 spread through safety measures at key settings like nursing homes, schools, congregate living settings, dense worksites, incarceration settings, and in other public facilities.
43 Columbus, Ohio Recovery Plan, https://www.columbus.gov/recovery/. 44 Luzerne County, Pennsylvania Recovery Plan,
https://www.luzernecounty.org/DocumentCenter/View/26304/Final-Interim-Recovery-Plan-Performance-Report- 83121.
49 This has included, for example, implementing infection prevention measures or making ventilation improvements.
In particular, state, local, and Tribal governments have mounted significant efforts to safely reopen schools. A key factor in school reopening is the ability to implement COVID-19 mitigation strategies such as providing masks and other hygiene resources, improving air-quality and ventilation, increasing outdoor learning and eating spaces, testing and contact tracing protocols, and a number of other measures.45 For example, one recipient described plans to use SLFRF funds to further invest in school health resources that were critical components of school reopening and reducing the spread of COVID-19 in schools. Those investments include the increasing school nurses and social workers, improved ventilation systems, and other health and safety measures.
The need for public health measures to respond to COVID-19 will continue moving forward. This includes the continuation of vaccination campaigns for the general public, booster doses, and children. This also includes monitoring the spread of COVID-19 variants, understanding the impact of these variants, developing approaches to respond, and monitoring global COVID-19 trends. Finally, the long-term health impacts of COVID-19 will continue to require a public health response, including medical services for individuals with “long COVID,” and research to understand how COVID-19 impacts future health needs and raises risks for the tens of millions of Americans who have been infected.
The COVID-19 pandemic also negatively impacted other areas of public health, particularly mental health and substance use. In January 2021, over 40 percent of American
45 This includes implementing mitigation strategies consistent with the Centers for Disease Control and Prevention’s (CDC) Guidance for COVID-19 Prevention in K-12 Schools (November 5, 2021), available at https://www.cdc.gov/coronavirus/2019-ncov/community/schools-childcare/k-12-guidance.html. 50 adults reported symptoms of depression or anxiety, up from 11 percent in the first half of 2019.46 The mental health impacts of the pandemic have been particularly acute for adults ages 18 to 24, racial and ethnic minorities, caregivers for adults, and essential workers, with all reporting significantly higher rates of considering suicide.47 The proportion of children’s emergency department visits related to mental health has also risen noticeably.48 Similarly, rates of substance use and overdose deaths have spiked: preliminary data from the CDC show a nearly 30 percent increase in drug overdose mortality from April 2020 to April 2021, bringing the estimated overdose death toll for a 12-month period over 100,000 for the first time ever.49 The CDC also found that 13 percent of adults started or increased substance use to cope with stress related to COVID-19 and 26 percent reported having symptoms of trauma- and stressor-related disorder (TRSD) related to the pandemic.50
Another public health challenge exacerbated by the pandemic was violent crime and gun violence, which increased during the pandemic and has disproportionately impacted low-income communities.51 According to the Federal Bureau of Investigation (FBI), although the property crime rate fell 8 percent in 2020, the violent crime rate increased 6 percent in 2020 compared to
46 Nirmita Panchal et al., The Implications of COVID–19 for Mental Health and Substance Abuse (Feb. 10, 2021), https://www.kff.org/coronaviruscovid-19/issue-brief/the-implications-of-covid-19- for-mental-health-and-substance- use/#:∼:text= Older%20adults%20are%20also%20 more,prior%20to%20the%20current%20crisis; Mark É. Czeisler et al., Mental Health, Substance Abuse, and Suicidal Ideation During COVID-19 Pandemic– United States, June 24- 30 2020, Morb. Mortal. Wkly. Rep. 69(32):1049-57 (Aug. 14, 2020), https://www.cdc.gov/mmwr/volumes/69/wr/mm6932a1.htm.
47 Id.
48 Rebecca T. Leeb et al., Mental Health-Related Emergency Department Visits Among Children Aged <18 Years During the COVID Pandemic—United States, January 1—October 17, 2020, Morb. Mortal. Wkly. Rep. 69(45):1675–80 (Nov. 13, 2020), https://www.cdc.gov/mmwr/volumes/69/wr/mm6945a3.htm. 49 Centers for Disease Prevention and Control, National Center for Health Statistics, Provisional Drug Overdose Death Counts, https://www.cdc.gov/nchs/nvss/vsrr/drug-overdose-data.htm (last visited May 8December 6, 2021). 50Panchal, supra note 42; Mark É. Czeisler et al., supra note 42. 51 The White House, FACT SHEET: More Details on the Biden-Harris Administration’s Investments in Community Violence Interventions (April 7, 2021), https://www.whitehouse.gov/briefing -room/statements- releases/2021/04/07/fact-sheet-more-details-on-the-biden-harris-administrations-investments-in-community- violence-interventions/.
51 2019 data.52 In particular, the estimated number of aggravated assault offenses rose 12 percent, while murder and manslaughter increased 30 percent from 2019 to 2020.53 The proportion of homicides committed with firearms rose from 73 percent in 2019 to 76 percent in 2020.54 Exposure to violence can create serious short-term and long-term harmful effects to health and development, and repeated exposure to violence may be connected to negative health outcomes.55 Addressing community violence as a public health issue may help prevent and even reduce additional harm to individuals, households, and communities.56 Many communities are using SLFRF funds to invest in holistic approaches in violence prevention that are rooted in targeted outreach and addressing root causes. For example, the City of St. Louis is planning to invest in expanding a “community responder” model designed to provide clinical help and to divert non-violent calls away from the police department.
Additionally, the city will expand access to mental health services, allowing residents to seek support at city recreation centers, libraries, and other public spaces.57 Similarly, Los Angeles County will further invest in its “Care First, Jails Last” program which seeks to replace “arrest and incarceration” responses with health interventions.58 While the pandemic affected communities across the country, it disproportionately impacted some demographic groups and exacerbated health inequities along racial, ethnic, and
52 Federal Bureau of Investigation, FBI Releases 2020 Crime Statistics (September 27, 2021) https://www.fbi.gov/news/pressrel/press-releases/fbi-releases-2020-crime-statistics. 53 Id.
54 Id.
55 The Educational Fund to Stop Gun Violence, Community Gun Violence, https://efsgv.org/learn/type -of-gun- violence/community-gun-violence/ (last visited November 9, 2021). 56 Giffords Law Center, Healing Communities in Crisis: Lifesaving Solutions to the Urban Gun Violence Epidemic (March 2016), https://giffords.org/wp-content/uploads/2019/01/Healing-Communities-in-Crisis.pdf. 57 St. Louis, MO Recovery Plan, https://www.stlouis-mo.gov/government/recovery/covid-19/arpa/plan/. 58 Los Angeles County, CA Recovery Plan, http://file.lacounty.gov/SDSInter/bos/supdocs/160391.pdf. 52 socioeconomic lines.59 The CDC has found that racial and ethnic minorities are at increased risk for infection, hospitalization, and death from COVID-19, with Hispanic or Latino and Native American or Alaska Native patients at highest risk.60
Similarly, low-income and socially vulnerable communities have seen the most severe health impacts. For example, counties with high poverty rates also have the highest rates of infections and deaths, with 308 deaths per 100,000 compared to the U.S. average of 238 deaths per 100,000, as of December 2021.61 Counties with high social vulnerability, as measured by factors such as poverty and educational attainment, have also fared more poorly than the national average, with 325 deaths per 100,000 as of December 2021.62 Over the course of the pandemic, Native Americans have experienced more than one and a half times the rate of COVID-19 infections, more than triple the rate of hospitalizations, and more than double the death rate compared to White Americans.63 Low-income and minority communities also exhibit higher rates of pre-existing conditions that may contribute to an increased risk of COVID-19
59 Office of the White House, National Strategy for the COVID-19 Response and Pandemic Preparedness (Jan. 21, 2021), https://www.whitehouse.gov/wp-content/uploads/2021/01/National-Strategy-for-the-COVID-19-Response- and-Pandemic-Preparedness.pdf.
60 In a study of 13 states from October to December 2020, the CDC found that Hispanic or Latino and Native American or Alaska Native individuals were 1.7 times more likely to visit an emergency room for COVID -19 than White individuals, and Black individuals were 1.4 times more likely to do so than White individuals. See Sebastian D. Romano et al., Trends in Racial and Ethnic Disparities in COVID–19 Hospitalizations, by Region—United States, March– December 2020, MMWR Morb Mortal Wkly Rep 2021, 70:560–565 (Apr. 16, 2021), https:// www.cdc.gov/mmwr/volumes/70/wr/ mm7015e2.htm?s_cid=mm7015e2_w. 61 Centers for Disease Control and Prevention, COVID Data Tracker: Trends in COVID -19 Cases and Deaths in the United States, by County-level Population Factors, https://covid.cdc.gov/covid-data-tracker/#pop-factors_totaldeaths (last visited December 7, 2021).
62 The CDC’s Social Vulnerability Index includes fifteen variables measuring social vulnerability, including unemployment, poverty, education levels, single-parent households, disability status, non-English speaking households, crowded housing, and transportation access.
Centers for Disease Control and Prevention, COVID Data Tracker: Trends in COVID -19 Cases and Deaths in the United States, by Social Vulnerability Index, https://covid.cdc.gov/covid-data-tracker/#pop-factors_totaldeaths (last visited December 7, 2021).
63 Centers for Disease Control and Prevention, Risk for COVID-19 Infection, Hospitalization, and Death By Race/Ethnicity, https://www.cdc.gov/coronavirus/2019-ncov/covid-data/investigations-discovery/hospitalization- death-by-race-ethnicity.html (last visited December 7, 2021). 53 mortality.64 In addition, individuals living in low-income communities may have had more limited ability to socially distance or to self-isolate when ill, resulting in faster spread of the virus, and were over-represented among essential workers, who face greater risk of exposure.65 Social distancing measures in response to the pandemic may have also exacerbated pre- existing public health challenges. For example, for children living in homes with lead paint, spending substantially more time at home raises the risk of developing elevated blood lead levels, while screenings for elevated blood lead levels declined during the pandemic.66 The combination of these underlying social and health vulnerabilities may have contributed to more severe public health outcomes of the pandemic within these communities, resulting in an exacerbation of pre-existing disparities in health outcomes.67
Summary of the Interim Final Rule Approach to Public Health Summary: As discussed above, the interim final rule provided flexibility for recipients to pursue a wide range of eligible uses to “respond to” the COVID-19 public health emergency.
Uses of funds to “respond to” the public health emergency address the SARS-CoV-2 virus itself,
64 See, e.g., Centers for Disease Control and Prevention, Risk of Severe Illness or Death from COVID -19 (Dec. 10, 2020), https://www.cdc.gov/coronavirus/2019-ncov/community/health-equity/racial-ethnic-disparities/disparities- illness.html (last visited December 7, 2021).
65 Milena Almagro et al., Racial Disparities in Frontline Workers and Housing Crowding D uring COVID-19:
Evidence from Geolocation Data (Sept. 22, 2020), NYU Stern School of Business (forthcoming), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3695249; Grace McCormack et al., Economic Vulnerability of Households with Essential Workers, JAMA 324(4):388-90 (2020), available at https://jamanetwork.com/journals/jama/fullarticle/2767630. 66 See, e.g., Joseph G. Courtney et al., Decreases in Young Children Who Received Blood Lead Level Testing During COVID-19 – 34 Jurisdictions, January-May 2020, Morb. Mort. Wkly. Rep. 70(5):155-61 (Feb. 5, 2021), https://www.cdc.gov/mmwr/volumes/70/wr/mm7005a2.htm; Emily A. Benfer & Lindsay F. Wiley, Health Justice Strategies to Combat COVID-19: Protecting Vulnerable Communities During a Pandemic, Health Affairs Blog (Mar. 19, 2020), https://www.healthaffairs.org/do/10.1377/hblog20200319.757883/full/. 67 See, e.g., Centers for Disease Control and Prevention, supra note 58; Benfer & Wiley, supra note 62; Nathaniel M. Lewis et al., Disparities in COVID-19 Incidence, Hospitalizations, and Testing, by Area-Level Deprivation – Utah, March 3-July 9, 2020, Morb. Mortal. Wkly. Rep. 69(38):1369-73 (Sept. 25, 2020), https://www.cdc.gov/mmwr/volumes/69/wr/mm6938a4.htm.
54 support efforts to prevent or decrease spread of the virus, and address other impacts of the pandemic on public health. The interim final rule implemented these provisions by identifying a non-exhaustive list of programs or services that may be funded as responding to COVID-19 (“enumerated eligible uses”), along with considerations for evaluating other potential uses of funds not explicitly listed. Enumerated eligible uses are discussed below. For guidance on how to determine whether a particular use is allowable, beyond those enumerated, see section Standards:
Identifying a Public Health Impact.
Enumerated eligible uses under this section built and expanded upon permissible expenditures under the Coronavirus Relief Fund; for clarity, the interim final rule expressly listed as eligible uses the uses permissible under the Coronavirus Relief Fund, with minor exceptions.68 The interim final rule also recognized that the nature of the COVID-19 public health emergency, and responsive policy measures, programs, and services, had changed over time and is expected to continue evolving.
The interim final rule categorized enumerated eligible uses to respond to the public health emergency into several categories: 1) COVID-19 mitigation and prevention, 2) medical expenses, 3) behavioral health care, 4) public health and safety staff, 5) expenses to improve the design and execution of health and public health programs, and 6) eligible uses to address disparities in public health outcomes. For each category in turn, this section describes public comments received and Treasury’s responses, as well as comments received proposing additional enumerated eligible uses.
68 Generally, funding uses eligible under CRF as a response to the direct public health impacts of COVID -19 will continue to be eligible under the ARPA, including those not explicitly listed in the final rule, with the following two exceptions: 1) the standard for eligibility of public health and safety payrolls has been updated (see section Public Sector Capacity and Workforce in General Provisions: Other) and 2) expenses related to the issuance of tax - anticipation notes are no longer an eligible funding use (see section Restrictions on Use: Debt Service). 55 Reorganizations and Cross-References: In some cases, enumerated eligible uses included in the interim final rule under responding to the public health emergency have been re- categorized in the organization of the final rule to enhance clarity. For discussion of eligible uses for public health and safety staff and to improve the design and execution of public health programs, please see section Public Sector Capacity and Workforce in General Provisions:
Other. For discussion of eligible uses to address disparities in public health outcomes, please see section Assistance to Households in Negative Economic Impacts.
Conversely, discussion of eligible assistance to small businesses and nonprofits to respond to public health impacts has been moved from Assistance to Small Businesses and Assistance to Nonprofits in Negative Economic Impacts to this section. This change is consistent with the interim final rule, which provides that appropriate responses to address the public health impacts of COVID-19 may be provided to any type of entity.
a. COVID-19 MITIGATION AND PREVENTION
COVID-19 public health response and mitigation tactics. Recognizing the broad range of services and programming needed to contain COVID-19, the interim final rule provided an extensive list of enumerated eligible uses to prevent and mitigate COVID-19 and made clear that the public health response to the virus is expected to continue to evolve over time, necessitating different uses of funds.
Enumerated eligible uses of funds in this category included: vaccination programs; medical care; testing; contact tracing; support for isolation or quarantine; supports for vulnerable populations to access medical or public health services; public health surveillance (e.g., monitoring case trends, genomic sequencing for variants); enforcement of public health orders; 56 public communication efforts; enhancement to health care capacity, including through alternative care facilities; purchases of personal protective equipment; support for prevention, mitigation, or other services in congregate living facilities (e.g., nursing homes, incarceration settings, homeless shelters, group living facilities) and other key settings like schools; ventilation improvements in congregate settings, health care settings, or other key locations; enhancement of public health data systems; other public health responses; and capital investments in public facilities to meet pandemic operational needs, such as physical plant improvements to public hospitals and health clinics or adaptations to public buildings to implement COVID-19 mitigation tactics. These enumerated uses are consistent with guidance from public health authorities, including the CDC.
Public Comment: Many commenters were supportive of expansive enumerated eligible uses for mitigating and preventing COVID-19, noting the wide range of activities that governments may undertake and the continued changing landscape of pandemic response. Some commenters requested that Treasury engage in ongoing consideration of and consultation on evolving public health needs and resulting eligible expenses. Some commenters noted that their jurisdiction does not have an official public health program, for example smaller jurisdictions or those that do not have a health department, and requested clarification on whether their public health expenses would still be eligible in compliance with program rules.
Treasury Response: In the final rule, Treasury is maintaining an expansive list of enumerated eligible uses to mitigate and prevent COVID-19, given the wide-ranging activities that governments may take to further these goals, including “other public health responses.” Note that the final rule discusses several of these enumerated uses in more detail below. 57 Treasury is further clarifying that when providing COVID-19 prevention and mitigation services, recipients can identify the impacted population as the general public. Treasury presumes that all enumerated eligible uses for programs and services, including COVID-19 mitigation and prevention programs and services, are reasonably proportional responses to the harm identified unless a response is grossly disproportionate to the type or extent of harm experienced. Note that capital expenditures are not considered “programs and services” and are not presumed to be reasonably proportional responses to an identified harm except as provided in section Capital Expenditures in General Provisions: Other. In other words, recipients can provide any COVID-19 prevention or mitigation service to members of the general public without any further analysis of impacts of the pandemic on those individuals and whether the service is responsive.
This approach gives recipient governments an extensive set of eligible uses that can adapt to local needs, as well as evolving response needs and developments in understanding of transmission of COVID-19. Treasury emphasizes how the enumerated eligible uses can adapt to changing circumstances. For example, when the interim final rule was released, national daily COVID-19 cases were at relatively low levels and declining;69 as the Delta variant spread and cases peaked in many areas of the country, particularly those with low vaccination rates, government response needs and tactics evolved, and the SLFRF funds provided the ability to quickly and nimbly adapt to new public health needs. Treasury also notes that funds may be used to support compliance with and implementation of COVID-19 safety requirements, including vaccination requirements, testing programs, or other required practices.
69 See Centers for Disease Control and Prevention, COVID Data Tracker, https://covid.cdc.gov/covid -data- tracker/#trends_dailycases (last visited December 7, 2021). 58 Recipient governments do not need to have an official health or public health program in order to utilize these eligible uses; any recipient can pursue these eligible uses, though Treasury recommends consulting with health and public health professionals to support effective implementation.
The CDC has provided recommendations and guidelines to help mitigate and prevent COVID-19. The interim final rule and final rule help support recipients in stopping the spread of COVID-19 through these recommendations and guidelines.70 The final rule reflects changing circumstances of COVID-19 and provides a broad range of permissible uses for mitigating and preventing the spread of the disease, in a manner consistent with CDC guidelines and recommendations.
The purpose of the SLFRF funds is to mitigate the fiscal effects stemming from the COVID-19 public health emergency, including by supporting efforts to stop the spread of the virus. The interim final rule and final rule implement this objective by, in part, providing that recipients may use SLFRF funds for COVID-19 mitigation and prevention.71 A program or service that imposes conditions on participation in or acceptance of the service that would undermine efforts to stop the spread of COVID-19 or discourage compliance with recommendations and guidelines in CDC guidance for stopping the spread of COVID-19 is not a permissible use of funds. In other words, recipients may not use funds for a program that undermines practices included in the CDC’s guidelines and recommendations for stopping the spread of COVID-19. This includes programs that impose a condition to discourage compliance with practices in line with CDC guidance (e.g., paying off fines to businesses incurred for
70 See Centers for Disease Control and Prevention, COVID-19, https://www.cdc.gov/coronavirus/2019- ncov/index.html (last visited November 8, 2021).
71 See 35.6(b); IFR discussion of CDC guidelines.
59 violation of COVID-19 vaccination or safety requirements), as well as programs that require households, businesses, nonprofits, or other entities not to use practices in line with CDC guidance as a condition of receiving funds (e.g., requiring that businesses abstain from requiring mask use or employee vaccination as a condition of receiving SLFRF funds).
Vaccination programs and vaccine incentives. At the time of the interim final rule release, many vaccination programs were using mass vaccination tactics to rapidly reach Americans en masse for first vaccine doses.72 Since that time, the FDA has authorized booster vaccine doses for certain groups and certain vaccines and has also authorized vaccines for youths73,74 The inclusion of “vaccination programs” as an eligible use allows for adaptation as the needs of programs change or new groups become eligible for different types of vaccinations.
Public Comment: Since the release of the interim final rule, many recipient governments have also requested clarification on whether vaccine incentives are a permissible use of funds.
Treasury Response: Treasury issued guidance clarifying that “[vaccine] programs that provide incentives reasonably expected to increase the number of people who choose to get vaccinated, or that motivate people to get vaccinated sooner than they otherwise would have, are an allowable use of funds so long as such costs are reasonably proportional to the expected public health benefit.”75 This use of funds remains permissible under the final rule.
72 Centers for Disease Control and Prevention, COVID Data Tracker: COVID -19 Vaccinations in the United States, https://covid.cdc.gov/covid-data-tracker/#vaccinations (last visited October 18, 2021). 73 U.S. Food and Drug Administration, Coronavirus (COVID-19) Update: FDA Takes Additional Actions on the Use of a Booster Dose for COVID-19 Vaccines, https://www.fda.gov/news-events/press-announcements/fda- authorizes-pfizer-biontech-covid-19-vaccine-emergency-use-children-5-through-11-years-age (last visited November 8, 2021).
74 U.S. Food and Drug Administration, FDA Authorizes Pfizer-BioNTech COVID-19 Vaccine for Emergency Use in Children 5 through 11 Years of Age, https://www.fda.gov/news-events/press-announcements/fda-authorizes- pfizer-biontech-covid-19-vaccine-emergency-use-children-5-through-11-years-age (last visited November 8, 2021) 75 Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions, as of July 19, 2021; https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
60 Capital expenditures.
Public Comment: Many commenters requested clarification around the types and scope of permissible capital investments in public facilities to meet pandemic operational needs; ventilation improvements in congregate settings, health care settings, or other key locations; and whether support for prevention and mitigation in congregate facilities could include facilities renovations, improvements, or construction of new facilities, or if the facilities must solely be used for COVID-19 response.
Treasury Response: For clarity, Treasury has addressed the eligibility standard for capital expenditures, or investments in property, facilities, or equipment, in one section of this Supplementary Information; see section Capital Expenditures in General Provisions: Other. In recognition of the importance of capital expenditures in the COVID-19 public health response, Treasury enumerates that the following projects are examples of eligible capital expenditures, as long as they meet the standards for capital expenditures in section Capital Expenditures in General Provisions: Other:
• Improvements or construction of COVID-19 testing sites and laboratories, and acquisition of related equipment;
• Improvements or construction of COVID-19 vaccination sites; • Improvements or construction of medical facilities generally dedicated to COVID-19 treatment and mitigation (e.g., emergency rooms, intensive care units, telemedicine capabilities for COVID-19 related treatment);
Note that programs may provide incentives to individuals who have already received a vaccination if the incentive is reasonably expected to increase the number of people who choose to get vaccinated or motivate people to get vaccinated sooner and the costs are reasonably proportional to the expected public health benefit. 61 • Expenses of establishing temporary medical facilities and other measures to increase COVID-19 treatment capacity, including related construction costs; • Acquisition of equipment for COVID-19 prevention and treatment, including ventilators, ambulances, and other medical or emergency services equipment; • Improvements to or construction of emergency operations centers and acquisition of emergency response equipment (e.g., emergency response radio systems); • Installation and improvements of ventilation systems; • Costs of establishing public health data systems, including technology infrastructure; • Adaptations to congregate living facilities, including skilled nursing facilities, other long-term care facilities, incarceration settings, homeless shelters, residential foster care facilities, residential behavioral health treatment, and other group living facilities, as well as public facilities and schools (excluding construction of new facilities for the purpose of mitigating spread of COVID-19 in the facility); and • Mitigation measures in small businesses, nonprofits, and impacted industries (e.g., developing outdoor spaces).
Other clarifications on COVID-19 mitigation: medical care, supports for vulnerable populations, data systems, carceral settings. Based on public comments and questions received from recipients following the interim final rule, Treasury is making several further clarifications on enumerated eligible uses in this category.
Public Comment: Several commenters requested clarification on eligible uses of funds for medical care; Treasury addresses those comments in the section Medical Expenses below.
Public Comment: Recipients posed questions on the type and scope of activities eligible as “supports for vulnerable populations to access medical or public health services.” 62 Treasury Response: Enumerated eligible uses should be considered in the context of the eligible use category or section where they appear; in this case, “supports for vulnerable populations to access medical or public health services” appears in the section COVID-19 Mitigation and Prevention. As such, these eligible uses should help vulnerable or high-risk populations access services that mitigate COVID-19, for example, transportation assistance to reach vaccination sites, mobile vaccination or testing programs, or on-site vaccination or testing services for homebound individuals, those in group homes, or similar settings.
Public Comment: Some commenters asked whether “enhancement of public health data systems” could include investments in software, databases, and other information technology resources that support responses to the COVID-19 public health emergency but also provide benefits for other use cases and long-term capacity of public health departments and systems.
Treasury Response: These are permissible uses of funds under the interim final rule and remain eligible under the final rule.
Assistance to businesses and nonprofits to implement COVID-19 mitigation strategies.
Background: As detailed above, Treasury received many public comments describing uncertainty about which eligible use category should be used to assess different potential uses of funds. As a result, Treasury has re-categorized some uses of funds in the final rule to provide greater clarity, consistent with the principle that uses of funds should be assessed based on their intended beneficiary. For example, COVID-19 mitigation and prevention serves the general public or specific populations within the public. However, in the interim final rule, assistance to small businesses, nonprofits, and impacted industries to implement COVID-19 mitigation and prevention strategies was categorized in the respective sections within Negative Economic 63 Impacts. The final rule consolidates all COVID-19 mitigation and prevention within Public Health.
Public Comment: Treasury has received multiple comments and questions about which eligible use permits the recipient to provide assistance to businesses and nonprofits to address the public health impacts of COVID-19.
Treasury Response: In the final rule, these services have been re-categorized under COVID-19 mitigation and prevention to reflect the fact that this assistance responds to public health impacts of the pandemic rather than the negative economic impacts to a small business, nonprofit, or impacted industry. When providing COVID-19 mitigation and prevention services, recipients can identify the impacted entity as small businesses, nonprofits, or businesses in impacted industries in general. As with all enumerated eligible uses, recipients may presume that all COVID-19 mitigation and prevention programs and services are reasonably proportional responses to the harm identified unless a response is grossly disproportionate to the type or extent of harm experienced. Note that capital expenditures are not considered “programs and services” and are not presumed to be reasonably proportional responses to an identified harm except as provided in section Capital Expenditures in General Provisions: Other. In other words, recipients can provide any COVID-19 prevention or mitigation service to small businesses, nonprofits, and businesses in impacted industries without any further analysis of impacts of the pandemic on those entities and whether the service is responsive.
In some cases, this means that an entity not otherwise eligible to receive assistance to respond to negative economic impacts of the pandemic, for example an entity that did not experience a negative economic impact, may still be eligible to receive assistance under this category for COVID-19 mitigation and prevention services. 64 Uses of funds can include loans, grants, or in-kind assistance to small businesses, nonprofits, or other entities to implement COVID-19 prevention or mitigation tactics, such as vaccination; testing; contact tracing programs; physical plant changes to enable greater use of outdoor spaces or ventilation improvements; enhanced cleaning efforts; and barriers or partitions.
For example, this would include assistance to a restaurant to establish an outdoor patio, given evidence showing much lower risk of COVID-19 transmission outdoors.76 Uses of funds can also include aid to travel, tourism, hospitality, and other impacted industries to implement COVID-19 mitigation and prevention measures to enable safe reopening, for example, vaccination or testing programs, improvements to ventilation, physical barriers or partitions, signage to facilitate social distancing, provision of masks or personal protective equipment, or consultation with infection prevention professionals to develop safe reopening plans.
Recipients providing assistance to small businesses, nonprofits, or impacted industries that includes capital expenditures (i.e., expenditures on property, facilities, or equipment) should also review the section Capital Expenditures in General Provisions: Other, which describes eligibility standards for these expenditures. Recipients providing assistances in the form of loans should review the section Treatment of Loans Made with SLFRF Funds in General Provisions:
Other.
Recipients should also be aware of the difference between beneficiaries of assistance and subrecipients when working with small businesses, nonprofits, or impacted industries. As noted above, Treasury presumes that the general public, as well as small businesses, nonprofits, and impacted industries in general, has been impacted by the COVID-19 disease itself and is eligible
76 See Centers for Disease Control and Prevention, Participate in Outdoor and Indoor Activities, https://www.cdc.gov/coronavirus/2019-ncov/daily-life-coping/outdoor-activities.html (last visited November 8, 2021).
65 for services that mitigate or prevent COVID-19 spread. As such, a small business, nonprofit, or impacted industry receiving assistance to implement COVID-19 mitigation measures is a beneficiary of assistance (e.g., granting funds to a small business to develop an outdoor patio to reduce transmission). In contrast, if a recipient contracts with, or grants funds to, a small business, nonprofit, or impacted industry to carry out an eligible use for COVID-19 mitigation on behalf of the recipient, the entity is a subrecipient (e.g., contracting with a small business to operate COVID-19 vaccination sites). For further information on distinguishing between beneficiaries and subrecipients, as well as the impacts of the distinction on reporting and other requirements, see section Distinguishing Subrecipients versus Beneficiaries.
b. MEDICAL EXPENSES
Background: The interim final rule also included as an enumerated eligible use medical expenses, including medical care and services to address the near-term and potential longer-term impacts of the disease on individuals infected.
Public Comment: Some commenters sought clarification on the types of medical expenses eligible and for whom, including whether funds could be used under this category for expanding health insurance coverage (e.g., subsidies for premiums, expanding a group health plan), improvements to healthcare facilities or establishment of new medical facilities, direct costs of medical services, and costs to a self-funded health insurance plan (e.g., a county government health plan) for COVID-19 medical care.
Treasury Response: In the final rule, Treasury is maintaining this enumerated eligible use category and clarifying that it covers costs related to medical care provided directly to an individual due to COVID-19 infection (e.g., treatment) or a potential infection (e.g., testing). 66 This can include medical costs to uninsured individuals; deductibles, co-pays, or other costs not covered by insurance; costs for uncompensated care at a health provider; emergency medical response costs; and, for recipients with a self-funded health insurance plan, excess health insurance costs due to COVID-19 medical care. These are medical expenses due to COVID-19 and distinguish this category of eligible uses from other related eligible uses, like COVID-19 mitigation and prevention and health insurance expenses to households, to provide greater clarity for recipients in determining which category of eligible uses they should review to assess a potential use of funds. For discussion of eligibility for programs to expand health insurance coverage, see section Assistance to Households.
c. BEHAVIORAL HEALTH CARE
Background: Recognizing that the public health emergency, necessary mitigation measures like social distancing, and the economic downturn have exacerbated mental health and substance use challenges for many Americans, the interim final rule included an enumerated eligible use for mental health treatment, substance use treatment, and other behavioral health services, including a non-exhaustive list of specific services that would be eligible under this category.
Public Comment: Many commenters expressed support for the interim final rule’s recognition of behavioral health impacts of the pandemic and eligible uses under this category.
Several commenters requested clarification on the types of eligible services under this category, specifically whether both acute and chronic care are included as well as services that often do not directly accept insurance payments, like peer support groups. Some commenters highlighted the importance of cultural competence in providing effective behavioral health services. Some 67 commenters suggested that funding should be available broadly and quickly for this purpose, recommending that funding available for behavioral health not be tied to the amount of revenue loss experienced by the recipient.
Treasury Response: In the final rule, Treasury is maintaining this enumerated eligible use category and clarifying that it covers an expansive array of services for prevention, treatment, recovery, and harm reduction for mental health, substance use, and other behavioral health challenges caused or exacerbated by the public health emergency. The specific services listed in the interim final rule also remain eligible.77
Treasury is further clarifying that when providing behavioral health services, recipients can identify the impacted population as the general public and, as with all enumerated eligible uses, presume that all programs and services are reasonably proportional responses to the harm identified unless a response is grossly disproportionate to the type or extent of harm experienced.
In contrast, capital expenditures are not considered “programs and services” and are not presumed to be reasonably proportional responses to an identified harm except as provided in section Capital Expenditures in General Provisions: Other.
In other words, recipients can provide behavioral health services to members of the general public without any further analysis of impacts of the pandemic on those individuals and whether the service is responsive. Recipients may also use this eligible use category to respond to increased rates of behavioral health challenges at a population level or, at an individual level, new behavioral health challenges or exacerbation of pre-existing challenges, including new barriers to accessing treatment.
77 Hotlines or warmlines, crisis intervention, overdose prevention, infe ctious disease prevention, and services or outreach to promote access to physical or behavioral health primary care and preventative medicine. 68 Services that respond to these impacts of the public health emergency may include services across the continuum of care, including both acute and chronic care, such as prevention, outpatient treatment, inpatient treatment, crisis care, diversion programs (e.g., from emergency departments or criminal justice system involvement), outreach to individuals not yet engaged in treatment, harm reduction, and supports for long-term recovery (e.g., peer support or recovery coaching, housing, transportation, employment services).
Recipients may also provide services for special populations, for example, enhanced services in schools to address increased rates of behavioral health challenges for youths, mental health first responder or law enforcement-mental health co-responder programs to divert individuals experiencing mental illness from the criminal justice system, or services for pregnant women with substance use disorders or infants born with neonatal abstinence syndrome. Finally, recipients may use funds for programs or services to support equitable access to services and reduce racial, ethnic, or socioeconomic disparities in access to high-quality treatment.
Eligible uses of funds may include services typically billable to insurance78 or services not typically billable to insurance, such as peer support groups, costs for residence in supportive housing or recovery housing, and the 988 National Suicide Prevention Lifeline or other hotline services. Recipients may also use funds in conjunction with other federal grants or programs (see section Program Administration Provisions), though eligible services under SLFRF are not limited to those eligible under existing federal programs.
Given the public health emergency’s exacerbation of the ongoing opioid and overdose crisis, Treasury highlights several ways that funds may be used to respond to opioid use disorder
78 However, SLFRF funds may not be used to reimburse a service that was also billed to insurance. 69 and prevent overdose mortality.79 Specifically, eligible uses of funds include programs to expand access to evidence-based treatment like medications to treat opioid use disorder (e.g., direct costs or incentives for emergency departments, prisons, jails, and outpatient providers to offer medications and low-barrier treatment), naloxone distribution, syringe service programs, outreach to individuals in active use, post-overdose follow up programs, programs for diversion from the criminal justice system, and contingency management interventions.
Finally, for clarity, Treasury has addressed the eligibility standard for capital expenditures, or investments in property, facilities, or equipment, in one section of this Supplementary Information; see section Capital Expenditures in General Provisions: Other.
Examples of capital expenditures related to behavioral health that Treasury recognizes as eligible include behavioral health facilities and equipment (e.g., inpatient or outpatient mental health or substance use treatment facilities, crisis centers, diversion centers), as long as they adhere to the standards detailed in the Capital Expenditures section.
d. PREVENTING AND RESPONDING TO VIOLENCE
Background: The interim final rule highlighted that some types of violence had increased during the pandemic and that the ability of victims to access services had decreased, noting as an example the challenges that individuals affected by domestic violence face in accessing services.
Accordingly, the interim final rule enumerated as an eligible use, in disproportionately impacted communities, evidence-based community violence intervention programs. Following the release of the interim final rule, Treasury received several recipient questions regarding whether and
79 In line with the Department of Health and Human Services, Overdose Prevention Strategy, https://www.hhs.gov/overdose-prevention/, and the Office of National Drug Control Policy, Administration’s Statement on Drug Policy Priorities for Year One (April 1, 2021), https://www.whitehouse.gov/wp- content/uploads/2021/03/BidenHarris-Statement-of-Drug-Policy-Priorities-April-1.pdf. 70 how funds may be used to respond to an increase in crime, violence, or gun violence in some communities during the pandemic. Treasury released further guidance identifying how enumerated eligible uses and eligible use categories under the interim final rule could support violence reduction efforts, including rehiring public sector staff, behavioral health services, and services to address negative economic impacts of the pandemic that may aid victims of crime.
The guidance also identified an expanded set of enumerated eligible uses to address increased gun violence.
Public Comment: Several commenters expressed support for this use of funds.
Treasury Response: In the final rule, Treasury is maintaining enumerated eligible uses in this area and clarifying how to apply eligibility standards. Throughout the final rule, enumerated eligible uses should respond to an identified impact of the COVID-19 public health emergency in a reasonably proportional manner to the extent and type of harm experienced. Many of the enumerated eligible uses – like behavioral health services, services to improve employment opportunities, and services to address educational disparities in disproportionately impacted communities – that respond to the public health and negative economic impacts of the pandemic may also have benefits for reducing crime or aiding victims of crime. For example, the pandemic exacerbated the impact of domestic violence, sexual assault, and human trafficking; enumerated eligible uses like emergency housing assistance, cash assistance, or assistance with food, childcare, and other needs could be used to support survivors of domestic violence, sexual assault, or human trafficking who experienced public health or economic impacts due to the pandemic.
Public Comment: Several commenters expressed support for community violence intervention programs or argued that traditional public safety approaches had negatively 71 impacted the social determinants of health in their communities. Several commenters recommended inclusion of approaches like mental health or substance use diversion programs.
Treasury Response: Treasury recognizes the importance of comprehensive approaches to challenges like violence. The final rule includes an enumerated eligible use for community violence intervention programs in all communities, not just the disproportionately impacted communities eligible under the interim final rule. Given the increased rate of violence during the pandemic, Treasury has determined that this enumerated eligible use is responsive to the impacts of the pandemic in all communities. The final rule incorporates guidance issued after the interim final rule on specifically types of services eligible, including:
• Evidence-based practices like focused deterrence, street outreach, violence interrupters, and hospital-based violence intervention models, complete with wraparound services such as behavioral therapy, trauma recovery, job training, education, housing and relocation services, and financial assistance; and
• Capacity-building efforts at community violence intervention programs like funding more intervention workers, increasing their pay, providing training and professional development for intervention workers, and hiring and training workers to administer the programs.
Public Comment: Some commenters sought further clarification on whether some of the enumerated eligible uses are considered responsive to all crime, violent crime, or gun violence.
Treasury Response: Enumerated eligible uses that respond to an increase in gun violence may be pursued in communities experiencing an increase in gun violence associated with the pandemic, specifically: 1) hiring law enforcement officials – even above pre-pandemic levels – or paying overtime where the funds are directly focused on advancing community policing 72 strategies for gun violence, 2) additional enforcement efforts to reduce gun violence exacerbated by the pandemic, including prosecuting gun traffickers, dealers, and other parties contributing to the supply of crime guns, as well as collaborative federal, state, and local efforts to identify and address gun trafficking channels, and 3) investing in technology and equipment to allow law enforcement to more efficiently and effectively respond to the rise in gun violence resulting from the pandemic, for example technology to assist in the identification of guns whose serial numbers have been damaged.
3. NEGATIVE ECONOMIC IMPACTS
a. ASSISTANCE TO HOUSEHOLDS
Background
While the U.S. economy is now on the path to a strong recovery, the public health emergency, including the necessary measures taken to protect public health, resulted in significant economic and financial hardship for many Americans. As businesses closed, consumers stayed home, schools shifted to remote education, and travel declined precipitously, over 22 million jobs were lost in March and April 2020.80 One year later, in April 2021, the economy still remained over 8 million jobs below its pre-pandemic peak,81 and the unemployment rate hovered around 6 percent.82
In the months since Treasury issued the interim final rule in May 2021, the economy has made large strides in its recovery. The economy gained over 4 million jobs in the seven months
80 U.S. Bureau of Labor Statistics, All Employees, Total Nonfarm [PAYEMS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PAYEMS (last visited December 7, 2021). 81 Id.
82 U.S. Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UNRATE (last visited December 7, 2021). 73 from May to November 2021;83 the unemployment rate fell more than 1.5 percentage points to
4.2 percent, which is the lowest rate since February 2020;84 and the size of the nation’s economy surpassed the pre-pandemic peak in the second quarter of 2021.85 While the economy has made immense progress in its recovery since May 2021, the economy has also faced setbacks that illustrate the continued risks to the recovery. As the Delta variant spread across the country this summer and fall, the United States faced another severe wave of cases, deaths, and strain on the healthcare system, which contributed to a slowdown in the pace of recovery in the third quarter.86 Supply chain disruptions have also demonstrated the difficulties of restarting a global economy.87 Moreover, although many Americans have returned to work as of November 2021, the economy remains 3.9 million jobs below its pre-pandemic peak,88 and 2.4 million workers have dropped out of the labor market altogether relative to February 2020.89 Thus, despite much progress, there is a continued need to respond to the pandemic’s economic effects to ensure a full, broad-based, and equitable recovery.
Indeed, the pandemic’s economic impacts continue to affect some demographic groups more than others. Rates of unemployment remain particularly severe among workers of color and workers with lower levels of educational attainment; for example, the overall unemployment rate in the United States was 4.2 percent in November 2021, but certain groups saw much higher
83 U.S. Bureau of Labor Statistics, supra note 79.
84 U.S. Bureau of Labor Statistics, supra note 81.
85 U.S. Bureau of Economic Analysis, Real Gross Domestic Product [GDPC1], retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/GDPC1 (last visited December 7, 2021). 86 U.S. Department of the Treasury, Economy Statement by Catherine Wolfram, Acting Assistant Secretary for Economy Policy, for the Treasury Borrowing Advisory Committee (November 1, 2021), available at https://home.treasury.gov/news/press-releases/jy0453.
87 Yuka Hayashi, IMF Cuts Global Growth Forecast Amid Supply-Chain Disruptions, Pandemic Pressures, Wall Street Journal (October 12, 2021), available at https://www.wsj.com/articles/imf-cuts-global-growth-forecast-amid- supply-chain-disruptions-warns-of-inflation-risks-11634043601. 88 U.S. Bureau of Labor Statistics, supra note 79.
89 U.S. Bureau of Labor Statistics, Civilian Labor Force Level [CLF16OV], retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/CLF16OV (last visited December 7, 2021). 74 rates: 6.7 percent for Black workers, 5.2 percent for Hispanic or Latino workers, and 5.7 percent for workers without a high school diploma.90 Job losses have also been particularly steep among low-wage workers, with these workers remaining furthest from recovery as of the end of 2020.91 A severe recession, and its concentrated impact among low-income workers, has amplified food and housing insecurity, with an estimated nearly 20 million adults living in households where there is sometimes or often not enough food to eat and an estimated 12 million adults living in households that were not current on rent.92
While economic effects have been seen across many communities, there are additional disparities by race and income. For example, approximately half of low-income, Black, and Hispanic parents reported difficulty covering costs related to food, housing, utility, or medical care.93 Over the course of the pandemic, inequities also manifested along gender lines, as schools closed to in-person activities, leaving many working families without childcare during the day.94
90 U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey: Employment status of the civilian population by sex and age (December 6, 2021), https://www.bls.gov/news.release/empsit.t01.htm (last visited December 7, 2021); U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey: Employment status of the civilian noninstitutional population by race, Hispanic or Latino ethnicity, sex, and age (December 6, 2021), https://www.bls.gov/web/empsit/cpseea04.htm (last visited December 7, 2021); U.S.
Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey: Employment status of the civilian noninstitutional population 25 years and over by educational attainment (December 6, 2021), https://www.bls.gov/web/empsit/cpseea05.htm (last visited December 7, 2021). 91 Elise Gould & Jori Kandra, Wages grew in 2020 because the bottom fell out of the low -wage labor market, Economic Policy Institute (Feb. 24, 2021), https://files.epi.org/pdf/219418.pdf. See also, Michael Dalton et al., The K-Shaped Recovery: Examining the Diverging Fortunes of Workers in the Recovery from the COVID -19 Pandemic using Business and Household Survey Microdata¸ U.S. Bureau of Labor Statistics Working Paper Series (July 2021), https://www.bls.gov/osmr/research-papers/2021/pdf/ec210020.pdf. 92 Center on Budget and Policy Priorities, Tracking the COVID–19 Recession’s Effects on Food, Housing, and Employment Hardships, https://www.cbpp.org/research/poverty-and-inequality/tracking-the-covid-19-economys- effects-on-food-housing-and (last visited December 17, 2021). 93 Michael Karpman, Dulce Gonzalez, Genevieve M. Kenney, Parents Are Struggling to Provide for Their Families during the Pandemic, Urban Institute (May 2020), https://www.urban.org/research/publication/parents-are- struggling-provide-their-families-during-
pandemic?utm_source=urban_researcher&utm_medium=email&utm_campaign=covid_parents&utm_term=lhp. 94 Women have carried a larger share of childcare responsibilities than men during the COVID-19 crisis. See, e.g., Gema Zamarro & María J. Prados, Gender differences in couples’ division of childcare, work and mental health during COVID-19, Rev. Econ. Household 19:11-40 (2021), available at https://link.springer.com/article/10.1007/s11150-020-09534-7; Titan Alon et al., The Impact of COVID-19 on Gender Equality, National Bureau of Economic Research Working Paper 26947 (April 2020), available at https://www.nber.org/papers/w26947.
75 Women of color have been hit especially hard: the labor force participation rate for Black women has fallen by 3.6 percentage points95 during the pandemic as compared to 1.3 percentage points for Black men96 and 1.7 percentage points for White women.97 As the economy recovers, the effects of the pandemic-related recession may continue to impact households, including a risk of longer-term effects on earnings and economic potential.
For example, unemployed workers, especially those who have experienced longer periods of unemployment, earn lower wages over the long term once rehired.98 In addition to the labor market consequences for unemployed workers, recessions can also cause longer-term economic challenges through, among other factors, damaged consumer credit scores99 and reduced familial and childhood wellbeing.100 These potential long-term economic consequences underscore the continued need for robust policy support.
Low- and moderate-income households, those with income levels at or below 300 percent of the federal poverty level (FPL), face particular hardships and challenges. These households report much higher rates of food insecurity and housing hardships than households with higher incomes. For example, households with incomes at or below 300 percent FPL are several times
95 U.S. Bureau of Labor Statistics, Labor Force Participation Rate - 20 Yrs. & Over, Black or African American Women [LNS11300032], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS11300032 (last visited December 7, 2021). 96 U.S. Bureau of Labor Statistics, Labor Force Participation Rate - 20 Yrs. & Over, Black or African American Men [LNS11300031], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS11300031 (last visited December 7, 2021). 97 U.S. Bureau of Labor Statistics, Labor Force Participation Rate - 20 Yrs. & Over, White Women [LNS11300029], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS11300029 (last visited December 7, 2021).
98 See, e.g., Michael Greenstone & Adam Looney, Unemployment and Earnings Losses: A Look at Long-Term Impacts of the Great Recession on American Workers, Brookings Institution (Nov. 4, 2011), https://www.brookings.edu/blog/jobs/2011/11/04/unemployment-and-earnings-losses-a-look-at-long-term-impacts- of-the-great-recession-on-american-workers/.
99 Chi Chi Wu, Solving the Credit Conundrum: Helping Consumers’ Credit Records Impaired by the Foreclosure Crisis and Great Recession, National Consumer Law Center (Dec. 2013), https://www.nclc.org/images/pdf/credit_reports/report-credit-conundrum-2013.pdf. 100 Irwin Garfinkel, Sara McLanahan, Christopher Wimer, eds., Children of the Great Recession , Russell Sage Foundation (Aug. 2016), available at https://www.russellsage.org/publications/children-great-recession. 76 more likely to have reported struggling with food insecurity compared to households with income above 300 percent FPL.101 Similarly, low- and moderate-income households reported being housing insecure102 at rates more than twice as high as higher-income households, and low- and moderate-income households reported housing quality hardship103 at rates statistically significantly greater than the rate for higher-income households.104 The economic crisis caused by the pandemic worsened economic outcomes for workers in many low- and moderate-income households. Industries that employed low-wage workers experienced a disproportionate level of job loss. For example, from February 2020 to February 2021, the hospitality and leisure industry lost nearly 3.5 million jobs.105 While the entire industry was impacted, 72 percent of the job losses occurred in the lowest wage service occupations compared to only a 6 percent rate of job loss in the highest wage management and finance jobs.106 Similar trends exist in other heavily impacted industries. In public education, the lowest wage occupations, service and transportation jobs, saw a job loss rate of 20 and 26 percent, respectively.107 During that same time period, the highest wage occupations in public education, management, actually saw jobs increase by 7 percent.108
101 Kyle J Casewell and Stephen Zuckerman, Food Insecurity, Housing Hardship, and Medical Care Utilization, Urban Institute (June 2018), available at https://www.urban.org/sites/default/files/publication/98701/2001896_foodinsecurity_housinghar dship_medicalcareu tilization_finalized.pdf
102 Housing insecurity is defined as not paying the full amount of rent or mortgage and/or utility bills (gas, oil, or electricity) sometime in the previous 12 months. 103 Housing quality hardship is defined as an affirmative response to one or more questions related to problems with a respondent’s physical dwelling: pests and/or insects; leaking roof or ceiling; windows that are broken or cannot shut; exposed electrical wires; broken plumbing (toilet, hot water, other ); holes in walls, ceiling, or floor; no appliances (refrigerator or stove); and no phone (of any kind). 104 Id.
105 Elise Gould and Melat Kassa. Low-wage, low-hours workers were hit hardest in the COVID-19 recession: The State of Working America 2020 employment report, Economic Policy Institute (May 2021), available at https://www.epi.org/publication/swa-2020-employment-report/. 106 Id.
107 Id.
108 Id.
77 While many households suffered negative economic outcomes as a result of the COVID- 19 pandemic and economic recession, households with low incomes were impacted in disproportionate and exceptional ways. From January 2020 to March 2021, low-wage workers experienced job loss at a rate five times higher than middle-wage workers, and high-wage workers actually experienced an increase in job opportunities.109 Because workers in low-income households were more likely to lose their job or experience reductions in pay, those same households were also more likely to experience economic hardships like trouble paying utility bills, affording rent or mortgage payments, purchasing food, and paying for medical expenses.110 The disproportionate negative impacts the pandemic has had on low-income families extend beyond financial insecurity. For example, low-income families have reported higher levels of social isolation, stress, and other negative mental health outcomes during the pandemic. While over half of all U.S. adults report that their mental health was negatively affected by the pandemic, adults with low incomes reported major negative mental health impacts at a rate nearly twice that of adults with high incomes.111
Summary of Interim Final Rule and Final Rule Structure
Summary: The interim final rule provided a non-exhaustive list of enumerated eligible uses to respond to the negative economic impacts of the pandemic through assistance to
109 R. Chetty, J. Friedman, N. Hendren, M. Stepner, & Team, T. O. I., The Economic Impacts of COVID -19:
Evidence from a New Public Database Built Using Private Sector Data (No. w27431; p. w27431) (2020), National Bureau of Economic Research. https://doi.org/10.3386/w27431. 110 M. Despard, Michal Grinstein-Weiss, Yung Chun, and Stephen Roll, COVID-19 job and income loss leading to more hunger and financial hardship, Brookings Institute (July 13, 2020), https://www.brookings.edu/blog/upfront/2020/07/13/covid-19-job-and-income-loss-leading-to-more-hunger-and- financial-hardship/.
111 N. Panchal, R. Kamal, C. Muñana, & P. Chidambaram, The Implications of COVID-19 for Mental Health and Substance Use, Kaiser Family Foundation (February 10, 2021), https://www.kff.org/coronavirus -covid-19/issue- brief/the-implications-of-covid-19-for-mental-health-and-substance-use/. 78 households, as well as a standard for assessing whether uses of funds beyond those enumerated are eligible.
The interim final rule described enumerated eligible uses for assistance to households in several categories: 1) assistance to unemployed workers, 2) state Unemployment Insurance Trust Funds, 3) assistance to households, and 4) expenses to improve the efficacy of economic relief.
Note that the interim final rule posed several questions to the public on enumerated eligible uses for assistance to households; comments on these questions are addressed in the relevant subject matter section below.
In addition, in recognition that pre-existing health, economic, and social disparities contributed to disproportionate pandemic impacts in certain communities, the interim final rule also provided a broader list of enumerated eligible uses to respond to the pandemic in disproportionately impacted communities, specifically: 1) building stronger communities through investments in housing and neighborhoods, 2) addressing educational disparities, and 3) promoting healthy childhood environments. In the interim final rule, under the Public Health section, recipients could also provide services to address health disparities and increase access to health and social services; these eligible uses have been re-organized into the Assistance to Households section to consolidate responses in disproportionately impacted communities and enhance clarity.
This section addresses enumerated eligible uses in the final rule to respond to negative economic impacts to households. As a reminder, recipients may presume that a household or population that experienced unemployment, experienced increased food or housing insecurity, or is low or moderate income experienced negative economic impacts resulting from the pandemic, 79 and recipients may provide services to them that respond to these impacts, including these enumerated eligible uses.
For guidance on how to determine whether a particular use, beyond those enumerated, is eligible; further detail on which households and communities are presumed eligible for services; and how to identify eligible households and communities beyond those presumed eligible, see section General Provisions: Structure and Standards.
Reorganizations and Cross-References: The final rule reorganizes all enumerated eligible uses for impacted and disproportionately impacted households into the section Assistance to Households, with the exception that expenses to improve the efficacy of economic relief has been re-categorized into a different section of the final rule for increased clarity; for discussion of that use category, see section General Provisions: Other.
Note that in conducting this reorganization, and based on further analysis and in response to comments, Treasury has determined that several enumerated uses included in the interim final rule for disproportionately impacted communities are directly responsive to negative economic impacts experienced by impacted households. In the final rule, these uses have been moved from “disproportionately impacted” to “impacted” households accordingly, making these services available to both disproportionately impacted and impacted households. These uses include assistance applying for public benefits or services; programs or services that address or mitigate the impacts of the COVID-19 public health emergency on childhood health or welfare, including childcare, early learning services, programs to provide home visits, and services for families involved in the child welfare system and foster youth; programs to address the impacts of lost 80 instructional time for students;112 and programs or services that address housing insecurity, lack of affordable housing, or homelessness.
The following activities remain enumerated eligible uses for disproportionately impacted households: remediation of lead paint or other lead hazards; housing vouchers and assistance relocating to neighborhoods with higher levels of economic opportunity; and programs or services that address educational disparities, including assistance to high-poverty school districts to advance equitable funding across districts and geographies and evidence-based services to address the academic, social, emotional, and mental health needs of students.
Enumerated Eligible Uses for Impacted Households
The interim final rule included several enumerated eligible uses to provide assistance to households or populations facing negative economic impacts due to COVID-19. Enumerated eligible uses included: food assistance; rent, mortgage, or utility assistance; counseling and legal aid to prevent eviction or homelessness; emergency assistance for burials, home repairs, weatherization, or other needs; internet access or digital literacy assistance; cash assistance; or job training to address negative economic or public health impacts experienced due to a worker’s occupation or level of training. It also posed a question as to what other types of services or costs Treasury should consider as eligible uses to respond to the negative economic impacts of COVID–19.
This section addresses each of these enumerated eligible uses in turn, with the exception of job training, which has been re-categorized for increased clarity to the eligible use for “assistance to unemployed and underemployed workers.” In general, commenters supported
112For which recipients may presume that any student who did not have access to in -person instruction for a significant period of time was impacted by the pandemic. 81 inclusion of these enumerated eligible uses to address key economic needs among households due to the pandemic, and Treasury is maintaining these eligible uses in the final rule, in line with commenters’ recommendations.
1. Food assistance. The interim final rule included an enumerated eligible use for food assistance. Some commenters expressed support for this eligible use and emphasized the importance of aid to address food insecurity. Some commenters raised questions as to whether food assistance funds could be used to augment services provided through organizations like food banks, churches, and other food delivery services, or generally be sub-awarded to these organizations.
Treasury Response: Treasury is maintaining this enumerated eligible use without change.
Recipients may, as was the case under the interim final rule, administer programs through a wide range of entities, including nonprofit and for-profit entities, to carry out eligible uses on behalf of the recipient government (see section Distinguishing Subrecipients versus Beneficiaries).
Further, Treasury is clarifying that capital expenditures related to food banks and other facilities primarily dedicated to addressing food insecurity are eligible; recipients seeking to use funds for capital expenditures should refer to the section Capital Expenditures in General Provisions:
Other for additional eligibility standards that apply to uses of funds for capital expenditures.
2. Emergency housing assistance. The interim final rule included an enumerated eligible use for rent, mortgage, or utility assistance and counseling and legal aid to prevent eviction or homelessness.
82 Public Comment: Several commenters supported the inclusion of eviction prevention activities as an eligible use given the high number of households behind on rent and potentially at risk of eviction. Following release of the interim final rule, Treasury had also received requests for elaboration on the types of eligible services in this category. Some commenters also recommended including assistance to households for delinquent property taxes, for example to prevent tax foreclosures on homes, as an enumerated eligible use.
Treasury Response: In response to requests for elaboration on the types of eligible services for eviction prevention, Treasury has provided further guidance that these services include “housing stability services that enable eligible households to maintain or obtain housing, such as housing counseling, fair housing counseling, case management related to housing stability, outreach to households at risk of eviction or promotion of housing support programs, housing related services for survivors of domestic abuse or human trafficking, and specialized services for individuals with disabilities or seniors that support their ability to access or maintain housing,” as well as “legal aid such as legal services or attorney’s fees related to eviction proceedings and maintaining housing stability, court-based eviction prevention or eviction diversion programs, and other legal services that help households maintain or obtain housing.”113 Treasury also emphasized that recipients may work with court systems, nonprofits, and a wide range of other organizations to implement strategies to support housing stability and prevent evictions.
In the final rule, Treasury is maintaining these enumerated eligible uses, including those described in the interim final rule and later guidance, in line with commenters’ recommendations. To enhance clarity, Treasury is also elaborating on some types of services
113 See FAQ 2.21. Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions, as o f July 19, 2021; https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf. 83 included under this eligible use category; this remains a non-exhaustive list of eligible services.
For example, eligible services under this use category include: rent, rental arrears, utility costs or arrears (e.g., electricity, gas, water and sewer, trash removal, and energy costs, such as fuel oil), reasonable accrued late fees (if not included in rental or utility arrears), mortgage payment assistance, financial assistance to allow a homeowner to reinstate a mortgage or to pay other housing-related costs related to a period of forbearance, delinquency, or default, mortgage principal reduction, facilitating mortgage interest rate reductions, counseling to prevent foreclosure or displacement, relocation expenses following eviction or foreclosure (e.g., rental security deposits, application or screening fees). Treasury is clarifying that assistance to households for delinquent property taxes, for example to prevent tax foreclosures on homes, was permissible under the interim final rule and continues to be so under the final rule. In addition, Treasury is also clarifying that recipients may administer utility assistance or address arrears on behalf of households through direct or bulk payments to utility providers to facilitate utility assistance to multiple consumers at once, so long as the payments offset customer balances and therefore provide assistance to households.
This eligible use category also includes emergency assistance for individuals experiencing homelessness, either individual-level assistance (e.g., rapid rehousing services) or assistance for groups of individuals (e.g., master leases of hotels, motels, or similar facilities to expand available shelter).
Further, Treasury is clarifying that transitional shelters (e.g., temporary residences for people experiencing homelessness) are eligible capital expenditures. Recipients seeking to use funds for capital expenditures should refer to the section Capital Expenditures in General 84 Provisions: Other for additional eligibility standards that apply to uses of funds for capital expenditures.
Note that this enumerated eligible use describes “emergency housing assistance,” or assistance for responses to the immediate or near-term negative economic impacts of the pandemic. The final rule also clarifies and expands the ability of recipients to use SLFRF funds to address the general lack of affordable housing and housing challenges underscored by the pandemic. For discussion of affordable housing eligible uses, including services that primarily increase access to affordable, high-quality housing and support stable housing and homeownership over the long term, see the eligible use for “promoting long-term housing security: affordable housing and homelessness.”
3. Emergency assistance for pressing needs: burials, home repairs, weatherization, or other needs. The interim final rule included an enumerated eligible use for emergency assistance for burials, home repairs, weatherization, and other needs; these types of programs may provide emergency assistance for pressing and unavoidable household needs. Treasury did not receive comments on this eligible use and is maintaining it in the final rule.
Background on Home Repairs and Weatherization: The economic downturn has meant fewer households had the resources needed to make necessary home repairs and improvements.
In May 2021, 28 percent of landlords reported deferring maintenance and 27 percent of tenants reported maintenance requests going unanswered.114 While small and cosmetic repairs can often
114 Jung Hyun Choi, Laurie Goodman, and Daniel Pang, The Pandemic Is Making It Difficult for Mom -and-Pop Landlords to Maintain Their Properties, Urban Institute (July 23, 2021), https: //www.urban.org/urban- wire/pandemic-making-it-difficult-mom-and-pop-landlords-maintain-their-properties. 85 wait, deferring major repairs, such as plumbing needs, can result in unsafe and unhealthy living environments and, eventually, the need for more expensive repairs and fixes.
In addition to repairs, many homes are in need of weatherization. Weatherization assistance helps low- and moderate-income Americans save energy, reduce their utility bills, and keeps them and their homes safe. One in three households is energy insecure,115 meaning they do not have the ability to meet their energy needs.116 Weatherization efforts are particularly important for low- and moderate-income households. Households of color, renters, and households with low or moderate incomes are all more likely to report energy insecurity.117 These disparities are partially a result of economic hardship but are also caused by inequitable access to housing with proper insulation, up to date heating, cooling, and ventilation systems, and functioning and up to date lighting and appliances.118 While programs that address the effects of energy hardships, like the Low-Income Home Energy Assistance Program (LIHEAP), are critical, weatherization attempts to address root causes by addressing issues that lead to energy insecurities.
4. Internet access or digital literacy assistance. The interim final rule included an enumerated eligible use for assistance to households for internet access or digital literacy assistance. This enumerated eligible use, which responds to the negative economic impacts of the
115 U.S. Energy Information Administration, Residential Energy Consumption Survey (2017), Retrieved from https://www.eia.gov/consumption/residential/data/2015/hc/php/hc11.1.php.
D. Hernández, Understanding ‘energy insecurity’ and why it matters to health, Social Science & Medicine, 167, 1 – 10 (2016), https://doi.org/10.1016/j.socscimed.2016.08.029. 116 Hernández, D. (2016). Understanding ‘energy insecurity’ and why it matters to health. Social Science & Medicine, 167, 1–10. https://doi.org/10.1016/j.socscimed.2016.08.029. 117 U.S. Energy Information Administration, Residential Energy Consumption Survey (RECS) https://www.eia.gov/consumption/residential/data/2015/hc/php/hc11.1.php (last visited November 9, 2021) 118 A. Drehobl, & L. Ross, Lifting the high energy burden in America’s largest cities: how energy efficiency can improve low income and underserved communities, American Council for an Energy Efficient Economy (2016), https://www.aceee.org/sites/default/files/publications/researchreports/u1602.pdf. 86 pandemic on a household by providing assistance that helps them secure internet access or increase their ability to use computers and the internet, is separate from the eligible use category for investments in broadband infrastructure, under Sections 602(c)(1)(D) and 603(c)(1)(D), which is used to build new broadband networks through infrastructure construction or modernization. For discussion of broadband infrastructure investment in the final rule, see section Broadband Infrastructure in Infrastructure.
Background: The COVID-19 public health emergency has underscored the importance of universally available, high-speed, reliable, and affordable broadband coverage as millions of Americans rely on the internet to participate in, among other critical activities, school, healthcare, and work. Recognizing the need for such connectivity, SLFRF funds can be used to make necessary investments in broadband infrastructure that increase access over the long term, as well as the necessary supports to purchase internet access or gain digital literacy skills needed to complete activities of daily living during the pandemic.
The National Telecommunications and Information Administration (NTIA) highlighted the growing necessity of broadband in daily lives through its analysis of NTIA Internet Use Survey data, noting that Americans turn to broadband internet service for every facet of daily life including work, study, and healthcare.119 With increased use of technology for daily activities and the movement by many businesses and schools to operating remotely during the pandemic,
119 See, e.g., Nation Telecommunications and Information Administration, More than Half of American Households Used the Internet for Health-Related Activities in 2019, NTIA Data Show (December 7, 2020), https://www.ntia.gov/blog/2020/more-half-american-households-used-internet-health-related-activities-2019-ntia- data-show; Nation Telecommunications and Information Administration, Nearly a Third of American Employees Worked Remotely in 2019, NTIA Data Show (September 3, 2020) https://www.ntia.gov/blog/2020/nearly -third- american-employees-worked-remotely-2019-ntia-data-show; and generally, Nation Telecommunications and Information Administration, Digital Nation Data Explorer (June 10, 2020), https://www.ntia.gov/data/digital -nation- data-explorer.
87 broadband has become even more critical for people across the country to carry out their daily lives.
However, even in areas where broadband infrastructure exists, broadband access may be out of reach for millions of Americans because it is unaffordable, as the United States has some of the highest broadband prices in the Organisation for Economic Co-operation and Development (OECD).120 According to a 2021 Pew Research Center study, 20 percent of non- broadband users say that the monthly cost of home broadband is the primary reason they do not have broadband at home, and 40 percent say that cost is one reason for their lack of home broadband.121 Further, according to another survey, 22 percent of parents with homebound schoolchildren during the COVID-19 pandemic say that it is very or somewhat likely that their children will have to rely on public wi-fi to finish their schoolwork because there is no reliable internet connection at home; this percentage nearly doubles for lower-income parents, 40 percent of whom noted that their children will have to rely on public wi-fi.122 The same survey showed that 36 percent of lower-income parents with homebound children say their child will not be able to complete their schoolwork because they do not have access to a computer at home.123 Public Comment: Many commenters highlighted the importance of broadband access during the pandemic, including for remote work and education, and argued that affordability presents a major barrier to broadband adoption by households; in other words, many households live in areas that have broadband infrastructure and service available but are unable to purchase
120 BroadbandSearch Blog Post, How Do U.S. Internet Costs Compare To The Rest Of The World?, available at https://www.broadbandsearch.net/blog/internet-costs-compared-worldwide. 121 Pew Research Center, Mobile Technology and Home Broadband 2021 (June 3, 2021), https://www.pewresearch.org/internet/2021/06/03/mobile-technology-and-home-broadband-2021/. 122 Pew Research Center, 53% of Americans Say the Internet Has Been Essential During the COVID -19 Outbreak (April 30, 2020), https://www.pewresearch.org/internet/2020/04/30/53 -of-americans-say-the-internet-has-been- essential-during-the-covid-19-outbreak/.
123 Id.
88 service for their household due to the high cost. These commenters argued that broadband must be affordable to be accessible.
Commenters proposed several potential responses to affordability concerns. Some commenters recommended that building “gap networks,” or broadband networks built at low cost to provide affordable service in areas where it is lacking, be eligible as assistance to households to respond to the negative economic impacts of the pandemic, even if they do not meet the technical standards for eligibility under the eligible use category of broadband infrastructure investment, especially the required speed standards for new service. These commenters argued that the networks have shown promise as a timely means to expand access to affordable broadband internet during the pandemic, even if they may not provide service speeds needed for more intensive internet uses. Another commenter requested eligible uses include funding cellular towers to decrease costs. One commenter recommended that affordability should be addressed through other programs but not SLFRF given that affordability and availability may require nuanced solutions that would be complex to combine.
Treasury Response: The interpretive framework and enumerated eligible uses allow recipients flexibility to address identified pandemic impacts, including through solutions that take into account the particularized issues in their community. Given extensive commenter feedback on the importance of affordability to achieving broadband access, and the centrality of broadband to participating in work, education, healthcare, and other activities during the pandemic, affordability programs are an appropriate eligible use to respond to the negative economic impacts of the pandemic and Treasury is maintaining the enumerated eligible use for assistance to households for internet access and digital literacy programs in the final rule. 89 Building or constructing new broadband networks is an infrastructure investment and is governed by a separate clause in the statute. Treasury has addressed comments on “gap networks” that require infrastructure build-out in the section Broadband Infrastructure in Infrastructure.
Public Comment: Some commenters also use the term “gap networks” to refer to equipment installed as part of wi-fi systems, such as routers, repeaters, and access points; this equipment provides consumer access to an existing broadband network and does not require new network build-out or construction. These commenters recommended that Treasury permit, as assistance to households for internet access, investments in public wi-fi networks, free wi-fi in public housing communities, and other equipment that offers internet access to end users by utilizing existing broadband networks.
Other commenters recommended that eligible uses in this category include providing devices and equipment necessary to access the internet, like computers and routers, directly to low-income households.
Treasury Response: Treasury has determined that these services, which expand internet access without constructing new networks, are an appropriate enumerated eligible use as assistance to households to respond to a negative economic impact, and they are permitted under the final rule. Treasury is clarifying that eligible uses under this category can also include a wide range of programs and services to expand internet access and digital literacy, such as subsidies for the cost of internet service, other programs that support adoption of internet service where available, digital literacy programs, or programs that provide devices and equipment to access the internet (e.g., programs that provide equipment like tablets, computers, or routers) to households. Recipients seeking to use funds for equipment should refer to the section Capital 90 Expenditures in General Provisions: Other for additional eligibility standards that apply to uses of funds for capital expenditures (e.g., equipment, property, and facilities).
5. Cash assistance. The interim final rule included as an enumerated eligible use cash assistance and provided that cash transfers must be “reasonably proportional” to the negative economic impact they address and may not be “grossly in excess of the amount needed to address” the impact. In assessing whether a transfer is reasonably proportional, recipients may “consider and take guidance from the per person amounts previously provided by the Federal Government in response to the COVID-19 crisis,” and transfers “grossly in excess of such amounts” are not eligible.
Public Comment: Several commenters expressed support for this eligible use, noting that this is a common policy tool for some governments to support the well-being of households and individuals in their communities. Some commenters requested that Treasury set a specific dollar amount for permissible cash transfers, and Treasury has also received recipient questions on whether specific types of transfers, such as those to a substantial share of the population in the jurisdiction, would be a permissible use of funds.
Treasury Response: Treasury is maintaining this enumerated eligible use in the final rule, in line with commenters’ recommendations. Because the final rule is intended to provide flexibility to recipients to respond to the particularized pandemic impacts in their communities, which may vary in type and intensity, setting a specific dollar threshold for eligible cash transfers would fail to recognize the particularized needs of communities and limit recipients’ flexibility to tailor their response to those needs.
91 To provide greater clarity, Treasury is elaborating on the analysis that recipients may undertake to assess the eligibility of specific cash assistance programs or transfers. Cash transfers, like all eligible uses in this category, must respond to the negative economic impacts of the pandemic on a household or class of households. For the reasons discussed above, recipients may presume that low- and moderate-income households (as defined in the final rule), as well as households that experienced unemployment, food insecurity, or housing insecurity, experienced a negative economic impact due to the pandemic.
Recipients may also identify other households or classes of households that experienced a negative economic impact of the pandemic and provide cash assistance that is reasonably proportional to, and not grossly in excess of, the amount needed to address the negative economic impact. For example, in the ARPA, Congress authorized Economic Impact Payments to households at certain income levels, identifying and responding to a negative economic impact of the pandemic on these households.
Finally, Treasury has reiterated in the final rule that responses to negative economic impacts should be reasonably proportional to the impact that they are intended to address. Uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses. Reasonably proportional refers to the scale of the response compared to the scale of the harm. It also refers to the targeting of the response to beneficiaries compared to the amount of harm they experienced; for example, it may not be reasonably proportional for a cash assistance program to provide assistance in a very small amount to a group that experienced severe harm and in a much larger amount to a group that experienced relatively little harm.
92 6. Survivor’s benefits. The interim final rule included an enumerated eligible use for survivor’s benefits to surviving family members of individuals who have died from COVID-19, including cash assistance to widows, widowers, or dependents.
Public Comment: Treasury did not receive any comments on the inclusion of survivor’s benefits as an enumerated use for impacted households in the interim final rule.
Treasury Response: This use of funds remains eligible under the final rule. Consistent with the general reorganization noted above, the final rule organizes survivor’s benefits under assistance to households to clarify that households are the intended beneficiaries of survivor’s benefits.
7. Assistance accessing or applying for public benefits or services. Recognizing that eligible households often face barriers to accessing public benefits or services that improve health and economic outcomes, the interim final rule included as an enumerated eligible use in disproportionately impacted communities, public benefits navigators to assist community members with navigating and applying for available federal, state, and local public benefits or services. Treasury also clarified in subsequent guidance after the interim final rule that this eligible use category would include outreach efforts to increase uptake of the Child Tax Credit.
Background: The under-enrollment of eligible households in social assistance programs is a well-recognized and persistent challenge. There are many reasons why a household may not be receiving a particular benefit even though they are eligible. For many federal programs, enrollment processes vary from state-to-state. Sometimes, households are simply unaware that they are eligible for a particular benefit.124 For example, despite having one of the highest rates
124 Amy Finkelstein & Matthew J Notowidigdo, Take-Up and Targeting: Experimental Evidence from SNAP, The Quarterly Journal of Economics, vol 134(3), pages 1505-1556 (2019), https://www.nber.org/papers/w24652. 93 of participation of any benefits program, nearly 20 percent of eligible individuals do not participate in the Supplementary Nutritional Assistance Program (SNAP).125 In other cases, policies like public charge and asset testing can discourage otherwise eligible households.126 While the gap between households that need assistance and the number of households participating in public benefit programs has always existed, narrowing that gap and ensuring households receive the support they need is critical in mitigating the negative economic impacts of the pandemic.
Public Comment: Treasury has also received feedback from recipients and stakeholders noting the need to increase awareness and uptake of assistance programs, including gaps that remain in enrollment of eligible households in programs to address the negative economic impacts of the pandemic.127
Treasury Response: Treasury has determined that this impact of the pandemic is widely experienced across many jurisdictions and programs or services to increase awareness and uptake of assistance programs would respond to the pandemic’s negative economic impact in all communities. As such, in the final rule, this use is eligible for any impacted household or class of households, not only in disproportionately impacted communities.
125 United States Department of Agriculture, Trends in Supplemental Nutrition Assistance Program Participation Rates: Fiscal Year 2016 to Fiscal Year 2018 (May 2021), https://fns-prod.azureedge.net/sites/default/files/resource- files/Trends2016-2018.pdf.
126 Jeremy Barofsky et al., Spreading Fear: The Announcement Of The Public Charge Rule Reduced Enrollment In Child Safety-Net Programs, Health Affairs (October 2020), https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.00763. 127 See, e.g., U.S. Department of the Treasury, By ZIP Code: Number of Children under Age 18 with a Social Security Number Who Are Not Found on a Tax Year 2019 or 2020 Tax Return but who Appear on a Tax Year 2019 Form 1095 and Associated Number of Policy Holders (June 2021), https://home.treasury.gov/system/files/131/Estimated-Counts-of-Children-Unclaimed-for-CTC-by-ZIP-Code- 2019.pdf.
94 8. Promoting healthy childhood environments. The interim final rule included programs and services that promote healthy childhood environments as an enumerated eligible use for disproportionately impacted households. The interim final rule listed three programs or services included under this use: childcare; programs to provide home visits by health professionals, parent educators, and social service professionals to individuals with young children to provide education and assistance for economic support, health needs, or child development; and services for child welfare-involved families and foster youth to provide support and education on child development, positive parenting, coping skills, or recovery for mental health and substance use.
The interim final rule also included an enumerated eligible use for early learning services in disproportionately impacted communities, to address disparities in education.
Public Comment: Childcare and Early Learning: Treasury received multiple comments that were supportive of the provision of childcare. Treasury has also received multiple comments and questions indicating that recipients have identified a need for childcare for a broader range of households and communities, for example those that may need childcare in order to return to work, in addition to households and communities disproportionately impacted by the pandemic.
Several commenters expressed uncertainty about how childcare facilities should interact with the boundaries of a QCT. Finally, one commenter recommended that pre-K or early learning services encompass care for infants and toddlers, arguing that these types of care are often more expensive or challenging to access for families.
Background: Childcare and Early Learning: As daycares and schools closed in-person activities during the pandemic, many working families were left without childcare during the 95 day.128 Although daycare centers and schools have since reopened in many communities, there remains a persistent childcare shortage as childcare employment levels have not fully rebounded since the sharp decline in childcare employment at the beginning of the pandemic.129 As a result, working parents in communities across the country, and more specifically women, may face challenges entering or reentering the labor force.130
Low-income households are also more likely to lose access to quality childcare.131 The widespread closure of childcare centers combined with a lack of access to paid family leave means parents in low-income households are more likely to experience a reduction of income or leave their jobs due to a lack of childcare options.132 Additionally, childcare providers serving primarily low-income families were less likely to remain open during the pandemic because of tighter profit margins and general community financial insecurity, compared to childcare providers serving primarily high-income families.133,134
128 Women have carried a larger share of childcare responsibilities than men during the COVID –19 crisis. See, e.g., Gema Zamarro & Marı´a J. Prados, Gender differences in couples’ division of childcare, work and mental health during COVID– 19, Rev. Econ. Household 19:11–40 (2021), available at https://link.springer.com/article/
10.1007/s11150-020-09534-7; Titan Alon et al., The Impact of COVID–19 on Gender Equality, National Bureau of Economic Research Working Paper 26947 (April 2020), available at https://www.nber.org/ papers/w26947. 129 See, e.g., Center For The Study Of Child Care Employment (CSCCE), Child Care Sector Jobs: BLS Analysis (November 8, 2021), https://cscce.berkeley.edu/child-care-sector-jobs-bls-analysis/; Emma K. Lee, and Zachary Parolin. The Care Burden during COVID-19: A National Database of Child Care Closures in the United States, Socius (January 2021), doi:10.1177/23780231211032028.
130 Jason Furman, Melissa Schettini Kearney, and Wilson Powell, The Role of Childcare Challenges in the US Jobs Market Recovery During the COVID-19 Pandemic, NBER Working Paper No. 28934 (June 2021), https://www.nber.org/papers/w28934.
131 U.S. Census Bureau, Phase 3.2 Household Pulse Survey: Table 2. Childcare Arrangements in the Last 4 Weeks for Children Under 5 Years Old, by Selected Characteristics, (Washington: 2021), available at https://www.census.gov/programs-surveys/household-pulse-survey/data.html. 132 Id.
133 N. Kalluri, C. Kelly, & A. Garg, Child Care During the COVID-19 Pandemic: A Bad Situation Made Worse.
Pediatrics (2021), https://doi.org/10.1542/peds.2020-041525. 134 National Association for the Education of Young Children, Am I Next? Sacrificing to Stay Open, Child Care Providers Face a Bleak Future Without Relief (December 2020), https://www.naeyc.org/sites/default/files/globally - shared/downloads/PDF.
96 In addition to disruptions to childcare, early learning services were also significantly impacted by the pandemic, and the disruption of these services had widespread ramifications for learning loss, parental support, and equity. Early learning centers have seen declined enrollment across the board, though there was a larger dip in enrollment for low-income households.135 This lower enrollment coincides with a diminishing workforce, as similarly to childcare, early childhood educators have been leaving the profession due to long hours, low pay,136 and health and safety concerns.137 As a result, children’s school readiness has suffered, leading to potential long-term impacts on life outcomes.138 The impact also extended to parents. Parents, especially mothers, may face challenges reentering or remaining in the workforce if early learning services are unavailable.
Treasury Response: Childcare and Early Learning Services: Treasury agrees with commenters’ analysis that challenges accessing or affording childcare have been widespread during the pandemic, affecting many jurisdictions and populations across the country.
Disruptions to early care and learning services similarly have had broad impact and likely result in negative impacts for young children and their parents. As such, these enumerated eligible uses are generally responsive to the negative economic impacts of the pandemic in all communities, not just in disproportionately impacted communities. Under the final rule, childcare and early
135 G. G. Weisenfeld, Impacts of Covid-19 on Preschool Enrollment and Spending, New Brunswick, NJ:
National Institute for Early Education Research (2021), https://nieer.org/wp - content/uploads/2021/03/NIEER_Policy_Brief_Impacts-of-Covid-19 on_Preschool_Enrollment_and_Spending_3_16_21.pdf.
136 Heather Long, ‘The pay is absolute crap’: Child-care workers are quitting rapidly, a red flag for the economy, Washington Post (September 19, 2021), https://www.washingtonpost.com/business/2021/09/19/childcare -workers- quit/.
137 Monash University, The emotional toll of COVID-19 among early childhood educators (August 5, 2020) https://lens.monash.edu/@education/2020/08/05/1381001/the-emotional-toll-of-covid-19-among-early-childhood- educators.
138 Daphna Bassok and Anna Shapiro, Understanding COVID-19-era enrollment drops among early-grade public school students, Brookings Institution (February 22, 2021), https://www.brookings.edu/blog/brown -center- chalkboard/2021/02/22/understanding-covid-19-era-enrollment-drops-among-early-grade-public-school-students/. 97 learning services are available to impacted households or classes of households, not just those disproportionately impacted. These eligible uses can include new or expanded services, increasing access to services, efforts to bolster, support, or preserve existing providers and services, and similar activities.
Further, Treasury is clarifying that improvements to or new construction of childcare, daycare, and early learning facilities are eligible capital expenditures. Recipients seeking to use funds for capital expenditures should refer to the section Capital Expenditures in General Provisions: Other for additional eligibility standards that apply to uses of funds for capital expenditures.
Public Comment: Home Visiting: Treasury has also received questions about whether the provision of home visiting services would be responsive to the health and mental health needs of impacted new mothers, citing the positive mental health impacts shown on the mother as well as improved outcomes for children.
Background: Home Visiting: Pregnant and recently pregnant individuals are at an increased risk for serious illness from COVID-19.139 Furthermore, pregnant individuals with COVID-19 are more likely to experience preterm birth (delivering the baby earlier than 37 weeks).140 In addition to heightened health risks from COVID-19, pregnant individuals may have experienced significant changes to their prenatal care during the pandemic141 or may also have
139 Centers for Disease Control and Prevention, Pregnant and Recently Pregnant People, https://www.cdc.gov/coronavirus/2019-ncov/need-extra-precautions/pregnant-people.html (last visited November 9, 2021).
140 Id.
141 Sarah Javaid, Sarah Barringer, Sarah D Compton, Elizabeth Kaselitz, Maria Muzik, Cheryl A. Moyer, The impact of COVID-19 on prenatal care in the United States: Qualitative analysis from a survey of 2519 pregnant women, Midwifery, Volume 98, 2021, 102991, ISSN 0266-6138, https://doi.org/10.1016/j.midw.2021.102991. 98 experienced increased mental health challenges, including high levels of depression, anxiety, loneliness, and post-traumatic stress during the pandemic.142 Home visiting services provided to families, particularly new mothers and newborns, feature regular home visits from trained nurses, social workers, and/or counselors who provide health care, mental health resources, positive parenting support, support in making personal health decisions, and awareness of other potentially helpful services. These functions have become even more essential at mitigating negative factors associated with the pandemic. Home visits give professionals a chance to flag potential domestic violence, which has risen worldwide over the course of the pandemic.143 Racial health disparities can also be driven down by home visits. For example, Black women are more likely to avoid hospitals during the pandemic, and home visitors can help either assuage concerns around hospitals or give effective advice for alternative methods of childbirth.144 Given the disproportionate effect of the pandemic on people of color, home visits are an essential equity tool that tackle major negative effects of the pandemic. These are just a few selections from the evidence that suggests many home visiting models can have a positive effect on maternal physical and mental health.145 Treasury Response: Home Visiting: Given the widespread impact of COVID-19 on pregnant and recently pregnant individuals, Treasury is re-categorizing home visiting services as an eligible use for impacted communities, not just disproportionately impacted communities.
142 A Basu, HH Kim, R Basaldua, KW Choi, L Charron, et al., A cross-national study of factors associated with women’s perinatal mental health and wellbeing during the COVID-19 pandemic, PLOS ONE 16(4): e0249780, (2021), https://doi.org/10.1371/journal.pone.0249780.
143 Amanda Taub, A New Covid-19 Crisis: Domestic Abuse Rises Worldwide, New York Times (April 6, 2020), https://www.nytimes.com/2020/04/06/world/coronavirus-domestic-violence.html. 144 Xenia Shih Bion, Efforts to Reduce Black Maternal Mortality Complicated by COVID -19, California Health Care Foundation (April 20, 2020), https://www.chcf.org/blog/efforts -reduce-black-maternal-mortality-complicated- covid-19/.
145 U.S. Department of Health and Human Services, Home Visiting Evidence of Effectiveness, https://homvee.acf.hhs.gov/outcomes/maternal%20health/In%20Brief. 99 Under the final rule, these eligible uses are available to impacted households or classes of households.
Public Comment: Child Welfare: While the interim final rule noted that certain types of assistance, particularly around child development and parenting, were eligible for child welfare- involved families, Treasury has received some recipient questions asking whether financial, educational, housing, or other supports and services are eligible uses for foster youth, including those aging out of the system, and child welfare-involved families. Other commenters asked about whether funding for kinship care would be eligible.
Background: Child Welfare: The COVID-19 pandemic placed meaningful strain on the child welfare and foster care system. Court hearings were delayed,146 essential mental health care was shifted to a virtual environment, and attendance and performance in school among foster children dropped sharply.147 Additionally, there was a nationwide rise of new children entering the foster care system and many states placed temporary moratoria on children aging out of the foster care system.148 As these temporary moratoria expire, additional support will be needed to assist children exiting the system.
Additionally, financial and material hardship are causal factors in the increase of new children entering the foster care system, whether through loss of a caregiver, domestic violence,149 or other associated costs of the pandemic. Therefore, support to decrease these
146 National Conference of State Legislatures, Criminal Justice System Responses to COVID -19 (November 16, 2020), https://www.ncsl.org/research/civil-and-criminal-justice/criminal-justice-and-covid-19.aspx. 147 John Burton Advocates for Youth, The Cumulative Impact of the Pandemic on Youth Who Have Been in Foster Care or Homeless (May 2020) https://jbay.org/wp-content/uploads/2021/04/JBAY-COVID-19- Impact.pdf.
148 John Kelly, Next Week, Thousands of Foster Youth Will Age Out on the Same Day (September 21, 2021), https://imprintnews.org/subscriber-content/thousands-of-foster-youth-will-age-out-on-the-same-day/59006. 149 Conrad-Hiebner, Aislinn, and Elizabeth Byram, The Temporal Impact of Economic Insecurity on Child Maltreatment: A Systematic Review. Trauma, Violence, & Abuse, vol. 21, no. 1, Jan. 2020, pp. 157 –178, doi:10.1177/1524838018756122.
100
hardships will support families and increase positive outcomes for youth and families that may otherwise become involved in the child welfare system.
Treasury Response: In the final rule, Treasury is clarifying that services to foster youth, including those aging out of the system, and child welfare-involved families may encompass a wide array of financial, educational, child development, or health supports, or other supports necessary, including supports for kinship care.
9. Addressing the impacts of lost instructional time.
Public Comment: The interim final rule included an enumerated eligible use to address educational disparities in disproportionately impacted communities, recognizing that underserved students have been more severely impacted by the pandemic and including responsive services for early learning, enhance funding to high-poverty districts, and providing evidence-based services to address the academic, social, emotional, and mental health needs of students. Some commenters expressed concerns that learning loss or the negative impacts of lost instructional time due to school closures or remote education during the pandemic had affected a significant share of students in grades kindergarten through twelve (K-12), including students who may not fall within a disproportionally impacted group.
Background: The COVID-19 pandemic resulted in the widespread closure of schools across the nation. While many schools and districts reopened to in-person instruction or implemented remote learning, the shift was not immediate or without consequence. Children who received virtual only or combined remote and in-person instruction were more likely to 101
report experiencing negative mental- and physical health outcomes than children who received in-person instruction.150
Treasury Response: Under the final rule, addressing the impact of lost instructional time and/or learning loss is an enumerated eligible use for impacted households. When providing services to address lost instructional time, recipients may presume that any K-12 student who lost access to in-person instruction for a significant period of time has been impacted by the pandemic and is thus eligible for responsive services.
Interventions or services that address the impact of lost instructional time may include offering high-quality tutoring and other extended learning opportunities, providing differentiated instruction, implementing activities to meet the comprehensive needs of students, expanding and improving language access for parents and families, providing information and assistance to parents and families on how they can effectively support students, including in a distance learning environment, improving student engagement in distance education, and administering and using high-quality assessments to assess students’ academic progress, among others. In designing services under this eligible use, recipients may wish to reference guidance from the Department of Education on strategies for addressing lost instructional time.151 The final rule also maintains a separate enumerated eligible use for addressing educational disparities in disproportionately impacted communities. This eligible use includes services to address disparities in educational outcomes that predate the pandemic and amplified its impact on underserved students; these include, for example, enhanced funding to high-poverty
150 Verlenden JV, Pampati S, Rasberry CN, et al. Association of Children’s Mode of School Instruction with Child and Parent Experiences and Well-Being During the COVID-19 Pandemic — COVID Experiences Survey, United States, October 8–November 13, 2020. MMWR Morb Mortal Wkly Rep 2021;70:369–376. DOI:
http://dx.doi.org/10.15585/mmwr.mm7011a1external icon.
151 U.S. Department of Education, Strategies for Using American Rescue Plan Funding to Address the Impact of Lost Instructional Time, August 2021. Retrieved from https://www2.ed.gov/ documents/coronavirus/lost- instructional-time.pdf.
102
districts and providing evidence-based services to address the academic, social, emotional, and mental health needs of students.
Finally, as described in the section Public Health, recipients can provide a broad range of behavioral health services, including services for children and youth in schools, to respond to the impacts of the pandemic on mental health and other behavioral health issues. When providing behavioral health services, recipients may presume that the general public was impacted by the pandemic and provide behavioral health services to members of the general public, including children and youth in schools, without any further analysis of impacts of the pandemic on those individuals and whether the service is responsive.
10. Promoting long-term housing security: affordable housing and homelessness. Under the interim final rule, recipients may use SLFRF funds to provide a set of housing services to communities that have been disproportionately impacted by the pandemic. Specifically, the interim final rule provided that programs or services that address housing insecurity, lack of affordable housing, or homelessness, were responsive to the negative economic impacts of the pandemic when provided to disproportionately impacted households and communities. The enumerated uses included supportive housing or other programs or services to improve access to stable, affordable housing among individuals who are homeless and development of affordable housing to increase supply of affordable and high-quality living units. Many recipients have already announced plans to use SLFRF funds for affordable housing interventions in all of these categories. Treasury received many comments asking for additional clarity or flexibility in these uses.
103
As detailed below, based on multiple public comments and questions and Treasury’s subsequent analysis, Treasury has determined that supportive housing or other programs or services to improve access to stable, affordable housing among individuals who are homeless, and the development of affordable housing to increase supply of affordable and high-quality living units are responsive to the needs of impacted populations, not only disproportionately impacted populations. This final rule reflects this clarification and builds on the objectives stated in the interim final rule to improve access to stable, affordable housing, including through interventions that increase the supply of affordable and high-quality living units, improve housing security, and support durable and sustainable homeownership.
Finally, note that “emergency housing assistance,” or assistance for responses to the immediate negative economic impacts of the pandemic through services like financial assistance for rental arrears or mortgage payments, is also an eligible use category for assistance to households under the final rule; see the eligible use for “emergency housing assistance” above.
The provision of housing vouchers and assistance relocating to neighborhoods with higher levels of economic opportunity remains an eligible use under assistance to disproportionately impacted households; for discussion, see the eligible use for “housing vouchers and assistance relocating” below.
Background: Affordable Housing: It is clear that the ongoing pandemic and resulting economic crisis are having a profound, long-term negative effect on the pre-existing affordable housing crisis facing low-income households.152 The combination of a large number of higher- income households who have weathered the pandemic without significant income losses, low interest rates, and housing supply constraints exacerbated by the pandemic, have driven a sharp
152 Consumer Financial Protection Bureau, Housing insecurity and the COVID -19 pandemic (March 2020), https://files.consumerfinance.gov/f/documents/cfpb_Housing_insecurity_and_the_COVID -19_pandemic.pdf. 104
increase in the sale price of homes.153 Meanwhile, many low-income renters and homeowners are struggling with lost employment and income and are behind on their housing payments.154 Public Comment: Affordable Housing Outside of Low-Income Geographies: A major theme in comments was that affordable housing interventions, especially development of affordable housing, should be allowed outside of QCTs, as concentrating the supply of affordable housing in low-income geographies can have the effect of increasing both concentrated poverty and racial and economic segregation, while locking lower-income households in need of housing support out of high-opportunity neighborhoods with access to employment and amenities.
Treasury Response: Affordable Housing Outside Low-Income Geographies: As previously stated, affordable housing is not confined to low-income geographies under the interim final rule. As discussed elsewhere, the interim final rule presumed that QCTs, as well as communities served by Tribal governments, were disproportionately impacted for administrative convenience, but recipients may identify other populations, households, or geographic areas with disparate impacts of COVID-19 and provide affordable housing services to them. For example, under the interim final rule, a city could determine that its low-income residents faced disproportionate impacts of COVID-19 and develop affordable housing targeted to these households. Such a scenario could include, for example, affordable projects in higher-income neighborhoods that would allow residents to live closer to jobs and well-resourced schools.
153 Joint Center For Housing Studies Of Harvard University, The State of the Nation’s Housing (June 2021), https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_State_Nations_Housing_2021.pdf. 154 Davin Reed and Eileen Divringi, Household Rental Debt During COVID-19: Update for 2021, Federal Reserve Bank of Philadelphia (2020), available at: https://www.philadelphiafed.org/community-development/housing-and- neighborhoods/household-rental-debt-during-covid-19-update-for-2021. Further, some research suggests that liquidity may be a more important predictor of default than other factors, including inco me or equity. See Trading Equity for Liquidity (June 2019), available at https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan -chase- and-co/institute/pdf/institute-trading-equity-for-liquidity.pdf. 105
Additionally, as noted above, Treasury is finalizing the rule with some changes to the treatment of affordable housing development designed to clarify that permanent supportive housing or other programs or services to improve access to stable, affordable housing among individuals who are homeless, and the development of affordable housing to increase supply of affordable and high-quality living units, are responsive to individuals and households that were impacted by the pandemic in addition to those that were disproportionately impacted. This shift is in line with commenters’ recommendations and consistent with the facts described above, which demonstrate that lack of supply of affordable housing units contributed to the pandemic’s impact on housing insecurity and unsustainable housing cost burdens and that these impacts were experienced broadly across the country.
Public Comment: Eligible Activities: Many commenters asked for clarity on what types of activities (e.g., land acquisition, construction, pre-construction costs, operating costs, etc.) are eligible uses of SLFRF, and what affordability criteria must be applied to affordable housing development. Commenters encouraged Treasury to allow the full array of affordable housing activities, including particular requests for broad flexibility for Tribal communities, and to specify that “development” should include construction, preservation, rehabilitation, and operation. Other commenters requested clarification about permissible program administration approaches for affordable housing, such as contracting methods and distribution of funds.
Some commenters asked that Treasury require SLFRF funds to be focused on the lowest- income households, who suffer the most severe rent burdens and risks of housing instability, and whose housing situation has left them particularly vulnerable to COVID-19. For example, one commenter argued that SLFRF funds should only be used to support affordable housing for households making 50 percent of AMI or less and that recipients should be required to set aside 106
significant portions of any developments for renters making 30 percent of AMI or less and persons with physical and sensory disabilities. Other commenters requested a more flexible approach to affordable housing definitions.
Treasury Response: Eligible Activities: The final rule clarifies eligibility of affordable housing development for recipients; these uses were eligible under the interim final rule, but Treasury is providing further guidance to enhance clarity and respond to recipient and commenter questions.
As with all interventions to address the negative economic impacts of the pandemic, affordable housing projects must be responsive and proportional to the harm identified. This test may be met by affordable housing development projects – which may involve large expenditures and capital investments – if the developments increase the supply of long-term affordable housing for low-income households. While there may be less costly (or non-capital) alternatives to affordable housing development, a comprehensive response to the widespread housing challenges underscored by the pandemic will require the production of additional affordable homes, and targeted affordable housing development is a cost-effective and proportional response to this need.
For purposes of this test, Treasury will presume that any projects that would be eligible for funding under either the National Housing Trust Fund (HTF) or the Home Investment Partnerships Program (HOME) are eligible uses of SLFRF funds. Note that these programs use different income limits than the definition of low- and moderate-income adopted by Treasury.
Given the severity of the affordable housing shortage, and the ways in which the pandemic has exacerbated the need for affordable, high-quality dwelling units, Treasury has determined that the households served by these federal housing programs have been impacted by the pandemic 107
and its negative economic impacts and that development of affordable housing consistent with these programs is a related and reasonably proportional response to those impacts. Additionally, affordable housing projects provided by a Tribal government are eligible uses of SLFRF if they would be eligible for funding under the Indian Housing Block Grant program, the Indian Community Development Block Grant program, or the Bureau of Indian Affairs Housing Improvement Program. Alignment with these programs, which define “affordable housing” in a manner consistent with a proportionate response to the affordable housing challenges faced by low- and moderate-income households as a result of the negative economic impacts of the pandemic, is intended to give recipients comfort and clarity as they design a wide variety of affordable housing interventions, including production, rehabilitation, and preservation of affordable rental housing and, in some cases, affordable homeownership units. These programs allow the financing of a wide range of affordable housing activities and set clear eligibility criteria that many recipients are already familiar with.
Finally, to further support sustainable and durable homeownership, recipients may consider offering down payment assistance, such as through contributions to a homeowner’s equity at origination or that establish a post-closing, mortgage reserve account on behalf of the borrower that may be utilized to make a missed or partial mortgage payment at any point during the life of the loan (e.g., if the borrower faces financial stress). Homeownership assistance that would be eligible under the Community Development Block Grant (at 24 CFR 507.201(n)) is also an eligible use of SLFRF funds.
Public Comment: Permanent Supportive Housing: Treasury has received comments encouraging the use of SLFRF funds for permanent supportive housing. This is an eligible use under the interim final rule: both the development of affordable housing (including operating 108
subsidies) and wraparound services such as behavioral health services, employment services, and other supportive services, are eligible responses to the public health crisis or its negative economic impacts.
Treasury Response: The final rule maintains the eligibility of permanent supportive housing as an enumerated use. Treasury is also clarifying that other affordable housing developments targeted to specialized populations are also eligible, for example recovery housing for individuals in recovery from substance use.
Public Comment: Operating Expenses: Commenters specifically asked that Treasury allow the use of SLFRF funds for operating expenses of affordable housing units, as operating subsidies are typically required to reach extremely low-income households, whose affordable rents may be lower than the ongoing cost of operating their unit.
Treasury Response: Operating expenses for eligible affordable housing were an eligible use of funds under the interim final rule and the final rule maintains this treatment. This may include capitalized operating reserves.
Rehabilitation and repair of public housing will also be considered an eligible use of SLFRF funds.
Public Comment: Affordable Housing Loans and Revolving Loan Funds: Some commenters requested that loans with maturities beyond the period of performance or revolving loan funds that revolve beyond the period of performance be eligible uses of SLFRF funds if used for affordable housing. Some commenters pointed out that for-profit developers of low- income housing through the Low-Income Housing Tax Credit (LIHTC) may be deterred from accepting grants to bridge funding gaps in current LIHTC deals by the treatment of grants to for- profit entities in the calculation of eligible basis for the LIHTC. 109
Treasury Response: The final rule does not change the treatment of loans from the interim final rule. For more details see section Treatment of Loans in Program Administration Provisions. Similarly, the final rule does not change the treatment of grants to support affordable housing development, including developments supported by the LIHTC: such grants are an eligible use of funds.
Additional enumerated eligible uses for assistance to impacted households. As noted above, the interim final rule posed a question on what other types of services or costs Treasury should consider as eligible uses to respond to the negative economic impacts of COVID–19. In response, commenters proposed a wide variety of additional recommended enumerated eligible uses to assist households, ranging from general categories of services (e.g., legal and social services) to services that respond to needs widely experienced across the country (e.g., access to and affordability of health insurance) to services that are most applicable to the particularized needs of certain populations or geographic areas of the United States (e.g., senior citizens, SNAP recipients, immigrants, formerly-incarcerated individuals, responding to environmental issues in certain geographic regions). Other commenters generally requested a high degree of flexibility to respond to the particular needs of their communities.
Treasury Response: Given the large number and diversity of SLFRF recipients, Treasury’s approach to assistance to households in the final rule aims to clarify additional enumerated eligible uses that respond to negative economic impacts of the pandemic experienced widely in many jurisdictions across the country, making it clear and simple for recipients to pursue these enumerated eligible uses under the final rule. In the final rule, Treasury is clarifying several additional uses, which generally respond to pandemic impacts experienced broadly 110
across jurisdictions and populations, are eligible under the interim final rule as assistance to households and continue to be so under the final rule, as outlined below.
11. Paid sick, medical, or family leave.
Public Comment: Some commenters argued that the pandemic increased the need for paid sick or medical leave, as staying home when ill is recommended by the CDC to prevent spread of the virus but lack of access to paid sick leave often prevents workers from staying home. Other commenters recommended paid family leave as an eligible use, arguing that shortages in access to childcare or home health assistance, as well as school closures, may increase the need for family members to serve as caretakers.
Background: The COVID-19 pandemic highlighted the importance of paid leave as well as the number of workers who do not have access to paid sick and/or family leave. When workers have access to paid leave, they are less likely to report to work sick, and therefore less likely to spread illnesses in the workplace: one study demonstrates that the emergency sick leave provision of the Families First Coronavirus Response Act (FFCRA) reduced the spread of COVID-19.155
The lack of paid leave exacerbates financial hardships experienced as a result of the public health emergency. A 2018 survey by the Department of Labor found that two-thirds of employees that took unpaid or partial-paid leave experienced financial hardship.156 Furthermore, because the Family and Medical Leave Act (FMLA) excludes small employers, part-time
155 Stefan Pichler, Katherine Wen, and Nicolas R. Ziebarth, COVID-19 Emergency Sick Leave Has Helped Flatten The Curve In The United States: Study examines the impact of emergency sick leave on the spread of COVID -19, Health Affairs 39, no. 12 (2020): 2197-2204, https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.00863. 156 Scott Brown et al., Employee and Worksite Perspectives of the Family and Medical Leave Act: Results from the 2018 Surveys, Abt Associates (July 2020),
https://www.dol.gov/sites/dolgov/files/OASP/evaluation/pdf/WHD_FMLA2018SurveyResults_FinalReport_Aug20
20.pdf.
111
workers, and workers who have been with their employer for less than a year, 44 percent of workers do not have access to even unpaid leave.157 Workers of color and workers with lower incomes are less likely to have access to paid leave.158,159 For workers that are also caregivers for children, seniors, or other family members, there may be a similar need for – and benefits of – paid family leave. For example, some workers may have struggled during the pandemic to balance caring for children, as schools and daycares closed, and working. For new parents, paid parental leave results in fewer infant hospitalizations, lowering parental stress, increasing parental involvement, and improving the overall health of parent and child.160 COVID-19 has also increased the levels of “caregiving intensity”161 and “caregiving burden”162 for those providing care to seniors or older family members.163,164 When surveyed, more than half of caregivers reported that COVID-19 increased both the amount of
157 Id.
158 Ann P. Bartel et al., Racial and ethnic disparities in access to and use of paid family and medical leave: evidence from four nationally representative datasets, U.S. Bureau of Labor Statistics (BLS) (January 2019), https://www.bls.gov/opub/mlr/2019/article/racial-and-ethnic-disparities-in-access-to-and-use-of-paid-family- andmedical-leave.htm.
159 U.S. Bureau of Labor Statistics, Employee Benefits in the United States (March 2019), https://www.bls.gov/ncs/ebs/benefits/2019/ownership/civilian/table31a.pdf. 160 Maya Rossin-Slater et al., Local exposure to school shootings and youth antidepressant use, Proceedings of the National Academy of Sciences, vol 117(38), pages 23484-23489 (2020), https://www.pnas.org/content/117/38/23484; Ariel Marek Pihl and Gaetano Basso, Did California Paid Family Leave Impact Infant Health?, Journal of Policy Analysis and Management, https://onlinelibrary.wiley.com/doi/abs/10.1002/pam.2210. 161 J. C. Jacobs, A. Laporte, C. H. Van Houtven, P. C. Coyte, Caregiving intensity and retirement status in Canada.
Social Science & Medicine, 102, 74–82 (2014),
https://www.sciencedirect.com/science/article/abs/pii/S0277953613006631. 162 E. Lightfoot, R. P. Moone, Caregiving in times of uncertainty: Helping adult children of aging parents find support during the COVID-19 outbreak, Journal of Gerontological Social Work, 63(6–7), 542–552 (2020), https://www.tandfonline.com/doi/abs/10.1080/01634372.2020.1769793. 163 Note: “Caregiving intensity” is defined as the amount and type of care provided by informal caregivers; “Caregiving burden” is defined as the impacts on physical and mental health, and health -related quality of life of informal caregivers.
164 SA Cohen, ZJ Kunicki, MM Drohan, ML Greaney, Exploring Changes in Caregiver Burden and Caregiving Intensity due to COVID-19, Gerontology and Geriatric Medicine (January 2021), doi:10.1177/2333721421999279. 112
caregiving responsibilities they had as well as the negative physical and mental impacts their caregiving responsibilities had on themselves.165
Treasury Response: Treasury agrees that these constitute impacts of the pandemic, and accordingly, under the final rule, creating, expanding, or financially supporting paid sick, medical, or family leave programs is an enumerated eligible use of funds to respond to the negative economic impacts of the pandemic.
12. Health insurance.
Public Comment: Several commenters recommended that uses of funds to expand access to health insurance be enumerated eligible uses; commenters believed that the heightened risk of illness or hospitalization due to COVID-19 had increased the negative economic impacts of lacking health insurance.
Background: In 2019, prior to the pandemic, it was estimated that 11 percent of nonelderly adults lacked health insurance.166 By mid-2020, job loss had resulted in an estimated
3.3 million people losing their employer sponsored insurance, resulting in an additional 2 million uninsured adults.167 Participation in Medicaid, the Children’s Health Insurance Program (CHIP), and the Affordable Care Act (ACA) marketplace played an important role in minimizing the number of people who completely lost health insurance during the early phases of the pandemic;
165 Id.
166 Jennifer Tolbert et al., Key Facts about the Uninsured Population, Kaiser Family Foundation (November 6, 2020), https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/. 167 Joshua Aarons et. al., As the COVID-19 Recession Extended into the Summer of 2020, More Than 3 Million Adults Lost Employer-Sponsored Health Insurance Coverage and 2 Million Became Uninsured, Urban Institute (September 18, 2020), https://www.urban.org/research/publication/covid -19-recession-extended-summer-2020- more-3-million-adults-lost-employer-sponsored-health-insurance-coverage-and-2-million-became-uninsured. 113
Medicaid and CHIP enrollment increased by 9 percent from February to September 2020168 and
8.3 million people enrolled in insurance through the ACA marketplace.169 Although the ACA, CHIP, and Medicaid have significantly reduced the number of uninsured Americans through the pandemic and the economic downturn, adequate coverage and affordability still remains an issue for many. In 2020, 21 percent of working-age adults were inadequately insured, meaning even if they had insurance, they incurred a significant amount of out-of-pocket costs.170 Additionally, 37 percent of adults reported struggling with medical bills or medical debt and 71 percent of adults who did not purchase insurance cited affordability as the main factor.171
Treasury Response: Treasury agrees that loss of health insurance, increased financial risk from lacking health insurance, or excessive out-of-pocket healthcare costs constitute negative economic impacts of the pandemic. Under the final rule, programs or services to expand access to health insurance coverage are an enumerated eligible use as assistance to households, for example, subsidies for health insurance premiums or expansion of a recipient’s health insurance plan to cover additional employees who currently lack coverage.
168 Centers for Medicare and Medicaid Services, Medicaid and CHIP Enrollment Trends Snapshot through September 2020 (Washington: 2021), available at https://www.medicaid.gov/sites/default/files/2021-01/september- medicaid-chip-enrollment-trend-snapshot.pdf.
169 Centers for Medicare and Medicaid Services, 2021 Federal Health Insurance Exchange Weekly Enrollment Snapshot: Final Snapshot (January 12, 2021) available at https://www.cms.gov/newsroom/fact-sheets/2021-federal- health-insurance-exchange-weekly-enrollment-snapshot-final-snapshot. 170 Sara R. Collins, Munira Z. Gunja, and Gabriella N. Aboulafia, U.S. Health Insurance Coverage in 2020: A Looming Crisis in Affordability (New York: Commonwealth Fund, 2020), available at https://www.commonwealthfund.org/publications/issue-briefs/2020/aug/looming-crisis-health-coverage-2020- biennial.
171 Id.
114
13. Services for the unbanked and underbanked.
Public Comment: One commenter expressed support for the inclusion of services to increase banking access as an allowable expense under SLFRF. The commenter recommended that states be encouraged to offer opportunities for consumers to open safe and affordable accounts capable of receiving direct payments. The commenter emphasized that allowing unbanked and underbanked households to receive funds securely through no-fee, direct deposit will help connect or reconnect consumers to the mainstream financial system.
Background: Banking inequities can make it difficult for unbanked or underbanked households to access housing, jobs, and other important economic opportunities. Being unbanked or underbanked can also make it challenging for households to apply for and receive financial assistance, including services like pandemic emergency housing assistance.
Safe, affordable, and accessible financial services play a critical role in assisting households in the United States in managing income volatility and cash flow shortages.172 Currently, over 5 percent of families, or 7 million households are “unbanked,” meaning they do not have a bank account.173 Low-income households, non-white households, and households with individuals with disabilities were even more likely to be unbanked. In 2019, 16 percent of Native American households, 14 percent of Black households, and 12 percent of Hispanic households were unbanked, compared to 2.5 percent of white households. Additionally, underbanked households—those that have a bank account but rely on alternative financial services, such as money orders, payday loans, and check cashing services— account for 16
172 Federal Deposit Insurance Corporation, FDIC National Survey of Unbanked and Underbanked Households (2015), https://www.fdic.gov/householdsurvey/2015/2015execsumm.pdf. 173 Federal Deposit Insurance Corporation, How America Banks: Household Use of Banking and Financial Services 2019 FDIC Survey, https://www.fdic.gov/analysis/household-survey/2019report.pdf. 115
percent of all households in the United States.174 As a result of the COVID-19 pandemic, new social distancing protocols have, in some instances, made it more difficult to perform financial transactions with paper instruments, like banknotes, coinage, paper checks, or money orders.
Households constrained to these payment methods may face challenges receiving government assistance. Additionally, businesses have transitioned to cashless payments systems to promote contactless payments.175 As a result, unbanked individuals may face additional challenges conducting financial transactions.
Treasury Response: Recognizing these challenges, Treasury is clarifying that recipients may use SLFRF funds to provide financial services that facilitate the delivery of federal, state, or local benefits (e.g., Child Tax Credit, Earned Income Tax Credit, tax refunds, or emergency housing or food assistance funds). The following includes a non-exhaustive list of uses to provide financial services to unbanked and underbanked households:
• Provide low or no cost financial services, including in conjunction with administration of benefits, such as pre-paid debit cards, e.g., via Economic Impact Payment or General Purpose Reloadable pre-paid cards or for the development of public banking infrastructure that can support benefit delivery.
• Provide transitional services to facilitate long-term access to banking and financial services.
• Provide financial literacy programs and conduct community outreach and deploy engagement resources to increase awareness about low-cost, no-overdraft fee accounts,
174 Board of the Governors of the Federal Reserve System, Report on the Economic Well -Being of U.S. Households in 2018 - May 2019, https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in- 2018-banking-and-credit.htm.
175 Zaheer Allam, The Forceful Reevaluation of Cash-Based Transactions by COVID-19 and Its Opportunities to Transition to Cashless Systems in Digital Urban Networks. Surveying the Covid -19 Pandemic and its Implications (2020): 107–117. doi:10.1016/B978-0-12-824313-8.00008-5. 116
pilot new strategies and approaches that help overcome barriers to banking access and support the gathering and sharing of information in ways that improve equity, such as community meetings, partnerships with community-based organizations, online surveys, focus groups, human-centered design activities, and other community engagement activities.
Assistance to Unemployed and Underemployed Workers
The interim final rule included assistance to unemployed workers as an enumerated eligible use, including “services like job training to accelerate rehiring of unemployed workers.” Treasury provided further guidance, based on recipient questions after the interim final rule, that eligible uses under this section also include “other efforts to accelerate rehiring and thus reduce unemployment, such as childcare assistance, assistance with transportation to and from a jobsite or interview, and incentives for newly employed workers[,]” as well as assistance to unemployed workers seeking to start small businesses. Finally, further guidance also provided that “public jobs programs, subsidized employment, combined education and on-the-job training programs, or job training to accelerate rehiring or address negative economic or public health impacts experienced due to a worker’s occupation or level of training” are all enumerated eligible uses as assistance to unemployed or underemployed workers.
The interim final rule defined eligible beneficiaries of assistance as “individuals who want and are available for work, including those who have looked for work sometime in the past 12 months or who are employed part time but who want and are available for full-time work.” This definition is based on definitions used by the Bureau of Labor Statistics to define individuals currently unemployed, as well as persons marginally attached to the labor force and 117
working part-time for economic reasons.176 The latter two classifications are types of labor underutilization, or “underemployed” workers.177 Finally, the interim final rule specified that assistance to unemployed workers included both workers who lost their job during the pandemic and resulting recession and workers unemployed when the pandemic began who saw further deterioration of their economic prospects due to the pandemic.
Public Comment: Commenters generally supported the inclusion of this enumerated eligible use. One commenter recommended including assistance for underemployed workers who took jobs due to the pandemic that did not fully utilize their skillset or did not provide the hours, wages, or job quality desired. Treasury has also received recipient questions on whether job fairs or grants to businesses to hire underserved workers are eligible uses under this category.
Another commenter recommended flexibility in eligible workforce development programs, arguing that rural areas may face particular challenges.
Treasury Response: Treasury is maintaining this eligible use in the final rule, including the enumerated eligible services in the interim final rule and subsequent guidance. Treasury is also confirming that job fairs or grants to businesses to hire underserved workers are eligible uses under this section.
Treasury is also enumerating that job and workforce training centers are eligible capital expenditures, so long as they adhere to the standards and presumptions detailed in the section Capital Expenditures in General Provisions: Other.
The final rule maintains the definition of eligible beneficiaries, which is aligned with the Bureau of Labor Statistics’ definitions of unemployed workers and other labor underutilization,
176 Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey: Concepts and Definitions, https://www.bls.gov/cps/definitions.htm (last visited November 9, 2021). 177 Id.
118
using a common, widely known definition that incorporates a broad group of individuals both unemployed or whose skills are otherwise underutilized in the labor market.
In addition, recognizing that the pandemic has generated broad workforce disruption, in the final rule, Treasury is making clear that recipients may provide job training or other enumerated types of assistance to individuals that are currently employed but are seeking to move to a job that provides better opportunities for economic advancement, such as higher wages or more opportunities for career advancement.
Recipient Unemployment Insurance Trust Funds and Related Expenses Under the interim final rule, a recipient may use funds to make deposits into its account of the Unemployment Trust Fund established under section 904 of the Social Security Act (42 U.S.C. § 1104) up to the level needed to restore the pre-pandemic balance of such account as of January 27, 2020 or to pay back advances received under Title XII of the Social Security Act (42 U.S.C. § 1321) for the payment of benefits between January 27, 2020 and May 17, 2021. These costs support the solvency of the unemployment insurance system and, ultimately, unemployment insurance benefits provided to unemployed workers during the pandemic.178 The interim final rule also posed the question of what, if any, conditions should be considered to ensure that funds used under this eligible use category repair economic impacts of the pandemic and strengthen unemployment insurance systems.
Public Comment: Inclusion as an Eligible Use and Conditions: Commenters expressed mixed perspectives on this eligible use category. Some commenters supported its inclusion,
178 Note that, while the economic harm being addressed accrued before March 3, 2021, the cost incurred to address the harm occurs after March 3, 2021 and provides assistance to unemployed workers, an eligible use of SLFRF funds.
119
arguing that unemployment insurance systems have faced significant costs to support unemployed workers during the pandemic and that this constitutes a negative economic impact that SLFRF funds should be able to address. Other commenters opposed this eligible use category, arguing that funds used under this category may not ultimately support unemployed workers. Some commenters noted that unemployment insurance taxes on businesses automatically increase when trust fund balances are low and suggested that permitting the deposit of funds into unemployment insurance trust funds prevents a tax increase on businesses, some of which may not have faced negative economic impacts from the pandemic, rather than providing assistance to unemployed workers. Other comments suggested that deposits are better thought of as savings for future needs than assistance to unemployed workers in the near term.
Responding to the interim final rule's question, several commenters suggested that, if Treasury maintains this eligible use, the final rule should require detailed reporting on funds used under this category or place conditions on this category to increase the likelihood that funds ultimately support unemployed workers. For example, some commenters suggested that recipients that deposit SLFRF funds into their trust fund should be barred from cutting unemployment insurance benefits for workers during the period of performance or from erecting new barriers to accessing benefits (e.g., through the application process and ongoing requirements to receive benefits). One commenter, noting that unemployment insurance benefits often provide low rates of wage replacement and do not cover some types of unemployed workers, argued that recipients should not be permitted to deposit funds into the trust fund unless the recipient concurrently expands benefits. Finally, one commenter suggested a cap on the amount of funds that can be used for this purpose.
120
Treasury Response: Inclusion as an Eligible Use and Conditions: In the final rule, Treasury is maintaining the inclusion of this eligible use category. Because unemployment insurance trust funds directly fund benefits to unemployed workers, maintaining the solvency of the trust fund is critical to the continued provision of assistance to unemployed workers. Further, funds deposited into the trust fund must be used as assistance to unemployed workers, an eligible use of SLFRF funds. Finally, while, in the absence of the SLFRF, trust fund deposits would likely be funded through increases on employer payroll taxes, the eligibility of uses of SLFRF funds does not depend on how obligations would otherwise be satisfied if the SLFRF were not available for this use.
While deposits to unemployment insurance trust funds generally serve as assistance to unemployed workers, recipients that make deposits but also cut unemployment insurance benefits to workers substantially decrease the likelihood that the deposited funds will assist unemployed workers. In other words, SLFRF funds deposited into an unemployment insurance trust fund generally serve as assistance to unemployed workers, unless recipients take policy actions that substantially decrease the extent to which SLFRF funds would flow to unemployed workers. As such, through December 31, 2024, recipients that deposit SLFRF funds into an unemployment insurance trust fund or use SLFRF funds to repay principal on Title XII advances, may not take action to reduce benefits available to unemployed workers by changing the computation method governing regular unemployment compensation in a way that results in a reduction of average weekly benefit amounts or the number of weeks of benefits payable (i.e., the maximum benefit entitlement).
121
Finally, until the final rule becomes effective on April 1, 2022, the interim final rule remains binding and effective.179 These requirements were not in effect under the interim final rule and do not apply to funds used (i.e., obligated or expended) under the interim final rule while it is in effect. In addition, recognizing that some recipients have taken significant steps toward making a trust fund deposit or repaying principal on Title XII advances under the interim final rule, such as the legislative appropriation of funds for this purpose, even if a formal obligation has not occurred, Treasury will exercise enforcement discretion to not pursue violations of this final rule provision (i.e., the requirement not to reduce benefits) for recipients that have appropriated funds for this purpose prior to the date of adoption of the final rule consistent with the laws and procedures in their jurisdiction. Recipients should refer to Treasury’s Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule, which provides additional detail on these issues.
Public Comment and Treasury Response: Technical Corrections and Amendments:
Following the interim final rule, Treasury received recipient questions on whether paying interest on advances received under Title XII of the Social Security Act (42 U.S.C. 1321) is an eligible use of SLFRF funds; Treasury is clarifying that such use is permissible, consistent with Treasury’s treatment of the eligibility of interest on Title XII advances under the Coronavirus Relief Fund.
Treasury is further clarifying that recipients may only use SLFRF funds for contributions to unemployment insurance trust funds and repayment of the principal amount due on advances
179 See, e.g., U.S. Department of the Treasury, More Information on the Conclusion of the Public Comment Period and the Interim Final Rule on the Coronavirus State and Local Fiscal Recovery Funds, https://home.treasury.gov/system/files/136/IFR-Explainer.pdf. 122
received under Title XII of the Social Security Act up to an amount equal to (i) the difference between the balance in the recipient’s unemployment insurance trust fund as of January 27, 2020 and the balance of such account as of May 17, 2021, plus (ii) the principal amount outstanding as of May 17, 2021 on any advances received under Title XII of the Social Security Act between January 27, 2020 and May 17, 2021. Further, recipients may use SLFRF funds for the payment of any interest due on such Title XII advances. In other words, excluding interest due on Title XII advances, the magnitude of the decrease of the balance in the unemployment insurance trust fund plus the principal outstanding on any Title XII borrowings made from the beginning of the public health emergency to the date of publication of the SLFRF interim final rule sets a cap on the amount of SLFRF funds a recipient may use for trust fund contributions and repayment of principal on Title XII advances. Further, a recipient that deposits SLFRF funds into its unemployment insurance trust fund to fully restore the pre-pandemic balance may not draw down that balance and deposit more SLFRF funds, back up to the pre-pandemic balance.
Enumerated Eligible Uses for Disproportionately Impacted Households Background
The COVID-19 pandemic has had disproportionally negative impacts on many households and communities that were already experiencing inequality related to race, gender, age, or income before the pandemic. People of color, low-income workers, and women 123
disproportionately lost their jobs during the COVID-19 pandemic and experienced disproportionate rates of negative health outcomes.180, 181 These disproportionate negative impacts experienced by systemically underserved communities are not novel to the COVID-19 pandemic and the economic downturn. Research shows that historically underserved communities that are experiencing economic and social disparities typically experience disproportionate impacts of economic downturns and natural disasters.182 This pattern held true for the effects of COVID-19 and the economic downturn:
historically undeserved groups experienced amplified negative impacts, further widening inequality.183
Many communities facing systemic barriers had not yet recovered from the impact of the Great Recession before experiencing the impacts of COVID-19 and the economic downturn. For example, in 2009, at the end of the Great Recession, households without a high school diploma had an average annual income of $32,300 (measured in 2018 dollars). By 2018, nine years into the economic recovery, those same households saw their average income increase by $600.
During that same time period, households with a bachelor’s degree saw an increase in their average household income of $6,100 (measured in 2018 dollars).184
180 U.S. Department of Health and Human Services, COVID-19 and Economic Opportunity: Inequities in the Employment Crisis, April 2021. Retrieved from
https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//199901/covid -economic-equity-brief.pdf. 181 Adelle Simmons et al., Health disparities by race and ethnicity during the COVID-19 pandemic: Current evidence and policy approaches. U.S. Department of Health and Human Services https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//199516/covid -equity-issue-brief.pdf. 182 Perry, Brea L., Brian Aronson, and Bernice A. Pescosolido, Pandemic precarity: COVID-19 is exposing and exacerbating inequalities in the American heartland, National Academy of Sciences (Febuary 2021), https://www.pnas.org/content/118/8/e2020685118.
183 Id.
184 Jesse Bennet & Rakesh Kochhar, Two Recessions, Two Recoveries, Pew Research Center (December 13, 2019), https://www.pewresearch.org/social-trends/2019/12/13/two-recessions-two-recoveries-2/. 124
The impact pre-existing inequalities have on a household or community’s ability to recover is intersectional. Research shows that pre-existing racial and gender disparities exacerbated the disproportionate economic and health impact COVID-19 and the economic downturn had on workers of color, and specifically, women of color.185 Another study found that during the first six months of the pandemic counties that were both high-poverty and majority non-white experienced COVID-19 infection rates eight times higher than high-poverty, majority white counties.186 Many residents in these communities are still coping with the negative health and economic impacts.
Summary of the Interim Final Rule and Final Rule Structure As described previously, the interim final rule provided a broader list of enumerated eligible uses to respond to the pandemic in disproportionately impacted communities, in recognition that pre-existing health, economic, and social disparities contributed to disproportionate pandemic impacts in certain communities and that addressing the root causes of those disparities constitutes responding to the public health and negative economic impacts of the pandemic. The interim final rule described eligible uses in disproportionately impacted communities in four categories, spread across public health and negative economic impacts: 1) addressing disparities in public health outcomes, 2) building stronger communities through investments in housing and neighborhoods, 3) addressing educational disparities, and 4) promoting healthy childhood environments. As described above, Treasury has moved eligible uses related to community violence intervention, assistance accessing or applying to public
185 Darrick Hamilton et al., Building an Equitable Recovery: The role of Race, Labo r Markets, and Education, The New School’s Institute on Race and Political Economy (February 2021). 186 Adhikari S, Pantaleo NP, Feldman JM, Ogedegbe O, Thorpe L, Troxel AB. Assessment of Community -Level Disparities in Coronavirus Disease 2019 (COVID-19) Infections and Deaths in Large US Metropolitan Areas.
JAMA Netw Open. 2020;3(7):e2016938. doi:10.1001/jamanetworkopen.2020.16938. 125
benefits and services, affordable housing development, healthy childhood environments, and addressing lost instructional time in K-12 schools into the category “assistance to impacted households,” recognizing that these pandemic impacts were widely shared across the country.
This section discusses enumerated eligible uses to address health disparities, to build stronger communities through investments in neighborhoods, to address educational disparities, to provide rental assistance vouchers or assistance relocating to areas of greater economic opportunity, and additional eligible uses to respond to negative economic impacts in disproportionately impacted communities. While many of these services impact both health and economic outcomes, Treasury has consolidated them into a single section for simplicity and clarity and to reflect the intertwined nature of these issues.
As a reminder, recipients can presume these uses are eligible when provided in a QCT, to families and individuals living in QCTs, by Tribal or territorial governments, or to low-income households or communities. As provided in section Standards: Designating Other Disproportionately Impacted Classes, recipients can also provide these services to other populations, households, or geographic areas disproportionately impacted by the pandemic.
Recipients may also identify additional disproportionate impacts of the pandemic and design an appropriate response to address that harm. For details on eligibility standards and presumed eligible populations, see section General Provisions: Structure and Standards.
Enumerated Eligible Uses for Disproportionately Impacted Households
1. Addressing health disparities.
Public Comment: General: In general, commenters supported eligible uses to address health disparities and support health equity; several commenters highlighted the disparities faced 126
by communities of color and low-income populations, as well as the importance of community engagement in developing effective programs to serve disproportionately impacted communities.
Many commenters recommended additional enumerated eligible uses to address health disparities; these are discussed further below in this section.
Treasury Response: In line with commenters’ recommendations, the final rule maintains several enumerated eligible uses to address health disparities, specifically:
a. Community health workers. Treasury received few comments on community health workers, though one requested further clarification on their role.187 Treasury is maintaining this eligible use in the final rule.
b. Remediation of lead paint or other lead hazards. The interim final rule included remediation of lead paint or other lead hazards as an enumerated eligible use to address health disparities.
Public Comment: Treasury received several comments asking for clarification on the eligibility of a particular use that would indirectly address lead pollution. For example, a commenter requested the ability to fund remedial actions, such as filtration and plumbing procedures to help address lead pollution. One commenter requested that private wells be eligible for funding to address contamination with substances such as lead. Other commenters requested that Treasury allow replacement of lead pipes as an eligible use of funds.
Treasury Response: Recipients may make a broad range of water infrastructure investments under section 602(c)(1)(d) and 603(c)(1)(d), which can include lead service
187 See, e.g., Centers for Disease Control and Prevention, Community Health Worker (CHW) Toolkit, https://www.cdc.gov/dhdsp/pubs/toolkits/chw-toolkit.htm (last visited November 9, 2021). 127
line replacement and other activities to identify and remediate lead in water. These uses are discussed in greater detail in section Water and Sewer Infrastructure of this Supplemental Information.
Treasury has further determined that several of the services identified by commenters are appropriate responses to address health disparities in disproportionately impacted households. These services were eligible under the interim final rule and continue to be so under the final rule. These services include remediation to address lead- based public health risk factors, outside of lead in water, including evaluation and remediation of lead paint, dust, or soil hazards; testing for blood lead levels; public outreach and education; and emergency protection measures, like bottled water and water filters, in areas with an action level exceedance for lead in water in accordance with the Environmental Protection Agency’s Lead and Copper Rule.188 Further, Treasury had determined that certain capital expenditures, including improvements to existing facilities to remediate lead contaminants (e.g., removal of lead paint), are eligible responses, although this does not include construction of new facilities for the purpose of lead remediation. Recipients should make sure that all capital expenditures adhere to the standards and presumptions detailed in section Capital Expenditures in General Provisions: Other.
c. Medical facilities. Treasury received a few comments from recipients seeking to use SLFRF funds to build new medical facilities, such as hospitals or public health clinics, to serve disproportionately impacted communities. Given the central role of access to high-
188 Environmental Protection Agency, 40 CFR 141.80(c)(1), https://www.ecfr.gov/current/title -40/chapter- I/subchapter-D/part-141/subpart-I/section-141.80.
128
quality medical care in reducing health disparities and addressing the root causes that led to disproportionate impact COVID-19 health impacts in certain communities, the final rule recognizes that medical equipment and facilities designed to address disparities in public health outcomes are eligible capital expenditures. This includes primary care clinics, hospitals, or integrations of health services into other settings. Recipients should make sure that all capital expenditures adhere to the standards and presumptions detailed in section Capital Expenditures in General Provisions: Other.
2. Housing vouchers and assistance relocating. In addition to other housing services, the interim final rule permitted a variety of rental assistance approaches to support low-income households in securing stable, long-term housing, including housing vouchers, residential counseling, or housing navigation assistance to facilitate household moves to neighborhoods with high levels of economic opportunity and mobility for low-income residents. Examples could include SLFRF-funded analogues to Section 8 Housing Choice vouchers; other kinds of rent subsidies, including shallow subsidies; and programs to help residents move to areas with higher levels of economic mobility.189 Treasury did not receive public comments on these enumerated eligible uses.
Treasury Response: Treasury maintains the eligibility of vouchers and relocation assistance in the final rule.
3. Building strong, healthy communities through investments in neighborhoods. While the interim final rule included a category of enumerated eligible uses for “building stronger
189 See, e.g., Opportunity Insights, Creating Moves To Opportunity (August 2019), https://opportunityinsights.org/policy/cmto/.
129
communities through investments in housing and neighborhoods,” the examples of services provided generally focused on housing uses. In response to questions following release of the interim final rule, Treasury issued further guidance clarifying that “investments in parks, public plazas, and other public outdoor recreation spaces may be responsive to the needs of disproportionately impacted communities by promoting healthier living environments.” Public Comment: General: A significant theme across many public comments was the importance of neighborhood environment to health and economic outcomes and the potential connections between residence in an underserved neighborhood and disproportionate impacts from the pandemic. Many commenters highlighted the connection between neighborhoods and health outcomes, including citing public health research linking neighborhood traits to health outcomes. For example, the CDC states that “neighborhoods people live in have a major impact on their health and well-being.”190 As such, CDC identifies “neighborhoods and built environment” as one of five key social determinants of health191 and includes “creat[ing] neighborhoods and environments that promote health and safety” as one of the agency’s goals for social determinants of health outcomes.
a. Neighborhood features that promote improved health and safety outcomes.
Public Comment: Commenters argued that neighborhoods impact physical health outcomes in several ways. First, some commenters reasoned that the physical environment and
190 U.S. Department of Health and Human Services, Neighborhood and Built Environment, https://health.gov/healthypeople/objectives-and-data/browse-objectives/neighborhood-and-built-environment#cit1 (last visited November 9, 2021).
191 Social determinants of health are “the conditions in the places where people live, learn, work, and play that affect a wide range of health risks and outcomes.” Centers for Disease Control and Prevention , About Social Determinants of Health (SDOH), https://www.cdc.gov/socialdeterminants/about.html (last visited November 9, 2021). 130
amenities in a community192 influence a person’s level of physical activity, with features like parks, recreation facilities, and safe sidewalks promoting increased physical activity that improves health outcomes. Conversely, commenters argued that a lack of these features in a neighborhood could dampen physical activity and contribute to health conditions like obesity that are risk factors for more severe COVID-19 health outcomes.
Second, some commenters also suggested that access to healthy food in a neighborhood impacts health outcomes. These commenters reasoned that lacking adequate access to affordable, healthy food or living in a “food desert” may contribute to disparities in diet that influence health outcomes, including contributing to pre-existing conditions that increased risk for severe COVID-19 outcomes. These commenters cited public health research finding “clear evidence for disparities in food access in the United States by income and race.”193 Some commenters also suggested that neighborhood environment is connected to other public health outcomes, like mental health and public safety. For example, some research suggests that living in neighborhoods with green space and tree cover correlates with improved mental health outcomes.194 Finally, some commenters argued that activities like installing
192 In public health, this is referred to as “built environment,” or the man-made physical aspects of a community (e.g., homes, buildings, streets, open spaces, and infrastructure). 193 J Beaulac, E Kristjansson, S Cummins, A systematic review of food deserts, 1966 -2007, Prev Chronic Dis 2009;6(3):A105, http://www.cdc.gov/pcd/issues/2009/jul/08_0163.htm. 194 See, e.g., Yijun Zhang et al. The Association between Green Space and Adolescents' Mental Well-Being: A Systematic Review. International journal of environmental research and public health vol. 17,18 6640 (Sep. 11 2020), doi:10.3390/ijerph17186640; EC South, BC Hohl, MC Kondo, JM Mac Donald, CC Branas, Effect of Greening Vacant Land on Mental Health of Community-Dwelling Adults: A Cluster Randomized Trial, JAMA Netw Open. 2018;1(3):e180298 (2018), available at: doi:10.1001/jamanetworkopen.2018.0298. 131
streetlights, greening or cleanup of public spaces or land, and other efforts to revitalize public spaces would support improved public safety.195,196
These commenters recommended that Treasury include as an enumerated eligible use in disproportionately impacted communities projects to develop neighborhood features that promote improved health and safety outcomes, such as parks, green spaces, recreational facilities, sidewalks, pedestrian safety features like crosswalks, projects that increase access to healthy foods, streetlights, neighborhood cleanup, and other projects to revitalize public spaces.
Background: Investments in neighborhood features, including parks, recreation facilities, sidewalks, and healthy food access, can work to improve physical and mental health outcomes.
Allowing people access to nature, including parks, has been connected to decreased levels of mortality and illness and increased well-being.197 Urban park use during the COVID-19 pandemic may have declined among lower-income individuals.198 Encouraging physical activity can also play a role in health outcomes, as a sedentary lifestyle is a risk factor for chronic diseases and more severe COVID-19 outcomes.199 Parks, recreation facilities, and sidewalks can promote healthier living environments by allowing for safe and socially distanced recreation during the COVID-19 pandemic.
195 See, e.g., Yanqing Xu, Cong Fu, Eugene Kennedy, Shanhe Jiang, Samuel Owusu-Agyemang, The impact of street lights on spatial-temporal patterns of crime in Detroit, Michigan, Cities, Volume 79, Pages 45 - 52, ISSN 0264-2751 (2018), https://doi.org/10.1016/j.cities.2018.02.021. 196 A. Chalfin, B. Hansen, J. Lerner et al., Reducing Crime Through Environmental Design: Evidence from a Randomized Experiment of Street Lighting in New York City, Journal of Quantitative Criminology (2021), https://doi.org/10.1007/s10940-020-09490-6.
197 See, e.g., American Public Health Association, Improving Health and Wellness through Access to Nature (November 5, 2013), https://www.apha.org/policies-and-advocacy/public-health-policy-statements/policy- database/2014/07/08/09/18/improving-health-and-wellness-through-access-to-nature. 198 LR Larson et al., Urban Park Use During the COVID-19 Pandemic: Are Socially Vulnerable Communities Disproportionately Impacted?, Front. Sustain. Cities 3:710243 (2021), https://doi.org/10.3389/frsc.2021.710243. 199 JP Després, Severe COVID-19 outcomes — the role of physical activity. Nat Rev Endocrinol 17, 451–452 (2021). https://doi.org/10.1038/s41574-021-00521-1.
132
Additionally, food insecurity rates, which are higher among lower-income households and households of color, doubled among all households and tripled among households with children during the onset of COVID-19 from February 2020 to May 2020.200 Improving healthy food access supports public health, particularly among lower-income households and households of color that face disproportionate outcomes.
Treasury Response: Treasury recognizes the connection between neighborhood built environment and physical health outcomes as discussed in the research and analysis provided by commenters, including risk factors that may have contributed to disproportionate COVID-19 health impacts in low-income communities. The final rule also recognizes that the public health impacts of the pandemic are broader than just the COVID-19 disease itself and include substantial impacts on mental health and public safety challenges like rates of violent crime, which are correlated with a neighborhood’s built environment and features. As such, neighborhood features that promote improved health and safety outcomes respond to the pre- existing disparities that contributed to COVID-19’s disproportionate impacts on low-income communities.
The final rule includes enumerated eligible uses in disproportionately impacted communities for developing neighborhood features that promote improved health and safety outcomes, such as parks, green spaces, recreational facilities, sidewalks, pedestrian safety features like crosswalks,201 projects that increase access to healthy foods, streetlights,
200 Caroline George and Adie Tomer, Beyond ‘food deserts’: America needs a new approach to mapping food, Brookings Institution (August 17, 2021), https://www.brookings.edu/research/beyond-food-deserts-america-needs-a- new-approach-to-mapping-food-insecurity/.
201 However, Treasury cautions recipients that general infrastructure development, including street or road construction, remains a generally ineligible use of funds under the final rule. Sidewalks and pedestrian safety should be the predominant component of uses of funds in this category. While projects may include ancillary construction needed to execute the predominant component, a project that predominantly involves street construction or repair to benefit vehicular traffic would be ineligible.
133
neighborhood cleanup, and other projects to revitalize public spaces. Recipients seeking to use funds for capital expenditures should refer to the section Capital Expenditures in General Provisions: Other, which describes additional eligibility standards that apply to uses of funds for capital expenditures.
b. Vacant or abandoned properties. As discussed above, the interim final rule included enumerated eligible uses for building stronger communities through investments in housing and neighborhoods in disproportionately impacted communities. The interim final rule also posed a question of whether other potential uses in this category, specifically “rehabilitation of blighted properties or demolition of abandoned or vacant properties,” address the public health or economic impacts of the pandemic.
Public Comment: Several commenters argued that programs or services to address vacant or abandoned property would respond to the public health and negative economic impacts of the pandemic in disproportionately impacted communities. Some commenters cited research suggesting that living near such property is correlated with worse physical health and mental health outcomes, noted that such properties pose an environmental hazard, or argued that such properties present a barrier to economic recovery. These commenters suggested that renovation or demolition of vacant or abandoned property could benefit community health and raise property values. Other commenters recommended that Treasury include an enumerated eligible use for the operation of land banks that redevelop or renew vacant properties and land.
Treasury Response: As noted throughout the final rule, the pandemic underscored the importance of safe, affordable housing and healthy neighborhood environments to public health and economic outcomes. Treasury agrees with commenters that high rates of vacant or 134
abandoned properties in a neighborhood may exacerbate public health disparities, for example through environmental contaminants that contribute to poor health outcomes or by contributing to higher rates of crime. As such, certain services for vacant or abandoned properties are eligible to address the public health and negative economic impacts of the pandemic on disproportionately impacted households or communities. Eligible activities include:
• Rehabilitation, renovation, maintenance, or costs to secure vacant or abandoned properties to reduce their negative impact
• Costs associated with acquiring and securing legal title of vacant or abandoned properties and other costs to position the property for current or future productive use • Removal and remediation of environmental contaminants or hazards from vacant or abandoned properties, when conducted in compliance with applicable environmental laws or regulations
• Demolition or deconstruction of vacant or abandoned buildings (including residential, commercial, or industrial buildings) paired with greening or other lot improvement as part of a strategy for neighborhood revitalization
• Greening or cleanup of vacant lots, as well as other efforts to make vacant lots safer for the surrounding community
• Conversion of vacant or abandoned properties to affordable housing • Inspection fees and other administrative costs incurred to ensure compliance with applicable environmental laws and regulations for demolition, greening, or other remediation activities
135
Vacant or abandoned properties are generally those that have been unoccupied for an extended period of time or have no active owner.202 Such properties may be in significant disrepair (e.g., major structural defects; lack of weather tight conditions; or lack of useable plumbing, kitchen facilities, electricity, or heating infrastructure (not to include utilities currently out of service or disconnected but able to be reconnected and used)), or may be declared unfit for inhabitants by a government authority.
As noted above, demolition and greening (or other structure or lot remediation) of vacant or abandoned properties, including residential, commercial, or industrial buildings, is an eligible use of funds. Treasury encourages recipients to undertake these activities as part of a strategy for neighborhood revitalization and to consider how the cleared property will be used to benefit the disproportionately impacted community. Activities under this eligible use should benefit current residents and businesses, who experienced the pandemic’s impact on the community.
Treasury encourages recipients to be aware of potential impacts of demolition of vacant or abandoned residential properties. Demolition activities that exacerbate the pandemic’s impact on housing insecurity or lack of affordable housing are not eligible uses of funds. This risk is
202 A state or locality may use its existing classifications of what is considered vacant or abandoned property under state law and local ordinances, as well as any corresponding processes for demolition, for these eligible uses. A recipient without a definition of vacant or abandoned property may refer to definitions used in the Department of Housing and Urban Development’s Neighborhood Stabilization Program (available at the citations below); however, recipients should be aware that other federal, state, or local requirements may apply such as compliance with the Uniform Relocation Act (see U.S. Department of Housing and Urban Development, Real Estate Acquisition and Relocation Overview in HUD Programs, https://www.hudexchange.info/programs/relocation/overview/#overview - of-the-ura (last visited November 9, 2021) and other state and local requirements like condemnation and code enforcement.
U.S. Department of Housing and Urban Development, What is the definition of vacant properties as referenced in NSP Eligible Use E - Redevelop Demolished or Vacant Properties? (October 2012), https://www.hudexchange.info/faqs/programs/neighborhood-stabilization-program-nsp/redevelopment/what-is-the- definition-of-vacant-properties-as-referenced-in-nsp-eligible/.
U.S. Department of Housing and Urban Development, What are the definitions of abandoned and foreclosed? (October 2012), https://www.hudexchange.info/faqs/programs/neighborhood-stabilization-program-nsp/program- requirements/eligible-activitiesuses/what-are-the-definitions-of-abandoned-and-foreclosed/. 136
generally more acute in jurisdictions with low or reasonable vacancy rates and less acute in jurisdictions with high or hyper-vacancy.203
Treasury presumes that demolition of vacant or abandoned residential properties that results in a net reduction in occupiable housing units for low- and moderate-income individuals in an area where the availability of such housing is lower than the need for such housing would exacerbate the impacts of the pandemic on disproportionately impacted communities and that use of SLFRF funds for such activities would therefore be ineligible. This includes activities that convert occupiable housing units for low- and moderate-income individuals into housing units unaffordable to current residents in the community. Recipients may assess whether units are “occupiable” and what the housing need is for a given area taking into account vacancy rates (as described above), local housing market conditions (including conditions for different types of housing like multi-family or single-family), and applicable law and housing codes as to what units are occupiable. Recipients should also take all reasonable steps to minimize the displacement of persons due to activities under this eligible use category, especially the displacement of low-income households or longtime residents.
Recipients engaging in these activities and other construction activities with SLFRF funds should be mindful of the provisions of the Uniform Relocation Assistance and Real
203 For analysis of vacancy rates considered low or high, see, e.g., page 12 of Alan Mallach, The E mpty House Next Door, Lincoln Institute (May 2018), https://www.lincolninst.edu/publications/policy -focus-reports/empty-house- next-door#:~:text=%E2%80%9CAlan%20Mallach%20is%20the%20sage,through%20data%20and%20model%20 practices.
Recipients may determine the appropriate geographic unit for which to analyze vacancy rates (e.g., county, census tract) based on their circumstances. As needed, recipients may refer to the Current Population Survey/Housing Vacancy Survey data series on Housing Vacancies and Homeownership as one data source to assess vacancy rates.
See https://www.census.gov/housing/hvs/index.html. Other data sources include the American Community Survey five-year estimates, for smaller geographic areas, or tabulations by the Department of Housing a nd Urban Development based on United States Postal Service Vacancy Data. See, respectively, https://data.census.gov/cedsci/table?q=DP04&tid=ACSDP5Y2019.DP04&hidePreview=true or https://www.huduser.gov/portal/datasets/usps.html.
137
Property Acquisition Policies Act of 1970, as amended, 42 U.S.C. 4601, and the Department of Transportation’s implementing regulations, 49 CFR Part 24, that apply to projects funded with federal financial assistance, such as SLFRF funds. Recipients should also be aware of federal, state, and local laws and regulations, outside of SLFRF program requirements, that apply to this activity. Recipients must comply with the applicable requirements of the Uniform Guidance regarding procurement, contracting, and conflicts of interest and must follow the applicable laws and regulations in their jurisdictions. Recipients must also comply with all federal, state, and local public health and environmental laws or regulations that apply to activities under this eligible use category,204 for example, requirements around the handling and disposal of asbestos- containing materials, lead paint, and other harmful materials may apply, as well as environmental standards for any backfill materials used at demolition sites. Treasury encourages recipients to consult and apply best practices from the Environmental Protection Agency as well.
Recipients must evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward related to safely and properly conducting activities under this eligible use. This may include checking for any past violations recorded by state or local environmental, workplace safety, licensing, and procurement agencies, as well as regular reviews for suspensions, debarments, or stop work orders. Recipients must establish rigorous oversight and internal controls processes to monitor compliance with any applicable requirements, including compliance by subrecipients.
4. Addressing educational disparities. The interim final rule included an enumerated eligible use for addressing educational disparities in disproportionately impacted communities
204 See U.S. Environmental Protection Agency, Large-Scale Residential Demolition, https://www.epa.gov/large- scale-residential-demolition (last visited November 9, 2021) for a primer on requirements that may apply. 138
and outlined some enumerated eligible services under this use. These enumerated uses included early learning services, assistance to high-poverty school districts to advance equitable funding across districts and geographies, and educational and evidence-based services to address the academic, social, emotional, and mental health needs of students. Addressing the many dimensions of resource equity—including equitable and adequate school funding; access to a well-rounded education; well-prepared, effective, and diverse educators and staff; and integrated support services—can also begin to mitigate the impact of COVID-19 on schools and students and can close long-standing gaps in educational opportunity. As discussed above, in the final rule, early learning services and addressing the impacts of lost instructional time for K-12 students are enumerated eligible uses for impacted communities, not just disproportionately impacted communities.
Public Comment: Treasury received some comments in this category. Generally, commenters expressed agreement with the elements of the interim final rule regarding use of funds for addressing educational disparities. Some commenters had questions about whether a few specific uses of funds qualified under this category. For example, commenters inquired about whether the funds could be used for behavioral health in a school setting or cultural language classes.
Treasury Response: Treasury is maintaining these enumerated eligible uses in the final rule, which are now organized under the heading of “services to address educational disparities.” Treasury reiterates that these uses include addressing educational disparities exacerbated by COVID-19, including but not limited to: increasing resources for high-poverty school districts, educational services like tutoring or afterschool programs, summer education and enrichment programs, and supports for students’ social, emotional, and mental health needs. This also 139
includes responses aimed at addressing the many dimensions of resource equity—including equitable and adequate school funding; access to a well-rounded education; well-prepared, effective, and diverse educators and staff; and integrated support services—in order to close long-standing gaps in educational opportunity.
Further, Treasury is clarifying that improvements or new construction of schools and other educational facilities or equipment are eligible capital expenditures for disproportionately impacted communities. Recipients seeking to use funds for capital expenditures should refer to the section Capital Expenditures in General Provisions: Other for additional eligibility standards that apply to uses of funds for capital expenditures.
Treasury notes that services to promote healthy childhood environments, including childcare, early learning services, and home visiting programs that serve infants and toddlers, is a separate category of enumerated eligible uses for households impacted by the pandemic (see eligible uses for “promoting healthy childhood environments”). Similarly, education services to address the impact of lost instructional time during the pandemic are a separate eligible use category for households impacted by the pandemic; when providing these services, recipients may presume that any K-12 student who lost access to in-person instruction for a significant period of time has been impacted by the pandemic and is thus eligible for responsive services (see eligible uses for “addressing the impact of lost instructional time”).
Proposed Additional Enumerated Eligible Uses Not Incorporated The interim final rule posed a question on what other types of services or costs Treasury should consider as eligible uses to respond to the disproportionate public health or negative economic impacts of COVID–19 on low-income populations and communities. 140
In response, commenters proposed a wide variety of additional recommended enumerated eligible uses to assist disproportionately impacted households, ranging from general categories of services (e.g., long-term investments to remediate long-term disparities) to highly specific examples of services (e.g., a specific type of healthcare equipment). As discussed above, Treasury is including several additional categories of enumerated eligible uses in the final rule in response to public comments.
Given the large number and diversity of SLFRF recipients, Treasury’s approach to assistance to households in disproportionately impacted communities in the final rule aims to provide enumerated eligible uses that respond to disproportionate impacts of the pandemic experienced widely in many jurisdictions across the country and are intended to simplify and clarify these enumerated eligible uses. At the same time, Treasury recognizes that the impacts of the pandemic vary over time, by jurisdiction, and by population; as such, the final rule provides flexibility for recipients to identify additional disproportionate impacts to additional households or classes of households and pursue programs and services that respond to those disproportionate impacts.
In the final rule, Treasury has not chosen to include as enumerated uses all uses proposed by commenters; given the significant range, and in some cases highly specific nature, of the proposed uses Treasury was not able to assess that the proposed uses would respond to disproportionate impacts experienced in many jurisdictions across the country, supporting an enumerated eligible use available to all recipients presumptively. However, the final rule continues to provide a framework to allow recipients to identify and respond to additional disproportionate impacts (for details, see section General Provisions: Structure and Standards). 141
Some types of proposed additional enumerated eligible uses for assistance to households in disproportionately impacted communities were recommended by several commenters:
• Capital expenditures. Many commenters recommended that capital expenditures on many different types of public and private facilities be enumerated eligible uses. For clarity, Treasury has addressed all comments on the eligibility of capital expenditures on property, facilities, or equipment in one section (see section Capital Expenditures in General Provisions: Other).
• Equity funds. Several commenters recommended that Treasury permit SLFRF funds to be deposited into an equity fund to support long-term racial and economic equity investments. The eligibility of such use would depend on the specific structure and uses of funds. Under the statute, SLFRF funds can only support costs incurred until December 31, 2024; see section Timeline for Use of SLFRF Funds in Program Administration Provisions. Further, recipients may calculate the cost incurred with respect to investments in revolving loan funds based on the methodology described in section Treatment of Loans in Program Administration Provisions. Projects funded by a revolving loan fund using SLFRF funds would also need to be eligible uses of SLFRF funds. • Environmental quality and climate resilience. Several commenters recommended eligible uses to enhance environmental quality, remediate pollution, promote recycling or composting, or increase energy efficiency or electrical grid resilience. Whether these projects respond to the disproportionate impacts of the pandemic on certain communities would depend on the specific issue they address and its nexus to the public health and economic impacts of the pandemic.
142
b. ASSISTANCE TO SMALL BUSINESSES
Background
The pandemic has severely impacted many businesses, with small businesses hit especially hard. Small businesses make up nearly half of U.S. private-sector employment205 and play a key role in supporting the overall economic recovery as they are responsible for two-thirds of net new jobs.206 Since the beginning of the pandemic, however, 400,000 small businesses have closed, with many more at risk.207 Sectors with a large share of small business employment have been among those with the most drastic drops in employment.208 The negative outlook for small businesses has continued: as of November 2021, approximately 66 percent of small businesses reported that the pandemic has had a moderate or large negative effect on their business, and over a third expect that it will take over 6 months for their business to return to their normal level of operations.209
This negative outlook is likely the result of many small businesses having faced periods of closure and having seen declining revenues as customers stayed home.210 In general, small
205 Board of Governors of the Federal Reserve System, Monetary Policy Repo rt (June 12, 2020), https://www.federalreserve.gov/monetarypolicy/ 2020-06-mpr-summary.htm. 206 U.S. Small Business Administration, Office of Advocacy, Small Businesses Generate 44 Percent of U.S.
Economic Activity (Jan. 30, 2019), https://advocacy.sba.gov/2019/01/30/small-businesses-generate-44-percent-of-u- s-economic-activity/.
207 Joseph R. Biden, Remarks by President Biden on Helping Small Businesses (Feb. 22, 2021), https:// www.whitehouse.gov/briefing-room/speechesremarks/2021/02/22/remarks-by-president-bidenon-helping-small- businesses/.
208 Daniel Wilmoth, U.S. Small Business Administration Office of Advocacy, The Effects of the COVID-19 Pandemic on Small Businesses, Issue Brief No. 16 (Mar. 2021), available at https://cdn.advocacy.sba.gov/wp- content/uploads/2021/03/02112318/COVID-19-Impact-On-Small-Business.pdf. 209 U.S. Census Bureau, Small Business Pulse Survey, https://portal.census.gov/pulse/data/ (last visited December 7, 2021).
210 Olivia S. Kim et al., Revenue Collapses and the Consumption of Small Business Owners in the Early Stages of the COVID-19 Pandemic (Nov. 2020), https://www.nber.org/papers/w28151. 143
businesses can face greater hurdles in accessing credit,211 and many small businesses were already financially fragile at the outset of the pandemic.212 While businesses everywhere faced significant challenges during the pandemic, minority- owned and very small businesses have faced additional obstacles. Between February and April 2020, the number of actively self-employed Black business owners decreased by 41 percent.213 During that same time period, Asian and Latino business owners decreased by 26 and 32 percent, respectively, compared to a 17 percent decrease in white business owners.214 Female business owners also saw significant impacts, with businesses owned by women falling by 25 percent.215 Many of the disparities in how minority business owners experienced the pandemic are rooted in systemic issues present even before the pandemic. For example, before the economic downturn, only 12 percent of Black-owned businesses and 19 percent of Hispanic-owned businesses had annual earnings of over $1 million compared to 31 percent of white-owned businesses.216 Minority-owned businesses were also overrepresented in industries hit hardest by the economic downturn (e.g., services, transportation and warehousing, healthcare and social assistance, administrative and support and waste management, and accommodation and food
211 See, e.g., Board of Governors of the Federal Reserve System, Report to Congress on the Availability of Credit to Small Businesses (Sept. 2017), available at https://www.federalreserve.gov/publications/2017-september- availability-of-credit-to-small-businesses.htm.
212 Alexander W. Bartik et al., The Impact of COVID-19 on small business outcomes and expectations, PNAS 117(30): 17656-66 (July 28, 2020), available at https://www.pnas.org/content/117/30/17656. 213 Robert Fairlie, The impact of COVID-19 on small business owners: Evidence from the first 3 months after widespread social-distancing restrictions, Journal of economics & management strategy (August 27, 2020), https://doi.org/10.1111/jems.12400.
214 U.S. Small Business Administration, The Effects of the COVID-19 Pandemic on Small Businesses (March 2021), https://cdn.advocacy.sba.gov/wp-content/uploads/2021/03/02112318/COVID-19-Impact-On-Small- Business.pdf.
215 Robert Fairlie, supra note 199.
216 Federal Reserve Bank of Atlanta. 2019. Small Business Credit Survey 2019 Report on Minority-Owned Firms.
December. fedsmallbusiness.org/survey/2019/report-on-minority-owned-firms 144
services).217 Approximately 22 percent of all minority-owned business fell into the hardest hit industries compared to 13 percent of nonminority-owned businesses.218 Although disparities in annual revenue are not a direct indication of a business’s ability to weather an economic downturn, they do highlight other disparities that make it more challenging for these businesses to survive the effects of the pandemic. Black-owned startups, for example, face larger challenges in raising capital, including securing business loans.219
Summary of the Interim Final Rule and Final Rule Structure Summary of Interim Final Rule: As discussed above, small businesses faced significant challenges in covering payroll, mortgages or rent, and other operating costs as a result of the public health emergency and measures taken to contain the spread of the virus. Under Sections 602(c)(1)(A) and 603(c)(1)(A), recipients may “respond to the public health emergency or its negative economic impacts,” by, among other things, providing “assistance to . . . small businesses.” Accordingly, the interim final rule allowed recipients to provide assistance to small businesses to address the negative economic impacts faced by those businesses. A “small business” is defined as a business concern or other organization that:
(1) Has no more than 500 employees or, if applicable, the size standard in number of employees established by the Administrator of the Small Business Administration for the industry in which the business concern or organization operates; and
217 Ding, Lei, and Alvaro Sanchez. 2020. What Small Businesses Will Be Impacted by COVID -19? Federal Reserve Bank of Philadelphia. philadelphiafed.org/covid-19/covid-19-equity-in-recovery/what-small-businesses-will-be- impacted.
218 Lucas Misera, An Uphill Battle: COVID-19’s Outsized Toll on Minority-Owned Firms, Federal Reserve Bank of Cleveland (October 8, 2020), https://www.clevelandfed.org/newsroom -and-events/publications/community- development-briefs/db-20201008-misera-report.aspx.
219 Robert Fairlie, A Robb, D Robinson, Black and White: Access to Capital among Minority-Owned Startups, NBER Working Paper 28154 (November 2020), https://www.nber.org/papers/w28154. 145
(2) Is a small business concern as defined in section 3 of the Small Business Act (15 U.S.C. 632).
Specifically, the interim final rule provided that recipients may provide assistance to small businesses to adopt safer operating procedures, weather periods of closure, or mitigate financial hardship resulting from the COVID–19 public health emergency, including:
• Loans or grants to mitigate financial hardship such as declines in revenues or impacts of periods of business closure;
• Loans, grants, or in-kind assistance to implement COVID–19 prevention or mitigation tactics; and
• Technical assistance, counseling, or other services to assist with business planning needs.
The interim final rule further provided that recipients may consider additional criteria to target assistance to businesses in need, including small businesses. Such criteria may include businesses facing financial insecurity, substantial declines in gross receipts (e.g., comparable to measures used to assess eligibility for the Paycheck Protection Program), or other economic harm due to the pandemic, as well as businesses with less capacity to weather financial hardship, such as the smallest businesses, those with less access to credit, or those serving underserved communities. The interim final rule also indicated that recipients should consider local economic conditions and business data when establishing such criteria. Finally, the interim final rule posed a question on whether there are other services or costs that Treasury should consider as eligible uses to respond to the disproportionate impacts of COVID–19 on low-income populations and communities.
Final Rule Structure: Consistent with the interim final rule approach, the final rule provides a non-exhaustive list of enumerated eligible uses for assistance to small businesses that 146
are impacted or disproportionately impacted by the pandemic. Further, within Assistance to Small Business, a recipient may also identify a negative economic impact experienced by small businesses and design and implement a response to that negative economic impact, beyond the uses specifically enumerated in the final rule, according to the standard described in the section Standards: Identifying a Negative Economic Impact. A recipient may also identify small businesses that have been disproportionately impacted by the public health emergency and design and implement a program that responds to the source of that disproportionate impact.
Consistent with other eligible use categories to respond to the public health and economic impacts of the pandemic, recipients may identify and serve small businesses that experienced a negative economic impact or disproportionate impact due to the pandemic, as described in the section Standards for Identifying Other Eligible Populations. For example, to identify impacted small businesses, a recipient may consider whether the small businesses faced challenges in covering payroll, mortgage or rent, or other operating costs as a result of the public health emergency and measures taken to contain the spread of the virus. In order to ease administrative burden, the final rule presumes that small businesses operating in QCTs, small businesses operated by Tribal governments or on Tribal Lands, and small businesses operating in the U.S. territories were disproportionately impacted by the pandemic.
Reorganizations and Cross-References: As detailed above, Treasury has re-categorized some uses of funds in the final rule to provide greater clarity. For discussion of assistance to small businesses and impacted industries to implement COVID-19 mitigation and prevention strategies, see section COVID-19 Mitigation and Prevention in Public Health.
147
Small Businesses Eligible for Assistance
Public Comment: Treasury received many comments about the general benefits or drawbacks of use of SLFRF funds to provide assistance to small businesses. Some commenters suggested that SLFRF funds should be available to assist all small businesses, rather than only businesses that experienced direct negative economic impacts due to the public health emergency. Other commenters argued that aid to small businesses should be narrowed in the final rule, asserting that SLFRF funds should instead focus on assistance to households or building public sector capacity.
Treasury also received comments requesting clarification of the types of small businesses eligible for assistance. For example, some commenters requested clarification about whether microbusinesses were included in the definition of small business. Comments also suggested that self-employed individuals and Tribal enterprises be classified as small businesses, respectively.
Commenters argued that these types of small businesses are more common among low-income and minority businessowners and serve as important institutions in underserved communities.
Finally, some commenters suggested that Treasury permit broader enumerated eligible uses to assist small businesses in disproportionately impacted communities and generally strengthen economic growth in these communities. These commenters recommended that Treasury presume small businesses operating in QCTs are disproportionately impacted and eligible for broader enumerated uses.
Treasury Response: As discussed in the section Designating a Negative Economic Impact, in the final rule, recipients must identify an economic harm caused or exacerbated by the pandemic on a small business or class of small businesses to provide services that respond. 148
As discussed above, programs or services in this category must respond to a harm experienced by a small business or class of small businesses as a result of the public health emergency. To identify impacted small businesses and necessary response measures, recipients may consider impacts such as lost revenue or increased costs, challenges covering payroll, rent or mortgage, or other operating costs, the capacity of a small business to weather financial hardships, and general financial insecurity resulting from the public health emergency.
Recognizing the difficulties faced by small businesses in certain communities, the final rule presumes that small businesses operating in QCTs, small businesses operated by Tribal governments or on Tribal Lands, and small businesses operating in the U.S. territories were disproportionately impacted by the pandemic. This presumption parallels the final rule’s approach to assistance to households, reflecting the more severe pandemic impacts in underserved communities and creating a parallel structure across different categories of eligible uses to make the structure simpler for recipients to understand and navigate.
Treasury notes that recipients may also designate a class of small businesses that experienced a negative economic impact or disproportionate negative economic impact (e.g., microbusinesses, small businesses in certain economic sectors), design an intervention to fit the impact, and document that the individual entity is a member of the class. Additional information about this framework is included in the section General Provisions: Structure and Standards.
Further, Treasury is maintaining the interim final rule definition of “small business,” which used the Small Business Administration’s (SBA) definition of fewer than 500 employees, or per the standard for that industry, as defined by SBA. This definition includes businesses with 149
very few employees, self-employed individuals, and Tribally owned businesses.220 Finally, Treasury notes that recipients may award SLFRF funds to many different types of organizations, including small businesses, to function as a subrecipient in carrying out eligible uses of funds on behalf of a recipient government. In this case, a small business need not have experienced a negative economic impact in order to serve as a subrecipient. See section Distinguishing Subrecipients versus Beneficiaries for more detailed discussion of interactions with subrecipients, in contrast to beneficiaries of assistance.
Enumerated Eligible Uses for Assistance to Small Businesses Public Comment: Treasury received comments requesting clarification of the types of assistance available to small businesses. For example, one commenter suggested that outdoor dining be an eligible use for SLFRF funds as assistance to small businesses. Other commenters asked for clarification about how SLFRF funds could be used to support new businesses and start-ups.
Several commenters requested clarification of whether and how recipients may provide services to business districts or downtown areas, particularly those that exist in whole or in part within a QCT, and requested reduced documentation of the specific negative economic impact for the businesses operating within those areas. These commenters argued in favor of allowing redevelopment or other support, including capital investments, in business districts that were negatively impacted by COVID-19. Several commenters also argued that funds should be
220 In regard to counting employees, businesses owned and controlled by a Tribal government are not con sidered affiliates of the Tribal government and are not considered affiliates of other businesses owned by the Tribal government because of their common ownership by the Tribal government or common management, as described in 13 C.F.R. § 121.103(b)(2). This definition is consistent with the Small Business Administration (SBA) HUBZone definition of a “small business concern” relating to Tribal governments as well as how Tribal enterprises are defined for the State Small Business Credit Initiative (SSBCI). 150
available to support and grow microbusinesses, or businesses with five or fewer employees, which are more likely to be owned by women and people of color.
Treasury Response: In the final rule, Treasury is maintaining and clarifying the enumerated eligible uses of funds for assistance to small businesses that are impacted or disproportionately impacted by the pandemic.
Impacted small businesses. Specifically, Treasury is maintaining enumerated eligible uses from the interim final rule for assistance to impacted small businesses. These include but are not limited to:
• Loans or grants to mitigate financial hardship such as declines in revenues or impacts of periods of business closure, for example by supporting payroll and benefits costs, costs to retain employees, mortgage, rent, or utilities costs, and other operating costs; • Loans, grants, or in-kind assistance to implement COVID-19 prevention or mitigation tactics (see section Public Health for details on these eligible uses); and • Technical assistance, counseling, or other services to assist with business planning needs.
Treasury acknowledges a range of potential circumstances in which assisting small businesses could be responsive to the negative economic impacts of COVID-19, including for small businesses startups and microbusinesses and individuals seeking to start small or microbusinesses. For example:
• As noted above, a recipient could assist small business startups or microbusinesses with additional costs associated with COVID-19 mitigation tactics; see section Public Health for details on these eligible uses.
• A recipient could identify and respond to a negative economic impact of COVID-19 on new small business startups or microbusinesses; for example, if small business startups or 151
microbusinesses in a locality faced greater difficulty accessing credit than prior to the pandemic or faced increased costs to starting the business due to the pandemic or if particular small businesses or microbusinesses had lost expected startup capital due to the pandemic.
• The interim final rule also discussed, and the final rule maintains, eligible uses that provide support for individuals who have experienced a negative economic impact from the COVID-19 public health emergency, including uses that provide job training for unemployed individuals. These initiatives also may support small business start-ups, microbusinesses, and individuals seeking to start small or microbusinesses.
Disproportionately impacted small businesses. Additionally, Treasury agrees with commenters that disproportionately impacted small businesses may benefit from additional assistance to address the sources of that disparate impact.
As such, the final rule provides a broader set of enumerated eligible uses for disproportionately impacted small businesses and/or small businesses in disproportionately impacted business districts. Recipients may use SLFRF funds to assist these businesses with certain capital investments, such as rehabilitation of commercial properties, storefront improvements, and façade improvements. Recipients may also provide disproportionately impacted microbusinesses additional support to operate the business, including financial, childcare, and transportation supports.
Recipients could also provide technical assistance, business incubators, and grants for start-ups or expansion costs for disproportionately impacted small businesses. Note that some of these types of assistance are similar to those eligible to respond to small businesses that experienced a negative economic impact (“impacted” small businesses). However, because the 152
final rule presumes that some small businesses were disproportionately impacted, these enumerated eligible uses can be provided to those businesses without any specific assessment of whether they individually experienced negative economic impacts or disproportionate impacts due to the pandemic.
Cross-References: Recipients providing assistance to small businesses for capital expenditures (i.e., expenditures on property, facilities, or equipment) should also review the section Capital Expenditures in General Provisions: Other, which describes eligibility standards that apply to capital expenditures. Recipients should also note that services to address vacant or abandoned commercial or industrial properties are addressed in section Vacant or Abandoned Properties in Assistance to Households.
Loans to Small Businesses
Public Comment: Treasury received many comments requesting clarification on using SLFRF funds to establish funds that provide loans to small businesses. For example, commenters sought clarification of how eligible use requirements and applicable dates for SLFRF funds would apply to third party organizations (like economic development organizations) who receive SLFRF funds in order to establish a loan fund. In addition, commenters requested clarification on what requirements apply to loan programs with available funds remaining after December 31, 2024.
Treasury Response: SLFRF funds may be used to make loans, including to small businesses, provided that the loan is an eligible use, and the cost of the loan is tracked and reported in accordance with Treasury’s Compliance and Reporting Guidance. Funds that are 153
unobligated after December 31, 2024 must be returned to Treasury. See section Treatment of Loans for more information about using SLFRF funds for loan programs.
c. ASSISTANCE TO NONPROFITS
Background: Nonprofits have faced significant challenges because of the pandemic, including increased demand for services and changing operational needs.221 Prior to the pandemic, the median U.S. nonprofit reported that it had six months of cash on hand.222 This varied by sector, however, with some sectors like disaster relief organizations reporting a median of 17 months cash on hand, and others, like mental health and crisis intervention organizations reporting only three months.223 Evidence suggests that the pandemic has damaged the financial health of nonprofits, with small nonprofits, which tend to rely more heavily on donations than large nonprofits, reporting relatively larger declines in donations — 42 percent versus 29 percent, respectively.224 Among nonprofits that collect fees for services, the median revenue amount collected from such fees fell by 30 percent from 2019 to 2020, with arts organization experiencing a 50 percent decline.225 Nonprofits also experienced significant job losses. While employment in the nonprofit sector has recovered from its low point in 2020, as of November
221 See, e.g., Federal Reserve Bank of San Francisco, Impacts of COVID–19 on Nonprofits in the Western United States (May 2020), https://www.frbsf.org/community-development/files/impact-of-covid. 222 Philanthropy and COVID-19: Measuring one year of giving, Candid and the Center for Disaster Philanthropy. (2021), https://www.issuelab.org/resources/38039/38039.pdf. 223 Id.
224 Elizabeth T. Boris et al., Nonprofit Trends and Impacts 2021, Urban Institute (October 7, 2021), https://www.urban.org/research/publication/nonprofit-trends-and-impacts-2021/view/full_report. 225 Id.
154
2021, the sector remained 485,000 jobs below its pre-pandemic level.226 In addition, some nonprofits may have experienced declines in volunteer staffing during the pandemic.227 At the same time, nonprofits provide a host of services for their communities, including helping Americans weather the multitude of challenges presented by the pandemic. The ARPA and the interim final rule recognized this dichotomy—nonprofits as entities that have themselves been negatively impacted by the pandemic and as entities that provide services that respond to the public health and negative economic impacts of the pandemic on households and others —by creating two roles for nonprofits.
First, under Sections 602(c)(1)(A) and 603(c)(1)(A), recipients may “respond to the public health emergency or its negative economic impacts,” by, among other activities, providing “assistance to . . . nonprofits.” The interim final rule defined assistance to nonprofits to include “loans, grants, in-kind assistance, technical assistance or other services, that responds to the negative economic impacts of the COVID-19 public health emergency,” and “nonprofit” to mean a tax-exempt organization under Section 501(c)(3) of the U.S. Internal Revenue Code.228 Second, as discussed above, ARPA and the interim final rule provided that nonprofit organizations may also receive funds as subrecipients of a recipient government (i.e., a government that received SLFRF funds); subrecipients carry out an eligible use of SLFRF funds on behalf of a recipient government (e.g., a recipient government that would like to provide food assistance to impacted households may grant funds to a nonprofit organization to carry out that eligible use). Recipients generally have wide latitude to award funds to many types of
226 Chelsea Newhouse, COVID-19 JOBS UPDATE, NOVEMBER 2021: Nonprofits add just 5,000 jobs in November, Center for Civil Society Studies at Johns Hopkins University (December 10, 2021), http://ccss.jhu.edu/november-2021-jobs/
227 Elizabeth T. Boris et al. supra note 209 at p. 38.
228 § 35.3 Definitions.
155
organizations, including nonprofit or for-profit organizations, as subrecipients to carry out eligible uses of funds on their behalf. For further information on distinguishing between beneficiaries and subrecipients, as well as the impacts of the distinction on reporting and other requirements, see section Transfer Process.229
Reorganization and Cross-References: Under the interim final rule, assistance to disproportionately impacted communities was a separate, stand-alone category. The final rule reorganizes the disproportionate impact analysis within the sections Assistance to Households, Assistance to Small Business, and Assistance to Nonprofits to better articulate how recipients can serve disproportionately impacted beneficiaries in each of those categories.
As detailed above in the Public Health subsection, in response to public comments describing uncertainty on which eligible use category should be used to assess different potential uses of funds, Treasury has re-categorized some uses of funds in the final rule to provide greater clarity. For discussion of assistance to nonprofits to implement COVID-19 mitigation and prevention strategies, see section COVID-19 Mitigation and Prevention in Public Health.
Recipients providing assistance via nonprofits involving capital expenditures (i.e., expenditures on property, facilities, or equipment) should also review the section Capital Expenditures in General Provisions: Other, which describes eligibility standards for these expenditures. Recipients providing assistances in the form of loans should review the section Treatment of Loans.
229 The ARPA also states under “Transfer Authority” that a Recipient “may transfer funds to a private nonprofit organization,” including, but not limited to, nonprofits as that term is defined in paragraph (17) of section 401 of the McKinney-Vento Homeless Assistance Act (42 U.S.C. § 11360(17). See 602 & 603 (c)(3) of the Social Security Act. Title 42, Section 11360(17) defines a “Private nonprofit organization” to mean an organization “(A) no part of the net earnings of which inures to the benefit of any member, founder, contributor, or individual; (B) that has a voluntary board; (C) that has an accounting system, or has designated a fiscal agent in accordance wit h requirements established by the Secretary; and (D) that practices nondiscrimination in the provision of assistance.” See section Transfers of Funds for additional information on other types of entities, including other forms of nonprofits, that may receive transfers.
156
Public Comment: Eligible Assistance to Impacted and Disproportionately Impacted Nonprofits: A few commenters asked Treasury to be more explicit in the final rule that recipients may use funds to provide relief directly to nonprofit organizations and to explain how nonprofits might qualify themselves for assistance and what expenses SLFRF funds may be used to cover.230 Commenters requested that Treasury note that the pandemic is leading to a changing financial landscape for nonprofits.
Treasury Response: Eligible Assistance to Impacted and Disproportionately Impacted Nonprofits: The interim final rule provided for, and the final rule maintains, the ability for recipients to provide direct assistance to nonprofits that experienced public health or negative economic impacts of the pandemic. Specifically, recipients may provide direct assistance to nonprofits if the nonprofit has experienced a public health or negative economic impact as a result of the pandemic. For example, if a nonprofit organization experienced impacts like decreased revenues or increased costs (e.g., through reduced contributions or uncompensated increases in service need), and a recipient provides funds to address that impact, then it is providing direct assistance to the nonprofit as a beneficiary under Subsection (c)(1) of Sections 602 and 603. Direct assistance may take the form of loans, grants, in-kind assistance, technical assistance, or other services that respond to the negative economic impacts of the COVID-19 public health emergency.
A recipient may identify a negative economic impact experienced by a nonprofit, or class of nonprofits, and design and implement a response to that negative economic impact, see section Standards: Designating a Negative Economic Impact. The final rule provides a non-
230 While not stated specifically in the interim final rule, the Department does not require or have a preference as to the payment structure for recipients that transfer funds to subrecipients (e.g., advance payments, reimbursement basis, etc.). Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries. 157
exhaustive list of enumerated eligible uses for assistance to nonprofits that are impacted or disproportionately impacted by the pandemic.
A recipient may also identify a class of nonprofits that have been disproportionately impacted by the public health emergency and design and implement a program that responds to the source of that disproportionate impact. For example, a recipient may determine that nonprofits offering after-school programs within its jurisdiction were disproportionately impacted by the pandemic due to the previous in-person, indoors nature of the work and the nonprofits’ reliance on fees received for services (e.g., attendance fees). The recipient might then design an intervention to assist those nonprofits in adapting their programming (e.g., to outdoor or online venues), their revenue structure (e.g., adapting the fee for service structure or developing expertise in digital donation campaigns), or both. Additional information about this framework is included in General Provisions: Structure and Standards. In order to ease administrative burden, the final rule presumes that nonprofits operating in QCTs, operated by Tribal governments or on Tribal Lands, or operating in the U.S. territories were disproportionately impacted by the pandemic.
To summarize, a recipient may determine that certain nonprofits were impacted by the pandemic or were disproportionately impacted by the pandemic and provide responsive services.
Public Comment: Beneficiaries and Subrecipients: As noted elsewhere in this final rule, Treasury received multiple comments expressing uncertainty on how to categorize a particular activity in the eligible use categories. For instance, some commenters requested that recipients be able to use SLFRF funds for certain expenses incurred by nonprofits (e.g., unemployment charges) as a response to a public health or negative economic impact to that nonprofit; others asked if nonprofits providing certain services (e.g., social services) made them eligible for direct 158
assistance. Commenters also requested that Treasury acknowledge that engagement directly with nonprofit organizations in low-income communities and communities of color may allow the recipient to better assess economic harms in these areas.
Treasury Response: Beneficiaries and Subrecipients: Treasury recognizes that many nonprofits play important roles in their communities, and some may have experienced public health or negative economic impacts during the pandemic. As such, under the interim final rule and the final rule, nonprofits may be impacted by the pandemic and receive assistance as a beneficiary, as described above, and/or be a subrecipient providing services on behalf of a recipient.231
Specifically, the interim final rule also allowed for, and the final rule maintains, the ability for the recipient to transfer, e.g., via grant or contract, funds to nonprofit entities to carry out an eligible use on behalf of the recipient. Treasury notes that recipients may award SLFRF funds to many different types of organizations to carry out eligible uses of funds and serve beneficiaries on behalf of a recipient government (e.g., assisting in a vaccination campaign, operating a job training program, developing affordable housing). When a recipient provides funds to an organization to carry out eligible uses of funds and serve beneficiaries, the organization becomes a subrecipient. In this case, a nonprofit need not have experienced a negative economic impact in order to serve as a subrecipient.
In the context of SLFRF, nonprofits of all types may be subrecipients. Treasury is not restricting the types of nonprofits that can operate as subrecipients, rather allowing recipients to decide what form best meets the needs of their community. Therefore, a “nonprofit” that is
231 Note, this response is meant to clarify the difference between nonprofits as beneficiaries and nonprofits as subrecipients. It is not meant to limit the types of relationships that a recipient may enter into with a nonprofit as permitted under the Uniform Guidance.
159
acting as subrecipient could include, but is not limited to, a nonprofit as that term is defined in paragraph (17) of section 401 of the McKinney-Vento Homeless Assistance.232 See section Distinguishing Subrecipients versus Beneficiaries for further information. Additional guidance on determining subrecipient status may be found in the Uniform Guidance.233 Recipients may transfer funds to subrecipients in several ways, including advance payments and on a reimbursement basis. Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries.
As part of accepting the Award Terms and Conditions for SLFRF, each recipient agreed to maintain a conflict-of-interest policy consistent with 2 C.F.R. § 200.318(c) that is applicable to all activities funded with the SLFRF award. Pursuant to this requirement, decisions concerning SLFRF funds must be free of undisclosed personal or organizational conflicts of interest, both in fact and in appearance. Recipients may avoid conflicts of interest in providing assistance to nonprofits or making subrecipient awards by, inter alia, making aid available to nonprofits on generally applicable terms or utilizing a competitive grant process, respectively. A recipient may not use control over SLFRF funds for their own private gain. Furthermore, no employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest.
Public Comment: Definition of Nonprofit: Treasury also received several requests to expand the definition of nonprofits so that other tax-exempt entities (e.g., 501(c)(7)s, 501(c)(9)s,
232 See sections 602(c)(3) and 603(c)(3) of the Social Security Act. Section 401 of the McKinney-Vento Homeless Assistance Act (42 U.S.C. § 11360(17) defines a “private nonprofit organization” to mean an organization “(A) no part of the net earnings of which inures to the benefit of any member, founder, c ontributor, or individual; (B) that has a voluntary board; (C) that has an accounting system, or has designated a fiscal agent in accordance with requirements established by the Secretary; and (D) that practices nondiscrimination in the provision of assist ance.”
160
501(c)(19)s, nonprofits with “historical significance”) could be eligible for direct assistance as beneficiaries.
Treasury Response: Definition of Nonprofit: The final rule expands the definition of nonprofits to mean 501(c)(3) organizations and 501(c)(19) organizations.234 The 501(c)(3) classification includes a wide range of organizations with varying charitable or public service- oriented goals (e.g., housing, food assistance, job training). As discussed above, these nonprofit organizations often experienced hardship due to increased needs for services combined with decreased donations and other sources of funding. In response to comments, Treasury has expanded the definition of nonprofit to include 501(c)(19) organizations, which includes veterans’ organizations, to provide recipients more flexibility and in alignment with the definition of nonprofit adopted by the CARES Act, wherein 501(c)(3)s and 501(c)(19)s were eligible for assistance.235
Public Comment: Reporting Requirements: One commenter asked Treasury to clarify if nonprofits that receive direct assistance as beneficiaries are required to comply with guidelines and reporting requirements.
Treasury Response: Reporting Requirements: Nonprofits that receive direct assistance as beneficiaries are not subrecipients under SLFRF and are therefore not required to comply with SLFRF reporting requirements. However, the recipient must comply with SLFRF reporting requirements, which would require reporting obligations and expenditures for assistance to
234 § 35.3 Definitions.
235 Treasury considered expanding the definition of nonprofit to include 501(c)(6) organizations, as Congress later did in the Coronavirus Response and Consolidated Appropriations Act of 2021, but ultimately decided to retain t he original CARES Act definition. To the extent impacted by the pandemic, 501(c)(6) organizations may be eligible to receive funds to support eligible uses that align with their overall purpose (e.g., tourism promotion in aid of an impacted industry).
161
nonprofits. The recipient may also choose to establish other forms of reporting or accountability as a part of the recipient’s direct assistance program.
A nonprofit entity that receives a transfer from a recipient is a subrecipient. Per the Uniform Guidance, subrecipients must adhere to the same requirements as recipients. Therefore, a nonprofit subrecipient may only receive funds to carry out an eligible use of SLFRF funds and must comply with any reporting and compliance requirements. Note that recipients are ultimately responsible for reporting information to Treasury and must collect any necessary information from their subrecipients to complete required reporting.
d. AID TO IMPACTED INDUSTRIES
The interim final rule allowed for “aid to tourism, travel, and hospitality, and other impacted industries” that responds to the negative economic impacts of the COVID-19 public health emergency. In designating other impacted industries, Treasury specified that recipients should consider the “extent of the economic impact as compared to tourism, travel, and hospitality” and “whether impacts were due to the COVID-19 pandemic, as opposed to longer- term economic or industrial trends unrelated to the pandemic.”236 Treasury identified declines in employment and revenue as possible metrics to compare the economic impact on a particular industry relative to the tourism, travel, and hospitality industries.
Treasury further provided that aid should be limited to businesses, attractions, business districts, and Tribal development districts237 that were operating prior to the pandemic and affected by required closures and other efforts to contain the pandemic. Examples of eligible aid
236 Coronavirus State and Local Fiscal Recovery Funds, 86 Fed. Reg. at 26795. 237 For a definition of “Tribal development districts,” please see FAQ 2.9 at the following: Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions, as of July 19, 2021; https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf. 162
include assistance to implement COVID-19 mitigation and infection prevention measures, aid to support safe reopening of businesses in these industries, as well as aid for a planned expansion or upgrade of tourism, travel, and hospitality facilities delayed due to the pandemic. The interim final rule and Treasury’s subsequent Compliance and Reporting Guidance also required governments to publicly report assistance provided to private-sector businesses under this eligible use and maintain records of their assessments to facilitate transparency and accountability.
Reorganization and Cross-References: As detailed above, Treasury has re-categorized some uses of funds in the final rule to provide greater clarity. In the interim final rule, aid to impacted industries to implement COVID-19 mitigation and prevention strategies was categorized under Aid to Impacted Industries; the final rule addresses these items under the section COVID-19 Mitigation and Prevention in Public Health. Recipients should also be aware of the difference between beneficiaries of assistance and subrecipients when working with impacted industries; for further information, see section Distinguishing Subrecipients versus Beneficiaries.
Designating an Impacted Industry
Public Comment: Many commenters requested greater clarity on how to designate “other impacted industries” within their jurisdiction. Commenters requested greater specificity as to the metrics used to measure impact, with some suggesting metrics such as the change in the size of an industry’s workforce due to the pandemic, as well as consideration of whether and why employees are choosing to return to work at slower rates in certain industries. One commenter asked if this meant nearly every industry was "disproportionately impacted." Some commenters 163
encouraged Treasury to focus on industries most negatively impacted by the pandemic, including disallowing across-the-board business subsidies to businesses that were not negatively impacted by the pandemic and saw revenue or profit growth. Other commenters asked for flexibility for recipients to determine impacted industries based on their local knowledge of the economic landscape.
Treasury Response: The final rule maintains the interim final rule’s approach of allowing recipients to designate impacted industries outside the travel, tourism, and hospitality industries, and, in response to comments, provides greater clarity as to how recipients may designate such impacted industries.
Sections 602(c)(1)(A) and 603(c)(1)(A) recognize that the tourism, travel, and hospitality industries are severely negatively impacted by the pandemic. Under the final rule, recipients may provide eligible aid (described in further detail herein) to the tourism, travel, and hospitality industries. Treasury considers Tribal development districts, which are commercial centers for Tribal hospitality, gaming, tourism, and entertainment and can include Tribal enterprises, as part of the tourism, travel, and hospitality industries that have been severely hit by the pandemic.
Therefore, Treasury reaffirms that Tribal development districts are considered impacted industries and recipients may provide eligible aid to them.
To identify other industries comparably impacted to the tourism, travel, and hospitality industries, recipients should undertake a two-step process: identifying an industry and determining whether that industry is comparably impacted. 164
First, recipients should identify an industry to be assessed. In identifying this industry, the final rule provides recipients the flexibility to define its substantive or geographic scope.238 Recipients may identify a broad sector that encompasses a number of sub-industries, or they may identify a specific sub-industry to be assessed. For example, a recipient may identify “personal care services” as an industry, or they may identify a more specific category within the “personal care services” industry (e.g., barber shops) as an industry. In defining the industry, Treasury encourages recipients to define narrow and discrete industries eligible for aid. Recipients are not required to follow, but may consider following, industry classifications under the North American Industry Classification System (NAICS). Treasury notes that the larger and more diverse the sector, the more difficult it may be to demonstrate that the larger and less specific sector is negatively impacted in the same way given the scale and diversity of businesses within it.
State or territory recipients may also define a constituent industry with greater geographic precision than state or territory-wide. For example, a state may identify a particular industry in a certain region of the state that was negatively impacted by the pandemic, even if the same industry in the rest of the state did not see a meaningful negative economic impact from the pandemic. State recipients oversee large and diverse industries, sometimes with differences in economic activity between geographic regions. Allowing greater geographic precision allows recipients to target aid to those that need it most, ensuring that state averages do not conceal hard-hit areas in their state.
238 Once an industry is designated as impacted, aid should be generally broadly available to businesses in the industry that qualify. Recipients should document how they defined the scope of their industry and how they determined that the industry was impacted. For states and territories, this includes documenting their justification for defining a constituent industry with greater geographic precision than state or territory -wide. 165
Second, to determine whether the industry is “impacted,” recipients should compare the negative economic impacts of the public health emergency on the identified industry to the impacts observed on the travel, tourism, and hospitality industries.
1. Simplified test. An industry is presumed to be impacted if the industry experienced employment loss of at least 8 percent.
Specifically, a recipient should compare the percent change in the number of employees of the recipient’s identified industry and the national Leisure & Hospitality sector in the three months before the pandemic’s most severe impacts began (a straight three-month average of seasonally-adjusted employment data from December 2019, January 2020, and February 2020) with the latest data as of the final rule release (a straight three-month average of seasonally-adjusted employment data from September 2021, October 2021, and November 2021).239 The national Leisure & Hospitality sector largely represents the national travel, tourism, and hospitality industries enumerated in the statute. According to the Bureau of Labor Statistics, employment has fallen by approximately 8 percent for the national Leisure & Hospitality sector when comparing the most recent three-month period available as of the date of adoption of the final rule to the three-month period immediately before the public health emergency. Therefore, if the identified industry has suffered an employment loss of at least 8 percent, the final rule presumes the industry to be an “impacted industry.”
For parity and simplicity, smaller recipients without employment data that measure industries in their specific jurisdiction may use data available for a broader unit
239 National Leisure & Hospitality supersector employment data can be found on th e U.S. Bureau of Labor Statistics website: U.S. Bureau of Labor Statistics, Leisure and Hospitality, https://www.bls.gov/iag/tgs/iag70.htm (last visited December 7, 2021).
166
of government for this calculation (e.g., a county may use data from the state in which it is located; a city may use data for the county, if available, or state in which it is located) solely for purposes of determining whether a particular industry is an impacted industry.
2. If simplified test is not met. If an industry does not satisfy the test above or data are unavailable, the recipient may still designate the industry as impacted by demonstrating the following:
a. The recipient can show that the totality of relevant major economic indicators demonstrate that the industry is experiencing comparable or worse economic impacts as the national tourism, travel, and hospitality industries at the time of the publication of the final rule, and that the impacts were generally due to the COVID-19 public health emergency. Example economic indicators include gross output, GDP, net profits, employment levels, and projected time to restore employment back to pre-pandemic levels. Recipients may rely on available economic data, government research publications, research from academic sources, and other quantitative sources for this determination.
If quantitative data is unavailable, the recipient can rely on qualitative data to show that the industry is experiencing comparable or worse economic impacts as the national tourism, travel, and hospitality industries, and the impacts were generally due to the COVID-19 public health emergency. Recipients may rely on sources like community interviews, surveys, and research from relevant state and local government agencies.
As the public health emergency and economic recovery evolves, recipients should assess how industry impacts shift over time. Impacted industries may recover in a short period of time 167
and no longer face a negative economic impact; in those circumstances, the recipient should ensure that the extent and length of aid is reasonably proportional to the negative economic impact that is experienced, as detailed further below and in section General Provisions: Structure and Standards. Recipients may add to their list of impacted industries by showing that the negative economic impacts to the industry at the time of the designation are comparable to the negative economic impacts to the national tourism, travel, and hospitality sectors as of the date of the final rule adoption, as detailed herein.
Eligible Aid
Public Comment: Commenters asked for further clarification as to the definition of eligible aid to an impacted industry, with many requesting that a broad range of aid be eligible.
Examples of aid that recipients asked to be considered eligible include aid to businesses to cover COVID-19 mitigation costs and planned renovations or improvements to tourism, travel, and hospitality facilities, as well as marketing and in-kind incentives to attract visitors. Commenters also asked about the eligibility of aid to broadly cover losses incurred by facilities such as convention centers and hotels due to the pandemic’s economic impact. Commenters also asked for further clarification about the requirements related to private-sector reporting. Further, some commenters asked for clarification about eligible aid to impacted industries owned and operated by Tribal governments, including for Tribal construction projects that have been delayed due to the pandemic’s economic impacts, and for deference to Tribal determinations of negative economic impacts.
168
Treasury Response: In response to commenters’ requests for clarification on eligible aid, the final rule requires that aid to impacted industries, including to Tribal development districts, be designed to address the harm experienced by the impacted industry.
First, recipients should identify a negative economic impact, i.e., an economic harm, that is experienced by businesses in the impacted industry. Second, recipients should select a response that is designed to address the identified economic harm resulting from or exacerbated by the public health emergency. Responses must also be related and reasonably proportional to the extent and type of harm experienced; uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses. Recipients should consider the further discussion of this standard provided in the sections Standards:
Designating a Public Health Impact and Standards: Designating a Negative Economic Impact.
These responses may take the form of direct spending by recipients to promote an industry or support for businesses within an “impacted” industry that experienced a negative economic impact (e.g., through a grant program). Examples of eligible responses include:
• Aid to mitigate financial hardship due to declines in revenue or profits by supporting payroll costs and compensation of returning employees for lost pay and benefits during the COVID-19 pandemic, as well as support of operations and maintenance of existing equipment and facilities, such as rent, leases, and utilities; • Aid for technical assistance, counseling, and other services to assist with business planning needs; and
• Aid to implement COVID-19 mitigation and infection prevention measures, such as vaccination or testing programs, is broadly eligible for many types of entities, including travel, tourism, hospitality, and other impacted industries. Recipients providing aid to 169
impacted industries for COVID-19 public health measures should review the section Assistance to Businesses to Implement COVID-19 Strategies in Public Health, which describes types of eligible uses of funds in this category.
To address the identified harms, responses (e.g., aid through a grant program) should be generally broadly available to all businesses within the impacted industry to avoid the risk of self-dealing, preferential treatment, and conflicts of interest.240 Treasury encourages recipients to design aid programs such that funds are first used for operational expenses that are generally recognized as ordinary and necessary for the recipient’s operation, such as payroll, before being used on other types of costs. As noted in the section General Standards: Structure and Standards, uses of funds that do not respond to the negative economic impacts of the pandemic, such as excessive compensation to employees, is ineligible.
The final rule maintains the interim final rule’s requirement that aid may only be considered responsive to the negative economic impacts of the pandemic if it supports businesses, attractions, and Tribal development districts operating prior to the pandemic and affected by required closures and other efforts to contain the pandemic. Further, to facilitate transparency and accountability, the final rule maintains the interim final rule’s requirement that recipients publicly report assistance provided to private-sector businesses under this eligible use, including tourism, travel, hospitality, and other impacted industries, and its connection to negative economic impacts of the public health emergency. Recipients also should maintain
240 As part of accepting the Award Terms and Conditions for SLFRF, each recipient agre ed to maintain a conflict-of- interest policy consistent with 2 C.F.R. § 200.318(c) that is applicable to all activities funded with the SLFRF award.
Pursuant to this policy, decisions concerning SLFRF must be free of undisclosed personal or organizational conflicts of interest, both in fact and in appearance. Recipients may avoid conflicts of interest in awarding aid to impacted industries by, inter alia, making aid available to businesses in the industry on generally applicable terms or utilizing a competitive grant process. A recipient may not use control over SLFRF for their own private gain. Furthermore, no employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest. 170
records to support their assessment of how businesses receiving assistance were affected by the negative economic impacts of the public health emergency and how the aid provided responds to these impacts.
Recipients providing aid to impacted industries for capital expenditures (i.e., expenditures on property, facilities, or equipment), including Tribal governments providing aid to Tribal development districts, should also review the section Capital Expenditures in General Provisions: Other, which describes eligibility standards that are applicable to these expenditures, depending on the type of aid. Recipients providing assistance in the form of loans should review the section Treatment of Loans in Program Administration Provisions.
4. GENERAL PROVISIONS: OTHER
As noted above, the final rule consolidates into a General Provisions section several types of uses of funds; in the interim final rule, the eligibility of these uses of funds was discussed within specific categories of eligible uses for public health and negative economic impacts.
Treasury anticipates that this re-organization will enhance recipient clarity in assessing eligible uses of funds. These General Provisions apply across all uses of funds under public health and negative economic impacts.
Specifically, this section considers eligible uses for:
• Public Sector Capacity and Workforce, which includes several separate and non-mutually exclusive categories articulated in the interim final rule: public health and safety staff; rehiring state, local, and Tribal government staff; expenses for administering COVID-19 response programs; expenses to improve the efficacy of public health or economic relief programs; and administrative expenses caused or exacerbated by the pandemic. Treasury 171
recognizes that these are closely related and frequently overlapping categories. The final rule treats them as a single purpose, supporting public sector capacity, and provides coordinated guidance on the standards and presumptions that apply to them. • Capital Expenditures, which was addressed only under Public Health in the interim final rule. The final rule moves this expense to General Provisions and provides more clarity on the eligibility of capital expenditures across all aspects of the public health and negative economic impacts eligible use category.
• Distinguishing Subrecipients versus Beneficiaries, which describes the differences between these two categories. Recipient governments responding to the public health and negative economic impacts of the pandemic may provide assistance to beneficiaries or execute an eligible use of funds through a subrecipient; some types of entities (e.g., nonprofits) could fit into either category depending on the specific purpose of the use of funds.
• Uses Outside the Scope of this Category, which addresses uses of funds that are ineligible or generally ineligible under this eligible use category in the interim final rule. These uses of funds remain ineligible under the final rule, but Treasury has re-categorized where they are addressed, as described below. This section also addresses enumerated eligible uses proposed by commenters that Treasury has not incorporated into the final rule.
Recipients should also note that the Office of Management and Budget's (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly called the “Uniform Guidance”) generally applies to SLFRF.
172
a. PUBLIC SECTOR CAPACITY AND WORKFORCE
Public Safety, Public Health, and Human Services Staff
Summary of Interim Final Rule: Under the interim final rule, funds may be used for payroll and covered benefits241 for public safety, public health, health care, human services, and similar employees242 of a recipient government, for the portion of the employee’s time that is spent responding to COVID-19. For administrative convenience, the recipient may consider public health and safety employees to be entirely devoted to responding to COVID-19, and therefore their full payroll and covered benefits eligible to be covered, if the employee, or his or her operating unit or division, is “primarily dedicated” to responding to COVID-19, meaning that more than half of the employee, unit, or division’s time is dedicated to responding to COVID-19.
Recipients may consider other presumptions for assessing the extent to which an employee, division, or operating unit is responding to COVID-19. Recipients must periodically reassess their determination and maintain records to support their assessment, such as payroll records, attestations from supervisors or staff, or regular work product or correspondence; recipients need not track staff hours. The interim final rule also posed a question on how long recipients should be able to use funds for staff responding to COVID-19 and what other measures or presumptions
241 In general, if an employee’s wages and salaries are an eligible use of SLFRF funds, recipients may treat the employee’s covered benefits as an eligible use of SLFRF funds. For purposes of SLFRF funds, covered benefi ts include costs of all types of leave (vacation, family-related, sick, military, bereavement, sabbatical, jury duty), employee insurance (health, life, dental, vision), retirement (pensions, 401(k)), unemployment benefit plans (federal and state), workers compensation insurance, and Federal Insurance Contributions Act (FICA) taxes (which includes Social Security and Medicare taxes). As described further in the section Deposits into Pension Funds in Restrictions on Use, that limitation on use does not apply to pension contributions that are part of regular payroll contributions for employees whose wages and salaries are an eligible use of SLFRF funds. 242 Note that the interim final rule adapted prior guidance issued for CRF that described these four categorie s of employees; however, when listing the specific occupations or types of employees in each of these categories, the guidance collapses health care and public health into one category titled “public health.” Therefore, the presumption described around public health employees also covers health care employees. 173
might Treasury consider to assess the extent to which public sector staff are engaged in COVID- 19 response in an easily administrable manner.
Treasury also provided further guidance on the types of employees covered by this category of eligible use, specifically: “Public safety employees would include police officers (including state police officers), sheriffs and deputy sheriffs, firefighters, emergency medical responders, correctional and detention officers, and those who directly support such employees such as dispatchers and supervisory personnel. Public health employees243 would include employees involved in providing medical and other health services to patients and supervisory personnel, including medical staff assigned to schools, prisons, and other such institutions, and other support services essential for patient care (e.g., laboratory technicians, medical examiner, or morgue staff) as well as employees of public health departments directly engaged in matters related to public health and related supervisory personnel. Human services staff include employees providing or administering social services; public benefits; child welfare services; and child, elder, or family care, as well as others.”
Public Comment: Measuring Time Spent on COVID-19 Response: Treasury received public comments on several components of this eligible use category. Many commenters argued that it poses an administrative burden to identify the extent to which staff are responding to COVID-19 and to maintain records to support that assessment. Largely citing administrative burden in assessing eligibility, several commenters recommended revisions to the administrative convenience that the full payroll and covered benefits for public health and safety staff “primarily dedicated” to responding to COVID-19 may be paid with SLFRF funds. Some commenters recommended presuming that all public health and safety staff are primarily
243 Note that this category encompasses both public health and health care employees; both are treated as public health employees for the purposes of this eligible use category. 174
dedicated to COVID-19 response, while others proposed that public health and safety workers who primarily serve QCTs or low- and moderate-income areas be presumed to be primarily dedicated to COVID-19 response, given the disproportionate impacts of the pandemic in those communities. Similarly, Tribal communities recommended that their public health staff be presumed eligible due to the disproportionate impact of the pandemic on their communities.
Some commenters proposed that they be able to use the administrative convenience for staff outside of public health and safety that are responding to COVID-19 (i.e., to be able to pay the full payroll and covered benefits for any staff “primarily dedicated” to COVID-19 response).
Treasury Response: In the final rule, Treasury is maintaining the approach in the interim final rule, including elaborations issued in further guidance, but providing additional clarification on its application, including methods to apply the approach to minimize administrative burden.
Treasury notes that recipients may assess the extent to which staff are dedicated to responding to COVID-19 through a variety of means, including establishing presumptions or assessing public health and safety staff at the division or operating unit level. For example, a recipient could consider the amount of time spent by employees in its public health department’s epidemiology division in responding to COVID-19 and, if a majority of its employees are dedicated to responding to COVID-19, determine that the entire division is primarily dedicated to responding to COVID-19. Treasury also clarifies that recipients may use reasonable estimates to establish administrable presumptions; for example, a recipient could estimate, based on discussions with staff, the general share of time that employees in a specific role or type of position spend on COVID-19 related tasks and apply that share of time to all employees in that position.
Recipients are generally required to be able to support uses of SLFRF funds as eligible, including, in this instance, maintenance of records to support an assessment that public health 175
and safety staff are primarily dedicated to responding to COVID-19. As noted above, recipients may use reasonable estimates to implement this provision. Recipients should maintain records on how they developed these estimates and need not track staff hours. Treasury notes that records retained can include payroll records (e.g., the number and type of staff in various positions), attestations from supervisors or staff (e.g., self-attestation of share of time spent on COVID-19), or regular work product or correspondence (e.g., calendars, e-mail correspondence, documents, and other electronic records). Treasury anticipates that these types of records are generally retained in many government settings; recipients should also consult the Award Terms and Conditions for SLFRF funds for requirements on length of record retention. For example, a recipient could establish a reasonable presumption about the share of time that an employee, division, or operating unit is responding to COVID-19 and simply retain those employees’ electronic records as a record to support their assessment.
Public Comment: Public Health and Safety Staff Primarily Dedicated to COVID-19 Response: Some commenters recommended expanding the administrative convenience for public health and safety staff primarily dedicated to COVID-19 response to further types of staff, to all public health and safety staff, or to public health and safety staff serving underserved areas.
Treasury Response: The interim final rule recognized that COVID-19 response continues to require substantial staff resources and provides an administrative convenience to make it relatively simpler to identify the eligibility of the types of workers – public health and safety workers – generally most involved in COVID-19 response. At the same time, many public health and safety workers perform roles unrelated to COVID-19; coverage of all roles would be overbroad compared to the workers responding to COVID-19 in actuality. For this reason, the final rule maintains the interim final rule’s approach to permitting SLFRF funds to be used for 176
public health and safety staff primarily dedicated to responding to COVID-19. Finally, to the extent that a greater proportion of public health and safety staff time is needed to respond to COVID-19 in disproportionately impacted communities, the “primarily dedicated” approach recognizes this increased need.
Public Comment: Eligible Types of COVID-19 Response: Some public commenters also sought further clarification on how to identify eligible types of “COVID-19 response.” For example, commenters requested clarification on delineating COVID-19 response from general public health response and defining COVID-19 response for public safety employees.
Treasury Response: Treasury is clarifying that “responding to” COVID-19 entails work needed to respond to the public health or negative economic impacts of the pandemic, apart from the typical pre-pandemic job duties or workload of an employee in a comparable role, if one existed. For example, responding to COVID-19 for a public safety worker may entail working in an emergency operations center to coordinate pandemic-related supply distribution, responding to an increased volume of 911 calls, or implementing COVID-19 prevention and mitigation protocols in a carceral setting.
Public Comment: Eligible Employees: Some commenters requested clarification on the types of eligible employees or expansion of eligible employees to include additional types of staff, including in behavioral health; administrative, management, or financial management positions; social services; morgue staff; and nonprofit staff supporting projects to undertake eligible uses of funds under SLFRF.
Treasury Response: Treasury provided further guidance on eligible types of employees following the interim final rule, which expressly included social services and morgue staff, and incorporates that guidance into the final rule. In addition, Treasury is clarifying that public health 177
“employees involved in providing medical and other health services to patients and supervisory personnel” includes behavioral health services as well as physical health services.
Treasury also is clarifying that this provision only addresses employees of the recipient government responding to COVID-19. For discussion of eligible expenses to administer SLFRF, including eligible costs for subrecipients performing eligible activities on behalf of a recipient government, see section Administrative Expenses in Program Administration Provisions.
Finally, Treasury is clarifying that indirect costs for administrative, management, and financial management personnel to support public health and safety staff responding to COVID- 19 are not permissible under this provision, given the relatively greater challenge of differentiating the marginal increase in staff time and workload due to pandemic response for indirect versus direct costs.
Public Comment: Time Period: Finally, some commenters made recommendations on the time period during which this eligible use should be available. Some commenters recommended eligibility begin before March 3, 2021, the period when Treasury’s interim final rule permitted recipients to begin to incur costs using SLFRF funds; for discussion of this topic, see section Timeline for Use of SLFRF Funds in Program Administration Provisions. As noted above, Treasury also posed a question in the interim final rule asking for how long Treasury should maintain the administrative convenience that SLFRF funds may be used for the full payroll and covered benefits of public health and safety staff primarily dedicated to COVID-19 response.
Several commenters recommended that Treasury maintain this approach throughout the program or through December 31, 2024. Other commenters requested clarification on whether eligibility for this use of funds was tied to the length of the state of emergency or whether a jurisdiction has an active state of emergency.
178
Treasury Response: In the final rule, Treasury is clarifying that recipients will be permitted to fund the full payroll and covered benefits of public health and safety staff primarily dedicated to COVID-19 response throughout the period of performance for the SLFRF program, though recipients should periodically reassess their determination of primarily dedicated staff, including as the public health emergency and response evolves.
Government Employment and Rehiring Public Sector Staff
The interim final rule permitted use of funds for costs associated with rehiring state, local, and Tribal government staff in order to bolster the government’s ability to effectively administer services. Specifically, recipients may pay for payroll, covered benefits, and other costs associated with the recipient increasing the number of its employees up to the pre- pandemic baseline, or the number of employees that the recipient government employed on January 27, 2020.
Public Comment: Many commenters requested greater flexibility and additional clarification on the provision’s requirements, including the pre-pandemic baseline and re-hiring process. Some commenters requested that the final rule allow for hiring above the pre-pandemic baseline given historic underinvestment in the public sector workforce. Commenters suggested a number of adjustments to the pre-pandemic baseline, including adjusting based on population or revenue growth, while some recommended allowing recipients to set their own hiring levels.
Others requested clarification on the definition of the baseline and the re-hiring process, including whether the pre-pandemic baseline referred to budgeted or filled positions and whether new hires had to fill the same roles as the previous hires. Commenters also asked whether recipients need to show if the reduction in number of employees was due to the pandemic in 179
order to qualify for funding and requested that workers dedicated to COVID-19 response be exempted from the calculation of number of employees.
Many commenters also requested an expanded set of eligible uses beyond restoring their workforce up to the pre-pandemic baseline. Commenters requested that funding be able to be used to avoid layoffs, provide back pay, retain employees through pay increases and other retention programs, or reimburse salaries and benefits already paid. Some commenters also requested clarification as to whether recipients can fund re-hired positions through the period of performance and on the definition of payroll and benefits. Other commenters requested preferential hiring for workers laid off, a strong commitment to equity, and a requirement that funds would not be used to pay for contract or temporary replacement workers during a labor dispute.
Treasury Response: The final rule allows for an expanded set of eligible uses to restore and support public sector employment. Eligible uses include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring.
Restoring pre-pandemic employment. In response to comments and recognizing underinvestment in public sector employment, the final rule expands the ability to use SLFRF funds to restore pre-pandemic employment. Treasury is also clarifying how, and the extent to which, recipients may use SLFRF funds to rehire public employees.
The final rule provides two options to restore pre-pandemic employment, depending on recipient’s needs. Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without 180
undergoing further analysis. Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline, by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire. Recipients may choose between these options but cannot use both.
To pursue the first option, recipients may use SLFRF funds to hire employees for the same positions that existed on January 27, 2020 but that were unfilled or eliminated as of March 3, 2021, without undergoing further analysis. For these employees, recipients may use SLFRF funds for payroll and covered benefit costs that are obligated by December 31, 2024 and expended by December 31, 2026, consistent with the Uniform Guidance’s Cost Principles at 200 CFR Part 200 Subpart E. This option provides administrative simplicity for recipients that would simply like to restore pre-pandemic positions and would not like to hire above the pre-pandemic baseline.
To pursue the second option, recipients should undergo the analysis provided below. In short, this option allows recipients to pay for payroll and covered benefits associated with the recipient increasing its number of budgeted full-time equivalent employees (FTEs) up to 7.5 percent above its pre-pandemic employment baseline, which adjusts for the continued underinvestment in state and local governments since the Great Recession. State and local government employment as a share of population in 2019 remained considerably below its share prior to the Great Recession in 2007, which presented major risks to recipients mounting a response to the COVID-19 public health emergency. The adjustment factor of 7.5 percent results from estimating how much larger 2019 state and local government employment would have needed to be for the share of state and local government employment to population in 2019 to have been back at its 2007 level and is intended to correct for this gap. 181
Recipients should complete the steps described below. Recipients may choose whether to conduct this analysis on a government-wide basis or for an individual department, agency, or authority.
• Step One: Identify the recipient’s budgeted FTE level on January 27, 2020. This includes all budgeted positions, filled and unfilled. This is called the pre-pandemic baseline. • Step Two: Multiply the pre-pandemic baseline by 1.075 (that is, 1 + adjustment factor).
This is called the adjusted pre-pandemic baseline.
• Step Three: Identify the recipient’s budgeted FTE level on March 3, 2021, which is the beginning of the period of performance for SLFRF funds. Recipients may, but are not required to, exclude FTEs dedicated to responding to the COVID-19 public health emergency.244 This is called the actual number of FTEs. • Step Four: Subtract the actual number of FTEs from the adjusted pre-pandemic baseline to calculate the number of FTEs that can be hired and covered by SLFRF funds.
Recipients may use SLFRF funds to cover payroll and covered benefit costs obligated by December 31, 2024, and expended by December 31, 2026, up to the number of FTEs calculated in Step Four, consistent with the Uniform Guidance’s Cost Principles at 2 CFR Part 200 Subpart E. Recipients may only use SLFRF funds for additional FTEs hired over the March 3, 2021 level of budgeted FTEs (i.e., the actual number of FTEs); note again that recipients may choose
244 Recipients may determine that a portion of an FTE’s time is dedicated to responding to the COVID-19 public health emergency. Further, for administrative convenience, the recipient may consider public health and safety FTEs to be entirely devoted to mitigating or responding to the COVID-19 public health emergency if the FTE, or his or her operating unit of division, is primarily dedicated to responding to the COVID -19 public health emergency.
Recipients may also consider other presumptions for assessing the extent to which an FTE , division, or operating unit is engaged in activities that respond to the COVID-19 public health emergency, provided that the recipient reassesses periodically and maintains records to support its assessment, such as payroll records, attestations from supervisors or staff, or regular work product or correspondence demonstrating work on the COVID -19 response. 182
whether to conduct the analysis of FTEs that can be covered by SLFRF funds on a government- wide basis or for an individual department, agency, or authority.
These FTEs must have begun their employment on or after March 3, 2021, which is the beginning of the period of performance. For administrative convenience, recipients do not need to demonstrate that the reduction in number of FTEs was due to the COVID-19 pandemic, as Treasury assumes the vast majority of employment reductions during this time were due to pandemic fiscal pressures on state and local budgets. Recipients do not need to hire for the same roles that existed pre-pandemic.
For illustration, consider a hypothetical recipient with 1000 budgeted FTEs on January 27, 2020 (950 filled FTE positions and 50 unfilled FTE positions). The recipient’s pre-pandemic baseline is 1000 FTEs; its adjusted pre-pandemic baseline is 1000 * 1.075 = 1075 FTEs. Now, assume that on March 3, 2021, the recipient had 800 budgeted FTEs in total (795 filled FTE positions and 5 unfilled FTE positions), with 50 FTEs primarily dedicated to responding to the COVID-19 public health emergency. The recipient would have the option of using either 800 FTEs or 750 FTEs as its actual number of FTEs for the calculation; assuming it chooses the lower number, it would be able to fund up to 325 FTEs with SLFRF funds (that is, 1075 – 750 = 325 FTEs). Specifically, the recipient would be able to use SLFRF to fund payroll and covered benefits for up to 325 FTEs that begin their employment on or after March 3, 2021, for costs obligated by December 31, 2024, and expended by December 31, 2026, consistent with the Uniform Guidance’s Cost Principles, as long as SLFRF funds are used for additional FTEs hired over the recipient’s 750 FTE level (which is its March 3, 2021 budgeted FTE level).
In hiring new employees, the final rule encourages recipients to ensure a diverse workforce. The final rule also prohibits recipients from using funds to temporarily fill positions 183
during a labor dispute, as this would not constitute responding to the public health or negative economic impacts of the pandemic. Further, recipients must ensure that its hiring practices do not violate conflict-of-interest policies.245 Total compensation for a hired employee that is substantially in excess of typical compensation for employees of their experience and tenure within the recipient’s government, without a corresponding business case, may indicate a potential conflict-of-interest in fact or appearance.
Providing additional funding for employees who experienced pay cuts and furloughs. In recognition of the economic hardship caused by pay cuts and furloughs, additional funds may be provided to employees who experienced pay cuts or were furloughed since the onset of the pandemic on January 27, 2020. Recipients must be able to substantiate that the pay cut or furlough was substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment. As a reminder, this additional funding must be reasonably proportional to the negative economic impact of the pay cut or furlough on the employee, which would include taking into account unemployment insurance (UI) benefits that a furloughed employee may have received during the furloughed period. Treasury presumes that additional funds beyond the difference in pay had the employee not received a pay cut or been furloughed would not be reasonably proportional.
Recipients may also provide premium pay to certain employees, as detailed further in section Premium Pay.
245 As part of accepting the Award Terms and Conditions for SLFRF, each recipient agreed to maintain a conflict -of- interest policy consistent with 2 C.F.R. § 200.318(c)112 that is applicable to all activities funded with the SLFRF award. Pursuant to this policy, decisions concerning SLFRF must be free of undisclosed personal or organizational conflicts of interest, both in fact and in appearance. A recipient may not use control over SLFRF for their own private gain. Furthermore, no employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest. 184
Avoiding layoffs. Funds may be used to maintain current compensation levels, with adjustments for inflation, in order to prevent layoffs that would otherwise be necessary.
Recipients must be able to substantiate that layoffs were likely in the absence of SLFRF funds and would be substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment.
Retaining workers. Funds may be used to provide worker retention incentives, which are designed to persuade employees to remain with the employer as compared to other employment options. Recipients must be able to substantiate that the employees were likely to leave employment in the absence of the retention incentive and should document their assessment. For example, a recipient may determine that a retention bonus is necessary based on the presence of an alternative employment offer for an employee.
All worker retention incentives must be narrowly tailored to need and should not exceed incentives traditionally offered by the recipient or compensation that alternative employers may offer to compete for the employees. Further, because retention incentives are intended to provide additional incentive to remain with the employer, they must be entirely additive to an employee’s regular rate of wages and other remuneration and may not be used to reduce or substitute for an employee’s normal earnings. Treasury will presume that retention incentives that are less than 25 percent of the rate of base pay for an individual employee or 10 percent for a group or category of employees are reasonably proportional to the need to retain employees, as long as the other requirements are met.
Ancillary administrative costs. Funds may be used to pay for ancillary administrative costs associated with administering SLFRF-funded hiring and retention programs detailed above, including costs to publish job postings, review applications, and onboard and train new hires. For 185
additional information on administrative expenses, see section Administrative Expenses in Program Administration Provisions.
Effective Service Delivery: Administrative Expenses
The interim final rule provided that funds could be used for: “Expenses to improve efficacy of public health or economic relief programs: Administrative costs associated with the recipient’s COVID-19 public health emergency assistance programs, including services responding to the COVID-19 public health emergency or its negative economic impacts, that are not federally funded.” In the final rule, Treasury is clarifying that there are several categories of eligible administrative expenses.
First, recipients may use funds for administrative costs to improve the efficacy of public health or economic relief programs through tools like program evaluation, data analysis, and targeted consumer outreach (see section Effective Service Delivery: Program Evaluation, Data, and Outreach).
Second, recipients may use funds for administrative costs associated with programs to respond to the public health emergency and its negative economic impacts, including programs that are not funded by SLFRF or not federally funded. In other words, Treasury recognizes that responding to the public health and economic impacts of the pandemic requires many programs and activities, some of which are not funded by SLFRF. Executing these programs effectively is a component of responding to the public health and negative economic impacts of the pandemic.
Finally, recipients may use funds for direct and indirect administrative costs for administering the SLFRF program and projects funded by the SLFRF program. See section 186
Administrative Expenses in Program Administration Provisions for details on this eligible use category.
Effective Service Delivery: Program Evaluation, Data, and Outreach The Supplementary Information of the interim final rule provided that state, local and Tribal governments may use SLFRF funds to improve the design and execution of programs responding to the COVID-19 pandemic and to improve the efficacy of programs addressing negative economic impacts. The interim final rule included high-level guidance about how SLFRF funds could be used in this eligible use category, including the use of targeted consumer outreach, improvements to data or technology infrastructure, impact evaluations, and data analysis.
Since the publication of the interim final rule, Treasury has also released supplementary information on data analysis, evidence building, and program evaluation in the Compliance and Reporting Guidance.
Public Comment: Treasury received positive comments about the opportunity to invest in data and technology upgrades with SLFRF funds. For example, one commenter noted that investing in technology for better connectivity, coupled with software and hardware upgrades, will allow the workforce to be more productive. Treasury also received comments seeking clarification on using funds for investments in data and technology, including whether upgrading government websites to improve community outreach and investing in technologies that support social distancing were eligible uses.
Treasury Response: Governments with high capacity to use data and evidence to administer programs are more likely to be responsive to the needs of their community, more 187
transparent about their community impact, and more resilient to emergencies such as the pandemic and its economic impacts.246 Treasury recognizes that collecting high-quality data and developing community-driven, evidence-based programs requires resources to hire and build the capacity of staff, adopt new processes and systems, and use new technology and tools in order to effectively develop, execute, and evaluate programs. As such, Treasury is clarifying that recipients may use SLFRF funds toward the following non-exhaustive list of uses to address the data, evidence, and program administration needs of recipients. Additional information may be provided in the Compliance and Reporting Guidance.
• Program evaluation and evidence resources to support building and using evidence to improve outcomes, including development of Learning Agendas247 to support strategic evidence building, selection of evidence-based interventions, and program evaluations including impact evaluations (randomized control trials and quasi-experimental designs) as well as rapid-cycle evaluations, process or implementation evaluations, outcome evaluations, and cost-benefit analyses. Recipients are encouraged to undertake rigorous program evaluations when practicable, assess the impact of their programs by beneficiary demographics (including race, ethnicity, gender, income, and other relevant factors), and engage with community stakeholders (including intended beneficiaries) when developing Learning Agendas and designing evaluations to ensure that programmatic, cultural, linguistic, and historical nuances are accurately and respectfully addressed.
246 Results for America, Invest in What Works State Standard of Excellence (August 2020), https://2020state.results4america.org/2020_State-Standard-of-Excellence.pdf. 247 Learning Agendas are systematic plans to identify, prioritize, answer important questions about programs and policies using analytic techniques that are appropriate to the type of question asked. For more information on learning agendas, please see OMB Memorandum M-19-23, available at: https://www.whitehouse.gov/wp- content/uploads/2019/07/M-19-23.pdf and and OMB Memorandum M-21-27, available at:
https://www.whitehouse.gov/wp-content/uploads/2021/06/M-21-27.pdf. 188
Recipients are also encouraged to use relevant evidence Clearinghouses,248 among other sources, to assess the level of evidence for their interventions and identify evidence- based models that could be applied in their jurisdiction (meaning models with strong or moderate evidence; see Compliance and Reporting Guidance for details on these terms). • Data analysis resources to gather, assess, and use data for effective policy-making and real-time tracking of program performance to support effective implementation of SLFRF-funded programs and programs that respond to the public health emergency and its negative economic impacts, or which households, small businesses, or impacted industries are accessing during the pandemic that are funded by other sources. These resources include but are not limited to data gathering, data cleaning, data analysis, data infrastructure, data management, data sharing, data transparency, performance management, outcomes-based budgeting, outcomes-based procurement, and other data needs. Treasury encourages the disaggregation of data to identify disparate program impacts and the use of cross-jurisdictional data sharing to better measure and implement government programs.
• Technology infrastructure resources to improve access to and the user-experience of government information technology systems, including upgrades to hardware and software as well as improvements to public-facing websites or to data management
248 Evidence Clearinghouses are databases of research in particular program areas. Frequently these Clearinghouses identify evidence-based programs, the strength of the evidence for those programs, and provide contextual or supporting information in easy to understand formats. Many federal departments have developed rigorous and helpful Clearinghouses that cover a wide range of uses enumerated in this final rule as well as other programs that may be responsive to public health or negative economic impacts of the pandemic. For more information on Clearinghouses, please see the Compliance and Reporting Guidance: U.S. Department of the Treasury , Recipient Compliance and Reporting Responsibilities, as of November 5, 2021; https://home.treasury.gov/policy - issues/coronavirus/assistance-for-state-local-and-tribal-governments/state-and-local-fiscal-recovery-funds/recipient- compliance-and-reporting-responsibilities.
189
systems, to increase public access and improve public delivery of government programs and services (including in the judicial, legislative, or executive branches). • Community outreach and engagement resources to support the gathering and sharing of information in ways that improve equity and effective implementation of SLFRF-funded programs and programs that respond to the public health emergency and its negative economic impacts, or which households, small businesses, or impacted industries are accessing during the pandemic that are funded by other sources. These methods include but are not limited to community meetings, online surveys, focus groups, human-centered design activities, behavioral science techniques, and other community engagement tools. • Capacity building resources to support using data and evidence in designing, executing, and evaluating programs, including hiring public sector staff, contractors, academics, consultants, and others with expertise in evaluation, data, technology, and community engagement as well as technical assistance support for public sector staff, staff of subrecipients, and community partners to support effective implementation of SLFRF- funded programs and programs that respond to the public health emergency and its negative economic impacts, or which households, small businesses, or impacted industries are accessing during the pandemic that are funded by other sources.
Administrative Needs Caused or Exacerbated by the Pandemic As described in guidance and the interim final rule, SLFRF funds may be used to address administrative needs of recipient governments that were caused or exacerbated by the pandemic.
Guidance following the interim final rule included several examples of this, for example, uses of funds to address backlogs resulting from pandemic-related shutdowns (e.g., backlogs in court 190
systems).249 This also includes using funds for increased repair or maintenance needs to respond to significantly greater use of public facilities during the pandemic (e.g., increased use of parks resulting in damage or increased need for maintenance). Some commenters expressed support for the ability to use funds for these purposes. Treasury is maintaining these enumerated eligible uses in the final rule and clarifying that capital expenditures such as technology infrastructure to adapt government operations to the pandemic (e.g., video-conferencing software, improvements to case management systems or data sharing resources), reduce government backlogs, or meet increased maintenance needs are eligible.
b. CAPITAL EXPENDITURES
The interim final rule expressly permitted use of funds for a limited number of capital expenditures that mostly pertained to COVID-19 prevention and mitigation. These included capital investments in public facilities to meet pandemic operational needs, such as physical plant improvements to public hospitals and health clinics; adaptations to public buildings to implement COVID-19 mitigation tactics; ventilation improvements in congregate settings, health care settings, or other key locations; assistance to small businesses and nonprofits and aid to impacted industries to implement COVID-19 prevention or mitigation tactics, such as physical plant changes to enable social distancing. For disproportionately impacted populations and communities, the interim final rule also expressly permitted development of affordable housing to increase the supply of affordable and high-quality living units.
249 See FAQ 2.19. Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions, as of July 19, 2021; https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf. In the case of courts specifically, this includes “implementing COVID-19 safety measures to facilitate court operations, hiring additional court staff or attorneys to increase speed of case resolution, and other expenses to expedite case resolution are eligible uses.” 191
Public Comment: Many commenters supported the interim final rule’s allowance of capital expenditures in facilities to meet pandemic operational needs but requested that the final rule explicitly allow for a broader range of capital expenditures. Commenters expressed an interest in investing in equipment, real property, and facilities that they argued will yield lasting benefits beyond the SLFRF period of performance. Some commenters stated that the approach in the interim final rule limited the vast majority of capital expenditures to governments that experienced revenue loss under Sections 602(c)(1)(C) and 603(c)(1)(C) and that this approach may prevent some governments from fully meeting the needs of their residents. A few commenters argued that Treasury should limit use of funds on capital expenditures not related to addressing a direct pandemic harm, such as general economic development or workforce development, and some expressed support for generally limiting capital expenditures to those that address the needs of low-income communities and communities of color.
Many commenters requested that capital expenditures related to direct COVID-19 public health response be included as enumerated eligible uses. The requested types of expenditures include improvements and construction of hospitals and health clinics (including behavioral health clinics), as well as other health-related infrastructure improvements, such as improvements to medical equipment or public health information technology. These commenters stated that investments in health and public health systems are vital to ensuring critical infrastructure necessary to respond to continued impacts of COVID-19 or to address disparities in health, due to lack of access to health care, that contributed to disproportionate impacts of COVID-19 on some communities. Further, some commenters requested that construction or improvements of emergency management and public safety facilities be deemed eligible, citing 192
that some of these sites serve as remote vaccination sites or are otherwise crucial to the pandemic public health response.
Commenters also requested use of funds for capital expenditures that support community needs apart from health care, such as new construction or improvements to schools, affordable housing (beyond presumed disproportionately impacted communities), childcare facilities, and community centers; some suggested that all types of projects permissible under the Community Development Block Grant Program should be eligible both for policy and administrability reasons. Further, some commenters also asked for clarification as to whether parks and recreational facilities are eligible if built in certain disproportionately impacted areas, as well as public transportation infrastructure.
Finally, some commenters also requested use of funds for capital expenditures in government administration buildings, such as public courthouses, as well as technology infrastructure that would allow for remote delivery of public benefits. Others also asked about whether funds could be used to renovate vacant business district buildings or commercial spaces to spur economic recovery.
Treasury Response: Capital expenditures, in certain cases, can be appropriate responses to the public health and economic impacts of the pandemic, in addition to programs and services.
Like other eligible uses of SLFRF funds in this category, capital expenditures should be a related and reasonably proportional response to a public health or negative economic impact of the pandemic. The final rule clarifies and expands how SLFRF funds may be used for certain capital expenditures, including criteria and documentation requirements specified in this section, as applicable.
193
Treasury provides presumptions and guidelines for capital expenditures that are enumerated earlier in sections Public Health, Negative Economic Impacts, and General Provisions: Other under the Public Health and Negative Economic Impact eligible use category (“enumerated projects”), along with capital expenditures beyond those enumerated by Treasury.
In addition to satisfying the two-part framework in Standards: Designating a Public Health Impact and Standards: Designating a Negative Economic Impact for identifying and designing a response to a pandemic harm, Treasury will require projects with total expected capital expenditure costs of $1 million or greater to undergo additional analysis to justify their capital expenditure. Increased reporting requirements will be required for projects that are larger in size, as well as projects that are not enumerated as eligible by Treasury, with certain exceptions for Tribal governments discussed below. Smaller projects with total expected capital expenditures below $1 million will not be required to undergo additional analysis to justify their capital expenditure, as such projects will be presumed to be reasonably proportional, provided that they are responding to a harm caused or exacerbated by the public health emergency. These standards and documentation requirements are designed to minimize administrative burden while also ensuring that projects are reasonably proportional and supporting Treasury’s risk-based approach to overall program management and monitoring.
This section provides (1) an overview of general standards governing capital expenditures; (2) presumptions on capital expenditures, which help guide recipients in determining whether the expenditure meets the standards and the associated documentation requirements; and (3) additional standards and requirements that may apply.
194
Overview of General Standards
In considering whether a capital expenditure would be eligible under the public health and negative economic impacts eligible use category, recipients must satisfy the requirements for all uses under the public health and negative economic impacts eligible use category, including identifying an impact or harm and designing a response that addresses or responds to the identified impact or harm. Responses must be reasonably designed to benefit the individual or class that experienced the impact or harm and must be related and reasonably proportional to the extent and type of impact or harm. Recipients should consult further details on this standard provided in the sections Standards: Designating a Public Health Impact and Standards:
Designating a Negative Economic Impact under General Provisions: Structure and Standards.
In addition to the framework described above, for projects with total expected capital expenditures of $1 million or greater, recipients must complete and meet the substantive requirements of a Written Justification for their capital expenditure, except for Tribal governments as discussed below. This Written Justification helps clarify the application of this interpretive framework to capital expenditures, while recognizing that the needs of communities differ. In particular, this justification reflects the fact that the time required for a large construction project may make capital expenditures less responsive to pandemic-related needs relative to other types of responses. In addition, as discussed in section Timeline for Use of SLFRF Funds of this Supplemental Information, SLFRF funds 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 harm 195
identified. For example, construction of a new, larger public facility for the purpose of increasing the ability to socially distance generally would not be considered a reasonably proportional response compared to other less time- and resource-intensive options that may be available and would be equally or more effective. Other solutions, such as improvements in ventilation, could be made more quickly and are typically more cost effective than construction of a new, larger facility. The needs of communities differ, and recipients are responsible for identifying uses of SLFRF funds that best respond to these needs. The Written Justification recognizes this while also establishing consistent documentation and reporting to support monitoring and compliance with the ARPA and final rule. Finally, the Written Justification also reflects the fact that infrastructure projects are generally not within scope of this eligible use category. See section Uses Outside the Scope of this Category in General Provisions: Other.
As noted above, Tribal governments are not required to complete the Written Justification for projects 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 sets 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).250 This includes the requirement in certain circumstances to seek the input or approval of one or more federal agencies such the Department of the Interior, which holds fee title of Tribal Trust Lands.
250 See 25 U.S.C. 5108.
196
As a result of their limited administrative capacity and 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 for applicable capital expenditures, the associated substantive requirements continue to apply, including the requirement that a capital expenditure must be reasonably designed to benefit the individual or class that experienced the identified impact or harm and must be related and reasonably proportional to the extent and type of impact or harm. 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 the final rule.
The Written Justification should (1) describe the harm or need to be addressed; (2) explain why a capital expenditure is appropriate to address the harm or need; and (3) compare the proposed capital expenditure against alternative capital expenditures that could be made. The information required for the Written Justification reflects the framework applicable to all uses under the public health and negative economic impacts eligible use category, providing justification for the reasonable design, relatedness, and reasonable proportionality of the capital expenditure in response to the harm or impact identified.
1. Description of harm or need to be addressed: Recipients should provide a description of the specific harm or need to be addressed, and why the harm was exacerbated or caused by the public health emergency. When appropriate, recipients may provide quantitative 197
information on the extent and type of the harm, such as the number of individuals or entities affected.
2. Explanation of why a capital expenditure is appropriate: Recipients should provide an independent assessment demonstrating why a capital expenditure is appropriate to address the specified harm or need. This should include an explanation of why existing capital equipment, property, or facilities would be inadequate to addressing the harm or need 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 harm or need 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 harm without additional capital expenditure.
3. Comparison of the proposed capital expenditure against alternative capital expenditures:
Recipients should provide an objective comparison of the proposed 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. 198
Recipients that complete analyses with minimal or no quantitative data should provide an explanation for doing so.
In determining whether their proposed 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 harm identified. Recipients should generally consider the effectiveness of the capital expenditures in addressing the harm over the useful life of the capital asset and may consider metrics such as the number of impacted or disproportionately impacted 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 capital expenditure required to construct, purchase, install, or improve the capital assets intended to address the public health or negative economic impact of the public health emergency.
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 199
substantively reduces the effectiveness of the capital investment in addressing the harm identified.
As an example, a recipient considering building a new diagnostic testing laboratory to enhance COVID-19 testing capacity may consider whether existing laboratories sufficiently meet demand for COVID-19 testing, considering the demand for test results (along with their turnaround time) as well as the impact of current testing availability on the spread of COVID-19.
Recipients may also consider other public health impacts of the level of diagnostic testing capacity, for example if insufficient capacity has decreased testing for other health conditions.
The recipient may consider alternatives such as expanding existing laboratories or building a laboratory of a different size. In comparing the effectiveness of the capital expenditures, examples of factors that the recipient may consider include when the facilities will become operational and for how long; the daily throughput of COVID-19 tests; and the effect on minimizing delays in test results on the populations that such tests will serve. In comparing costs, the recipient may compare the total expected cost of the new laboratory (including costs of acquisition of real property, construction of the laboratory, and purchase of any necessary equipment needed to operationalize the lab), against the expected costs of expanding existing laboratories (whether by replacing current equipment with higher throughout devices or physically expanding space to accommodate additional capacity) or building a new laboratory of a different size, including by leasing property. As a reminder, recipients should only consider alternatives that are potentially effective and reasonably feasible.
Because, in all cases, uses of SLFRF funds to respond to public health and negative economic impacts of the pandemic must be related and reasonably proportional to a harm caused or exacerbated by the pandemic, some capital expenditures may not eligible. For example, 200
constructing a new correctional facility would generally not be a proportional response to an increase in the rate of certain crimes or overall crime as most correctional facilities have historically accommodated fluctuations in occupancy.251 In addition, construction of new congregate facilities, which would generally be expected to involve expenditures greater than $1 million, would generally not be a proportional response to mitigate or prevent COVID-19, because such construction is generally expected to be more costly than alternative approaches or capital expenditures that may be equally or more effective in decreasing spread of the disease.252 These alternatives include personal protective equipment, ventilation improvements, utilizing excess capacity in other facilities or wings, or temporary facility capacity expansions.
Large capital expenditures intended for general economic development or to aid the travel, tourism, and hospitality industries – such as convention centers and stadiums – are, on balance, generally not reasonably proportional to addressing the negative economic impacts of the pandemic, as the efficacy of a large capital expenditure intended for general economic development in remedying pandemic harms may be very limited compared to its cost.253
251 See, e.g., “Economic Perspectives on Incarceration and the Criminal Justice System,” Council of Economic Advisers (April 2016), pg. 36-43.
252 For instance, the CDC has published detailed recommendations for nursing homes, long -term care facilities, and correctional and detention facilities, on infection prevention and control. Many of these recommendations are relatively low cost, such as proper use of PPE. In addition, increasing vaccination rates among nursing home staff is among the most important ways to decrease the spread of the disease. Centers for Disease Control and Prevention, Interim Infection Prevention and Control Recommendations to Prevent SARS -CoV-2 Spread in Nursing Homes (September 10, 2021), https://www.cdc.gov/coronavirus/2019-ncov/hcp/long-term- care.html#anchor_1631030153017.
253 For instance, researchers have found no consistent positive relationship between building sports facilities and local economic development. As Siegfried and Zimbalist (2000, 103) write in a review of the literature, “independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facility construction and economic development.” John Siegfried and Andrew Zimbalist, The Economics of Sports Facilities and Their Communities, Journal of Economic Perspectives 14, no. 3 (Summer 2000): 95-114, https://www.aeaweb.org/articles?id=10.1257/jep.14.3.95. 201
Presumptions on Capital Expenditures
For administrative convenience, the final rule provides presumptions on whether a Written Justification is required – and required to be submitted to Treasury through reporting – based on the type and size of the capital expenditure, as detailed in the table below.
As discussed above, Tribal governments are not required to complete the Written Justification for applicable capital expenditures, but the associated substantive requirements continue to apply, including the requirement that a capital expenditure must be reasonably designed to benefit the individual or class that experienced the identified impact or harm and must be related and reasonably proportional to the extent and type of impact or harm.
If a project
has total
expected
capital
expenditures
of
and the use is enumerated by
Treasury as eligible, then254
and the use is beyond those
enumerated by Treasury as
eligible, then255
Less than $1
million No Written Justification required No Written Justification required Greater than
or equal to $1
million, but
less than $10
million
Written Justification required but
recipients are not required to submit
as part of regular reporting to
Treasury Written Justification required and
recipients must submit as part of
regular reporting to Treasury
$10 million or
more
Written Justification required and
recipients must submit as part of
regular reporting to Treasury
254 Whether or not a Written Justification is required, recipients should still determine that the response is re lated and reasonably proportional to the public health emergency and its negative economic impacts. Treasury recognizes that enumerated eligible uses are “related” to the public health emergency and its negative economic impacts and presumed to be reasonably proportional, except recipients pursuing projects with expected total capital expenditures equal to or greater than $1 million should still independently determine that the expenditures are a reasonably proportional response. Enumerated projects with total expected capital expenditures under $1 million receive a safe harbor and deemed to meet the related and reasonably proportional standard. 255 Whether or not a Written Justification is required, recipients should still determine that the response is relat ed and reasonably proportional to the public health emergency and its negative economic impacts. Treasury presumes that projects with total expected capital expenditures under $1 million are reasonably proportional in size to responding to the public health emergency and its negative economic impacts; however, recipients should determine that the response otherwise meets the requirements of the standard, including that the response is related to the public health emergency and its negative economic impacts.
202
In selecting these thresholds, Treasury recognized that capital expenditures vary widely in size and therefore would benefit from tiered treatment to implement eligibility standards while minimizing administrative burden, especially for smaller projects. For example, Treasury selected $1 million as a threshold for whether a recipient needs to complete a Written Justification as well as a threshold under which capital expenditures would be presumed reasonably proportional. Treasury estimates that $1 million would encapsulate the costs of a significant portion of equipment or small renovations. These types of smaller projects are often a necessary and reasonably proportional part of a response to the public health emergency; therefore, the $1 million threshold provides a simplified pathway to complete smaller projects more likely to meet the eligibility standard. At the same time, Treasury selected $10 million as the threshold for more intensive reporting requirements, estimating that projects larger than $10 million would likely constitute significant improvements or construction of mid- or large-sized facilities. As discussed above, given their scale and longer time to completion, these types of larger projects may be less likely to be reasonably proportional responses. The $10 million threshold also generally aligns with thresholds in other parts of the SLFRF program, such as for enhanced reporting on labor practices.
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 school on the land, and purchase of school equipment), or are of the same or similar type and would be utilized for a common purpose (e.g., acquisition of a fleet of ambulances that would be used for COVID- 19 emergency response). Recipients must not segment a larger project into smaller projects in 203
order to evade review. A recipient undertaking a set of identical or similar projects (e.g., development of a number of new affordable housing complexes across the recipient jurisdiction) may complete one Written Justification comprehensively addressing the entire set of projects.
Projects Enumerated as Eligible by Treasury
Under the public health and negative economic impacts eligible use category, the final rule provides a non-exclusive list of eligible uses of funding for projects that respond to the public health emergency or its negative economic impacts. Treasury has determined that these enumerated projects are related to the public health emergency and its negative economic impacts; however, recipients (other than Tribal governments) undertaking these projects with total expected capital expenditures of $1 million or greater must still complete and meet the substantive requirements of a Written Justification as part of their demonstration that the project is a related and reasonably proportional response to the harm identified. • Projects with total expected capital expenditures of under $1 million: Treasury provides a safe harbor for projects with total expected capital expenditures of less than $1 million and will not require recipients to complete, submit, or meet the substantive requirements of a Written Justification for the capital expenditure. In essence, recipients may pursue an enumerated project with total expected capital expenditures of under $1 million without having to undergo additional assessments to meet SLFRF requirements. • Projects with total expected capital expenditures of at least $1 million but under $10 million: Recipients should complete a Written Justification for the capital expenditure and make an independent assessment of whether their proposed capital expenditure meets the substantive requirements of the Written Justification. Recipients will not be required 204
to submit the Written Justification as part of regular reporting to Treasury but should keep documentation for their records.
• Projects with total expected capital expenditures of at least $10 million: Similar to the above, recipients should complete a Written Justification of the capital expenditure and make an independent assessment of whether their proposed capital expenditure meets the substantive requirements of the Written Justification. Further, recipients will be asked to submit the Written Justification as part of regular reporting to Treasury. Similar to other parts of the SLFRF program, such as on reporting on labor practices, Treasury recognizes that projects with expected total capital expenditures of at least $10 million may be less likely to meet eligibility requirements and therefore requires recipients to provide an enhanced level of information to Treasury.
Projects Beyond Those Enumerated as Eligible by Treasury
As with all uses, recipients that undertake capital expenditures beyond those enumerated as eligible by Treasury must meet the two-part framework under Standards: Designating a Public Health Impact and Standards: Designating a Negative Economic Impact under General Provisions: Structure and Standards, including the requirement that responses are related and reasonably proportional to the harm or impact identified. As part of that assessment, these recipients may also be asked to complete a Written Justification. Recipients (other than Tribal governments) are subject to the following presumptions for the Written Justification of the capital expenditure, based on the total expected capital expenditures of the project:
• Projects with total expected capital expenditures of under $1 million: Treasury provides a safe harbor for unenumerated projects with total expected capital expenditures of under 205
$1 million and will not require recipients to complete, submit, or meet the substantive requirements of a Written Justification of the capital expenditure. Recipients should still make a determination as to whether the capital expenditure is part of a response that is related and reasonably proportional to the public health emergency or its negative economic impacts.
• Projects with total expected capital expenditures of $1 million or over: Recipients should complete a Written Justification of the capital expenditure and make an independent assessment that their proposed capital expenditure meets the substantive requirements of the Written Justification. Further, recipients will be asked to submit the Written Justification as part of regular reporting to Treasury.
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 capital expenditures should complete more detailed analyses for their Written Justification, commensurate with the scale of the project.
Additional Provisions, Standards, and Definitions
Strong Labor Standards in Construction
Treasury encourages recipients to carry out projects 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 (PLAs) 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 who can demonstrate that their workforce meets high safety and training standards (e.g., 206
professional certification, licensure, and/or robust in-house training), that hire local workers and/or workers from historically underserved communities, and who 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 200, Appendix II, all contracts made by a recipient or subrecipient in excess of $100,000 with respect to a capital expenditure 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 seek information from recipients on their workforce plans and practices related to capital expenditures undertaken under the public health and negative economic impacts eligible use category with SLFRF funds. This reporting will support transparency and competition by enhancing available information on the services being provided.
207
Environmental, Uniform Guidance, and Other Generally Applicable Requirements Treasury cautions that, as is the case with all projects using SLFRF funds, all projects must comply with applicable federal, state, and local law. In the case of capital expenditures in particular, this includes environmental and permitting laws and regulations. Likewise, as with all capital expenditure projects using the SLFRF funds, projects must be completed in a manner that is technically sound, meaning that it must meet design and construction methods and use materials that are approved, codified, recognized, fall under standard or acceptable levels of practice, or otherwise are determined to be generally acceptable by the design and construction industry.
Further, as with all other uses of funds under the SLFRF program, the Uniform Guidance at 2 C.F.R. 200 applies to capital expenditures unless stated otherwise. Importantly, this includes 2 C.F.R. 200 Subpart D on post-federal award requirements, including property standards pertaining to insurance coverage, real property, and equipment; procurement standards; sub- recipient monitoring and management; and record retention and access.
Definitions
Treasury adopts several definitions from the Uniform Guidance at 2 C.F.R. 200.1 under this section, including for capital expenditures, capital assets, equipment, and supplies.
Per the Uniform Guidance, the term “capital expenditures” means “expenditures to acquire capital assets or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life.” The term “capital assets” means “tangible or 208
intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with [Generally Accepted Accounting Principles].” Capital assets include lands, facilities, equipment, and intellectual property. Equipment means “tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-Federal entity for financial statement purposes, or $5,000.” Supplies, which means all tangible personal property other than those included as “equipment,” are not considered capital expenditures.
Recipients may also use SLFRF funds for pre-project development costs that are tied to or reasonably expected to lead to an eligible capital expenditure. For example, pre-project costs associated with planning and engineering for an eligible project are considered an eligible use of funds.
c. DISTINGUISHING SUBRECIPIENTS VERSUS BENEFICIARIES
Under the interim final rule, state, local, and Tribal governments that receive a federal award directly from a federal awarding agency, such as Treasury, are designated as “recipients,” and state, local, and Tribal governments are authorized to transfer funds to other entities, including private entities like nonprofits. The interim final rule stated that, “[a] transferee receiving a transfer from a recipient under sections 602(c)(3) and 603(c)(3) will be a subrecipient. Subrecipients are entities that receive a subaward from a recipient to carry out a program or project on behalf of the recipient with the recipient’s Federal award funding.” For funds transferred to a subrecipient, the interim final rule noted that “[r]ecipients continue to be responsible for monitoring and overseeing the subrecipient’s use of SLFRF funds 209
and other activities related to the award to ensure that the subrecipient complies with the statutory and regulatory requirements and the terms and conditions of the award. Recipients also remain responsible for reporting to Treasury on their subrecipients’ use of payments from the SLFRF funds for the duration of the award.”
Public Comment: Treasury received many comments requesting clarification about which entities qualify as subrecipients and are, in turn, subject to subrecipient monitoring and reporting requirements. For example, commenters sought clarification about whether a nonprofit that received a grant to provide services under a program to carry out an enumerated eligible use would qualify as a subrecipient and be subject to subrecipient monitoring and reporting requirements. Similarly, commenters also wondered if a nonprofit that received a grant in recognition of experiencing a negative economic impact of the public health emergency would also be a subrecipient and subject to subrecipient reporting requirements.
Treasury Response: Treasury is clarifying the distinction between a subrecipient and beneficiary in the final rule. The Uniform Guidance definitions for subaward and subrecipient inform Treasury’s distinction between subrecipients and beneficiaries.
First, per 2 CFR 200.1 of Uniform Guidance “[s]ubaward means an award provided by a pass-through entity256 to a subrecipient for the subrecipient to carry out part of a Federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a Federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract.”
256 In this context, a pass-through entity means a recipient of SLFRF funds. 210
Further, 2 CFR 200.1 of the Uniform Guidance defines a subrecipient, in that “[s]ubrecipient means an entity, usually but not limited to non-Federal entities, that receives a subaward from a pass-through entity to carry out part of a Federal award; but does not include an individual that is a beneficiary of such award. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency.” Treasury is aligning the definition of subrecipient in the final rule with the definition of subrecipient in the Uniform Guidance.
Treasury is maintaining the monitoring and subrecipient reporting requirements outlined in the final rule. Per 2 CFR 200.101 (b)(2) of the Uniform Guidance, the terms and conditions of federal awards flow down to subawards to subrecipients. Therefore, non-federal entities, as defined in the Uniform Guidance, must comply with the applicable requirements in the Uniform Guidance regardless of whether the non-federal entity is a recipient or subrecipient of a federal award. This includes requirements such as the treatment of eligible uses of funds, procurement, and reporting requirements.
The Uniform Guidance definitions for both subaward and subrecipient specify that payments to individuals or entities that are direct beneficiaries of a federal award are not considered subrecipients. The final rule adopts this definition of a beneficiary and outlines that households, communities, small businesses, nonprofits, and impacted industries are all potential beneficiaries of projects carried out with SLFRF funds. Beneficiaries are not subject to the requirements placed on subrecipients in the Uniform Guidance, including audit pursuant to the Single Audit Act and 2 CFR Part 200, Subpart F or subrecipient reporting requirements.
The distinction between a subrecipient and a beneficiary, therefore, is contingent upon the rationale for why a recipient is providing funds to the individual or entity. If the recipient is providing funds to the individual or entity for the purpose of carrying out a SLFRF program or 211
project on behalf of the recipient, the individual or entity is acting as a subrecipient. Acting as a subrecipient, the individual or entity is subject to subrecipient monitoring and reporting requirements. Conversely, if the recipient is providing funds to the individual or entity for the purpose of directly benefitting the individual or entity as a result of experiencing a public health impact or negative economic impact of the pandemic, the individual or entity is acting as a beneficiary. Acting as a beneficiary, the individual or entity is not subject to subrecipient monitoring and reporting requirements.
d. USES OUTSIDE THE SCOPE OF THIS CATEGORY
Summary of the Interim Final Rule and Final Rule Structure In the interim final rule, Treasury noted that certain uses of funds are not permissible under the eligible use category of responding to the public health and negative economic impacts of the pandemic. In the final rule, these uses remain impermissible, but Treasury has re- categorized where they are addressed to increase clarity.
Specifically, the interim final rule provided that the following uses of funds are not eligible under this eligible use category: contributions to rainy day funds, financial reserves, or similar funds; payment of interest or principal on outstanding debt instruments; fees or issuance costs associated with the issuance of new debt; and satisfaction of any obligation arising under or pursuant to a settlement agreement, judgment, consent decree, or judicially confirmed debt restructuring plan in a judicial, administrative, or regulatory proceeding, except to the extent the judgment or settlement requires the provision of services that would respond to the COVID-19 public health emergency. These uses of funds remain ineligible under the final rule; Treasury has re-categorized these issues to the section Restrictions on Use, which describes restrictions that 212
apply to all eligible use categories, to clarify that these uses are not eligible under any eligible use category of SLFRF. Treasury responds to public comments on this issue in the section Restrictions on Use.
As noted above, the interim final rule also posed several questions on what other types of services or costs Treasury should consider as eligible uses to respond to the public health and negative economic impacts of COVID–19, including in disproportionately impacted communities. In this section, Treasury addresses proposed uses of funds suggested by commenters that Treasury has not included as enumerated eligible uses of funds in this eligible use category.
General Eligible Uses
Public Comment: Commenters proposed a wide variety of additional recommended enumerated eligible uses in all sections of the public health and negative economic impacts eligible use category, including in impacted and disproportionately impacted communities. The proposed additional uses included general categories of services (e.g., legal and social services, long-term investments to remediate long-term disparities, response to natural disasters). Other suggested uses of funds respond to needs widely experienced across the country (e.g., access to and affordability of health insurance). Finally, other suggested uses of funds were highly specific (e.g., healthcare equipment for a specific health condition, fire hydrants, weather alert systems) or most applicable to the particularized needs to certain populations or geographic areas of the United States (e.g., senior citizens, immigrants, formerly incarcerated individuals, responding to environmental issues in certain geographic regions). Other commenters generally requested a high degree of flexibility to respond to the particular needs of their communities. 213
Treasury Response: Given the large number and diversity of SLFRF recipients, Treasury has aimed to include as enumerated eligible uses programs, services, and capital expenditures that respond to public health and negative economic impacts of the pandemic experienced widely in many jurisdictions across the country, making it clear and simple for recipients to pursue these enumerated eligible uses under the final rule. This provides enumerated eligible uses that many recipients may want to pursue, while including uses that are responsive to the pandemic’s impacts across the diverse range of SLFRF recipients. In the final rule, Treasury has clarified several additional uses that generally respond to pandemic impacts experienced broadly across jurisdictions and populations.
Treasury has not chosen to include as enumerated uses all uses proposed by commenters; given the significant range, and in some cases highly specific nature, of the proposed uses Treasury was not able to assess that the proposed uses would respond to negative economic impacts experienced generally across the country, supporting an enumerated eligible use available to all recipients presumptively.
However, Treasury emphasizes that the enumerated eligible uses are non-exhaustive and that other uses, beyond those enumerated, are eligible. Treasury recognizes that the impacts of the pandemic vary over time, by jurisdiction, and by population; as such, the final rule provides flexibility for recipients to identify other public health or negative economic impacts to additional households, small businesses, or nonprofits, including classes of these entities, and pursue programs and services that respond to those impacts. Treasury also notes that some populations are presumed to be impacted or disproportionately impacted by the pandemic, and thus eligible for responsive services; these presumed eligible populations may encompass many 214
individuals in the specific populations for whom commenters recommended services. For details on these issues, see section General Provisions: Structure and Standards.
Infrastructure, Community Development, and General Economic Development Some potential additions to enumerated eligible uses were also recommended by several commenters each but are not included as enumerated eligible uses in the final rule.
Public Comment: Infrastructure: In the interim final rule, Treasury noted that a “general infrastructure project, for example, typically would not be included [in this eligible use category] unless the project responded to a specific pandemic public health need.” Numerous commenters requested that Treasury permit investments in infrastructure as a response to the public health and negative economic impacts of the pandemic. While these comments most commonly recommended that constructing and maintaining roads and surface transportation infrastructure be eligible, the proposed uses for infrastructure ranged widely and included parking lots, bridges, traffic management infrastructure, solid waste disposal facilities, and utility infrastructure (outside of water, sewer, and broadband).
Many commenters argued that infrastructure development and maintenance is a pressing need in their communities and that their communities had less need for water, sewer, and broadband infrastructure or other eligible uses to respond to the public health and negative economic impacts of the pandemic. Other commenters argued that these uses would stimulate the economy, attract businesses, or allow for tourist movement; these commenters argued that, by generally supporting a stronger economy or facilitating conditions that are more conducive to business activity and tourism, these uses respond to the negative economic impacts of the pandemic.
215
Treasury Response: In the final rule, Treasury is maintaining the approach under the interim final rule that general infrastructure projects, including roads, streets, and surface transportation infrastructure, would generally not be eligible, unless the project responded to a specific pandemic public health need or a specific negative economic impact.
The ARPA expressly includes infrastructure if it is “necessary” and in water, sewer, or broadband, suggesting that the statute contemplates only those types of infrastructure. Further, responding to the public health and negative economic impacts of the pandemic requires identifying whether, and the extent to which, there has been a harm that resulted from the COVID-19 public health emergency and whether, and the extent to which, the use would respond or address this harm. Uses of funds intended to generally grow the economy and therefore enhance opportunities for workers and businesses would not be an eligible use, because such assistance is not reasonably designed to impact individuals or classes that have been identified as having experienced a negative economic impact. In other words, there is not a reasonable connection between the assistance provided and an impact on the beneficiaries. Such an activity would be attenuated from and thus not reasonably designed to benefit the households that experienced the negative economic impact.
Note, however, that Treasury has clarified that capital expenditures that are related and reasonably proportional to responding to the public health and economic impacts of the pandemic are eligible uses of funds, in addition to programs and services; for details on eligibility criteria for capital expenditures, see section Capital Expenditures in General Provisions: Other.
Public Comment: Community Development Block Grant: Several commenters recommended that Treasury enumerate as eligible uses those eligible under the Department of 216
Housing and Urban Development’s Community Development Block Grant (CDBG) or the Housing and Community Development Act of 1974, which established the CDBG program.
Commenters requested that these uses be eligible either to respond to the negative economic impacts of the pandemic, or in the alternate the disproportionate negative economic impacts of the pandemic in certain communities. Under the CDBG program, recipient governments may undertake a wide range of community and economic development services and projects.
Commenters reasoned that many state and local governments are familiar with this program, and that aligning to its eligible uses may help recipients easily understand and pursue eligible projects. Commenters also noted that Treasury had chosen to align with existing federal programs in other eligible use categories, namely water infrastructure, in the interim final rule.
Treasury Response: In the final rule, Treasury is not including all categories of projects permissible under CDBG as enumerated eligible uses to respond to the public health and negative economic impacts of the pandemic. Because CDBG permits such a broad range of activities, including services to individual households, communities, small businesses, general economic development activities, and capital expenditures, Treasury determined that it was more appropriate to assess the underlying types of projects eligible within CDBG and whether each type of project responds to the negative economic impacts of the pandemic. In other words, Treasury considered whether various types of community and economic development projects respond to the impacts of the pandemic in different communities and circumstances. In the final rule, Treasury addresses the eligibility of these various types of projects in each relevant eligible use category within public health and negative economic impacts under SLFRF, including assistance for impacted households, disproportionately impacted households, disproportionately impacted small businesses, and capital expenditures.
217
Public Comment: General Economic Development: Treasury provided guidance following the interim final rule that general economic development or workforce development would generally not be eligible as it does not respond to a negative economic impact of the COVID-19 public health emergency.
Some commenters recommended that Treasury expand enumerated eligible uses to include general economic development activities, beyond those that respond to negative economic impacts of the pandemic, such as creating an economic development strategy for the jurisdiction’s overall economic growth, creating a general workforce development strategy, or providing funds to businesses that did not experience negative economic impacts to carry out economic development activities or to incentivize the addition or retention of jobs. Commenters supportive of assistance to businesses for general economic development activities argued that subsidies to businesses increase job growth and that, in some cases, assistance to companies that excelled during the public health emergency would help create more job opportunities for workers or expand the jurisdiction’s tax base and produce funds to support government services.
In contrast, other commenters argued that academic research consistently finds that economic development subsidies have a negligible, or even negative, economic effect, citing research findings to this effect.257
257 See, e.g., Matthew D. Mitchell et al., The Economics of a Targeted Economic Development Subsidy (Arlington, VA: Mercatus Center at George Mason University, 2019), 5, available at https://www.mercatus.org/publications/government-spending/economics-targeted-economic-development-subsidy; Timothy J. Bartik, Who Benefits from Economic Development Incentives? How Incentive Effects on Local Incomes and the Income Distribution Vary with Different Assumptions about Incentive Policy and the Local Economy (Upjohn Institute Technical Report No. 13-034, W.E. Upjohn Institute for Employment Research, March 1, 2018), available at: https://research.upjohn.org/up_technicalreports/34/; Cailin Slattery and Owen Zidar, Evaluating State and Local Business Tax Incentives, Journal of Economic Perspectives 34, no. 2 (2020): 90 –118, available at:
https://www.aeaweb.org/articles?id=10.1257/jep.34.2.90; Kenneth Thomas, The State of State and Local Subsidies to Business (Mercatus Policy Brief, Mercatus Center at George Mason University, Arlington, VA, October 2019), available at: https://www.mercatus.org/system/files/thomas_-_policy_brief_- _the_state_of_state_and_local_subsidies_to_business_-_v1.pdf; Dennis Coates, Growth Effects of Sports Franchises, Stadiums, and Arenas: 15 Years Later (Mercatus Working Paper, Mercatus Center at George Mason
218
Treasury Response: In the final rule, Treasury maintains the interim final rule’s approach that general economic development or workforce development, meaning activities that do not respond to negative economic impacts of the pandemic and rather seek to more generally enhance the jurisdiction’s business climate, would generally not be eligible under this eligible use category. As noted above, to identify an eligible use of funds under this category, a recipient must identify a beneficiary or class of beneficiaries that experienced a harm or impact due to the pandemic, and eligible uses of funds must be reasonably designed to respond to the harm, benefit the beneficiaries that experienced it, and be related and reasonably proportional to that harm or impact.
As noted above, recipients should analyze eligible uses based on the beneficiary of the assistance, and recipients may not provide assistance to small businesses or impacted industries that did not experience a negative economic impact. Provision of assistance to a business that did not experience a negative economic impact, under the theory that such assistance would generally grow the economy and therefore enhance opportunities for workers, would not be an eligible use, because such assistance is not reasonably designed to impact individuals or classes that have been identified as having experienced a negative economic impact. In other words, there is not a reasonable connection between the assistance provided and an impact on the beneficiaries. Such an activity would be attenuated from and thus not reasonably designed to benefit the households that experienced the negative economic impact. Research cited by some
University, Arlington, VA, September 2015), available at: https://www.mercatus.org/system/files/Coates -Sports- Franchises.pdf; Dennis Coates and Brad R. Humphreys, Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events?, Econ Journal Watch 5, no. 3 (2008): 294–315, available at:
https://econjwatch.org/articles/do-economists-reach-a-conclusion-on-subsidies-for-sports-franchises-stadiums-and- mega-events; Matthew D. Mitchell, Daniel Sutter, and Scott Eastman, The Political Economy of Targeted Economic Development Incentives, Review of Regional Studies 48, no. 1 (2018): 1 –9, available at:
https://www.mercatus.org/publications/corporate-welfare/political-economy-targeted-economic-development- incentives.
219
commenters finding that business subsidies have limited or negative economic impact also suggests that such a response may not be reasonably designed to benefit households and other entities impacted by the pandemic. Similarly, planning activities for an economic development or workforce strategy regarding general future economic growth do not provide a program, service, or capital expenditure that responds to negative economic impacts of the pandemic.
However, Treasury notes that the final rule includes as enumerated eligible uses many types of assistance that respond to negative economic impacts of the pandemic and may produce economic development benefits. For example, see sections Assistance to Unemployed Workers, Assistance to Small Businesses, and Capital Expenditures.
B. PREMIUM PAY
Background and Summary of the Interim Final Rule
Sections 602(c)(1)(B) and 603(c)(1)(B) of the Social Security Act, as added by the ARPA, provide that SLFRF funds may be used “to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the . . . government that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work.” Premium pay is designed to compensate workers that, by virtue of their employment, were forced to take on additional burdens and make great personal sacrifices as a result of the COVID-19 pandemic. Premium pay can be thought of as hazard pay by another name.258
258 See U.S. Department of Labor, Hazard Pay, https://www.dol.gov/general/topic/wages/hazardpay (last visited October 18, 2021).
220
During the public health emergency, employers’ policies on COVID-19-related premium pay or hazard pay have varied widely, with many essential workers not yet compensated for the heightened risks they have faced and continue to face.259 Many of these workers earn lower wages on average and live in socioeconomically underserved communities as compared to the general population.260 A recent study found that 25 percent of essential workers were estimated to have low household income, with 13 percent in high-risk households.261 The low pay of many essential workers makes them less able to cope with the financial consequences of the pandemic or their work-related health risks. As Americans return to work and governments relax certain rules, essential workers will continue to bear the brunt of the risk of maintaining the ongoing operation of vital facilities and services. The added health risk to essential workers is one prominent way in which the pandemic has amplified pre-existing socioeconomic inequities.
Premium pay is designed to address the disparity between the critical services provided by and the risks taken by essential workers and the relatively low compensation they tend to receive.
The interim final rule established a three-part framework for recipients seeking to use SLFRF funds for premium pay. First, to receive premium pay one must be an eligible worker.
Second, an eligible worker must also perform essential work. Finally, premium pay must respond to workers performing essential work during the COVID-19 public health emergency. Most of the comments received by Treasury pertaining to premium pay related to these three requirements. Comments also addressed the definition of premium pay generally and posed questions regarding premium pay program structuring. This section responds to the comments by
259 Economic Policy Institute, Only 30% of those working outside their home are receiving hazard pay (June 16, 2020), https://www.epi.org/press/only-30-of-those-working-outside-their-home-are-receiving-hazard-pay-black-and- hispanic-workers-are-most-concerned-about-bringing-the-coronavirus-home/. 260 McCormack, supra note 61.
261 Id.
221
addressing the three requirements in turn, then the overall definition of premium pay and, finally, program structure.
Eligible Workers
The ARPA defines “eligible workers” as “those workers needed to maintain continuity of operations of essential critical infrastructure sectors and additional sectors as each . . . [government] may designate as critical to protect the health and wellbeing of [its] residents.” The interim final rule supplemented this definition by identifying a list of “essential critical infrastructure sectors” whose workers are eligible workers, based on the list of sectors in the HEROES Act, a bill introduced in the House of Representatives in 2020 that would have provided premium pay to essential workers.262 In addition to the critical infrastructure sectors defined in the interim final rule, the chief executive (or equivalent) of a recipient government may designate additional non-public263 sectors as critical so long as doing so is necessary to protecting the health and wellbeing of the residents of such jurisdiction.
Public Comment: Treasury received multiple comments on the definition of “eligible worker” included in the interim final rule. Many commenters agreed with the definition of eligible worker adopted by Treasury. Other commenters sought clarification about or changes to the definition of eligible worker, including the definition of eligible sectors, the inclusion of government workers in the definition of eligible workers, and the process for designating additional non-public sectors as eligible.
262 See H.R. 6800, 116th Cong. (2020).
263 Note that the sectors defined in the interim final rule already include all state, local, and Tribal government employees.
222
Some commenters asked Treasury to change how it identifies eligible sectors, including suggestions to add to or subtract from the list of eligible sectors. For example, some commenters asked Treasury to consider using Bureau of Labor Statistics (BLS)-Standard Occupational Classifications to identify specific sectors or occupations, in contrast to the approach taken in the interim final rule, which included a mixture of economic sectors, industries, and occupations.
Many commenters asked Treasury to explicitly clarify that a particular industry or occupation is covered by the definition of "essential critical infrastructure sector." Some of these commenters represented public employees, e.g., employees of facilities and public works; public utilities; courthouse employees; police, fire, and emergency medical services; and waste and wastewater services. Others were a mixture of public and private sector employees, e.g., coroners and medical examiners; transportation infrastructure (specifically electric vehicle infrastructure and supply equipment); electric utilities, natural gas, and steam supply; and grocery employees.
Other commenters requested that Treasury prohibit certain occupations currently included in the eligible workers definition (e.g., police and corrections officers) from receiving premium pay for performance of regular duties.
Commenters also asked Treasury to clarify which government workers are included in the definition of eligible workers. The interim final rule included as an essential critical infrastructure sector, “any work performed by an employee of a State, local, or Tribal government.” Some commenters requested that Treasury adopt a definition of eligible worker that includes all employees of the recipient government; however, all public employees of state, local, and Tribal governments are already included in the interim final rule definition of “eligible worker.” Commenters asked whether this includes governments that did not receive SLFRF funds (i.e., “non recipient governments”). Many commenters from Tribal governments requested 223
that the definition of eligible worker, which includes “any work performed by an employee of a . . . Tribal government,” also include an employee of a “Tribal enterprise” to remove uncertainty regarding which employees are included.
Finally, commenters made suggestions for the process by which the chief executive (or equivalent) of a recipient government may designate additional non-public sectors as critical.
Commenters asked that Treasury adopt a requirement that Treasury must approve or deny any additional non-public sector identified by the chief executive of a recipient government prior to implementation of the recipient’s program.
Some commenters asked Treasury to clarify whether their chief executive (or equivalent) could designate particular, and in some cases all, employees of the recipient government as eligible for premium pay.
Treasury Response: In the final rule, Treasury will preserve the definition of “eligible worker” as it was defined in the interim final rule with minor modifications to clarify that all public employees of recipient governments are already included in the interim final rule definition of “eligible worker.” A more specific eligibility system (e.g., linking eligibility to specific occupational or industry codes) would have provided more certainty but would have been much more rigid. In contrast, the current definition is flexible enough to give recipients the ability to tailor their premium pay programs to meet their needs while ensuring that programs focus on sectors where workers were forced to shoulder substantial risk as a result of the COVID-19 pandemic. Furthermore, the critical infrastructure sectors defined in the interim final rule already include many of the occupations that commenters requested be added. For example, Treasury received many comments from public workers asking to be included in the definition of “eligible worker” even though these workers already fall within the scope of “any work 224
performed by an employee of a State, local, or Tribal government.” Treasury has clarified in the final rule that the chief executive’s discretion to designate additional sectors as critical relates only to “non-public” sectors, since all public employees of recipient governments are already included in the definition of “eligible worker.” While all such public employees are “eligible workers” and the chief executive (or equivalent) of a recipient government may designate additional non-public sectors as critical, in order to receive premium pay, these workers must still meet the other premium pay requirements (e.g., performing essential work).
Treasury recognizes that the list of “essential critical infrastructure sectors” includes both occupations and sectors. Recipients, if uncertain which occupations are included in a critical infrastructure sector, may consult government occupational classifications if helpful but are not required to do so.264 Furthermore, a recipient government does not need to submit to Treasury for approval its designation of a sector as essential critical infrastructure; rather, Treasury will defer to the reasonable interpretation of the recipient government and the discretion of the recipient’s chief executive in making such designations. If a recipient is unsure if a non-public sector is covered by the definition in the final rule,265 the chief executive (or equivalent) of a recipient government may also identify the non-public sector as critical so long as the chief executive deems the non-public sector necessary to protecting the health and wellbeing of residents.
Treasury has, where possible, clarified the definition of “essential critical infrastructure sectors.” For instance, Treasury has clarified in the final rule that work performed by an employee of a Tribal government includes an employee of a Tribal enterprise and discussed in this
264 See, e.g., sources such as Bureau of Labor Statistics, Occupational Outlook Handbook, which provide information on which professions or occupations are typically included in interpretations of a sector, https://www.bls.gov/ooh/.
265 Public sector workers are “eligible workers” under the interim final rule and final rule. 225
Supplementary Information how a recipient may qualify other non-public sectors as essential critical infrastructure.
Essential Work
The interim final rule defined “essential work” as work that (1) is not performed while teleworking from a residence and (2) involves either (i) regular, in-person interactions with patients, the public, or coworkers of the individual that is performing the work or (ii) regular physical handling of items that were handled by, or are to be handled by, patients, the public, or coworkers of the individual that is performing the work. Treasury adopted this definition of essential work to ensure that premium pay is targeted to workers that faced or face heightened risks due to the character of their work during a pandemic.
Public Comment: Some commenters found the definition unclear and asked Treasury to clarify what constitutes “essential work.” Others disagreed with the essential work test altogether, arguing that it forces recipients to distinguish between essential and non-essential employees, which may be difficult to do. Accordingly, these commenters asked Treasury to allow recipients to determine which workers qualify as essential. Treasury also received several requests that specific occupations be explicitly deemed essential, including all public employees, veterinarians, election administrators, detention staff and sheriff’s deputies, and employees of utilities, such as electric power, natural gas, steam supply, water supply, and sewage removal.
Several commenters requested that Treasury not distinguish between remote and in- person work or amend the standard so that employees providing essential services would still be eligible even if they worked remotely. Finally, a few commenters requested clarification as to the 226
definition of “regular” in-person interactions and whether Treasury could clarify which job functions merit more (or less) premium pay.
Treasury Response: Treasury is maintaining the definition of “essential work” in the final rule without modification. The test adopted in the interim final rule was designed to compensate workers facing disproportionate risk due to the pandemic. COVID-19 is transmitted through person-to-person interactions, and therefore, workers with regular in-person interactions are the primary group facing increased health risks. Although COVID-19 is not transmitted primarily by people handling items, such work may present increased risk in certain cases, and the final rule maintains the interim final rule’s inclusion of such work in order to give recipient governments the flexibility to include workers performing such work as they determine appropriate. Changing the test as some commenters suggested, e.g., by eliminating the in-person work requirement or allowing recipients to designate which employees are essential, even if not working in person, would no longer focus the program on workers taking on additional health risks and instead allow premium pay to be awarded to individuals who experienced relatively little risk of exposure to COVID-19. To maintain flexibility, Treasury is not defining the term “regular” with regard to in-person interactions, allowing recipients to develop programs based on the specific workforce to be served and local circumstances. Generally speaking, however, recipients are encouraged to consider an eligible worker’s risk of exposure in designing premium pay programs.
Respond To
As required by the ARPA, the interim final rule required that premium pay programs “respond to” eligible workers performing essential work during the COVID-19 public health 227
emergency. Premium pay responds to eligible workers performing essential work if it prioritizes low- and moderate-income persons, given the significant share of essential workers that are low- and moderate-income and may be least able to bear added costs associated with illness. The level of the award limit—up to $13 per hour not to exceed $25,000 in aggregate—in the ARPA supports this reasoning.
Accordingly, the interim final rule required written justification for how premium pay to certain higher-income workers responds to eligible workers performing essential work: if a recipient (or grantee) uses SLFRF funds to provide premium pay to an employee and the pay or grant would increase a worker’s total pay above 150 percent of their residing state or county’s average annual wage for all occupations, as defined by the BLS Occupational Employment and Wage Statistics, whichever is higher, on an annual basis, then the recipient must provide, whether for themselves or on behalf of a grantee, written justification to Treasury detailing how the award responds to eligible workers performing essential work.
Public Comment: Treasury received numerous comments on the wage threshold and the written justification requirement. Several commenters supported the threshold as a way to encourage recipients to target premium pay to lower-income, eligible workers. Some commenters even asked Treasury to make the wage threshold a firm restriction, above which an eligible worker could not receive premium pay. Others agreed with the threshold but also requested flexibility to use existing worker classifications as an administratively simple way to identify workers for whom premium pay would be responsive. For instance, a few commenters asked Treasury to allow recipients or grantees to presume that premium pay “responds to” eligible workers performing essential work when it is provided to employees who are not exempt 228
from the Fair Labor Standards Act (FLSA) overtime provisions — a test that employers are routinely required to apply.266
In contrast, several commenters disagreed with the threshold and the requirement for written justification. A few commenters thought the threshold was too low to capture employees in certain critical infrastructure sectors (e.g., public safety, waste collection) and that it did not sufficiently account for the variance in economic need across different geographic areas and family structures. Some smaller communities argued that the threshold was difficult to calculate and apply.
Other commenters proposed revisions for how the threshold is calculated. For instance, a few commenters asked Treasury to consider using alternative earnings measures such as median income. Similarly, another commenter asked Treasury to consider the incomes of workers with different levels of seniority in developing any income thresholds for permitting or reporting on premium pay.
Finally, there was also some uncertainty as to the threshold and the requirement for written justification. Some commenters interpreted the threshold as a hard cap on who was eligible for premium pay, which is not the case. Relatedly, some commenters also requested further guidance on what recipients should include in the written justification submitted to the Secretary.
Treasury Response: The final rule makes some modifications to the determination of when premium pay “responds to” eligible workers performing essential work during the public health emergency. Under the interim final rule, premium pay was responsive if either the workers’ pay was below a wage threshold or, if the pay was above a wage threshold, the
266 See generally 29 U.S.C. 207(a); U.S. Department of Labor, Overtime Pay Requirements of the FLSA (Fact Sheet No. 23), https://www.dol.gov/agencies/whd/fact-sheets/23-flsa-overtime-pay. 229
recipient submitted written justification to Treasury explaining how the premium pay was responsive. The final rule retains these two means of establishing premium pay in response to workers performing essential work and adds an additional means of demonstrating that premium pay is responsive. Under the final rule, a recipient may also show that premium pay is responsive by demonstrating that the eligible worker receiving premium pay is not exempt from the FLSA overtime provisions.267 This change will expand the number of workers eligible to receive premium pay268 and does not require recipients to provide written justification to Treasury regarding the workers who are not exempt from the FLSA overtime provisions, making the program easier to administer for recipients. Incorporating this change further simplifies application of the final rule for recipients because Treasury understands that most employers, public and private, are familiar with and are routinely required to apply the FLSA.