Treasury Ready to Send Billions to States for Broadband Projects

Friday, September 24, 2021

Weekly Digest

Treasury Ready to Send Billions to States for Broadband Projects

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Round-Up for the Week of September 20-24, 2021

Kevin Taglang
Taglang

This week, the Department of the Treasury released guidance for the Coronavirus Capital Projects Fund program established by the American Rescue Plan Act of 2021. The program allocates $10 billion for eligible governments to carry out critical capital projects that directly enable work, education, and health monitoring, including remote options. Projects eligible for funding must be designed to address a critical need that results from, or was made apparent or exacerbated by, the COVID-19 public health emergency. A key priority of this program is to make funds available to recipients that would like to make investments in high-quality, affordable broadband infrastructure and other digital connectivity technologies.

Who is Eligible for Coronavirus Capital Projects Fund Support?

Each of the 50 states, the District of Columbia, and Puerto Rico are eligible for Coronavirus Capital Projects Fund Support along with seven territories and “freely associated states”: the United States Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. Also, any Tribal government that is the recognized governing body of any Indian or Alaska Native tribe, band, nation, pueblo, village, community, component band, or component reservation may apply for support. 

Recipients of Capital Projects Fund support may award funds to subrecipients, such as municipalities or counties, non-profits, or private entities. Subrecipients may include co-operatives, electric utilities, and other entities that build or operate broadband networks, including networks that are owned, operated by, or affiliated with local governments.

The allocation of funds to the states and territories has already been determined. (You can view allocations here.) States must specify the amount of Capital Projects Fund grant funding that they wish to receive, not to exceed their allocated amount.

What Can Coronavirus Capital Projects Fund Support Be Used For?

To be eligible for Capital Projects Fund grant funds, a capital project must:

  1. Invest in capital assets designed to directly enable work, education, and health monitoring;
  2. Be designed to address a critical need that resulted from, or was made apparent or exacerbated by, the COVID-19 public health emergency; and
  3. Be designed to address a critical need of the community to be served by it.

Although a variety of projects might meet the criteria above, there are three types of “presumptively eligible projects”: 

1. Broadband Infrastructure Projects

  • The construction and deployment of broadband infrastructure projects are eligible for funding under the Capital Projects Fund program if the infrastructure is designed to deliver, upon project completion, service that reliably meets or exceeds symmetrical download and upload speeds of 100 Mbps.(1)
  • Treasury encourages recipients to focus on projects that will achieve last-mile connections. Recipients considering funding middle-mile projects are encouraged to have commitments in place to support new and/or improved last-mile service.
  • Recipients are encouraged to prioritize investments in fiber-optic infrastructure where feasible, as such advanced technology better supports future needs.
  • Treasury encourages recipients to prioritize projects that involve broadband networks owned, operated by or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to generate profits and with a commitment to serving entire communities.
  • Treasury strongly encourages that the chief executive of the eligible applicant and/or the authorized representative consult with the statewide entity or office that oversees broadband planning and implementation, where such an entity or office exists, when planning for the use of Capital Projects Fund grant funds.
  • Recipients are encouraged to address affordability as a barrier to full use of the internet when developing their plans. Affordability of broadband is necessary to directly enable its use by all Americans. Therefore, when selecting projects for Capital Projects Fund grant funding, recipients are required to consider whether the broadband service options offered by recipients of Capital Projects Fund grant funding will be affordable to their target markets in the proposed service area.
  • Recipients are also encouraged to consult with the community as part of the process they undertake to consider affordability and are required to publish the description of their process for considering affordability in their project selection process.
  • Recipients are encouraged to require that services provided by a Capital Projects Fund-funded project include at least one low-cost option offered at speeds that are sufficient for a household with multiple users to simultaneously telework and engage in remote learning.
  • Recipients will be required to report pricing data as part of program performance and monitoring.
  • Recipients are also required to ensure that the service provider for a completed project participate in federal programs that provide low-income consumers with subsidies on broadband internet access services.
    • Initially, recipients will be required to ensure that completed service offerings funded by the Capital Projects Fund allow subscribers in the service area to utilize the Federal Communications Commission’s Emergency Broadband Benefit Program.
    • Treasury will identify any other program(s) that service providers must participate in to meet this requirement.
    • Treasury will not identify programs that would require the service provider to be designated as an eligible telecommunications carrier.

Recipients must explain why the communities they have identified to be served by Broadband Infrastructure Projects have a critical need for those projects as is related to access, affordability, reliability, and/or consistency.

Recipients are encouraged to prioritize projects that are designed to provide service to households and businesses not currently served by a wireline connection that reliably delivers at least 100 Mbps of download speed and 20 Mbps of upload speed. Recipients may take into account a variety of factors, including whether users actually receive internet service at or above speed thresholds at all hours of the day, whether factors other than speed such as latency or jitter, or deterioration of the existing connections make their user experience unreliable, and whether the existing service is being delivered by legacy technologies, such as copper telephone lines (typically using Digital Subscriber Line technology) or early versions of cable system technology (DOCSIS 2.0 or earlier), and other factors related to the services to be provided by Broadband Infrastructure Projects. Recipients may consider the actual experience of current broadband customers when making their determinations; and whether there is a provider serving the area that advertises or otherwise claims to offer broadband at a given speed is not dispositive.

To the extent recipients are considering deploying broadband to locations where there are existing enforceable federal or state funding commitments for reliable wireline service at speeds of at least 100 Mbps of download speed and 20 Mbps of upload speed, the recipient should ensure that the Capital Projects Fund grant funding will not be used for costs that will be reimbursed by the other federal or state funding stream(s). That is, Capital Projects Fund grant funds must be used only for complementary purposes. Recipients must ensure there is additional public benefit and a justification for using additional public funding to deploy to those locations.

2. Digital Connectivity Technology Projects

The purchase and/or installation of devices and equipment to facilitate broadband internet access are eligible for funding where affordability has been identified by the recipient as a barrier to broadband adoption and use. Permitted devices and equipment include laptops, tablets, and desktop personal computers for distribution to members of the public through a short- or long-term loan program or to be made available for use in public facilities. Permitted equipment includes equipment installed as part of public Wi-Fi infrastructure (e.g., access points, repeaters, routers). (Ownership of the equipment must be maintained by the recipient or a subrecipient.)

3. Multi-Purpose Community Facility Projects

Projects to construct or improve buildings that are designed to jointly and directly enable work, education, and health monitoring are eligible for funding.

  • Activities to help community members engage in employment, search for employment, and/or develop the requisite skills and knowledge to become employed (e.g., participate in career counseling programs, workforce training programs, as well as gain access to internet websites to search for and apply to jobs). The asset itself must enable new and further employment opportunities beyond employment at the location of the completed project.
  • Activities to acquire knowledge and/or skills, undertaken as part of a person’s participation in school, an academic program, extracurricular program, social-emotional development program for students or youths, internship, or professional development program, or in another educational environment.
  • Services to monitor an individual’s health, including with respect to either physical or behavioral health. Health monitoring activities are often conducted as part of telemedicine appointments with a healthcare provider, but these activities can be conducted in a variety of other ways, such as during in-person appointments with health care providers or as part of community health screening programs.

One example is a building, such as a library or community center providing the public with access to computers with high-speed internet service. Treasury will require recipients to commit that the projects will provide services or activities that directly enable work, education, and health monitoring for at least five years from the completion of the project.

Project Costs

A recipient may use funds to cover costs incurred during the period beginning March 15, 2021, for one or more eligible projects. For pre-award costs incurred after March 15, 2021, but prior to execution of the grant agreement, recipients are required to provide reasonable assurance that the costs were incurred pursuant to the negotiation of and in anticipation of the Capital Projects Fund award and are necessary for the efficient and timely performance of the project. Such costs are allowable only to the extent they would have been allowable if incurred after the date of the Capital Projects Fund award and only with the written approval of Treasury.

Project costs are not limited to new construction; they may include improvements and repairs to buildings to permit the buildings to be used for eligible purposes.

Eligible costs include:

  • Costs associated with completing the grant or Application and Grant Plan;
  • Pre-project development costs and uses, including data-gathering, feasibility studies, community engagement and public feedback processes, equity assessments and planning, and needs assessments; permitting, planning, architectural design, engineering design, and work related to environmental, historical, and cultural reviews;
  • Costs of repair, rehabilitation, construction, improvement, and acquisition of real property, equipment (e.g., devices and office equipment), and facilities (e.g., telecommunications equipment, including infrastructure for backhaul, middle, and last mile networks);
  • Cost of long-term leases (for terms greater than one year) of facilities required to provide qualifying broadband service, including indefeasible right-of-use (IRU) agreements and capital leases;
  • Personnel costs including salaries and fringe benefits for staff and consultants required for carrying out a Capital Project (such as project managers, program directors, subject matter experts, equity consultants, grant administrators, financial analysts, accountants, and attorneys);
  • Ancillary costs necessary to operationalize and put the capital assets to full use, including costs to increase broadband adoption and improve digital literacy;
  • Costs associated with monitoring of and reporting on Projects in compliance with Treasury requirements, including award closeout costs;
  • Costs associated with collecting and measuring performance data and conducting activities needed to establish and maintain a performance management and evaluation regime related to Projects funded by the Capital Projects Fund program.

Ineligible costs include:

  • Acquisition of spectrum licenses;
  • Operating expenses, other than grant administration costs;
  • Short-term operating leases;
  • Payment of interest or principal on outstanding debt instruments, or other debt service costs incurred prior to March 15, 2021;
  • Fees or issuance costs associated with the issuance of new debt;
  • 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; or
  • To support or oppose collective bargaining.

Administrative Costs

Program administrative costs(2) over the period of performance may not exceed the greater of five percent of the total amounts of the grant or $25,000.(3) The five percent limitation on administrative expenses includes the combined total of indirect costs and direct administrative costs charged to an award.  

What Is The Process for States to Get the Funding?

The process for requesting Capital Projects Fund grant funding involves three main steps:

  1. Submission of an Application to Treasury establishing eligibility.
  2. Execution of a grant agreement with Treasury.
  3. Submission of grant plans to Treasury, which will be used by Treasury to assess proposed use of funds for alignment with Capital Projects Fund objectives and requirements.

For an application and grant plan to be approved, an applicant must:

  • Demonstrate eligibility;
  • Demonstrate that funds will be used for eligible Capital Projects, including how the funds will address critical needs of the communities to be served;
  • Provide a grant plan for use of the funds;
  • Demonstrate that program performance will be measured in a robust manner, measuring outputs and outcomes for Projects and Programs, through a program evaluation plan;
  • Comprehensively respond to all Application and Grant Plan requirements; and
  • Provide additional information as required by Treasury

A grant plan will consist of an executive summary, an allocation table showing the broad categories of Capital Projects the Recipient seeks to undertake using Capital Projects Fund grant funds (e.g., Broadband Infrastructure Projects, Digital Connectivity Technology Projects, Multi-Purpose Community Facility Projects) and how much the recipient intends to spend on each such category, and one or more program plans.

Each program plan is intended to provide more detailed information on a particular type of Capital Project(s) the recipient intends to undertake, and constitutes a request for funding for those Capital Projects. For example, a state might file a grant plan that indicates that it intends to spend funding on broadband deployment throughout the state, and a program plan that provides detailed information on its deployment plan for only some of the counties in the state. Later, it could file program plans detailing its deployment plans for other counties in the state.

Treasury will review grant plans for completeness and consistency with Capital Projects Fund requirements. If Treasury approves a grant plan only in part, the recipient will be provided an opportunity to provide further information or address deficiencies identified by Treasury. Treasury may also return a grant plan to the recipient with recommendations for improvement and resubmission to Treasury for reconsideration. Treasury may, in its discretion, allow grant plan deadline extensions for those plans undergoing remediation related to consistency with project eligibility criteria. It is the recipient’s responsibility to be responsive to Treasury communications and submit complete and accurate information by the stated deadlines to receive timely consideration and a definitive response. Failure to comply with Treasury’s deadlines and information requests could jeopardize access to full Capital Projects Fund grant.

Treasury is available to answer questions about the grant process and the Capital Projects Fund in general through email at [email protected]. On September 30, 2021, Treasury is offering a webinar focused on accessing and navigating the application portal. Register at https://ustreasury.zoomgov.com/meeting/register/vJIsfuuvqTMjHw93RwQHSJsm…

What’s the Timeline?

Treasury is opening the Capital Projects Fund application portal on September 24, 2021.

States and territories have until December 27 to complete an initial application.

Recipients must submit a plan for deploying Capital Projects Fund grant funding within 365 days of the Capital Projects Fund Portal launch, providing information on the recipient’s intended uses of Capital Projects Fund funds. They may also submit additional program plans on a rolling basis throughout the 365-day submission window so that recipients can seek funding for a particular Capital Project (or Projects) when the recipient is ready.

Treasury will review grant plans upon receipt. (Recipients are encouraged to submit grant plans as soon as possible after the Capital Projects Fund Portal Launch to expedite Treasury review and subsequent access to funds.)

After Treasury approves a Grant Plan in whole or in part, Treasury will inform the recipient of the schedule for payments. The amounts, timing, and conditions of such payments will be determined by Treasury in its sole discretion.

All funds must be expended by December 31, 2026. Treasury may, in its sole discretion, grant extensions to the period of performance upon request from recipients.


Notes

(1) If it would be impracticable—because of geography, topography, or excessive cost—for a project to be designed to deliver services at such a speed, the project must be designed so that it reliably meets or exceeds 100 Mbps download speeds and between 20 Mbps and 100 Mbps upload speeds and be scalable to a minimum of 100 Mbps symmetrical for download and upload speeds.

(2) The costs of administering the Capital Projects Fund grant funding by a recipient, providing technical assistance to potential Subrecipients, and complying with grant administration and audit requirements.

(3) Recipients may request a higher limit on administrative costs by providing a rationale for the use of additional funds for administrative purposes.

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