Shot Clock Winding Down on ARPA Funds For Broadband Projects

Communities looking to leverage American Rescue Plan Act (ARPA) funding for broadband or other local infrastructure need to act soon or risk losing access to a once-in-a-generation funding resource.

Most ARPA recipients seem well aware of the deadline, but data suggests more than a few communities could drop the ball.

As part of the 2021 American Rescue Plan Act (ARPA), $25 billion was specifically earmarked for broadband expansion.

But the law also created the State and Local Fiscal Recovery Funds (SLFRF) program, which doled out $350 billion for states, municipalities, and tribal governments to offset pandemic losses or flexibly invest in local infrastructure.

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ARPA broadband investment strategies have varied dramatically by state. Some states like Massachusetts threw significant money into the laps of regional monopolies like Verizon. Other states, like New York, California, and Vermont have leveraged ARPA funds to breathe life into community owned and operated broadband competition.

Regardless of how ARPA recipients spend the funds, they all face losing access to funding if they fail to meet a looming government deadline to obligate these funds by December 31, 2024, and spend them by December 31, 2026.

Despite a steady parade of government reminders – and an obvious and widespread need for infrastructure and telecom improvements across vast swaths of the country – some municipalities still have yet to obligate or budget vast swaths of ARPA funding, and now risk losing access to the funds if they fail to meet the year-end deadline.

Budgeting Is Not The Same As “Obligating”

The Treasury Department releases periodic updates on SLFRF spending, including examples of how ARPA funding has proven transformative for local municipalities. According to the department’s latest update (current as of April 2024), the majority of municipalities receiving ARPA funding had at least budgeted for ARPA-financed projects as of last spring.

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“States and the largest cities and counties have reported budgeting 94% of their total SLFRF funds to specific projects, with the total number of reported projects growing 23% since the previous reporting period, demonstrating continued steady progress in recipients’ planning for the use of these funds,” the Treasury Department stated.

But “obligation” of ARPA funds is not the same as budgeting those funds. According to the ARPA legislation’s exact wording, obligation means “an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment.”

As the New Hampshire Business Review notes, some municipalities may still be under the impression that simply budgeting ARPA funds was enough, when hard contracts for projects and services are required to meet the government’s looming year-end deadline.

“For example, a town deciding to spend $100,000 of these funds on a fire truck would be budgeting those funds, but the funds would likely not be considered obligated by the federal government until a contract exists to purchase that truck for that amount with the company selling it,” the outlet notes.

An Untold Number Of Municipalities May Be Running Late

The Treasury Department tracks allotted ARPA awards and projected budget plans via a massive database. According to the Treasury, there’s 21,000 local governments participating in the SLFRF program. Those participants reported nearly $320 billion in lost revenue resulting from the pandemic – $131 billion of which have been offset by SLFRF funding.

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According to the Treasury, SLFRF recipients have budgeted more than $8.2 billion in SLFRF funds for more than 1,400 broadband deployment projects nationwide. The “projects” tab of the Treasury’s SLFRF dashboard breaks down budgeted, obligated, and expended deployments.

But according to the National League of Cities (NLC), the data on how many municipalities have actually fully met obligation requirements isn’t as up to date. That data, some of which is only current through December 31, 2023, indicates that tier 1, 2, and 3 recipients have obligated 72.3%, 67.6%, and 69.8% of allocated awards, numbers that have likely increased since.

How much those figures have increased – and how many municipalities will lose access to what could be some of the most flexible broadband subsidies in their lifetimes – remains an open question.  

Doug Dawson, a telecom industry consultant that works closely with local governments on broadband infrastructure improvements, told ILSR that the lion’s share of municipalities are well aware of the looming deadline.

“There will no doubt be some communities who don’t do this right and will lose funding – but everybody I work with seems well aware of the deadlines and the requirements,” he noted.

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“I’m working with half a dozen local governments that are still finalizing broadband grants,” Dawson said. “All of them are operating under the impression that they have to have this money designated to some purpose by the end of this year. For most of them, this means having their Council or Board approve a resolution that defines the categories of expenditure.

"They are all working right now to define who will win those grants – but I don’t know if that also means having a contract with each ISP winner,” he added.

More localized county data may provide a bit more insight. In New Hampshire, county governments indicate that as of last March, the state’s 10 counties collectively had about $52 million unobligated, while $31 million in city ARPA funding was still unobligated.

“113 cities and towns reported obligating or spending at least 95% of their allocation, but 13 reported obligating or spending less than 25%, and five towns had not obligated any of their funds,” the New Hampshire Business Review noted.

The lack of timely data has led to some growing worry among locals that their governments may drop the ball. In July, a contributor to the Tennessean expressed concerns that as of last April, the state had spent just 10.5% of the $3.7 billion it received in ARPA fiscal recovery funds in 2021. However, the state was quick to refute those concerns.

“Tennessee has allocated all $500 million of its ARPA SLFRF funding for broadband infrastructure expansion and digital opportunity programs,” officials said. “Of that, $149 million has been paid out to grantees as of June 30, 2024. We are on track to spend all the funding by December 2026. The December 2024 date is for these funds to be obligated, which they all have been in accordance with the guidance from U.S. Treasury.”

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Dawson doesn’t expect too many municipalities to conflate budgeted funds with fully contracted and obligated expenditures.

“They are under the impression that they will need invoices showing spending was done, and most of them hope that all monies are spent by the end of September 2026 so they have time to compile their final ARPA report for Treasury,” he said.

The Treasury department’s SLFRF program FAQ offers updated guidance for state, local, and tribal governments rushing to meet the end-of-year deadline.

Intense focus has been given to the $42.5 billion in BEAD (Broadband Equity Access and Deployment) broadband subsidies included in the 2021 infrastructure bill, which should begin hitting states early next year. But as ILSR has previously noted, ARPA funding comes with significantly more flexibility, making it particularly problematic should municipalities drop the ball.

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Inline image of SLRFRF spending table courtesy of U.S. Treasury quarterly report April 2024

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