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ADEM: Water and sewer project funds come with deadline warning

The Alabama Department of Environmental Management has distributed more than $1 billion for hundreds of local communities’ water and sewer projects in 2022 and 2023, including the combined $620 million in American Rescue Plan funding allocated by lawmakers this year and last.

The federal ARPA funds come with a December 2026 spending deadline and ADEM Director Lance LeFleur told Alabama Daily News his agency is watching the clock.

“I think everyone is concerned about it,” LeFleur said this week about the deadline state leaders already warned could be a problem, especially as every state has an infusion of infrastructure dollars to spend and supplies and installation crews are limited. 

“The supply chain problems are just going to get worse because all of the states are now in the process of trying to get commitments to push the money out the door when they actually start spending the money. And orders start being placed … everybody’s going to be in the market at the same time.”

He said ADEM wanted to get projects in the queue early, “but there are definitely going to be problems.” 

Some engineering firms already have more work than they can do, he said.

Communities have been told that projects that haven’t broken ground by early 2026 could lose their funding, LeFleur said. That money would be reallocated to other projects already underway, he said.

While many will likely want to see that 2026 deadline extended, LeFleur said ADEM is operating under the assumption it won’t change.

“(If) we don’t meet that deadline, the money is going back to the Treasury,” he said. “No one wants money to go back to the Treasury.” 

Greg Cochran, executive director of the Alabama League of Municipalities, said its members are aware of the timeline.

“The Alabama League of Municipalities is working with state and local partners to identify resources for municipalities to spend their ARPA funds before the deadline in 2026 along with sharing legal guidance,” Cochran told ADN. “We are also providing municipal officials the opportunity to attend intentionally planned meetings with engineers, architects and other professional service providers to get their projects moving.”

The projects

Along with the ARPA funds, ADEM is at the same time doling out money from the 2021 federal Bipartisan Infrastructure Law and the state’s clean water and drinking water revolving funds, which allocate low-interest loans to municipalities and are 80% federally funded.

As the trio of funds have been committed to utilities and municipalities, ADEM has updated online spreadsheets detailing the sewer and drinking water projects. Funding amounts range from tens of thousands of dollars to several million.

Agency officials could not say which pool of money was funding each specific allocation and, in some cases, projects will receive a combination of money. The spreadsheets also show any match dollars the local municipality must provide in order to get the federal funding.

As of mid-July, more than $811 million had been committed to about 400 projects in 2022 and 2023. Some ARPA money offered to locations has not yet been accepted by the local utility and isn’t yet listed and tallied on the spreadsheets, LeFleur said.

Combined, systems around the state applied for about $3 billion in funding for 646 water and sewer projects.

LeFleur said the funding applications in 2022 required a preliminary engineering report and a financial audit of the applying systems.

“We categorized each project by need … and funded the highest need projects first,” LeFleur said.

Last year, the agency was criticized by some lawmakers for not allocating enough money for systems in growing communities. It’s a complaint LeFleur will likely hear again. The Legislative ARPA oversight committee meets later this month at the State House.

LeFleur said he knows lawmakers from fast-growing areas want more money for their areas. In the first round of ARPA distribution last year, there was no prioritization for communities’ growth or size.

“A lot of smaller communities do have high financial needs, situations and high physical plant situations. So there’s a number of smaller communities that are funded in both ARPA I and ARPA II,” LeFleur said. “Now, in the fast-growth communities if they have financial wherewithal and their systems are in good shape, then they, of course, don’t rank as high.” 

LeFleur said restrictions on ARPA, BIL and the state revolving funds prevent them from being spent on anticipated or future growth.

Sen. Chris Elliott, R-Josephine, said he’s not asking ADEM to look in the future.

“Just look at what happened last week, last month, last year,” Elliott said about the 7,000 new residents who moved to Baldwin County in one recent year.

Lagniappe recently reported the city of Fairhope is considering borrowing $45 million to pay for sewer and water upgrades. 

Given the 2026 deadline, Elliott, a member of the oversight committee, said more consideration should be given to communities ready to execute projects and “sitting on go.” 

When doling out the ARPA II money early this year, lawmakers were more specific in how it should be spent. Of $395 total, $195 million targeted high-need projects; $100 million required some matching funds; and $100 million for projects with at least a 35% local match. 

The thinking was smaller, slow-growth areas would not be able to meet that 35% match and the funding would be available to some of the larger, growing communities, LeFleur said.

“It was not our intention to try to make every county have a project, but the reality is that every single county in the state will have projects,” LeFleur said. “And every legislator has at least one funded project in his or her district. That speaks to a uniform need across the state.” 

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