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TDEC ARP Infrastructure Investment Program & Grant FAQs

The following FAQs relate to the draft Water Infrastructure Investment Plan. TDEC will issue updated FAQs with new information relating to the final investment plan in January 2022.

Non-Competitive Formula-Based Grant

Project Selection and Planning

When selecting projects, counties should keep in mind that TDEC is targeting enhancements to community public drinking water systems, wastewater systems with a component of municipal or domestic wastewater, and stormwater management systems serving the public including MS4s. Counties and systems should also review and consider the set of priority areas of emphasis included in the Draft Water Infrastructure Investment Plan. For additional information about collaborative planning in project and proposal development, refer to the “Best Practices in Collaborative Planning” guidance document found on the TDEC ARP website.

Communities are encouraged to invest in thoughtful planning activities that will position the communities for successful collaborative project identification and prioritization supporting comprehensive approaches to the communities’ needs.

Yes, regional projects to address major water challenges are eligible and encouraged uses of these funds. TDEC encourages counties to collaborate across water systems that operate and serve within their jurisdiction to explore potential regional projects. TDEC encourages counties, municipalities and systems to review TN H2O, a plan that includes an assessment of current water resources and recommendations to support the future of Tennessee’s water resources.

All systems will need to complete a TN Infrastructure Scorecard, which is a benchmarking and diagnostic tool for water, wastewater, stormwater, and asset management. The scorecard template is set to be released in November 2021. It highlights the financial stability of a system and can assist in identifying critical needs like addressing excessive water loss, inflow and infiltration of wastewater, and opportunities to improve system resiliency. The Tennessee Association of Utility Districts (TAUD) is designing workshops and training sessions on how to complete scorecards. These workshops will be offered to all systems and hosted both virtually and at regional site locations. In addition, TAUD will assist any small or disadvantaged system with completing a scorecard. Information regarding dates, times, and locations for trainings will be posted on both the ARP and TAUD websites as they become available. We anticipate information becoming available by mid-November.

TDEC has developed a document, “Best Practices in Collaborative Planning,” that outlines a recommended process for facilitating collaboration between counties, municipalities, and systems to develop the non-competitive formula-based grant applications. This resource is available on TDEC’s ARP website.

TDEC recommends that counties, municipalities, and systems consult existing project lists and past applications that were not selected as a starting point in project planning. The CDBG applications may be a good start if the requests align with the TN Infrastructure Scorecard priority areas of need.

TDEC strongly encourages systems to consider how this funding opportunity may be used to provide centralized services to underserved communities, especially for those citizens who are struggling with contaminated well water.

We have developed a document that outlines a recommended process for facilitating collaboration between counties, municipalities, and systems to develop applications for the non-competitive grants, available on the TDEC ARP website. We intend to require that county-level proposals demonstrate all systems and municipalities within the county had an opportunity to present a project or projects, the projects selected were the best use of funds, and there is county-wide support among counties, municipalities, and systems for the county proposal.

TDEC has partnered with TAUD to provide county collaboration and system support for proposal development. TAUD will assist the State, as requested, with non-competitive grant coordination and annual non-competitive grant support. Other potential technical assistance providers may be able to help facilitate the collaborative process, such as MTAS, CTAS, development districts, or consulting groups. Although there are no formal partnerships with these agencies, TDEC believes they may be beneficial in supporting collaborative planning activities with counties.

Planning activities, including contracting with a third-party partner to support collaborative conversations and facilitate project and proposal development, are an allowable expense with these funds. TDEC encourages recipients to consider leveraging some of these funds to support planning activities.

The funds available to counties through this offering may not be used for purposes other than those explicitly identified in the Water Infrastructure Investment Plan. Funds will not be provided to counties until all application requirements are met, including approval of specific projects and documentation indicating that all relevant stakeholders within the county were provided the opportunity to collaborate. While funds are proposed to be allocated to counties, TDEC expects counties to collaborate with municipalities and systems in their jurisdiction to identify projects and must direct funds to water infrastructure or planning projects.

MS4s play an important role in managing stormwater and water quality. TDEC expects counties to coordinate with MS4s that operate within their jurisdiction to consider stormwater projects as allowable expenses under this grant offering. Visit the “NPDES Municipal Separate Storm Sewer System (MS4) Program” website for additional information. Identification of eligible water quality-focused stormwater projects and stormwater management planning can be viewed in the EPA Overview of Clean Water State Revolving Fund Eligibilities.

TDEC believes allocating funds at the county level will encourage regional collaboration and coordination and ensure more funds are available to address the highest needs and opportunities within counties.

We recognize the added effort required from counties to serve in this role and plan to support counties in this process. Additionally, planning activities are an eligible expense and TDEC encourages local stakeholders, including counties, municipalities, and systems, to consider leveraging some of these funds to support planning activities.

Application

No. The application process for ARP funds will be a unique and streamlined process. TDEC will release a grant manual in early 2022 with details about the application process and requirements.

TDEC anticipates that the application to receive funds under the non-competitive grant program will open in early 2022 and close in December 2022.

At this point TDEC is planning for counties to submit Notices of Intent to Apply to TDEC as the first step in the application process.

The second step will be for counties to submit county-wide (regional) proposals and project-specific applications based on projects identified and proposed by project managers/owners. There are important roles for systems and municipalities within a county in this process. TDEC envisions a collaborative planning process that enables systems and municipalities to identify and develop project proposals with the county primarily serving as a convener and aggregator of these projects for all systems in the county’s jurisdiction. TDEC developed guidance document called “Best Practices in Collaborative Planning” that outlines a recommended process for facilitating collaboration between counties, municipalities, and systems to develop the county proposal and project-specific applications. This resource is available on the TDEC ARP website.

Most construction-ready project proposals will require the submittal of a justification, alternatives analysis, and may require submittal of plans and specifications prior to award. Examples of projects requiring plans submittals include modifications to drinking water or wastewater treatment plants and construction projects that propose significant impacts to streams, lakes, or wetlands. Further, all construction projects will be required to demonstrate stormwater permit coverage, identify any water resources within the boundaries of the project, and obtain an aquatic resource alteration permit, or ARAP, for any impacts to water resources before construction begins. For all construction projects, final plans and specifications and appropriate permit coverage must be submitted after the grant award and prior to the construction start.

For projects executing planning, design, and construction after the grant award, the grant contract will specify the documents and approvals required for the grant.

Certain projects, like asset management plans, water loss-reduction projects, and projects focused on eliminating inflow and infiltration, will not be required to provide justification. An alternatives analysis and plans and specifications may be submitted after the grant award. Construction projects that fit into these categories may also be eligible for a streamlined permitting process.

Contracting and Oversight

TDEC will conduct routine subrecipient monitoring. Oversight mechanisms typically consist of reviewing invoices, receipts, and site inspections.

The non-competitive grant application process includes a step during which TDEC will review and approve projects for eligibility and alignment with the Water Infrastructure Investment Plan and relevant federal law and guidance. This step will occur prior to issuance of a grant contract and disbursement of funds. The ARP grants will follow current grant contract templates issued by the Central Procurement Office, which typically require reimbursement of payments. The local government would need to include the ARP funds in the local government’s budget and demonstrate proof of payment prior to reimbursement requests.

Yes, local procurement practices will be allowed. TDEC may also prepare agreement templates for county/cities that will specify procurement requirements.

A county may acquire its own design and construction services or may subcontract that responsibility to the entity requesting the project. The county should specify that responsibility in the written agreement with the subrecipient project manager/owner.

Allocation and Co-Funding

TDEC published currently proposed funding allocations in the Draft Water Infrastructure Investment Plan, available online. These funds are meant to be shared amongst water, sewer, and stormwater systems within the county based on needs and opportunities, population served/size of the system, and available co-funding. Co-funding requirements are also included in the Water Infrastructure Investment Plan and range from 20-40 percent of the county’s allocation based on the Ability to Pay Index.

TDEC’s non-competitive grant program is proposing to distribute funding for projects through counties and is encouraging counties to engage in collaborative and inclusive planning activities with systems and municipalities to identify specific projects for funding. Under the current plan, direct allocations will only be provided to counties.

As proposed, each county will be eligible to receive a base allocation plus a portion of funds determined based on county population. The formula that will be used is:

County Allocation = $2,105,263 + [$800,000,015 * (County Population / Tennessee Population)]

TDEC published proposed base and total allocations and match rates for each county as part of its draft investment plan. This approach sets aside $200 million for equal distribution among each of Tennessee’s 95 counties, providing each county a base allocation of $2,105,263. The remaining funds set aside for non-competitive grants, approximately $800 million, will be distributed to each county proportional to the county’s population. A county’s total budget includes the TDEC allocation and required co-funding.

All county level collaborative project proposals will be required to demonstrate a plan for contributing 20-40 percent of the project cost as outlined in in the Draft Water Infrastructure Investment Plan. Counties must ensure that the county’s proposal, which may contain one or multiple projects, meets the minimum cost share requirements and identifies the sources of those funds. TDEC expects collaboration between the county and municipalities and systems to develop a co-funding plan.

TDEC is strongly encouraging co-funding of projects using direct local ARP funds to meet co-funding requirements. However, in the Draft Water Infrastructure Investment Plan TDEC proposes to consider co-funding of projects using any local source of funds that would allow the proposal to meet minimum subrecipient requirements.

Co-funding may come from counties, municipalities, and systems as well as other sources. While counties are not required to be the sole source of cost share funds for subrecipients, TDEC encourages counties to provide cost share funds especially for projects benefit residents county-wide. If systems within the county have funds available to support co-funding requirements, TDEC encourages systems to communicate this availability to the county or counties that they serve.

Yes, co-funding can be either cash or in-kind contributions.

  • Cash can be in the form of other non-matching grants, cash reserves, municipal bonds, or donations from partners and sponsors. TDEC will also consider federal funds as a source of co-funding, including SRF loans, but note that there may be requirements associated with using those funds as match that would then apply to projects funded by ARP. TDEC strongly encourages using local ARP dollars to meet co-funding requirements.
  • In-kind contributions should be in the form of valuable goods or services, like plans and specifications developed on or after March 3, 2021.

Note that non-competitive grant ARP funds may not be used as required matching funds for other federal grant programs that prohibit the use of federal funds as match. These funds can be leveraged, but not provided as a source of matching funds.

TDEC is proposing to require local co-funding based on the total allocation identified for each county. TDEC is not proposing to require local match on a project-by-project basis. TDEC is proposing to provide counties, cities, and utilities the flexibility to coordinate with one another directly to determine how local match will be sourced.

Eligible Expenditures

The Draft Water Infrastructure Investment Plan is aligning eligible uses of these funds with the interim final rule issued by the United States Department of Treasury (“U.S. Treasury”). Currently, this means that funds available under this offering align with SRF project eligibility. Planning and administrative expenses are eligible uses of these funds and TDEC encourages communities to consider how they may leverage these funds for planning and administrative activities.

The U.S. Treasury interim final rule authorizes reimbursement for project expenditures that occurred on or after March 3, 2021 and qualify as an eligible activity. TDEC is working with state procurement partners and legal counsel to develop grant contract language to allow reimbursement of eligible expenses that occurred after March 3, 2021. Updated information will be published in the grant manual in early 2022. Activities occurring prior to March 3, 2021, will not be eligible for reimbursement.

Yes, ARP funds can be used to build wastewater treatment capacity in preparation for future needs, as these projects are eligible under the EPA Clean Water State Revolving Fund (CWSRF) program. TDEC is targeting systems that support improving current needs and expanding to existing communities as a part of this offering. We caution any system proposing capacity expansion to consider the cost of depreciation and operation and maintenance of a system that is not yet supported by a customer base.

No, ARP funds cannot be used to fund drinking water growth projects, as these projects are ineligible under the EPA Drinking Water State Revolving Fund (DWSRF) program. Current need must be established for drinking water capacity development projects to be eligible expenses. TDEC is targeting systems that aim to improve the quality of public drinking water supplies for existing customers and provide service to existing communities that have yet to receive safe, reliable drinking water as a part of this offering.

Stormwater runoff is generated from rain and snowmelt events that flow over land or impervious surfaces and impact rivers, streams, lakes, and wetlands. Stormwater systems, or controls, help manage stormwater through best management practices. Eligible stormwater projects are those that protect water quality through measures that manage, reduce, treat, infiltrate, or recapture stormwater or subsurface drainage water. These systems consist of both grey and green infrastructure, including wet weather conveyances. So, if your stormwater system does the above, TDEC would consider it part of your system.

Yes, waterline extensions for the primary purpose of addressing current, unmet domestic drinking water supply needs are an eligible expense under the EPA DWSRF program. Generally, waterline extensions to address anticipated future domestic drinking water supply needs are not an eligible expense. The U.S. Treasury interim final rule specifies that eligibility for water and sewer projects under the ARP program aligns with that of the DWSRF and CWSRF programs. Therefore, waterline extensions are only eligible if they are being pursued to provide supply to existing unmet domestic drinking water needs, not anticipated future domestic drinking water needs.

No, waterline extensions for the primary purpose of fire protection are ineligible projects under EPA DWSRF programs. The U.S. Treasury interim final rule specifies that eligibility for water and sewer projects under the ARP program aligns with that of the DWSRF and CWSRF programs. Therefore, waterline extensions to support fire protection are not eligible projects under this grant program.

It depends. A wide variety of stormwater management projects with a primary purpose of improving or maintaining water quality often have the co-benefit of providing flood mitigation for nuisance and/or minor episodic flood events. TDEC strongly encourages applicants to propose projects with these co-benefits, as this makes Tennessee communities more resilient. However, ARP funds cannot be used solely for the purpose of flood control. Eligible activities must demonstrate a valid water quality component to be eligible. In addition, no project may negatively impact water quality or the current designated use support for a stream or wetland.

It depends. Projects must meet SRF eligibilities and eligible projects that address consent decrees can be funded. In addition, section 603(c)(11)(B) of the Clean Water Act allows funds to be used to provide assistance to qualified nonprofit entities to assist in achieving compliance with the Clean Water Act. Therefore infrastructure and planning needs that have been identified in a consent decree are eligible. Projects can include the planning, design, and installation of new or rehabilitation projects necessary to bring the system into compliance. However, funds cannot be used to pay off fines or any other settlement costs, including those associated with a consent decree. Addressing compliance with local, state, and federal drinking water, wastewater, and stormwater water quality requirements is one of the priority areas of emphasis for funding under this offering.

Yes, systems that treat domestic or municipal sewage with decentralized wastewater treatment are eligible for ARP funds. Decentralized wastewater treatment is defined as an onsite or clustered system used to collect, treat, and disperse or reclaim wastewater from a small community or service area. Eligible decentralized wastewater treatment projects include the upgrade, repair, or replacement of existing systems; construction/installation of new systems; costs associated with the establishment of a responsible management entity; and septage treatment works and pumper trucks to support the proper maintenance of decentralized systems.

Privately owned lagoons with non-domestic sewage are eligible under the 319 Non-Point Source program and must implement a watershed management program. These projects are best funded through the Tennessee Department of Agriculture or the SRF loan program, or both.

Yes, ARP funds may be used for asset management planning or stormwater management planning. Given the timeframe associated with these funds – funds must be obligated by December 31, 2024 and spent by December 31, 2026 – TDEC encourages communities to consider how they may leverage these funds for planning and design activities and address future phases of projects through other funding sources, such as the SRF loan program.

Yes, as long as the scope of the repairs to the road or highway are kept to a minimum and are commensurate with impacts from the water infrastructure repair, replacement, or rehabilitation project. It is common for water infrastructure repair and replacement projects to occur within the right-of way for roads and highways and to intersect roads and highways themselves.

Other

U.S. Treasury has given no specific guidance, other than to say later this fall. TDEC plans to review and update, if necessary, the Draft Water Infrastructure Investment Plan as soon as the final rule is released.

Yes. State of Tennessee rules require utilities to fully fund depreciation for assets. There are several eligible project types, including asset management plans, stormwater management planning, and planning and design activities leading to capital improvements, that will not result in the need to increase depreciation expenses.

Competitive Grants

TDEC plans to shape its competitive grant process based on feedback provided during the public comment period, experience gained during the non-competitive grant process, and areas of unmet need during earlier stages of the investment program. As TDEC nears releasing competitive grant information, we plan to provide guidance and workshops prior to the application process, tentatively in January 2023.

This Page Last Updated: December 17, 2021 at 2:46 PM